TMI Tax Updates - e-Newsletter
May 3, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Addition made by treating LTCG as Income from other sources Sale of shares transactions in purchase and sale of shares is just a colourable device especially when the assessee had not done any such transaction in the preceding or subsequent year - AT
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Income Tax:
Addition made u/s 56 - the word relative includes 'relatives' and such 'relatives' coming together as a group and constituting themselves as a legal entity, viz. 'HUF', are not disentitled from their original right of giving gifts to any eligible relative either within or outside the ring of HUF - AT
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Income Tax:
Accrual of income - Income from publication in yellow pages - if the orders of the revenue authorities are to be sustained, the department will have a revenue gain, because, the AO has not made any adjustment to the income pertaining to the preceding year and has been booked in the current year - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (5) TMI 49
Cancellation of penalty u/s 271(1)(c) of the Act Concealment of particulars - Deduction u/s 80IB of the Act - Held that:- The assessee is an export house registered under the Govt. of India Export Manufacturing and Exporting Leather Garments Scheme u/s 80IB - The income was received under the duty drawback, DEPB, and interest on FDRs - The assessee claimed deduction, since the receipts were part of the receipts relating to the assessees industrial undertaking. Full deduction was disallowed, but such disallowance of claim cannot be said to be, by any stretch of imagination, concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee - the appellant had disclosed all the primary and material facts and it could not be said that the appellant had concealed his income or had furnished inaccurate particulars of income - the appellant had filed explanation regarding its claim for deduction under section 80-IB of the Act thus, there is no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (5) TMI 48
Taxability of Royalty under the Act - Royalty received treated as business income u/s 5(2) and 19(1)(i) of the Act DTAA between India and USA - Whether the amount is taxable under the Indian Income Tax Act in India if not as royalty, but as business income Held that:- The amount received by the assessee cannot be considered as royalty as was done by the Assessing Officer while invoking the Article 12(2) of the DT for taxing the amounts the decision in assessees own case for the previous assessment year has been followed, the assessee does not have any permanent establishment in India - Since the Indian company who obtained the rights is acting independently, Agency PE provisions are not applicable to the assessee company - incomes arising to a Non-Resident cannot be taxed as business income in India, without a PE - As the assessee does not have any permanent establishment in India, the incomes arising outside Indian Territories cannot be brought to tax - income arising to the assessee cannot be taxed as royalty within the meaning of Income Tax Act or DTAA and it also cannot be taxed in the hands of the assessee as business income as assessee does not have any Permanent Establishment in India Decided in favour of Assessee.
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2014 (5) TMI 47
Admission of additional grounds Held that:- The additional grounds are legal in nature and go to the root of the matter, thus, following the decision in National Thermal Power Corporation Ltd. V/s. CIT [1996 (12) TMI 7 - SUPREME Court] the additional grounds are admitted for consideration. Invoncation of section 158BD of the Act - Non recording of satisfaction by the AO Held that:- The condition precedent for initiating a block assessment under S.158BD is reaching/recording satisfaction by the AO, as enjoined in S.158BD of the Act, to the effect that incriminating material indicating undisclosed income assessable in the hands of the assessee, was found during S.132 proceedings of the person searched - revenue demonstrated that the material for such satisfaction has in fact been recorded by the AO thus, there is no merit in ground raised by the assessee Decided against Assessee. Service of assessment order Impact on computation of period of limitation Held that:- The decision in Commissioner Of Income-Tax Versus Gangadhar Gowd Rama Gowd And Co [1984 (11) TMI 19 - ANDHRA PRADESH High Court] followed - considering the fact of service of orders refusing the registration of the firm on one of the partners by name, after dissolution of the said firm, the appeal filed by the other partner, on obtaining certified copies of the relevant orders, was held to be within time and not barred by limitation - there was no delay in the filing of the first appeal before the CIT(A), and consequently, the CIT(A) was not justified in holding the appeal before him as barred by limitation thus, the order of the CIT(A) set aside Decided in favour of Assessee. Estimation of undisclosed income - Evidentiary value of the documents found and seized at the time of search Held that:- The undisclosed income for the purpose of block assessment has to be completed solely on the basis of seized material and any enquiry made by the AO relatable to such material, meaning thereby neither any enquiry report nor any document procured either before or after search can be considered while computing the undisclosed income of the assessee - any document found and seized during the course of search has to be interpreted literally and nothing can be added or subtracted- The material found and seized are two sheets of typed paper - They are simply unsigned and cannot be attributed to the assessee - unsigned papers are mere dumb documents and cannot be relied upon for making a block assessment Relying upon ACIT V/s. Dr. Kamla Prasad Singh [2010 (3) TMI 939 - ITAT PATNA] the addition made by the AO on the basis of unsigned papers cannot be sustained thus, the order of the CIT(A) set aside Decided in favour of Assessee. Penalty imposed u/S 158BFA(2) of the Act Held that:- The decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad [2013 (9) TMI 485 - ITAT HYDERABAD] followed the addition is beind deleted, based on which penalty has been levied the very basis of the penalty no longer survives thus, the penalty confirmed by the CIT(A) also set aside - Decided in favour of Assessee.
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2014 (5) TMI 46
Deletion of STCG - Valuation of asset Held that:- The decision in M/s Lalbhai Kalidas & Co. Versus Income Tax Officer 16(3) (2), Mumbai [2013 (11) TMI 682 - ITAT MUMBAI] followed - FAA was of the view that a reading of section 43 clause (c) indicated that the written down value had to be adjusted by the actual cost of any asset falling within the block acquired during the year, that the assessee had purchased two galas and entire amount of Rs. 40 lacs had been paid, that registration had been complete, that the assessee had acquired the assets as per section 43(6)(c) - The material test in the connection is domain over the flat and investment in it - Central Board of Direct Taxes Circular No. 471*, dated October 15, 1986, deals with investment in flats under the self-financing scheme of the Delhi Development Authority - The Board has stated in the circular that when an allotment letter is issued to an allottee under this scheme on payment of the first instalment of the cost of construction, the allotment is final unless it is cancelled - The Board has directed that such an allotment of a flat under this scheme should be treated as a case of construction for the purpose of capital gains thus, the order of the FAA upheld Decided against Revenue. Reference made to DVO - Valuation of property u/s 50C(2) of the Act Held that:- FAA was of the view that the assessee had already disputed the valuation before the AO and the AO was duty bound to send the matter to the DVO for valuation - As the AO did not any mention of reference to the DVO in the assessment order, he directed the AO to adopt the value determined by the DVO, in case matter was referred by him to the DVO - The decision in S. Muthuraja Versus Commissioner of Income Tax [2013 (8) TMI 40 - MADRAS HIGH COURT] followed - the mandate of section 50C(2)is very clear and AO is left with no option, but to refer the matter to the DVO - if the FAA has given a conditional direction in accordance with the provisions of the Act, then his order has to be upheld Decided against Revenue.
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2014 (5) TMI 45
Addition u/s 36(1)(va) r.w. section 2(24)(x) of the Act Delayed remittance of EPF contribution and ESI Subscriptions Held that:- The decision in CIT V/s. Sabari Enterprises [2007 (7) TMI 169 - KARNATAKA HIGH COURT] followed section 36(1)(va) clear that amounts actually paid on or before the due date of filing return u/s 139 are allowable deductions The Explanation Clause (va) of Section 36 of the Income Tax Act further makes it very clear that the amount actually paid by the assessee on or before the due date applicable in this case at the time of submitting returns of income under Section 139 of the Act to the revenue in respect of the previous year can be claimed by the assessees for deduction out of their gross income - contributions by assessee to P.F. & Employees State Insurance are deductible even if made beyond period prescribed u/s 36(1)(va) but before the due date for furnishing return Decided in favour of Assessee. Disallowance of professional charges Permissibility of disallowance u/s 14A after the adjudication made by the DRP - Held that:-In view of amendment to S.144C of the Act, by the Finance Act, 2012 with effect from 1.4.2009, whereby it has been explained that 'the power of the DRP to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee - Relying upon Aurobindo Pharma Ltd. V/s. Asstt. Commissioner of Income-tax[2014 (4) TMI 27 - ITAT HYDERABAD] - There was no infirmity in the action of the AO, in sustaining the addition, not in terms of S.14A of the Act, but on grounds of absence of evidence brought on record by the assessee to substantiate its claim as to the genuineness of the expenditure, as held by the DRP Decided against Assessee. Addition of professional charges made u/s 40(a)(ia) of the Act Held that:- DRP had followed the decision in Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM], and the same decision is being pending in the High Court thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Deduction u/s 10A of the Act - Interest income not considered part of the profits Held that:- The decision in Livingstones Jewellery (P) Ltd. V.s. Dy. CIT [2009 (5) TMI 617 - ITAT MUMBAI ] followed when sub-section (1) of section 10A is read in juxtaposition to sub-section (4), the only the profit and gains as derived by the undertaking from the export of articles cannot be accepted as eligible for deduction - All the profits which have nexus with the business of the undertaking will qualify for deduction - the assessee had given FDRSs to the bank for obtaining credit facility - Such interest has nexus with the business of the undertaking and falls under the head "Profits and gains of business or profession' as having relation with the carrying on of the business - Decided against Assessee. Deduction u/s 10A of the Act - Foreign exchange fluctuation not considered part of profits Held that:- The decision in Commissioner of Income Tax Versus M/s. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] followed - an assessee would be eligible for relief under S.10A in respect of foreign exchange gain earned on realisation of export receipts in the year of export thus, the order of the DRP set aside and the AO is directed to recomputed the relief u/s 10A of the Act Decided in favour of Assessee. Deduction u/s 10A of the Act Expenses in foreign exchange towards telephone and interest charges Held that:- The deduction is allowed and the order of the DRP is set aside the AO id directed to recompute the eligible deduction under S.10A of the Act, excluding the expenditure in the form of telephone, internet charges, etc., which have been deducted from the export turnover, from the total turnover as well Decided in favour of Assessee.
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2014 (5) TMI 44
TDS on reimbursement of salary Invocation of section 40(a)(iii) of the Act Hedl that:- The Japanese company had deputed two of its employees one director and other General Manager to work for the Indian Company under the terms of deputation agreement which provided that they have to work under the control and supervision of the assessee- company The salary includes the salary paid by the Japanese Company also - Despite this vital information placed before the AO as well as the CIT(A), both have failed to appreciate that the assessee has already deducted tax u/s 192, on the entire salary including salary reimbursed by the assessee company thus, there was no requirement of making any disallowance u/s 40(a)(iii) on the ground that no TDS has been deducted - it has not been brought on the record as to how the reimbursement of salary made by the assessee company amounts to payment to the Japanese company on account of rendering of services, which can lead to an inference that there is an element of income for which there was an obligation to withhold tax u/s 195 - no disallowance either u/s 40(a)(i) or 40(a)(iii) is called for as the assessee has duly deducted tax on the entire salary u/s 192 - the total taxable salary as per the Act is ₹ 83,19,640/- only, which has been included in from no.16 an observation of the CIT(A) to confirm the findings and addition made by the AO is completely vitiated and cannot sustained - the disallowance made by the AO and confirmed by the CIT(A) is set aside Decided in favour of Assessee. Disallowance of foreign travelling expenses - Revenue was of the view that the assessee was not required to incur expenses on foreign traveling as the same should have been borne by the parent company Held that:- Once the assessee has shown that its employees have undertaken foreign travelling for the purpose of indenting business on which it has earned commission income and also on the business of import and export of goods, then same cannot be doubted until and unless it has been found that these expenses are either personal in nature or it was not for the business purpose at all- the Revenue cannot decide who should bear the expenses and why the assessee was required to incur such expenses - The decision to incur expenses is upon the assessee, so long as it is for the purpose of business - the assessee has filed exhaustive details of the foreign traveling expenses alongwith the evidences on which no infirmity or discrepancy has been found either by the Assessing Officer or by the learned CIT(A) - the assessee has incurred these expenses, which are fully verifiable and have shown to be for the business purpose, adverse presumption cannot be drawn that such expenses were genuine or were not required to be incurred by eh assessee thus, the view of the CIT(A) for confirming the disallowance cannot be sustained Decided in favour of Assessee. Disallowance of expenses u/s 40(a)(i) of the Act Held that:- The deduction of TDS amount of ₹ 1320, pertains to payment of Professional fees of ₹ 12809 to Bharti Corporate Services for providing recruitment services for the parent company - The amount of TDS which was deducted, has been deposited in the government account on 02/05/2008 i.e. much prior to the date of filing of return of income which was on 29/09/2008 filed u/s 139(1) - not only the estimated disallowance is unwarranted but also the same is uncalled for Decided in favour of Assessee. Deletion of disallowance u/s 40(a)(ia) of the Act Reimbursement of expenses Held that:- The CIT(A) has held that the expenses relating to sample charges, meeting expenses and hotel expenses are not covered under any of the provisions of section 192 to 194 LA - There is no requirement of withholding the tax under any provisions of the Act including section 195 thus, there is no reason to deviate from the findings recorded by the CIT(A) Decided against Revenue. Deletion of disallowance of 50% of commission and brokerage expenses Expenses paid for renewal of lease and license agreement Held that:- The payment of brokerage commission was paid for the purpose of renewal of Leave & License Agreement of the rented properties - The AO himself has admitted that such expenditure is allowable, but they are allowable for the period for two years thus, there is no reason for such allocation of the revenue expense to be allowed for the period of two years as the brokerage is paid in this year and is to be allowed in this year only, because the same is on account of renewal of Leave & License Agreement thus, the order fo the CIT(A) upheld Decided against Revenue.
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2014 (5) TMI 43
Addition made by treating LTCG as Income from other sources Sale of shares Factual evidences and submissions not considered Held that:- CIT(A) was of the view that the profits can be only STCG as there is no authentic proof of holding those shares before the date of Demat and accordingly taxable @ 30% instead of 10% - assessee had not shown any income from sale of shares before or after AY 05-06 and he has traded mainly in these two shares only assessee during search could not give satisfactory explanation to various questions posed to him such as why he preferred to do transaction in these shares only when he had never done any transaction in shares before - the assessee declared long term capital gain on account of sale of shares of M/s. Tanu Health Care Ltd. and Comfort Intech Ltd. - The cost of purchase of shares of M/s. Tanu Health Care Ltd. were made after a lapse of more than one year from the date on which shares were purchased by the broker - The assessee was not known to the broker - During the course of search the statement of the assessee was recorded wherein he has stated that the sale transactions were done as per advice of his friend Shri Anand Jaju, Pune who has expertise in share market. Relying upon Sumati Dayal Vs. CIT [1995 (3) TMI 3 - SUPREME Court] - the assessee during the course of assessment proceedings has surrendered the income after the modus operandi as discussed by the Assessing Officer in the body of the assessment order was confronted - It is a fact that the assessee never appeared before the Assessing Officer and was always represented by his Advocate - the contention of the assessee has surrendered the income due to coercion cannot be substantiated The assessee has surrendered the income before the AO for which the Assessing Officer did not proceed for any further enquiry and completed the assessment by treating the long term capital gain as income from other sources and since the surrounding circumstances of the case also prove that the transactions in purchase and sale of shares is just a colourable device especially when the assessee had not done any such transaction in the preceding or subsequent year and the assessee even does not know the broker personally thus, there is no infirmity in the order of the CIT(A) Decided against Assessee.
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2014 (5) TMI 42
Claim of benefit of section 43D of the Act Assessee not being a NBFC Held that:- The assessee qualifies both the conditions to fall within the meaning of a State Industrial Investment Corporation u/s.43D of the Act - The assessee is a State Government Company and is providing long term finance for industrial projects the decision in assessees own case for the previous years has been followed - the assessee had not charged in its books of accounts any interest on the loans classified by it as non-performing assets - It is not a case where assessee had credited such interest and then claimed write off, Assessee might have been following mercantile system of accounting. The prudential norms prescribed by RBI, for non-banking financial Company u/s 45 Q of the RBI Act, made it obligatory for the assessee to classify the loans on which interest was not received for a period exceeding six months, as non-performing assets - Once it was so classified, interest could not be charged in its accounts and taken as income Relying upon CIT Vs. Elgi Finance Ltd [2007 (6) TMI 180 - MADRAS High Court] - assessee was justified in not recognizing income from non-performing assets in consonance with the notification issued by RBI thus, there is no reason to interfere in the findings of the CIT(A) Decided against Revenue.
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2014 (5) TMI 41
Addition made u/s 56 of the Act - Gift received from HUF - Whether a gift received by the assessee from the HUF is eligible for being considered as a gift received from a 'relative' so as to qualify for exemption from tax Held that:- The CIT(A) was of the view that HUF is nothing but a group of relatives - Merely because it is given legal status as a 'HUF' the individuals do not lose their identity as relatives - Such group of relatives who are members of the HUF clearly fall in the definition of the term 'relative' provided in explanation to clause (vi) of S.56 of the Income- tax Act - the word relative includes 'relatives' and such 'relatives' coming together as a group and constituting themselves as a legal entity, viz. 'HUF', are not disentitled from their original right of giving gifts to any eligible relative either within or outside the ring of HUF the decision in Harshabhai Dahyalal Vaidhya(HUF) V/s. ITO [2013 (11) TMI 617 - ITAT AHMEDABAD] relied upon - Thus, there is no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (5) TMI 40
Deletion on account of gross profit Held that:- The AO has allowed a number of opportunities to the assessee to plead its case and lead evidences, which the assessee has not fully availed - the books of accounts of the assessee were rightly rejected by the Revenue - the expenses were clearly of allowable nature, and no reason has been advanced by the AO to disallow the same - the rate applied at 25% on the gross receipts of the assessee is unjustified and that ends of justice shall be met if flat rate of net profit at 8% is applied on the gross receipts received by the assessee, without any further deduction of any expenses or depreciation the AO is directed to adopt the figure as income from the transport business of the assessee Decided partly in favour of Revenue. Addition made u/s 68 of the Act Unaccounted cash credits Held that:- The amounts if have been accounted for as income in the succeeding assessment year 2008-2009, the same could not be doubly taxed in the relevant assessment year 2007-2008 also thus, matter is remitted back to the AO and he is is directed to verify from record and the ledger account of the different parties, and in case, the assesee has accounted for the amounts in question as income in the succeeding assessment year 2008-2009, no addition under section 68 of the Act Decided in favour of Revenue. Disallowance of 1/3rd of cash expenses Held that:- Application of a flat rate of net profit at the rate of 8% to the gross receipts of the transport business of the assessee - no separate addition to the extent of 1/3rd of the cash expenses could not be made thus, the disallowance is set aside Decided in favour of Assessee.
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2014 (5) TMI 39
Revision of an order - Jurisdiction of CIT u/s 263 of the Act Held that:- The AO came to the conclusion after detailed examination of the facts and circumstances of the case and direction of the Tribunal - The observation of the CIT in the proceedings u/s. 263 of the Act is unwarranted - The AO having applied his mind came to the conclusion that there is no necessity of addition relating to the issue raised by the CIT - as there was enquiry by the AO, even assuming that it is inadequate, that would not give an occasion to exercise jurisdiction by the CIT u/s. 263 of the Act. Assessment order cannot be revised on the ground that a deeper enquiry should have been made or proper exercise was not done while making the assessment there is no finding by the CIT that there is any loss of revenue and the impugned receipt was subject to tax in A.Y. 2004-05 - the order passed by the AO cannot be termed as erroneous or prejudicial to the interests of revenue so as to assume jurisdiction by the CIT u/s. 263 of the Act - The CIT having not brought on record any error or omission or failure on the part of the AO so as to make the assessment order erroneous or prejudicial to the interests of revenue, the order of the CIT passed u/s. 263 of the Act has no legs to stand thus, the order of the CIT set aside Decided in favour of Assessee.
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2014 (5) TMI 38
Deletion of addition made Inadmissible expenditure Genuineness of expenses incurred under the head advertisement and publicity not proved Cheques issued and equal cash withdrawn Held that:- AO rightly was of the view that the assessee has failed to produce the books of account and given reasonable explanation to justify the nature of its claim, how it qualifies for deduction and how whatsoever evidence is brought on record does substantiate the theory put forth by it - Most of the bills issued by M/s. Ratna Enterprises are in seriatim, cheques issued by the assessee firm which were deposited in the said account of M/s. Ratna Enterprises, were withdrawn of equal amount on the same date, cheques and pay-in-slips have been prepared by one and same person in one hand-writing - the assessee has not rebutted the allegations and facts on record and no material rebutting the findings of the AO have been brought on record before the CIT(A) or before the Tribunal. Free of cost distribution of gifts Held that:- No identity of the customers have been placed on record, either before the AO or before the CIT(A) or Tribunal the payment through cheques by the party is not sacrosanct and furnishing the particulars is not enough Relying upon CIT vs. Precision Finance Pvt. Ltd. [1993 (6) TMI 17 - CALCUTTA High Court] and Kachwala Gems vs. JCIT [2006 (12) TMI 83 - SUPREME COURT] the CIT(A) is not justified in accepting the technical rule of evidence and ignoring the circumstances thus, the order of the CIT(A) set aside Decided in favuor of Revenue. Deletion of expenses on sale promotion Held that:- Since the additions have been deleted in quantum appeal by the CIT(A), and now the quantum appeal decided by the CIT(A) in favour of the assessee has been reversed by the order of even date the order of the CIT(A) will not survive the CIT(A) has not decided the issue on merits thus, the matter is remitted back to the CIT(A) for Adjudication Decided in favour of Assessee.
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2014 (5) TMI 37
Disallowance of bad debts Held that:- The assessee has filed party-wise details of sales made to these persons, income accounted for and the reasons for the amount written off as bad debts Relying upon T.R.F Limited Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] - it is not necessary for the assessee to establish that the debts, in fact, has become the irrecoverable - It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - the assessee has filed the details before the CIT(A) , but it has not been appreciated thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Disallowance of claim of additional depreciation Addition of MODVAT u/s 145A of the Act Held that:- The assessee was required to furnish the details of machinery or plant and increase in the installed capacity of production to claim additional depreciation - The assessee shall be given one more opportunity to furnish complete particulars including installed capacity, details of machinery etc. -The assessee shall also submit a certificate from the Chartered Engineer regarding the installed capacity so that the requirement of the AO can be satisfied in this regard thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Claim of deduction u/s 35(1)(iv) of the Act Capital expenses on research and development Held that:- Following CIT Vs. Deltron Ltd. [2007 (9) TMI 132 - HIGH COURT, DELHI] - while considering the assessees claim for deduction u/s 35(1) on account of expenditure on scientific research, the AO is not the prescribed authority in this matter and is not competent to determine as to whether the machinery was for research and development purposes or not - the CIT(A) was justified in holding that the AO could not have disallowed the expenditure without following the procedure laid down u/s 35(3) thus, there is no reason to interfere in the order of the CIT(A) Decided against Revenue.
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2014 (5) TMI 36
Validity of reopening of assessment u/s 147 of the Act Bar of limitation - Proceedings initiated after four years Held that:- The AO has completed the assessment u/s 143(3) r.w.s.147 of the Act on 26.8.2011 - CIT(A) annulled the assessment after observing that the reasons enumerated by AO for his action of reopening of assessment are not tenable and justified Relying upon M/s ICICI Home Finance Co.Ltd V/s ACIT [2012 (8) TMI 312 - BOMBAY HIGH COURT]. The same issue has been considered by AO as well as by CIT(A) and the Tribunal when the assessment was made u/s 143(3) of the Act the contention of the assessee that the AO has initiated re-assessment proceedings on the basis of the same facts which has been considered in the original assessment proceedings is accepted - there is no new facts which has come to the knowledge of AO for initiation of re-assessment proceedings also, re-assessment proceedings has been initiated after expiry of more than four years, as is evident from the notice issued u/s 148 dated 28.3.2011, which is after expiry of four years from the end of the relevant assessment year thus, the order of the CIT(A) is upheld that the action of AO was not justified Decided against Revenue.
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2014 (5) TMI 35
Disallowance of depreciation on goodwill Held that:- The decision in CIT vs Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] followed - Explanation 3 states that the expression `asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature - A reading the words `any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature' Decided in favour of Assessee. Disallowance of gratuity payment Held that:- The issue is now approved by the CIT as per the letter of approval appended in the APB thus, the assessee's prayer for allowance of the gratuity payment is allowed the order of the CIT(A) set aside Decided in favour of Assessee. Disallowance u/s 14A of the Act Held that:- The decision in M/s Just Dial Private Limited Versus Dy. CIT 9(2), Mumbai [2013 (12) TMI 770 - ITAT MUMBAI] followed - the application of Rule 8D is w.e.f. assessment year 2008-09 as per the decision of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT, [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the matter has been remitted back to the AO for fresh adjudication in the subsequent assessment year Decided in favour of Assessee. Taxability of income - Income from publication in yellow pages Held that:- The revenue is to be booked when the work is completed - the work undertaken gets spilled over in the next year, wherein, the assessee books its revenue & declares it - if the orders of the revenue authorities are to be sustained, the department will have a revenue gain, because, the AO has not made any adjustment to the income pertaining to the preceding year and has been booked in the current year - In effect, the assessee is being taxed for the preceding year, and as per the orders, for the current year as well - to keep the consistent approach and most importantly there being no revenue loss, the view of the revenue cannot be accepted thus, the order of the CIT(A) set aside and the AO is directed to delete the addition Decided in favour of Assessee. Disallowance of renovation and civil expenses Held that:- The premises renovated did not belong to the assessee and the assessee incurred expenses, to design the premises to a condition for its use - Since the premises are leased, the lessee always have an option to remove the alternations done by him/it, because he has to return the premises, at the end of tenor in the same condition, as it was taken - the licensee is authorized to remove all its renovations at the time of vacation or it can ask the licensor to take the same - the repairs and renovations are done only for the period of stay/tenor, which may be short or long, it cannot be said to giving an enduring benefit to the assessee - the expenditure incurred by the assessee on repairs and renovations are allowable expenses the order of the CIT(A) set aside and the AO is directed to delete the addition Decided in favour of Assessee. Disallowance of franchise termination compensation Held that:- There is an agreement for termination, but the amount as claimed is at variance, because as per the orders, the amount paid aggregates to ₹ 19,50,000/- and not ₹ 18,50,000 thus, the matter is remitted back to the AO for fresh for the issue of payment of termination compensation of ₹ 18,50,000 Decided in favour of Assessee.
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Customs
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2014 (5) TMI 56
Imposition of penalties - u/s 112(a) of the Customs Act 1962 - Cutoms Duty Erroneous business diligence - Duty & Interest paid - Held That:- Duty has already been discharged by importers alongwith interest - This Court finds that the penalties imposed on the importers and their employees is not sustainable The action of the importers or their employees in paying an amount for which was shown by the individuals who master minded the entire fraud, can at the most be an act of erroneous business diligence on their part - Such an action is not covered u/s 112(a) in as much as the importers or their employees never could have had a doubt that their goods are liable for confiscation, as the said goods were removed on BOE on which there was payment of duty - Importers having discharged the customs duty and the interest thereof on all the goods imported by them, the question of visiting them with penalty does not arise - The importer cannot be charged with the commission of omission which made the goods liable for confiscation - The importers and their employees have made out the case for setting aside the penalty imposed on them Relied upon M/s ITW India Ltd vs Commissioner of Customs, Chennai 2006(198) ELT.117 [2005 (10) TMI 392 - CESTAT, BANGALORE] Decided in favour of assesse.
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2014 (5) TMI 55
Applicability of unjust enrichment principle prior to 13.07.2006 amendment - Claim of refund - Pre-deposit - Finalization of provisional assessment - Held that:- It is not disputed that the excess amount paid by the assessee consequent to finalization of provisional assessment was required to be suo moto refunded prior to 1-8-1998 - Relying upon COMMISSIONER OF CUSTOMS Versus Hindalco Industries Ltd. [2008 (9) TMI 71 - HIGH COURT GUJARAT] - Principle of unjust enrichment is not applicable in such cases prior to 13.7.2006 Excess duty paid should be refunded without any claim made by assesse - The period involved in the dispute pertains to the period 1998-99 - As the disputed period is prior to amendment of Section 18 i.e. before 14.07.2006 and the assessment being provisional, the provisions of unjust enrichment are not applicable Therefore, the rejection of claim of ₹ 17.50 Lakhs by the lower authority is not sustainable. Commissioner (A) has recorded that amount deposited prior to adjudication of demand case did not remain pre-deposit as the said deposit stood adjusted against the duty confirmed in the demand order and deposit converted into duty, hence unjust enrichment is applicable - Finding of the Commissioner (A) is not convincing for the reason that even though the deposit made before adjudication of demand and it got appropriated against a demand of duty, if there is a contest to the said demand in form of appeal, the nature of deposit remained as a pre-deposit stood maintained - On setting aside the demand order by Tribunal, the action of appropriation of amount of deposit in duty and the whole order become non existent and such order cannot be of any help for the revenue to treat the amount deposited as a duty - Even if at one stage deposit made by the appellant is appropriated as duty but on setting aside the demand itself the appropriation also become null & void - Therefore, the doctrine of unjust enrichment to such a refund claim is not applicable - Assessees are entitled for the refund in question and impugned order is set aside Decided in favour of assesses.
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2014 (5) TMI 54
Bar of limitation - No notice of delay in filing appeal - preliminary grounds - Disposal without considering merits - No acknowledgment receipt of courier signed by assessee Opportunity of hearing - Held that:- The order which was purportedly sent by courier on 29.10.2012 could not have reached at destination (Ludhiana) on 30.10.2012, as is evident from the e-mail received from Professional Courier - This e-mail also indicate that, normally such kind of packets takes 3 to 4 days for delivering to consignee in Ludhiana, if are sent from Mundra - First appellate authority did not put to notice the appellant that there is delay in filing appeal and disposed it only on limitation - This is not a correct approach for disposing an appeal. First appellate authority should have disposed the appeal on merits and if he felt so strongly that appeal has been filed belatedly, he should have given an opportunity to the appellant to explain the delay It is found that there is no delay in filing the appeal before the first appellate authority - This Court is unable to go into merits of the case as the first appellate authority has not recorded any finding on the merits of the case, impugned order is set-aside Matter is remanded back to first appellate authority for disposal on merits Decided in favour of assesse.
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2014 (5) TMI 53
Liability to pay duty - Identification of Grey fabrics - Imported or not No Reference of demand in Show cause Notice - Expert Evidence Non-retracted statement of Director - Leviability of duty on the unit - 100% EOU or from some local traders - Illicit removal of grey fabrics Not sufficient Evidence Non-maintenance of separate record - Whether CESTAT is justified in holding that the Revenue has failed to establish from the documentary evidence that the grey fabrics were imported one and customs duty is liable to be paid, ignoring the material evidence being the statement of Director of the unit recorded u/s. 14 of the Central Excise Act, 1944 which has not been retracted by him at any point of time Held that:- In the show cause notice, issued u/s 124, itself, the demand was made for the duty, interest and levying of penalty for having removed the material without payment of customs duty leviable thereon - Order-in-Original dealt with the contention raised by both sides with regard to the import of fabrics used in the material which was said to have been illicitly removed - Thus, both the adjudicating authorities found clear breach of Notification No. 53/97, dated 3-6-1997 r/w provisions of Customs Act - This was in violation of EXIM policy and procedures laid down under the Customs law where imported grey fabrics on payment of customs duty was to be necessarily utilized for manufacturing final products of processed MMF and the same was required to be exported. Tribunal held that the findings of the lower authorities were not based on evidence, while accepting the fact that for removal of goods in illicit manner and for selling grey fabrics in small quantities in the market, there could not be possibly any evidence available - It is required to be specifically mentioned that Tribunal noted that there ought to be proper documentation for 100% EOU taking out the goods - As seen from the orders of all the adjudicating authorities that the Order-in-Original and the order of Commissioner (A) relied on the evidences that have been adduced by Department and also depended heavily on the statement given by the Director who has not retracted the same till the date - What had further weighed with the authorities is the fact that there was no separate maintenance of record which would reveal either the material having been imported or having been procured from 100% EOU. Again the orders of both the authorities go to unfailingly suggest and as mentioned hereinabove, by way of clearly given findings that there was no such documentary evidence, however, if the Tribunal still found that the material which had been placed before the authorities was not sufficient for them to reach to the conclusion with regard to such material on such a specific finding of Tribunal, it could have remanded the matter back to the authority who passed the Order-in-Original for it to examine in greater detail instead of setting aside orders of both the adjudicating authorities despite strongly worded reasoning - Therefore, matter is remanded back to the authority who passed the Order-in-Original for fresh consideration Order of CESTAT set aside Decided in favour of Customs.
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2014 (5) TMI 52
Payment of Demand - Non-sitting Tribunal - Release of duty drawbacks Commencement of Coercive Steps Undisposed Stay petition Held That:- However, as on date, since the first respondent/the Tribunal is vacant for some time and in the meanwhile by taking advantage of non-sitting of the Tribunal, as the second respondent is taking coercive steps, this Court directs the second respondent not to take any coercive steps till the disposal of the stay petition filed by the petitioner in No. C/S/266-2011 in C/357/2011, dated 23-11-2011 Decided in favour of Assessee.
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2014 (5) TMI 51
Importation of Mulberry Silk Fabrics Detention of Consignments Release of Consignments - - Unsuccessful in appeal & Review Held that:- Commissioner of Customs passed an order dated November 18, 2010, inter alia, holding that the Additional Commissioner of Customs was legally correct in dropping the proceedings against the notice Since, the application for review was also rejected - There can be no ground for detention of the consignments in question. Submission of department that the petitioner is required to make an application before the Assistant Commissioner (Seizure & Disposal) for release of the goods is difficult to accept -The Department seized the goods - Being unsuccessful in adjudication, in appeal or in the review application, the Department is obliged to immediately release the goods - Respondent nos. 1 to 3 are directed to forthwith release the consignments - Affidavits not having been called for, the allegations in writ petition shall be deemed not to have been admitted Decided in Favour of petitioner.
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Corporate Laws
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2014 (5) TMI 50
Winding up of company - Respondent not made payment of its dues even after statutory notice - Petitioner had placed the Fixed Deposit Receipts with the Corporation Bank - Respondent approached the Corporation Bank for Term loan - Bank required that the respondent company should tender security for the Term loan and therefore, the respondent company requested the petitioner, to give security on its behalf and also requested that the fixed deposits which the petitioner had placed with the Bank may be offered towards security for the loan to the respondent by Bank - therefore, petitioner agreed to allow the Bank to mark lien on the said two fixed deposits so that the respondent company can avail loan from the Bank to the extent of 90% of the value of the said two fixed deposits - Respondent failed to make payment of loan taken - Due to the respondent's default, the bank appropriated the fixed deposits towards outstanding loan against the respondent - Respondent contends that its Board of Directors had not sanctioned/approved decision to avail loan and/or to request the petitioner to allow its FDRs as collateral security and it was said Mr. Khurana who had on his own and without sanction/approval of respondent company / its Board of Directors entered into and executed said transaction by taking disadvantage of the position that he alongwith others (most of them were associate of petitioner / Mr. Khurana) was promoter of said MSK Projects (India) Ltd., i.e. the respondent and was also one of the Directors in the petitioner company. Held that:- In light of the said two letters dated 25.2.2011 and 9.3.2011 by the petitioner company and the respondent company respectively (and from other material / documents which are placed on record by the contesting parties), relevant fact which emerges is that when the petitioner company directly approached / communicated with the respondent company vide its said letter dated 25.2.2011, the respondent company forwarded its reply to the petitioner vide its letter dated 9.3.2011 (wherein the respondent company raised the issue about sanction in respect of the term loan by the company / its Board of Directors). controversy between the parties involve factual disputes, i.e. disputed facts and the said disputed facts are such which would necessitate documentary oral evidence by both sides. Ordinarily, Company Court would not entertain and maintain petitions invoking provisions under Sections 433 and 434 of the Act when the petition involves disputed facts which would oblige the parties to lead oral evidence. Such process would be feasible and practicable in ordinary civil remedy, i.e. suit proceedings before appropriate Court - Court is not inclined to entertain present petition and would rather relegate the parties to ordinary civil remedy with the clarification that the observations made in the order are only for the purpose of deciding maintainability of the petition and do not reflect views of the Court on the merits of the dispute or controversy, much less about the merits of the claim of the petitioner or defence of the respondent - Decided against appellant.
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Service Tax
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2014 (5) TMI 68
Waiver of pre-deposit of the service tax - Reversal of CENVAT Credit availed - applicant are now providing renting of immovable property service, management and maintenance or repair service, availed the credit of tax paid in respect of services used for construction of Mall - Held that:- The Tribunal in the matter of Galaxy Mercantile (2013 (10) TMI 820 - CESTAT NEW DELHI - LB) was dealing with the situation similar to that in the present case. In that case also a mall had been constructed by a contractor. The Service Tax on the construction of the mall was paid at concessional rate under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 on the condition that the contractor would not avail credit of duty paid on inputs used by him in the construction. The Tribunal in the case of Galaxy Mercantile (supra) took a view that reversal of credit/pre-deposit to the extent of 35% of the credit involved on inputs and capital goods would be sufficient for the purpose of entertaining the appeal on merits. At the prima facie stage we are of the view that the decision of the Tribunal in Galaxy Mercantile (supra) is applicable to the facts of this case - Time to make pre deposit is extended - Decided partly in favour of assessee.
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2014 (5) TMI 67
Service tax liability on Indian Railways Whether issuance of SCN in the name of Divisional Railway Manager is valid as competent party - Renting of immovable property service - Whether the CESTAT was right in holding the appeal to be an incompetent appeal when the dispute arose out of quasi-judicial proceedings inter-se between two departments of the Union of India (Central Govt.) as the Union of India was not impleaded - Held that:- Assessment was in respect of the Union of India through the Ministry of Railways. The Divisional Railway Manager, who is an employee of the Union of India or Ministry of Railway, is not the assessee. No show cause notice was issued to the Union Government. The adjudication did not take place against the Union Government. The order of adjudication and the demand that would be raised in pursuance thereof, would be enforced not against the Divisional Railway Manager but against the Union of India through the Ministry of Railways. Having regard to this position, it is but necessary that the proceedings commencing with the notice to show cause must be initiated against the Union of India through the Ministry of Railways - the entire exercise of adjudication which commenced with the notice to show cause is clearly a nullity. The show cause notice ought to have been issued against the Union of India through the Ministry of Railways and not against the Divisional Railway Manager who was but an employee and servant of the Ministry of Railways - Decided against Revenue.
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2014 (5) TMI 66
Penalty u/s 78 - Invocation of section 80 - Held that:- Respondent is engaged in providing security services. For the period under consideration, he had short paid the service tax. The proceedings were initiated for recovery as well as penalty. The Commissioner holding that the respondent had manoeuvering intention in not paying the service tax in full. The respondent approached in appeal. The Tribunal in facts of the case held that the assessee had bona fide belief that as his clients did not pay service tax as indicated in the invoice, his liability to pay the same to the Department did not arise. The Tribunal noted that such nonpayment was by the service requirement of the assessee, which included Vadodara Municipal Corporation, Surat Municipal Corporation and Gujarat Electricity Corporation /Board. It was also noted that as and when he had received the payments, he had promptly paid the same with the authority. The Tribunal relied on the decision of the Karnataka High Court in the case of Commissioner of Income-tax, Bangalore v. Motor World, reported in [2012 (6) TMI 69 - KARNATAKA HIGH COURT]. When section 80 of the Act gives discretion not to impose penalty, if the assessee shows sufficient cause for not depositing the service tax and when the Tribunal has adverted to relevant facts to hold that there was sufficient cause on the part of the assessee - No substantial question of law arises - Decided against Revenue.
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2014 (5) TMI 65
Demand of service tax - Banking and financial services - Credit card facility - present dispute relates to the classification that whether the credit card facility provided by the appellant falls within the term "banking and other financial services" and is accordingly covered under clause (zm) of Section 65(105) of the Act and whether such service is not liable to service tax or NIL rate of duty. Thus, we are of the view that such dispute can not be examined by this Court and can only be examined by the Apex Court in an appeal under Section 35L of the Act - Following decision of Naveen Chemicals Mfg. & Trading Co. Ltd., Vs. Collector of customs [1993 (9) TMI 107 - SUPREME COURT OF INDIA] - Appeal not maintainable.
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2014 (5) TMI 64
Demand of service tax - Penalty u/s 78 - Intention to evade tax - Held that:- the "intention to evade service tax" is necessary to attract penalty under Section 78 of Act, 1994 - if the due tax has been deposited alongwith interest and there is no specific finding that there was any intention on the part of assessee to evade payment of tax, imposition of penalty is not justified - in the entire order of adjudicating authority, there is not even a whisper to suggest that there was any intention on the part of petitioner to evade service tax. Despite repeated query, learned counsel appearing for respondents could not show from impugned order that any such finding has been recorded. The impugned orders, to the extent as above, therefore, cannot sustain - Penalty set aside - Following decision of M/s Govind Sugar Mills Limited, Lakhimpur Khiri Vs. Commissioner of Trade Tax [2008 (4) TMI 695 - ALLAHABAD HIGH COURT] - Decided partly in favour of assessee.
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Central Excise
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2014 (5) TMI 61
Denial of rebate claim - Discrepancy in description of goods - Held that:- so far as description of goods do not tally in invoice no. 27 and ARE-I are concerned, it was mentioned in show cause notice and has consistently been found correct. The petitioner could not give any explanation in this regard. Similarly, for the purpose of difference of weights, the details have been discussed in the order of A.C., C.C.E. and petitioner got opportunity even before Appellate Authority but could not explain the same satisfactorily. The difference could not be explained even before this Court - No justifiable ground to interfere with impugned order - Decided against assessee.
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2014 (5) TMI 60
Denial of rebate claim - Alteration in statutory order by executive order - Held that:- By means of Circular in question, Central Board of Excise and Customs has revised the procedure, which was to be followed in respect to acceptance of proof of exports, though the procedure was already prescribed in Notification dated 6.9.2004 and, therefore, the question of revising procedure for such proof touching upon the matter already covered by Notification dated 6.9.2004 does not arise for the reason that an executive order, laying down something otherwise than what is prescribed in the Notification would not be permissible in law. It is well established that an executive order cannot prevail over the statutory rules. Mere executive decision cannot authorize the authorities concerned to do something which is not otherwise permitted under statutory rules. It is well settled that an executive order cannot prevail over statutory rules - Decided in favour of assessee.
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2014 (5) TMI 59
Interest on refund claim - Section 11-BB - Held that:- A bare perusal of Section 11BB of the Act, reveals that the payment of interest is not depended on the claim by the party. It is automatic. In case, if refund is not paid within three months from the date of receipt of the application, the authority concerned is under obligation to pay the interest. In Section 11BB of the Act the word used is "there shall be paid to the applicant." It means that it is not discretionary and has to pay. The payment of interest is statutory and automatically. The waiver of the interest by the party has no relevance and on the said ground payment of interest can not be denied. Petitioner is entitled for the interest under Section 11BB of the Act on the refunded amount, if the amount has been refunded after three months from the date of receipt of the application. Having regard to the facts and circumstances, of the present case, we are not impressed with the argument of learned counsel for the petitioner that the petitioner is entitled for interest on interest - Decided partly in favour of assessee.
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2014 (5) TMI 58
Reduction in pension - Performance of quasi judicial functions - Initiation of disciplinary proceedings - Exceeding his financial powers as the matter related to approval of classification lists - Held that:- We have endeavoured to analyse the Circular dated 14.5.1992, which prescribes the monetary limits for adjudication. No doubt, a monetary limit has been prescribed for different officers, but the Circular is qualified by the expression other than the cases relating to approval of classification lists and price lists The petitioner was performing this very function and, thus, the financial limit would not inhibit him from deciding the cases. This aspect stands completely clarified by both the stand taken by the respondents before us in the pleadings as well as by the cross examination of the witness of the department. Petitioner would have no option but to act in accordance with the judicial hierarchy of the appellate authority being CEGAT, which had already expressed its view on the issue of this classification vide order dated 20.12.1990. Not only that, the petitioner brought to the notice of the Inquiry Officer that identical orders were passed by other officers, as per Exhibits D- 5, D-6 and D-7 placed before the Inquiry Officer, where the same orders of the CEGAT had been followed. We find it quite surprising that such a hue and cry has been made in the case of the petitioner in the aforesaid circumstances, especially when there was no loss of revenue in view of the Special Leave Petition being dismissed as also the review application. - Impugned order is set aside - Decided in favour of petitioner.
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2014 (5) TMI 57
CENVAT Credit - Whether in the facts and circumstances of the case the Hon'ble CESTAT has committed an error in concluding that Cenvat Credit on the inputs received is admissible to the respondent on the ground that no action is taken by the Revenue at the supplier's end, especially when there are no provisions of law for such action - Held that:- a manufacturer would be entitled to avail the cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rule 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the cenvat credit. It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (5) TMI 63
Rate of Tax Classification of fabricated steel Rectification of assessment order - Jurisdiction of Tribunal - Section 22 of U.P. Trade Tax Act Whether manufacturing of fabricated steel by the respondents herein is to be assessed at the rate of 7.5% instead of 3% - Held that:- Insofar as the order passed by the First Appellate Authority in rejecting the Revenue's application u/s 22 High Court has rightly come to the conclusion that the First Appellate Authority was not justified in rejecting the application since there was an error apparent on the face of record and because the order of assessing officer had merged in the order of First Appellate Authority, the rectification application filed by the Revenue before the First Appellate Authority was maintainable - The High Court while partly allowing the revision petition had come to the conclusion that the power given to Tribunal is not co-extensive with the powers of the assessing officer and hence the Tribunal can only restore assessment order but cannot enhance the turnover on tax. However, High Court has permitted the Revenue to rectify the orders passed by the assessing authority for the assessment years 1971-72, 1973-74 and 1974-75 only and confirmed the orders passed by the First Appellate Authority and Tribunal - Since the prayers sought for by the Revenue in this appeal have already been granted by the High Court and accordingly complied with by the Revenue, nothing survives in these appeals for our consideration and decision and thus, these appeals require to be disposed of in light of the same Therefore, this Court confirms the judgment and order passed by Tribunal and confirmed by High Court Decided against Revenue.
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2014 (5) TMI 62
Amendment of registration certificate with retrospective effect Held that:- Certificate of registration was granted to the dealer on 06.12.1990 including certain items - The said certificate came to be amended by assessing authority whereby certain items were deleted from the certificate of registration by order dated 26.10.1993 - The said order has been set aside by Tribunal restoring the original certificate - That means to show that the order passed by the Tribunal has to be understood to have given retrospective effect to its own order by restoring the earlier order passed by the assessing authority - Since the order passed by Tribunal restored the certificate of registration dated 06.12.1990 and quashed amended certificate of registration which operated retrospectively, High Court ought not to have observed that the order passed by Tribunal is prospective only - Appeals are allowed and orders passed by the High Court are set aside and the order of the Tribunal is restored Decided in favour of assessee.
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