TMI Tax Updates - e-Newsletter
June 14, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Wealth tax
Highlights / Catch Notes
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Income Tax:
Revision u/s 263 - period of limitation for revision order - The order passed by the CIT was admittedly issued only on 01-05-13 diapatched by post only on 08-05-13 and served on assessee later and it was in his custody till 01-05-2013 and was issued only on 01-05-13. In other words it was the order was issued only after 01-05- 2013 after the expiry of the period of limitation - AT
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Income Tax:
Penalty u/s. 271(1)(c) - the notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income - Penalty cannot sustain - AT
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Income Tax:
Bogus purchase - Deduction u/s 80IB - even if regarded as bogus purchase, the same would stand to be disallowed u/s. 37(1), leading to an increase in the assessable profits of the eligible unit - had it not been so, the addition of income u/s. 69C, i.e., on account of expenditure not explained as to its source, the same would not be liable to be regarded as the profit of the eligible unit. - AT
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Income Tax:
Registration u/s.12A denied - DIT(E) declined registration as is mixed trust (Charitable & non charitable trust) with lack of binding legal obligation on trustees in regard to application of Income - DIT(E) directed to grant the registration within 60 days - AT
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Income Tax:
Assessment u/s. 153A in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee - assessment set aside - AT
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Customs:
Import of second hand cars misdeclaring them as new - by giving the proximity of the date of manufacture and the date of import of the car, it cannot be said that the said car ceased to be a new car and became a 'second hand' car at the time of its import. - HC
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Service Tax:
Refund claim - Notification No. 41/2007-ST - The transportation of the goods between the ICD and the port was clearly covered as a specified service - AT
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Service Tax:
Management, maintenance or repair service, construction of complex service and in respect of late payment charges recovered from customers under construction of complex service - the related amount so collected and transferred to the cooperative societies when they are formed by the residents prima facie may not be liable to service tax - AT
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Central Excise:
Cenvat Crediti - processing on the barrels to convert into final product, by fixing of injection moulded caps, inners, etc was not amount to manufacture - once the duty of Excise is paid by utilizing the credit availed by an assessee, the same would amount to reversal of credit and there can be no requirement of any further reversal. - AT
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Central Excise:
Cenvat Credit _ Manufacturer has made a provision for written-off but inputs and components were not actually not written off - He has used these inputs and components later on, in the manufacture of final goods - as per provision of Rule 3 (5B) appellant is entitled to take cenvat credit on these inputs and components - AT
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Central Excise:
Eligibility of Cenvat credit of services at their retail outlets from where sales are effected - the appellant has correctly availed CENVAT Credit on input services availed at the retail outlets which will be the place of removal in the present case - AT
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Central Excise:
Manufacturer cannot take place of excisable goods being Sugar et cetera, without repair and maintenance of capital equipment like sugar Cane cutter et cetera - the appellant is entitled the cenvat credit on the same - AT
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Central Excise:
Removal of goods for export without payment of duty - goods cleared for export - goods removed having been subject to further manufacture and finally exported by the manufacturer - benefit of export cannot be denied - AT
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (6) TMI 458
Revision u/s 263 - period of limitation for revision order - CIT(A) held that the assessee is not eligible for deduction to an amount in respect of gain of foreign currency loan, which was included and claimed as deduction u/s. 80IA before the AO by observing as it is not a profit and gain from industrial undertaking or enterprises engaged in infrastructure development u/s. 80IA of the Act - Held that:- The order passed u/s. 263 of the Act by the CIT was admittedly issued only on 01-05-13 diapatched by post only on 08-05-13 and served on assessee later and it was in his custody till 01-05-2013 and was issued only on 01-05-13. In other words it was the order was issued only after 01-05- 2013 after the expiry of the period of limitation. As held by the Hon’ble High Court in the case of Government Wood Works [1987 (1) TMI 451 - KERALA HIGH COURT ] to make the order complete and effective it should be issued so as to be beyond the control of the authority concerned. Therefore, the ratio of the Hon’ble Kerala High Court in the case of Government Wood Works supra is applicable to the facts of the present case. Respectfully following the same, we hold that the impugned order passed u/s. 263 of the Act by the CIT is barred by limitation - Decided in favour of assessee
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2016 (6) TMI 457
Penalty u/s. 271(1) (c) - income disclosed u/s. 132(4)and included in the return filed u/s. 153A - Held that:- On perusal of the said show cause notice issued u/s. 274 r.ws. 271(1)( c) of the Act purportedly issued to show cause why the penalty shall not be imposed, We find that irrelevant portion of such notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income. See Suvaprassanna Bhattacharya case [2015 (12) TMI 43 - ITAT KOLKATA] - Decided in favour of assessee.
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2016 (6) TMI 456
Expenses incurred for business re-organization - revenue v/s capital - AO has disallowed the expenses comprising of VRS, salary and other over-head cost of personnel by treating them as capital expenditure confirmed by CIT(A) - Held that:- As decided in assessee's own case for earliear AY [2010 (11) TMI 766 - ITAT, Kolkata] for allowing the deduction of VRS expenses as revenue expenses. With regard to the expenses incurred in connection with the re-organisation expense which comprise mainly salary and overhead cost of personnel engaged in the restructuring exercise, we find that all of these expenses are revenue in nature. These expenditures do not result into any fixed assets. See CIT v. JCT Electronics Ltd. [2011 (1) TMI 918 - Punjab and Haryana High Court]. Finally we hold that the VRS expenses amounting to ₹ 421.24 lacs will be allowed in five equal instalments in the manner as laid down under section 35DDA of the Act. For the salary of the personnel along with their overhead cost amounting to ₹ 102.69 lacs engaged in the business reorganisation activity will be allowed in full as revenue expenditure. AO is directed accordingly. - Decided in favour of assessee Disallowance of excess depreciation on the WDV of the block of assets - Held that:- The instant issue is already covered in favour of assessee in its own case for the assessment year 04-05 wherein held Depreciation claimed by the assessee was disallowed in earlier year based on WDV of the block of assets arrived at after adjusting sale consideration of the undertaking viz., fertilizer, old fibres, seeds, Agro chemicals etc., transferred following which depreciation as per reduced WDV adopted by the Department works out at ₹ 22,02,10,622/- as against claim of ₹ 24,27,86,408/- keeping in view the practice adopted in the past assessment years, the difference amount of depreciation (Rs.24,27,86,408/- - ₹ 22,02,10,622/-), being reduced to the extent of ₹ 2,25,75,786- against the claim of the assessee - Decided in favour of assessee Disallowance of deduction for pharmaceutical revenue expenses - Held that:- In the instant case, assessee was having several other business units and the expenses were incurred for the running of the business units on continuous basis and the unit which was under consideration owned by the assessee till the actual date of transfer. In the similar facts and circumstances, the Hon’ble Supreme Court in the case of B.R. Ltd. v. V.P.Gupta, CIT [1978 (5) TMI 3 - SUPREME Court], wherein the head note – Section 72 of the Income-tax Act,. 1961 [Corresponding to section 24(2) of the Indian Income-tax Act, 1922] – Losses – Carry forward and set off of business losses – Assessment years 1954-55 to 1956-57 – Whether test to determine whether two business constitute same business, is unity of control and not nature of two lines of business – Held. Yes – Business of import of woolen goods carried on by assessee-company was stopped due to losses during assessment year 1953- 54 – From assessment year 1954-55, it carried on business of exporting of cotton textiles and earned profits – There was common control and common management of same board of directors of business of import and export – Whether on facts, it could be said that there was dovetailing or interlacing between business of import and business of export carried on by assessee and that they constituted same business – Held, yes. Respectfully following the decision of the Hon’ble Supreme Court in the case of B.R. Ltd. (supra) we allow assessee’s ground.- Decided in favour of assessee Accepting of valuation of Chowringhee property - on the basis of DVO report or taking the valuation made by the registered valuer engaged by the assessee - whether the valuation made by the DVO as on 01.04.1981 should be adopted for working out of capital gains in the instant case? - Held that:- In the instant case, assessee has shown fair market value more as determined by the DVO, therefore, in our considered view, lower authorities have no power to refer the matter before DVO u/s. 55A of the Act.- Decided in favour of assessee Disallowance of expenses under section 14A - Held that:- The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under the income tax. Computation of expenditure at 1 per cent of such dividend income which, according to them, is the thumb rule applied consistently. See COMMISSIONER OF INCOME TAX, KOLKATA-IV, KOLKATA Versus M/s. RR. SEN & BROTHERS (P) LTD. [2013 (7) TMI 260 - Calcutta High Court] Disallowance of brought forward business loss and long term capital loss - Held that:- Ground raised by the assessee is consequential in nature and will have the effect as per the order of the AO of the relevant years. Hence, we allow assessee’s ground for statistical purposes. Addition on account of custom duty paid before filing income tax return - addition by virtue of the provisions of section 43B of the Act which was not included in closing stock of finished goods in terms of provision of Sec. 145A of the Act - Held that:- From the provision of the section we find the amount of any tax duty cess or fee which is actually paid or incurred to bring the goods to the place of its location and condition as on the date of valuation needs to be included in the valuation of closing stock. In the instant case, the goods had not reached to the location of the assessee but are lying in the bounded warehouse, which means that the liability for the custom duty has not accrued on the date of valuation. Therefore, in our considered view such duty is not liable to be included in the value of the closing stock. - Decided against revenue Addition made on account of interest paid on borrowed fund which was diverted for the purchase of shares - Held that:- AR demonstrated that the investment was made out of the own funds and no borrowed funds was investment in that investment, as such Ld. AR prayed for the disallowance of the addition made by AO on account of borrowed fund. From the aforesaid discussion, we find that AO has disallowed the interest expenses on account of holding that the investment was made out of the borrowed fund, however, Ld.AR before us has demonstrated that no borrowed fund was utilized in making such investment. In rejoinder, Ld. DR has not raised any objection to controvert the argument of Ld. AR. Now the question before us arises for adjudication so as to whether the borrowed fund has been utilized to make the investment in the sister concern. We find force from the submission of Ld. AR that there are sufficient funds available for the investment and as such no borrowed fund was utilized for the aforesaid investment. Therefore, in our considered view no disallowance of interest on the borrowed fund required to be disallowed as contemplated u/s 36(1)(iii) of the Act.- Decided against revenue Disallowance of payment to organization not notified by the Director General exemption in official gazette - Held that:- Deduction u/s. 35 of the Act is available if the donation is made to the notified organization by the Central Govt. of India in the Official Gazette. In the instant case, assessee failed to provide the copy of the Notification to justify that the institution was approved. In view of this, we reverse the order Ld. CIT(A) - Decided against assessee Addition made on account of delayed payment towards PF contribution - Held that:- From the assessment order we find that all the payment of employees contribution were made before the due date of filing of Income Tax Return as specified u/s.139(1) of the Act. Now, this issue stands covered in favour of assessee and against the Revenue by the decision of Hon’ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] - Decided against revenue MAT credit in the same manner as in the case of TDS and Advance Tax for the purpose of calculation of interest u/s 234B and 234C - Held that:- Similar issue in assessee’s own case for AY 2002-03 decided by the Co-ordinate Bench of this Tribunal by restoring to the file of AO for fresh adjudication wherein held Entitlement of MAT credit is not dependent upon any action taken by the Department. However, quantum of tax credit will depend upon the assessment framed by the Assessing Officer. Thus, the right to set off arises as a result of the payment of tax under section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. - Decided in favour of assessee by way of remand. Capitalization of premium paid for premature redemption of debenture - Held that:- As decided in f DCIT v. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] wherein held Expression “for the purpose of business" occurring in s. 36(1)(iii) indicates that once the test of "for the purpose of business" is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under s. 36(1)(iii)-This provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset-What sub-cl. (iii) emphasizes is the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital- Sec. 36(1)(iii) is a code by itself-Determination of actual cost in s. 43(1) has relevancy in relation to ss. 32, 32A, 33 and 41-"Actual cost" of an asset has no relevancy in relation to s. 36(1)(iii)-Hence, Expln. 8 to s. 43(1) has no relevancy to s. 36(1)(iii)-Proviso to s. 36(1)(iii) inserted by the Finance Act, 2003, w.e.f. 1st April, 2004, is only prospective and would not apply to assessment years in question - Decided in favour of assessee Disallowance of entrance fee paid to the club - Held that:- This issue is squarely covered in favour of assessee by judgment of Hon’ble jurisdictional High Court in the case of Assam Brook Ltd. v. CIT [2004 (1) TMI 46 - CALCUTTA High Court ] as held that if the management pays some amount for the upliftment/running of the club in question in an effective way then it must be held that the said payment was made in the interest of the company so that its employees remained happy and consequently the work of the company is not hampered in any way due to dissatisfaction on the part of its employees. As this payment was made by the company to the club keeping its business interest in mind, the said payment must be held to be business expenditure and accordingly as per s. 37 the assessee-company is entitled to get deduction. - Decided in favour of assessee Disallowance of expenses incurred in relation to transfer of catalyst business undertaking as a going concern for a slum price - Held that:- The provisions claimed by the assessee have not been crystallized during the year under consideration. All the provisions were depending on the outcome of the future event. There was a time limit of five years from the date of the agreement for the transfer of the undertaking and the period of five years have expired so in the interest of justice and fair play we are inclined to restore the issue to the file of AO for fresh adjudication as per law. Hence this ground of assessee appeal is allowed for statistical purpose. Disallowance u/s. 80IB - Held that:- As observed that the assessee has failed to furnish the prescribed certificate in Form No. 10CCB duly certified by Chartered Accountant for claiming the deduction u/s. 80IB of the Act. - Decided in favour of revenue
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2016 (6) TMI 455
Estimation of the assessee’s income - unaccounted receipt - reliance of books of accounts - Held that:- The assessee’s books of accounts (including note books and other documents) would indicate the purchase or the sale price and, therefore, yield the undisclosed profit, which may be worked either on the basis of the percentage or at ₹ 250 per box. In this regard, we do note that the assessee has also stated vide his said answer that there is no margin ‘now’. This is firstly inexplicable in-as-much as the assessee performing an economic function, as also assuming business risk, should definitely stand to gain a margin, even if nominal. Secondly, the statement of ‘no margin’ is qualified by the word ‘now’, and which would only indicate a reference to recent months, while here the year under reference is the financial year 2006-07. Coming, next, to the turnover by way of subscription, the assessee’s operating results would first be required to be reckoned after elimination of the STB turnover, against which no profit has been admittedly disclosed by the assessee. We further observe that the expenses claimed by the assessee are in the nature of semi-variable expenditure, so that they would vary with the increase in the volume, though not in linear proportion thereto. As such, to contend, as does the assessee, that its’ profit be estimated at 11.95%, i.e., as reported for A.Y. 2005-06, or justifying its results with reference thereto, is not acceptable in-as-much as the expenditure would not stand to increase in the same proportion (of sales). The turnover for A.Y. 2005-06, assuming the entire of it as of other than STBs, to our mind, represents a normative level (attained after over a decade of being in business), based on which the income for the subsequent years could be estimated. The expenditure can be said to have stabilized at 88% of the turnover. The excess turnover would therefore entail expenditure not to the extent of 88% (100-12) thereof. We estimate the same at 2/3 thereof, i.e., at say 58.66% or (say) 60%. As such, the additional turnover would entail a margin of 40%. The additional turnover (over that for A.Y. 2005-06), i.e., ₹ 17.33 lacs (Rs.79.87 lacs – ₹ 62.54 lacs) would yield a profit of 40%,while the balance turnover of ₹ 62.54 lacs would a normative rate of 12%, i.e., at a total profit of ₹ 14.44 lacs or at a net profit of a little over 18%. To this would stand to be added, of-course, the profit on the turnover on STBs, if any, as indicated above. Similarly for A.Y. 2007-08, the second year. - Decided partly in favour of assessee.
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2016 (6) TMI 454
Validity of the proportionate deduction to the assessee’s, a builder and developer, housing project to meet the stipulated criteria of the maximum built-up area of 1000 sq. ft. per section 80-IB(10)(c) - Held that:- Proportionate deduction on the profits of a housing project which otherwise satisfies the condition of section 80-IB(10), i.e., as referable to residential units having the maximum built-up area as prescribed per clause (c) thereof, would qualify for deduction on a proportionate basis, i.e., to the exclusion of the other residential units. Addition u/s. 69C - Held that:- whether the ‘addition’ is of unexplained expenditure, deemed as income u/s. 69C, or would appropriately be disallowable as an expenditure u/s. 37(1)? - Held that:- We are at loss to understand as to how and on what basis the assessee having claimed the expenditure through its’ books of account, so that the source is explained with reference thereto, the Revenue regards it as unexplained expenditure and, consequently, deems it as income u/s. 69-C. We, accordingly, agree with the ld. CIT(A) that even if regarded as bogus purchase, the same would stand to be disallowed u/s. 37(1), leading to an increase in the assessable profits of the eligible unit. We may here also clarify that had it not been so, the addition of income u/s. 69C, i.e., on account of expenditure not explained as to its source, the same would not be liable to be regarded as the profit of the eligible unit. We have already held that the addition as made has been rightly regarded by the ld. CIT(A) as a disallowance u/s. 37(1). We, therefore, accepting the assessee’s plea that the entire amount ‘added’ be regarded as a disallowance, approve of the allowance of the assessee’s claim for deduction u/s.80-IB(10)(a) with reference to the increased amount and directed for the computation of deduction u/s.80-IB(10) at the amount so determined.
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2016 (6) TMI 453
Registration u/s.12A denied - DIT(E) declined registration as is mixed trust (Charitable & non charitable trust) with lack of binding legal obligation on trustees in regard to application of Income - Held that:- The main object are charitable in nature and all the activities are not restricted to any cast or creed. Even these facts were accepted by the DIT(E) as on in para 4, page 9 of the order (also reproduce as clause (e) of reason for denial of registration at page no.1 of Fact sheet. Panch Pratikams and other are just for teaching of morals to the general public. It is spread to general public, therefore, trust is an charitable trust. However, at the time of grant of registration director of Exemption is required to verify only the object of the trust and whether the activities of trust are genuineness. The Hon’ble Supreme Court in the case of Dawoodi Boharh Jamat [2014 (3) TMI 652 - SUPREME COURT ] held that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under Section 11 of the Act. Hence, registration required to be granted. In view of the above, we direct the DIT(E) to grant registration within a period of 60 days from the date of receipt of this order of Tribunal. - Decided in favour of assessee.
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2016 (6) TMI 452
Reopening of assessment - Deduction under section 80IB(10) allowed excessively to the extent that it is beyond the amount of income under the head ‘business or profession’ - CIT(Appeals) allowing assessee’s claim for deduction under section 80IB(10) to the extent of gross total income and not restricting the same to extent of income under the head ‘business and profession’ - Held that:- It is a trite law that ‘reason to believe’ referred to in Sec. 147 of the Act is one which is prudent and plausible in law and not based on any misconception either in law or on facts. In the present case, the reasons recorded clearly suggest that Assessing Officer is under a misconception in inferring that there is an excessive grant of deduction u/s 80IB(10) of the Act. Ostensibly, the proposition in the mind of the Assessing Officer is not borne out of the bare phraseology of the relevant provisions, as we have seen in the earlier part of this order, and rather, it is contrary to the legal position approved by the Hon’ble Bombay High Court in the case of J.B. Boda & Co. Pvt. Ltd. (2010 (10) TMI 1102 - BOMBAY HIGH COURT ). In view of the aforesaid discussion, in our view, the reasons recorded by the Assessing Officer suffer from an infirmity of being misconceived in law and, therefore, initiation of proceeding thereupon is bad in law. Consequently, the assessment finalised by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act dated 6.12.2012 is held to be invalid and bad in law, and is hereby set-aside - Decided in favour of assessee.
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2016 (6) TMI 451
Adoption of FMV - claim of deduction U/s 50C - allowance of indexation - inheritance of property - AO taken value on the basis of DVO’s valuation - Held that:- It is undisputed fact that the assessee inherited the property from his mother in law and has 50% share in it, which has been sold during the year under consideration at ₹ 1.20 crores. The assessee’s share was ₹ 60.00 lacs, which has been disclosed. The assessee had computed the capital gain by considering the FMV as on 01/4/1981 at ₹ 1,92,282/-. However, the ld. Assessing Officer had taken value at ₹ 1,28,700/- on the basis of DVO’s valuation. It is settled law that the Assessing Officer cannot refer this issue U/s 55A to the DVO as the assessee has shown FMV as on 01/4/1981 at ₹ 1,92,282, which is more than FMV decided by the DVO at ₹ 1,28,700/-. Sub-section (a) of Section 55A of the Act had been amended by the Finance Act, 2012 w.e.f. 01/7/2012 and variance word inserted in this sub-section. Therefore, the ld Assessing Officer is directed to allow the indexation for the F.Y. 1981-82 on ₹ 1,92,282/-. Further the assessee had claimed improvement cost in F.Y. 2000-01 at ₹ 3.00 lacs and in F.Y. 2004-05 at ₹ 1,30,000/- in which indexation has been claimed by the assessee but the assessee had not produced any evidence before the lower authority to demonstrate that his mother in law had incurred any cost on improvement. Even registered valuer of the assessee and DVO of the department has not referred any improvement in the valuation report, therefore, we dismiss the assessee’s appeal on indexation claimed in F.Y. 2000-01 and 2004-05. Deduction U/s 54F of the Act on two flats - Held that:- This issue has been considered by the various courts and in number of cases that this deduction is allowable on even two flats, which can be a complete unit or even can be on different floors of the apartment. Accordingly we allow the deduction U/s 54F of the Act on two flats. Adoption of sale consideration - Held that:- As for deduction U/s 54, the sale consideration is to be taken on the basis of actual sale consideration received by the assessee not determined by the stamp authority for the registration purposes or determined by the DVO referred U/s 50C of the Act.
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2016 (6) TMI 450
Scope of jurisdiction u/s. 153A - incriminating material found during the course of search - Held that:- Additions made by the AO are beyond the scope of section 153A of the Income Tax Act, 1961, because no incriminating material or evidence had been found during the course of search so as to doubt the purchases. It was noticed that as on the date of search i.e. 26.4.2010, no assessment proceedings were pending for the year under consideration and the AO was not justified in disturbing the concluded assessment without there being any incriminating material being found in search. In fact, in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal. Therefore, in our considered opinion, the action of the AO is based upon conjectures and surmises and hence, the additions made on the assessed bogus purchases is not sustainable in the eyes of law, because this issue in dispute is now no more res-integra in view of decision of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ] - Decided in favour of assessee
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2016 (6) TMI 449
Reopening of assessment - whether the AO can initiate proceedings u/s 147/148 on the basis of certain communication received from his superior revenue authorities showing that the assessee has been provided with accommodation entry to the tune of ₹ 15,00,000/- by a shell company/concern floated by S.K. Gupta? - Held that:- Basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. See PR. Commissioner of Income Tax-4 Versus G & G Pharma India Ltd. [2015 (10) TMI 754 - DELHI HIGH COURT] - Decided in favour of assesee
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Customs
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2016 (6) TMI 460
Import of second hand cars misdeclaring them as new - Eligibility for grant of benefit of Notification No. 21/2002-Customs dated 1st March 2002 - to settle differential customs duty and interest - Confiscation in lieu of redemption fine and imposition of penalty - Held that:- by giving the proximity of the date of manufacture and the date of import of the car, it cannot be said that the said car ceased to be a new car and became a 'second hand' car at the time of its import. The impugned order of the CCESC giving the benefit of the Customs Notification dated 1st March 2002 and determining the differential customs duty to the tune of ₹ 7,92,228 cannot be said to be perverse and warranting any interference by this Court. Other directions issued by the CCESC regarding interest, penalty and fine in lieu of confiscation and granting immunity from prosecution to the Respondent also do not require interference by this Court. - Petition disposed of
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2016 (6) TMI 459
Seeking direction for disposing of fresh representation - Refund of seized rubber on market value - Commissioner sanctioner refund of ₹ 1.55 lac instead of ₹ 5,68,174/- - Held that:- we finally dispose of this writ petition with a direction to the Assistant Commissioner of Customs, (Preventive) NER Region, Shillong to decide the representation 21.8.2015 of the petitioner by a reasoned order within 45 days from the date of receipt of a copy of this order and communicate the order to him. - Petition disposed of
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Service Tax
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2016 (6) TMI 475
Demand of Service tax alongwith interest and penalties - Management, maintenance or repair service, construction of complex service and in respect of late payment charges recovered from customers under construction of complex service - Held that:- an amount of Rs. 18,49,532/- has already been remitted. Regarding the remaining component of ₹ 88,24,333/- it is found that the related amount so collected and transferred to the cooperative societies when they are formed by the residents prima facie may not be liable to service tax in view of judgement of CESTAT in the case of Kumar Beheray Rathi Vs. CCE, Pune-III [2013 (12) TMI 269 - CESTAT MUMBAI]. However, the said judgement is distinguishable to the extent that in the present case as pointed by Revenue that the appellant had the freedom to utilise this amount for maintenance of buildings up to the time the residents cooperative societies came into existence while in the case of Kumar Behary Rathi, CESTAT had clearly given a finding that the builder was not in the business of maintenance of immovable property. Therefore, a pre-deposit of ₹ 30 lakhs would meet the requirement of Section 35F of Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Accordingly, we order pre-deposit of ₹ 30 lakhs within six weeks. Compliance is to be reported on 15.7.2016. - Stay granted
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2016 (6) TMI 474
Refund claim - Notification No. 41/2007-ST - Transportation of goods from factory to ICD and from ICD to Port - documents evidencing payment of Service like debit notes, invoices, Bank statement etc. submitted by appellant - Held that:- the service tax paid for transport of goods from the factory to ICD, it is seen that Notification 41/2007 did not cover the same for the purpose of refund and therefore refund thereof is not admissible. The transportation of the goods between the ICD and the port was clearly covered as a specified service under Notification 41/2007-ST. The remaining issues relating to debit notes and invoices are also covered in favour of the appellant vide the Judgments of CESTAT in the case of M/s. Shivam Exports, M/s. Mecshot Blasting Equipment (P) Ltd. And M/s. Shree Ram Industries Versus CCE Jaipur [2016 (2) TMI 259 - CESTAT NEW DELHI], SRF Ltd. vs CCE, Jaipur [2015 (9) TMI 1281 - CESTAT NEW DELHI] and M/s Suncity Art Exporters Versus CCE & ST, Jaipur- II [2014 (11) TMI 251 - CESTAT NEW DELHI]. - Decided partly in favour of appellant
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2016 (6) TMI 473
Refund claim - unutilized credit accumulated prior to date of registration - Rule 5 of CCR 2004 - 100% EOU - Business Process Outsourcing activities to foreign clients - Held that:- by following the decision of Hon'ble Karnataka High Court in the case of mPortal India Wireless Solutions P.Ltd. Vs CST Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT], the refund of cenvat credit cannot be rejected in absence of any specific provisions which prescribe that registration is mandatory for claim of the refund of the cenvat credit. Eligibility - Refund claim - input service credit availed on service tax paid is in relation to output service - Held that:- the services for which the authority has held that they do not have not any direct nexus for providing the output service, are outdoor catering, transportation of employees, office building maintenance and air travel agency services. Rent-a-cab service is found to be essential for the transportation of the employees in the adjudication order itself. When such a service is not found irrelevant to the business, credit of input tax cannot be denied since rent-a-cab service is essential for the movement of the employees of company from & to the work place. With regard to management, maintenance or repair services, this very Bench of the Tribunal in the case of Rotork Control (India) Pvt. Ltd. Vs CCE Chennai [2010 (6) TMI 336 - CESTAT, CHENNAI] has held that said service is eligible for claim of refund. In view of the decisions of various High Courts, the appellants are eligible for credit with regard to Information Technology Services and Air Travel Agency services as these activities are relating to business. Eligibility - Refund claim - input credit for service tax paid before the service became taxable - Held that:- in the absence of any positive submission backed with material evidence, I find it difficult to entertain the plea of the appellant. Accordingly, this plea with regard to refund claim to the tune of ₹ 2958/- is rejected. Eligibility - Refund claim - Period of limitation - Held that:- the situation is not covered under the situation categorized under Section 11B as this is a case pertaining to claim of refund on the unutilized credit or input service. The definition of relevant date also does not cover refund of unutilized credit. Therefore, the notification issued under Rule 5 of CCR, in my view, cannot go beyond the primary Section which is Section 11B. It was also submitted by appellant that there was an amendment brought in the present Budget 2016 wherein there were certain proposals made and it is only prospective in nature and since the period of dispute is only retrospective in their case it would not get covered with the amendment and prayed that this portion of the refund order holding that refund is time-barred be set aside. But, I find that the first appellate authority would not have had a chance to look into the amendment to come to the conclusion. In the interest of fairness, and justice, I remand this aspect of the matter to the Commissioner (Appeals) for him to examine this aspect in the light of the amendment. Appellant is at liberty to furnish all evidence and records before the first appellate authority for him to arrive at a conclusion on this issue.
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2016 (6) TMI 472
Constitutional validity of Section 35F of the Central Excise Act, 1944 - Minimum requirement of pre-deposit of 7.5% to file an appeal - Held that:- the Petitioner cannot afford the pre-deposit that might be ordered by the CESTAT, the Court finds the plea to be premature since there has been no occasion for the CESTAT to yet pass any order of pre-deposit. As already noticed, the CESTAT declined to hear the Petitioner’s appeal only because the Petitioner has instituted parallel proceedings in this Court by way of the present petition challenging, inter alia, the adjudication order dated 21st April 2014. The Petitioner cannot be allowed to bypass the statutory remedy available to it. The right course is for the Petitioner to revive/seek restoration of its appeal before the CESTAT accompanied by an application for condonation of delay in filing such restoration application seeking recall of the CESTAT's order dated 21st August 2015. The question of the Court in the present petition interfering with the show cause notices which led to passing of the above adjudication order also does not arise. The question whether the amended Section 35 F of the CE Act will apply to the Petitioner's appeal will be decided by the CESTAT in accordance with law. It will be open to the Petitioner, if it files the restoration application in the CESTAT not later than ten days from today along with an application for condonation of delay, to urge that the Petitioner was bonafide pursuing the present petition and that this factor should be taken into account while considering the prayer for condonation of delay in filing the restoration application. - Petition disposed of
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Central Excise
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2016 (6) TMI 470
Cenvat Crediti - processing on the barrels to convert into final product, by fixing of injection moulded caps, inners, etc was not amount to manufacture - reversal of credit - Held that:- The appeals can be disposed of on legal grounds that credit having been utilized by the appellant for payment of duty for their final product and thus not require any further reversal. It has been the subject matter of various decisions that once the duty of Excise is paid by utilizing the credit availed by an assessee, the same would amount to reversal of credit and there can be no requirement of any further reversal. Reference in this regard can be made to a latest decision of the Tribunal in the case of Asian Colour Coated Ispat Ltd. Vs. Commissioner of C. Excise., Delhi-III [2014 (9) TMI 974 - CESTAT NEW DELHI] where there was difference of opinion between two original Members of the Bench and the issue was resolved by a third Member. After discussing the entire case laws, it was held that the credit availed on the inputs which were allegedly used for payment of duty on the final product, which cannot be held to be a manufactured product, would not call for further reversal. Inasmuch as we hold in favour of the assessee on the main issue, and the issue of reversal of credit on account of non-receipt of inputs sent to the job worker within a period of 180 days is a procedural lapse and inasmuch as the credit has been reversed along with interest even before the issue of show-cause notice, we find no justifiable reason to impose penalty on the appellant and also on the Managing Director. The penalty is accordingly set aside
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2016 (6) TMI 469
Requirement of reversal of Cenvat credit - finished goods which have been written-off - Rule 3(5B) of the Cenvat Credit Rules, 2004 – Held that:- there is no provision for reversal of cenvat credit on inputs/ components which have been used in the manufacture of final product. In fact, as per Section'3 of the Central Excise Act, 1944, the goods manufactured by an assessee are to be cleared on payment of duty, therefore, reversal of cenvat credit on finished goods does not arise; at the most, duty can be demanded. Requirement of reversal of Cenvat credit - traded goods - no credit has been taken – Held that:- as no cenvat credit has been taken by the appellant on traded goods, reversal of cenvat credit on those goods does not arise. Requirement of reversal of Cenvat credit - inputs/ components - provision has been made in the balance sheet but not actually written-off – Held that:- appellant has made a provision for written-off but inputs and components were not actually not written off by the appellant. Further, the appellant has used these inputs and components later on, in the manufacture of final goods, in that circumstances, as per provision of Rule 3 (5B) appellant is entitled to take cenvat credit on these inputs and components. Therefore, appellant is not required to reverse cenvat credit on inputs/ components for which they have made provision in the balance sheet. Invokation of extended period of limitation – Issuance of subsequent SCN – Held that:- it is found that periodical show cause notices had been issued to the appellant as the first show cause notice for the period 2005-08 to 2008-09 was issued on 05.04.2010, therefore, both the show cause notices issued in question to the appellant by invoking extended period are barred of limitation. Therefore, the show cause notices are not sustainable in the eyes of law. Accordingly, the impugned proceedings are set aside as time barred. Applicability of Rule 14 of Cenvat Credit Rules, 2004 – Held that:- it is found that the appellant had taken cenvat credit correctly on inputs/ components at the time of procurement thereof and there is no allegation in the show cause notice that appellant has wrongly taken cenvat credit. Therefore, the provision of Rule 14 of Cenvat Credit Rules, 2004 are not applicable to the facts of the case. – Decided in favour of appellant with consequential relief
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2016 (6) TMI 468
Eligibility of Cenvat credit of services at their retail outlets from where sales are effected - No sales are effected at the factory gate but duty is paid at the time of clearance - Held that:- since the goods are not sold at the factory gate but are sold at the retail outlets, therefore, by virtue of the express provisions of Section 4(3)(c)(iii) of the Central Excise Act, 1944 the place of removal in the case of appellant will be the retail outlets from where goods are sold. Therefore, the appellant has correctly availed CENVAT Credit on input services availed at the retail outlets which will be the place of removal in the present case. - Decided in favour of appellant with consequential relief
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2016 (6) TMI 467
Valuation - Includability - Value of valve bodies supplied by principal manufacturer under job work provision as laid down under Rule 57F(3) of the Central Excise Rules, 1944 and Rule 4(5)(a) of Cenvat Credit Rules, 2004 - Demand of duty and imposition of penalties - Appellant had already paid excise duty on the rubber product manufactured by them and also on the job work charges - Held that:- the job work activity since clearly covered under job work provisions, no duty is required to be paid on the job work activity in terms of Notification No. 214/86-CE. Accordingly value of machine bodies supplied by the principle manufacturer need not to be added or same should not be levied with excise duty. The issue in the present case is squarely covered by the judgment of Hon’ble Supreme Court in case of International Auto Ltd Vs. CCE [2005 (3) TMI 132 - SUPREME COURT OF INDIA]. Therefore, by following the same the appellant are not required to pay duty on the machine body supplied by the principle manufacturer therefore the impugned order is not sustainable. Also the penalty imposed on the appellant is set aside. - Decided in favour of appellant
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2016 (6) TMI 466
Entitlement of Cenvat credit - Hot Strip Mill Plates, Flat, STRL, Plate, Mill Plates, M.S.Channel, Angles, Joists, Chequered Plates and Beam and Joist etc. - utilized in fabrication of Bio-Gas Plant-a Pollution Control Equipment - Held that:- as bio-gas plant is a pollution control equipment defined in rule 2 (a)(A)(ii) of Cenvat Credit Rules, 2004, the appellant have rightly taken credit, being entitled to the same. Further, some portion of the capital goods about 15% used in the existing machinery, like repair and fabrication of Sugar Cane, cutter bagasse, courier et cetera, the appellant is entitled to Cenvat credit on the same as Rule 2 (l) of Cenvat Credit Rules provides that an assessee is entitled to Cenvat credit, on equipments utilised directly or indirectly in or in relation to the manufacture of final products and the clearing of final products, upto the place of removal. Here the appellant, manufacturer cannot take place of excisable goods being Sugar et cetera, without repair and maintenance of capital equipment like sugar Cane cutter et cetera, I hold that the appellant is entitled the cenvat credit on the same. Therefore, the impugned orders are set aside. - Decided in favour of appellant with consequential relief
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2016 (6) TMI 465
Clandestine removal of goods - shortages in the finished goods - Seeking cross-examination of witnesses who allegedly maintained the log books – Held that:- non-examination of the concerned person, whose statements have been relied upon is in violation of Section 9D of the Act, which provides that where any statements are to be relied upon of any person, in any proceedings under the Act, then such person must be examined in the proceedings under the Act, which includes adjudication proceedings. Further, cross-examination has to be essentially given in the facts of in the present case as statements of the concerned persons are recorded at the back of the appellants. Therefore, the impugned order is set aside and remand the matter for denovo adjudication by the Commissioner with direction that he shall examine and witnesses in presence of the appellant Company, Director and/or their Authorized Representative and shall also offer his witnesses for cross-examination . The appellant shall be provided inspection of documents either relied upon and/or not relied upon, a copy of which, if they have not been given earlier shall be provided. Thereafter, the appellants, if they so desire, can file supplementary reply to the show-cause notice and after hearing the parties, the adjudication order shall be recorded by the authority. – Appeal allowed by way of remand
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2016 (6) TMI 464
Central Excise Duty recovery of unaccounted production and clearance of block-board, decorative plywood and film laminated plywood - duty demand and penalty imposed - Held that:- There was a seizure of undeclared items in the premises of the appellants. The original authority examined all the evidences and the submissions made by the appellants regarding the contention of the appellants that they were manufacturing block-board up to 31.03.2000 and there after stopped the production. This is not evidenced by the declarations filed by the appellant. The testing records and quality control records scrutinized by the Officers indicated that on various dates' samples of block-boards were drawn for testing. These facts are contrary to the assertion made by the appellants. We also find that the Manager (Production) has categorically accepted the contents of hot press production chart, which shows the actual production of laminated plywood. The details available in these charts and BSRS slips showing production of various types of plywoods are not reflected in the RG-I or lab register. We find the Original Authority as well as First Appellate Authority have examined the evidences available to arrive at the conclusion of undeclared manufacture and clearance of excisable goods by the appellants. - Decided against assessee.
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2016 (6) TMI 463
Claim of CENVAT credit of service tax paid on clearing and forwarding charges, subscription to association or clubs and periodicals, inspection and freight charges - Held that:- It is not in dispute that the respondent is an exporter/domestic seller of sugar. Therefore, availing of services of C&F agent is nothing uncommon. Similarly, pre-dispatch inspection is conducted to ensure quality. So also freight charges are incurred to make the goods available at seaport/domestic market and buyers. All the three services are integrally connected to export/domestic sales for which the service tax paid thereon claimed as CENVAT credit is allowed. So far as subscription of association/clubs/periodicals is concerned, that does not have any integral connection to manufacture for which no CENVAT credit of the service tax paid thereon is admissible. This is the consistent view of this Bench. - Decided partly in favour of revenue Finding no malafide in respect of the claim of CENVAT credit on subscription of association/club/periods made by appellant, there shall be no penalty.
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2016 (6) TMI 462
CENVAT Credit on the strength of bogus invoices - Held that:- As the entire case of Revenue is based on the statements of various persons and even the impugned order records a finding that the statements of the persons are inconsistent and contradictory. I find that the Commissioner (Appeals) in the impugned order observed that the respondents were unable to give any evidence such as, gate register, lot register, L.R, payment particulars etc. so as to prove that the invoices were accompanied with the goods, thereby eligible for the availment of credit. Thus, the entire focus of the investigation is on the transport of goods. In such circumstances, when the truck no. are mentioned on the invoices, denial of cross-examination of the transporters who claimed that they had not transported the goods in incorrect and leads to denial of proper opportunity to the appellant. In view of the above, the impugned order is set aside and the matter is remanded to the original adjudicating authority to decide the matter afresh after allowing the cross-examination of the transporters.
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2016 (6) TMI 461
Removal of goods for export without payment of duty - goods cleared for export - goods removed having been subject to further manufacture and finally exported by the manufacturer-exporters, who also filed the required Annexure 45 in terms of said Notification with the Revenue and also executed Bond to safeguard the interest of revenue - Notification No. 43/2001-CE (NT), read with Rule 19(2) - Held that:- The use of the word "any other premises" would indicate that the appellant could send even the inputs procured by him to EOU/exporter and avail benefit under Rule 19(2). - the issue is no longer res Integra and is squarely covered by the ruling of Tribunal in the case of Rhoda Textile Private Ltd. Vs. CCE, Jaipur [2003 (9) TMI 489 - CESTAT, MUMBAI] . Accordingly the appellant have not violated the provisions of Rule 19(2) of Central Excise Rules read with Notification No. 43/2001-CE (NT). The impugned order is set aside. - Decided in favour of appellant with consequential relief
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Wealth tax
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2016 (6) TMI 471
Escapement of wealth chargeable to tax - cash found in excess of ₹ 50,000/-, being the limit prescribed under Wealth Tax Act, 1957 - Held that:- Revenue’s submission that since the cash balances are in excess of the limit prescribed under Wealth Tax Act, 1957, the cash balance in excess of ₹ 50,000/- are to be treated as wealth of the assessee. On the other hand, apart from other submissions, it is assessee’s submission that the cash which is owned up by assessee as reflected in the Settlement Commission order, represents the cash of various entities (i.e. 65 entities) and is not the cash of assessee alone. We find that there is no finding of any of the lower authorities as to the amount of cash of the various entities. In such a situation, we are of the view, that the issue needs to be re-examined at the end of AO. AO is directed to consider the cash as wealth of the assessee in accordance with law and only to the extent of the cash as at the close of year that belongs to the assessee. We therefore remit the issue to the file of AO to decide the taxability of cash as wealth as noted herein. The assessee is also directed to co-operate by promptly furnishing all the details called for by the authorities. - Decided in favour of revenue for statistical purposes.
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