TMI Tax Updates - e-Newsletter
June 7, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Disallowance u/s 43B the assessee has retained the money from the suppliers on the pretext that it will make the payment to the Government - provision of section 43B are applicable - AT
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Income Tax:
Penalty u/s 271E - When the assessee has transferred the loan from himself to his wife by way of journal entry, it is only the substitution of one debtor by another debtor - There is no Violation of section 269T - AT
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Income Tax:
Recall of order a mistake which may be discovered by a complicated process of investigation, argument or proof cannot be rectified u/s. 254(2) - AT
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Customs:
Confiscation of goods - Claim of waiver from imposition of redemption fine - merely because the importer acted in good faith will not entitle the importer to complete waiver of redemption fine - HC
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Service Tax:
Extended period of limitation - If non-payment of service tax is taken as one of the criterion for invokation of longer period of limitation, then the normal period would not be applicable, in any case of demand of service tax. - AT
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Service Tax:
Refund claim - Resubmission of claim - period of limitation to be computed from the date of original application - AT
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Central Excise:
Refund of amount deposited under protest - It is well settled law that the onus to prove clandestine activities is upon the Revenue and is required to be discharged by production of positive evidences. - AT
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Central Excise:
Valuation of cars sold to dealers - So-called special discount offered by the appellant does not conform to any of the requirements of the trade discount - demand of duty and penalty confirmed - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (6) TMI 154
Validity of order u/s 263 of the Act - Whether the AO in allowing the claim of the assessee with respect including the receipt of sum of ₹ 18 crores from the German Concern took a possible view of the matter Held that:- There was absolutely no attempt on the part of Mr. Nizamuddin to demonstrate that the AO did not take a possible view in accepting the contention of the assessee - The parent contract dated 14th September, 1995 did not provide for payment of any compensation or any sum on any account whatsoever - Upon expiry of the contract, the assessee was liable to surrender the technical know-how and to cease to manufacture the goods - The assessee was not entitled in any event, upon expiry of the contract, to prevent the German Concern from setting up its 100% subsidiary for the purpose of manufacturing and marketing its goods - In case the German Concern paid the aforesaid sum for the purpose of securing an NOC from the assessee, even if it is assumed that by agreeing to issue the same the assessee agreed to have his manufacturing and trading structure impaired resulting in loss of his source of income - the receipt would be a capital receipt Relying upon Kettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta [1964 (5) TMI 4 - SUPREME Court] - If on the other hand it was a gratuitous payment as indicated in the agreement dated 22nd March, 2005 amounts are being paid by BDF on its own free will the receipt would still be a capital receipt - the Tribunal was justified in holding that the AO took a possible view. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact - Tribunal has held that the assessment order was not passed without application of mind - The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time - the fact that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous - A prima facie evidence on the basis of the presumption is converted into a conclusive proof of the fact the order was passed by the AO after due application of mind - unless the recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind - If the AO cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. The Tribunal reached the conclusion that the order of the AO was not passed without application of mind Revenue is unable to point out any part of the finding, recorded by the Tribunal - in the absence of any challenge to the finding of the Tribunal that the ITO had actually made an enquiry the Revenue was precluded from challenging the order of the Tribunal setting aside an order passed in exercise of power u/s 263 - The ground as regards perversity is relatable to a finding on a question of fact revenue did not draw any attention to any part of the finding of the Tribunal which according to him was perverse Decided against Revenue.
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2014 (6) TMI 153
Disallowance of remuneration to dealers Held that:- Whether the parties were required to reduce the rates of commission for each year in to writing is not an aspect which could have been gone into by the AO - The way parties entering into a voluntary commercial transaction spell out their relationship, is a matter of contract, which except by statutory supervision, the AO cannot go into, at least u/s 37 (1), given that the exclusive domain of deciding whether the expenditure is warranted, is that of the assessee - The decision is entirely a business related one - If the matter is viewed from this perspective, the fact that the commission was 90% in the first year and reduced to some extent in the latter years ipso facto is not a consideration for the AO to have concluded that, it necessarily had to be reduced to 60% for the fourth year, i.e., 2006-07 - no support in terms of the contract or expressed provision of law or rules has been cited in support of the AOs determination in this regard - TDS payments were made in respect of the dealership commission parted or shared by the assessee, as is evident from the records Decided in favour of Assessee.
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2014 (6) TMI 152
Computation of deduction u/s 80HHC of the Act - Exclusion of scrap sale from turnover Interest on late payment from customers Held that:- In so far as the exclusion of 90% of the net interest and net commission as against gross amounts under these heads from the profit of the business for the purpose of computing deduction u/s section 80HHC of the and the deletion of the disallowance u/s.43B to be paid beyond the limit as provided u/s.36(1)(va) of the Act, is concerned, the decision in ACG Associated Capsules Pvt.Ltd. Vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business - the issue raised stands answered in favour of the assessee and against the Revenue thus, no substantial question of law arises for consideration Decided against Revenue.
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2014 (6) TMI 151
Admission of appeal - Rejection of condonation of delay Held that:- One of the ground involves a major amount of a sum of Rs.3.45 crores approximately - The deletion made by the CIT(A) CIT(A) was of the view that the assessee is a Government of India Enterprise - There are regular checks and unrecorded sale is not possible AO has not brought any evidence on record or instance of unrecorded sale - Since the appeal is not admitted, any opinion is not being expressed - facts and circumstances appearing from the records are enough as to why should the Court to be refrained from admitting the appeal Decided against Revenue.
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2014 (6) TMI 150
Maintainability of appeal Held that:-Whenever the CIT(A) and the Tribunal follows their own order for the preceding years or a view taken for the successive AYs, the Revenue files an appeal concerning only the last AY for which the Tribunal delivered the order - There is absolutely no explanation as to why, when on the same facts the judgment and order of the CIT(A) and the Tribunal for earlier AYs is accepted by the Revenue, an appeal is filed for the assessment year in question thus, no substantial question of law arises for consideration Decided against Revenue.
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2014 (6) TMI 149
Validity of reopening of assessment Mere change of opinion - Carry forward of unabsorbed depreciation beyond eight years Assessee contended that allowing the depreciation pertaining to earlier years had remained unabsorbed was examined by the AO during the course of original scrutiny assessment - Any attempt on his part to revisit the issue would be based on mere change of opinion - Held that:- Following General Motors India P. Ltd. v. Deputy CIT [2012 (8) TMI 714 - GUJARAT HIGH COURT] - carry forward of unabsorbed depreciation and set off would be permissible without reference to any time limit - notice was issued beyond the period of four years from the end of the relevant AY - depreciation is deductible in the first place from the income of the business to which it relates - If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee - If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year - In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof - there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year - any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 - once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997- 98 upto the A.Y.2001- 02 got carried forward to the AY 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - when the ground on which notice is founded is held to be invalid in law, thus, the very foundation for issuance of notice would not survive Decided in favour of Assessee.
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2014 (6) TMI 148
Allowability of deduction u/s 80IB of the Act Held that:- Assessee has not furnished any details of Built-up area before AO - AO has to obtain the sale deeds to ascertain the built-up area - CIT(A) without referring the issue on remand for verification of built up area, simply allowed the deduction, without verification of facts - Not only that he allowed proportionate deduction at sixty/sixty five flats in both years, without restricting to the actual profit on sale of flats - the CIT(A) erred in allowing the proportionate allowance without subjecting the details furnished to verification - The actual profit working of the project, excluding other real estate transactions is not on record as copy of 3CB reports were not placed in paper books - This also requires verification thus, the order is set aside and the matter is remitted back to the AO to examine the eligibility and determine the amount of profit, if assessee is found eligible for deduction u/s 80IB Decided in favour of Revenue. Addition of Rs.1.78 Crores Held that:- The assessees Managing Director was confronted with the statement of Mr. P. Shankara Rao and the assessee has admitted to have paid Rs. 1.78 crores vide statement dated 09.11.2006 whereas, search was conducted on 07.11.2006 - the statement of the assessee was recorded much after the search, thus, it cannot be said that the assessee was under the state of utter confusion or not in a proper state of mind while making the statement on account of pressure from the Department - the statement of the assessee was not even recorded during the course of search - it cannot be said that the statement was recorded under utter confusion as he has sufficient time to consult the professionals - Moreover the assessee has filed the affidavit retracting from his earlier statement there was no infirmity in the order of the CIT (A) who has rightly treated the receipt of on money Decided against Assessee.
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2014 (6) TMI 147
Deletion of sundry creditors TDS payable - Held that:- Out of the four items appearing under sundry creditors, the AO in his remand report has himself accepted the genuineness of the credits and agreed for giving credit to the assessee in respect of them - So far as TDS payable, the CIT(A) on verifying details has found that the amount was actually paid by the assessee on 31/03/2005 it could not be understood as to how the department can be aggrieved of the order passed by the CIT(A) - There seems to be non -application of mind both by AO and CIT, who authorised the appeal decided against Revenue.
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2014 (6) TMI 146
Taxing of interest received on application money Purchase of tax free bonds Held that:- Following CIT vs. Bharat Heavy Electricals Ltd.[2012 (9) TMI 515 - DELHI HIGH COURT] - interest for the brief period between the date of application and allotment of bonds could not be taxed Revenue could not bring any contrary fact or case law Decided in favour of Assessee. Disallowance of foreign exchange fluctuation loss - Revenue expenditure or not - Disallowance of investment allowance on increase in liability on account of foreign exchange fluctuation loss Expenses on AGM of shareholders Disallowance of guest house expenses u/s 37(4) of the Act Held that:- Following M/s. Tata Chemicals Ltd. Versus The DCIT, Special Range-1, Mumbai [2014 (5) TMI 956 - ITAT MUMBAI] - the assessee has been allowed depreciation on foreign exchange fluctuation loss thus, the AO is directed to allow depreciation as per law also the AO is directed to allow the investment allowance on exchange loss treated as capital expenditure thus, the matter is remitted back to the AO Decided in favour of Assessee. Expenses on issue of debentures and bonds Held that:- Following M/s. Tata Chemicals Ltd. Versus The DCIT, Special Range-1, Mumbai[2014 (5) TMI 956 - ITAT MUMBAI] - the Tribunal has allowed the debenture expenses thus, the AO is directed to allow the expenses on issue of debenture Decided in favour of assessee. Disallowance of sundry contributors u/s 40A(9) of the Act Staff welfare expenses Held that:- As it has been already decided by the Tribunal in the earlier assessment years, the AO is directed to allow the expenses - So far the payments to schools (staff welfare expenses) is concerned, the matter is remitted back to the AO for adjudication Decided in favour of Assessee. Family planning expenses Held that:- Following Atlas Cycle Industries Ltd. [1980 (3) TMI 43 - PUNJAB AND HARYANA High Court] - the disallowance of 50% made by the Income Tax Authorities for such type of expenditures incurred on an Eye Camp for the workers of the assessee company is upheld - The 50% of the expenditure was disallowed in the case on the ground that the benefit was also derived by the outsiders - thus, the disallowance on the issue is restricted to 50% of the expenditure incurred Decided partly in favour of Assessee. Interest of advance to subsidiary companies Held that:- The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] the AO is directed to decide the issue as per the decision Decided in favour of Assessee. Disallowance of extra shift depreciation Various additions on plant and machinery Held that:- Following M/s. Tata Chemicals Ltd. Versus The DCIT, Special Range-1, Mumbai[2014 (5) TMI 956 - ITAT MUMBAI] - the Tribunal has restored back the issue to the files of the AO to consider the claim of the assessee after taking into consideration the I.T. Rule-5 of 1984-85 thus, the AO is directed to decide the issue afresh Decided in favour of Assessee. Disallowance of investment allowance Disallowance of investment allowance on increase in liability on account of foreign exchange fluctuation loss - Held that:- Tata Chemicals Limited Versus The ACIT Cir 2(2), Mumbai & Others [2012 (10) TMI 46 - ITAT MUMBAI] - the disallowance of investment allowance on certain items treated in the nature of civil work and not integral part of the plant and machinery there was merit in the contention of the assessee that the Tribunal on the similar issue has upheld the order of the CIT(A) who set aside the issue to the file of the AO thus, the matter is remitted back to the AO for fresh adjudication Decided partly in favour of Assessee. Disallowance u/s 43B of the Act Royalty on limestone and mineral rights tax - Held that:- The AO has disallowed Royalty of Limestone following the assessment - the Tribunal has restored back the issue to the file of the AO to verify the payment and allow deduction as per law if the payments have already been made this, as far as royalty of limestone is concerned, the matter is remitted back to the AO for verification of the payments as per the provisions of Sec. 43B - So far the disallowance relating to mineral rights tax is concerned - the assessee has retained the money from the suppliers on the pretext that it will make the payment to the Government - as the assessee itself has agreed to pay the MRT on the limestone purchased by it and as it has not discharged the liability till the end of the accounting year, there was no reason to interfere in the order of the CIT(A) Decided against Assessee. Employees entertainment expenses u/s 37(2) r.w. Explanation III - Subsidized lunch coupons Payments made to Tata Services Ltd. incentive bonus to workers - Held that:- As decided in assessees own case for the earlier assessment year, it has been already decided in favour of assessee thus, there is no need for interference Decided against Revenue.
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2014 (6) TMI 145
Rectification of order Deemed dividend in the hands of partners u/s 2(22)(e) of the Act - Held that:- directions were given by the Tribunal in pursuance to the admission made by the assessee before CIT(A) - The relevant extract of the order of CIT(A), the assessee had conceded that the deemed dividend is taxable in the hands of the shareholders - The assessee has explained that only the partners of the appellant firm are shareholders in the company (EEPL) and not the appellant firm itself - deemed dividend can be assessee only in the hands of a person who is a shareholder of the lender company and not in the hands of the borrowing concern in which such shareholder is member or partner having substantial interest Relying upon ACIT V. Bhaumik Colour (P) Ltd., 2008 (11) TMI 273 - ITAT BOMBAY-E ] the amount cannot be treated as deemed dividend u/s.2(22)(e) in the hands of the appellant - It is not the case where the Tribunal has made observations on its own - The directions against which the assessee is aggrieved are based on the admission of the assessee before the CIT(A) - there is no error as alleged by the assessee in the order of the Tribunal Decided against Assessee.
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2014 (6) TMI 144
Disallowance of brokerage claim Held that:- CIT(A) was rightly of the view that the onus in this regard is on the assessee to establish that the expenditure on payment of brokerage charges was wholly and exclusively incurred for the purposes of its business the assessee has failed to discharge the onus, there was no justifiable reasons to interfere with the orders of CIT(A) confirming the disallowance made by AO on account of brokerage paid by assessee to Shri Ishwarchand Goel for both the years under consideration Decided against Assessee. Disallowance of depreciation on building Held that:- The onus was on the assessee to substantiate its claim for the expenditure incurred on the construction of additional building by producing the relevant documentary evidence such as bills, vouchers etc. - The statement of the assessee and indication in the relevant seized documents was not sufficient to establish that the amount was incurred by assessee on account of construction of additional factory building and that too to its existing building in MIDC, Dombivali. It is not a case where the statement or relevant seized documents are partly accepted and partly rejected by the authorities below as sought to be contended by the assessee the statement and the relevant seized documents were not sufficient to establish the case of the assessee of having spent an amount for the construction of additional factory building and the claim of the assessee for depreciation on such additional building was disallowed - the assessee failed to substantiate the said claim by bringing any documentary evidence there was no infirmity in the orders of authorities below in disallowing the assessees claim of depreciation Decided against Assessee.
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2014 (6) TMI 143
Determination of LTCG as per section 50C of the Act Valuation of property Held that:- The assessee has filed a valuation report in support of his claim that the value adopted by the stamp duty valuation authority is on the higher side - the assessee can object to the value adopted by the stamp valuation authority and if this is done, the AO may refer the valuation to the valuation officer - the AO has not followed the procedure - If the assessee has filed a report of the approved valuer, the AO may either accept the valuation of the property on the basis of this report or refer the question of valuation to the department valuation officer in accordance with section 55A of the Act thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Dismissal of the claim of cost of acquisition FMV provided u/s 55(22)(b)(i) of the Act as on 01.04.1981 Held that:- An option is given to the assessee to substitute fair market value as on 01.04.1981 if the property became the property of the assessee before 01.04.1981 - the assessee has claimed that the property was acquired in 1963, the cost of acquisition should be the fair market value as on 01.04.1981 thus, the matter is remitted back to the AO for verification - Decided in favour of Assessee. Denial of deduction u/s 80C of the Act Tuition fee for education - the AO has referred to the claim of deduction u/s. 80C relating to the payment of housing loan - in the assessment order while computing the assessed income, no deduction u/s. 80C in respect of tuition fees has been allowed by the AO - The AO is directed to allow the claim of the assessee for deduction u/s. 80C of the Act in relation to the payment of housing loan along with the claim of payment of tuition fees Decided in favour of Assessee.
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2014 (6) TMI 142
Addition of Transfer Fees and TDR premium power of appellate commission to accept fresh claim being revised computation - Held that:- Even if a claim is not made before the AO it can be made before the appellate authorities - The jurisdiction of the appellate authorities to entertain such a claim is not barred Relying upon Jute Corporation of India Limited vs. CIT [1990 (9) TMI 6 - SUPREME Court] - the power of the Appellate Commissioner is coterminous with that of the Income Tax Office and an appellate authority while hearing appeal against the order of the subordinate authority has all the powers which the original authority may have in deciding the questions before it subject to the restrictions or limitations if any prescribed by statutory provisions. In the absence of any statutory provision the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. Revised Computation not accepted on wrong appreciation of facts Held that:- CIT(A) failed to exercise his appellate jurisdiction u/s 250 of the Act Relying upon Smt. Prabhavati S. Shah v. CIT [1998 (2) TMI 107 - BOMBAY High Court] - the powers conferred on the first appellate authority u/s 250(4) of the Act, being a quasi-judicial power, it is incumbent on him to exercise the same, if the facts and circumstances justify - though the discretion is vested with the appellate authorities to admit or reject the new/additional claim but the discretion in that regard is to be exercised fairly and justifiably so as to serve the interest of justice thus, the matter is remitted back to the Tribunal for fresh adjudication Decided in favour of Assessee.
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2014 (6) TMI 141
Taxability of interest income Business income or income from other sources No business activity carried on Held that:- CIT(A) while allowing the claim of the assessee has observed that among other objects as per the memorandum and article of association of the assessee company, one of the objects was to lend and advance or to give money on credit to such persons or companies on such terms and conditions as may seem expedient - CIT(A) was of the view that one of the objects of the company was also to lend the money and that the claim of the assessee has been consistently allowed by the AO in the earlier years and for this year there was no change of facts and circumstances in the case in hand thus, there was no reason to interfere in the order of the CIT(A) interest income is taxable as income from business - Decided against Revenue.
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2014 (6) TMI 140
Deletion of penalty u/s 271E - Violation of section 269T of the Act transfer of loan by journal entry - period of limitation Held that:- When there is any acceptance/ repayment of loan in violation of section 269SS/269T, it is the AO who has to prima facie satisfy himself whether there is a violation of section 269SS/269T and if there is a violation then he may initiate the penalty proceedings u/s. 271D/271E and thereafter should refer the matter to the Joint Commissioner of Income Tax who will finally decide and if satisfied, will levy the penalty u/s 271D/271E - The AO when noticed the transfer of loan by journal entry, he prima facie formed an opinion of violation of section 269T. The assessment order is followed by the penalty notice issued on the same date - the period of limitation is to be counted from the date of the initiation of the penalty proceedings by the AO - the penalty proceedings was initiated in the course of assessment proceedings in the financial year 2011-12, such financial year expired on 31.3.2012 - Six months from the initiation of penalty proceedings also expired on 30.6.2012 - The penalty order has been passed on 14.9.2012 which was certainly after the period of limitation prescribed u/s. 275(1)(c) - CIT(A) rightly held that the penalty order to be barred by limitation. U/s 269T no person shall repay the loan otherwise, than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan - the assessee has transferred the loan by way of journal entry to his wife - When the assessee has transferred the loan from himself to his wife by way of journal entry, it is only the substitution of one debtor by another debtor - creditors has not received any amount and since the creditors has not received any amount, it cannot be said that there is a repayment of loan - Section 269 would come into play only when there is actual repayment of loan - Merely because loan is assigned by the assessee to his wife by way of journal entry, it cannot be said that there is a repayment of loan, otherwise, than by account payee cheque or account payee bank draft, so as to penalize the assessee u/s 271E CIT(A) was of the view that the assessee is not liable to be penalised u/s. 271E thus, there was no justification to interfere with the order of the CIT(A) Decided against Revenue.
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2014 (6) TMI 139
Addition made on account of cessation of liability Held that:- Following CIT vs. Nitin Garg 208 Taxman [2012 (5) TMI 30 - Gujarat High Court] - the assessee had continue to show admitted amount as liability in the balance sheet cannot be added u/s 41(1) of the Act on the ground remission or cessation of trading liability - even the liability itself seems under serious doubt - The AO undertook the exercise to verify the records of the so called creditors - Many of them were not found at all in the given address - In one or two cases, the response was that they had no dealing with the assessee nor did they know him - the inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest the findings - the liability as it stands perhaps holds that there was no cessation or remission of liability - the amount in question cannot be added back as a deemed income u/s 41(c) of the Act - The assessee has not credited the liability in the book of account and had not shown as income during the year - The AO found that the lenders had not shown this amount in the balance sheet as debtors but, the assessees intention is to pay the amount to the lenders - the order of the CIT(A) is set aside Decided in favour of Assessee. Addition made Outstanding amount of money borrowed Held that:- Both the parties M/s. Ambica Mills and M/s. Shatmurti Investment and Trading Pvt. Ltd. had gone into liquidation assessee being secured creditor, filed a case for recovery of amount through liquidator for amount of Rs.2,57,04,019/- (principal + interest) - The details of the case filed by both the parties, were considered by the CIT(A) in his findings - M/s. Shatmurti Investment and Trading Pvt. Ltd. also filed Civil Suit against M/s. Ambica Mills Ltd. for recovery of Rs.1,14,12,473 - The Skylark Finance Ltd. had confirmed the outstanding balance as on 31.03.1998 from its books of account thus, the CIT(A) was justified in deleting the addition - Decided against Revenue.
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2014 (6) TMI 138
Recall of order Rectification of mistake apparent from record Restriction of addition u/s 69C of the Act Held that:- The working of the addition was confirmed by both the parties before the Tribunal - Revenue could not point out any apparent mistake of the Tribunal which needs correction Relying upon Perfetti Van Melle India (P) Ltd. vs. CIT [2007 (5) TMI 214 - DELHI High Court] - a mistake capable of rectification u/s 254(2) is one which is patent, obvious and whose discovery is not dependent on argument- a mistake which may be discovered by a complicated process of investigation, argument or proof cannot be rectified u/s. 254(2) - the Tribunal have no power to review the order - the Revenue has failed to point out any mistake apparent from record Decided against Revenue.
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2014 (6) TMI 137
Estimation of profits @12% on total receipts Addition of members contribution and the closing stock - Addition made u/s 41(1) of the Act - Rejection of books of accounts Held that:- The accounting method followed by the Assessee was not as per the established accounting principles as the Assessee had not accounted the receipts on the basis of booking amount and nor the receipts were accounted on the basis of actual sales made when the possession was given and proceeds realized but had stated to have accounted on the basis of Architects Certificate regarding construction completed during the year. The accounting method followed by the Assessee was not proper and it was impossible to work out true profit on the basis of entries made in the books of accounts and the accounts of the Assessee as not correct or complete and the proper course would be to reject the books of accounts and estimate the profits the Assessee had shown members contribution which was not shown in earlier years - the net profit received since inception of the project and applying the profit rate of 12% and after giving the credit of the amount shown by the Assessee, held the balance amount as the income of the Assessee - the accounts of the Assessee has been found to be incorrect and the method adopted to be improper and the book entries to be not reliable and the percentage of the total receipts was already added for working out the income, no addition separately on account of closing stock could be added - Revenue has not brought any material on record to controvert the findings of CIT(A) thus, there was no reason to interfere in the order of CIT(A) Decided against Revenue.
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Customs
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2014 (6) TMI 159
Confiscation of goods - Claim of waiver from imposition of redemption fine - Bonafide conduct of parties - Held that:- though the quantum of redemption fine would depend upon totality of the fact and circumstances of the case but merely because the importer acted in good faith will not entitle the importer to complete waiver of redemption fine. if the conduct of the importer was beneficial then no redemption fine is to be imposed for allowing redemption of confiscated goods. In the present facts, there is no dispute that the seized cut and polished diamonds are liable for confiscation. In view of the Jain Exports -II (1990 (1) TMI 73 - SUPREME COURT OF INDIA) decision, there can be no dispute that redemption fine is imposable on confiscated goods even if the conduct of the parties is bona fide. Once the goods are liable for confiscation, redemption fine was imposable. The petitioner before us sought to emphasize the bona fide conduct of its manager by pointing out that diamonds were being taken out to show to the Japanese buyer who was leaving the country next day. This excuse or reason for not recording the removal of diamonds in petitioner's record was found on facts by the Tribunal to be an after thought as it was not so mentioned by its manager when the diamonds were seized on 31 May 1990 at the gate of SEEPZ. In this case, the market value of the goods is ₹ 1.06 Crores. The benefit of which the petitioner would obtain by the illegal conduct of its Manager would have resulted in non-payment of excise duty which is equivalent to customs duty i.e. 60% ad-valorem. The petitioner being a limited company cannot act but through the human agency of its Directors, Manager and Workers. Therefore, the submissions of the petitioner that it cannot held liable for the acts of its Manager/employees is unacceptable. The confiscation of the diamonds and the redemption fine of ₹ 20 lacs on the confiscated diamond was reached taking into account the overall facts and appreciation of evidence on record. This finding is not shown to be arbitrary and/or perverse - no question of law arises so as to direct the Tribunal to send any case for our consideration - Decided against assessee.
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2014 (6) TMI 158
Penalty u/s 112(a) on the person who dealt with goods liable to confiscation - tribunal deleted the penalty - Held that:- As may be noted from the discussion elaborately made by the CESTAT, the Commissioner of Customs while levying penalty had essentially relied upon the statements recorded of Shri Shashi Bhushan of M/s.Efficient Exports against whom main charges were levelled. The Tribunal after detailed discussion, on the modus which was adopted by Shri Shashi Bhushan concluded that there was insufficient material to indicate the involvement of the respondent herein and except a one line statement of Shri Shashi Bhushan, there was no corroborative evidence leading to conclude the involvement and the charges levelled against the respondent. This resulted into the Tribunal deleting the penalty.There is neither any perversity in the findings nor in conclusion arrived at by the Tribunal nor any substantial question of law emerging - Decided against Revenue.
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2014 (6) TMI 157
Non-renewal of the CHA Licence - Regulation 11 of the CHALR, 2004 - maintainability of appeal before tribunal - Held that:- Parties to the appeal In Real Logistics Shipping Agencies (2010 (7) TMI 390 - CESTAT, MUMBAI) did not bring to the Notice of the Bench that there is a decision of the Bombay High Court in the case of A.S. Vasan (2009 (4) TMI 100 - BOMBAY HIGH COURT) specifically holding that no appeal lies against an order rejecting an pplication for renewal of CHA licence. In view of the said decision of the Honble Bombay high court, which has also referred to a similar judgment of the Honble Calcutta high court in M.Dutta Agency vs Commissioner of Customs-[1998 (1) TMI 86 - HIGH COURT OF CALCUTTA], no appeal lies against the impugned order and hence the same cannot be entertained by the Tribunal - Appeal not maintainable - Decided against the appellant.
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2014 (6) TMI 156
Waiver of pre-deposit of duty - Suppression of facts - Extended period of limitation - Held that:- there is no challenge against the Commissioner (Appeals) finding that it is time-barred under Section 11A of the Central Excise Act and B-17 Bond does not cover the Advance DTA Sale in terms of C.B.E. & C.s Circular dated 17-11-1999. In these circumstances, the Applicant has made out a prima facie case in their favour for total waiver of the pre-deposit. Accordingly, the requirement of pre-deposit is waived and recovery thereof, is stayed during the pendency of the Appeal - Stay granted.
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Service Tax
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2014 (6) TMI 169
Business auxiliary services - Intellectual Property Right service - Procurement of master CD containing software opera - Held that:- demand of Rs. 64,11,347/- is covered by the earlier decision of the Tribunal in the case of Paul Merchants Ltd. [2012 (12) TMI 424 CESTAT, Delhi (LB)] and in the case of Gap International India Pvt. Ltd. [2014 (3) TMI 696 - CESTAT NEW DELHI] - As regards, the balance demand of Rs.31,78,587/- , we note that appellant admittedly started paying the service tax liability on such activities with effect from 16.5.2008, under the category of Information technology software. As such, the Revenue came to know about the activities of appellant at least with effect from 16.5.2008, the demand having been raised in the year 2011 is by invoking the longer period of limitation. The reasoning of the authorities below that appellant did not take the service tax registration and did not file any return cannot be adopted as the condition for invokation of longer period inasmuch as the question of limitation would admittedly arise in the case where no service tax has been paid. If non-payment of service tax is taken as one of the criterion for invokation of longer period of limitation, then the normal period would not be applicable, in any case of demand of service tax. As such, we prima facie agree with the applicant that longer period is not available to the Revenue - Reference made to Tribunals decision in the case of IBM India (P) Ltd. [2009 (7) TMI 487 - CESTAT, NEW DELHI] wherein Tribunals decision in the case of BCCI [2007 (5) TMI 24 - CESTAT, MUMBAI) and Glaxo Pharmaceuticals [2005 (7) TMI 25 - CESTAT, Mumbai] is relied upon - Stay granted.
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2014 (6) TMI 168
Service Tax demand - providing franchise service to its dealers under a scheme of activity known as Maruti True Value Service - dealers are provided the right to use the proprietary system and business concepts owned and developed by the petitioner from time to time - Penalty u/s 77 & 78 - Interest u/s 75 - Held that:- Referring the earlier decision [2011 (1) TMI 729 - CESTAT, NEW DELHI] involving the simplifier issues of the same party, wherein it was observed that, Prima facie, the applicants are rendering the franchise services, appellant directed to pre-deposit an amount of Rs. 2,00,00,000/- (Rupees Two Crore) - stay granted partly.
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2014 (6) TMI 167
Denial of refund claim - Resubmission of claim - Bar of limitation - whether resubmission of the refund claim by the appellant would be hit by limitation as provided under Notification No.41/2007-ST as amended by Notification No.32/2008-ST - Held that:- appellant had filed refund claim on 31/03/2009 on the last day when the refund claim needs to be filed for the period from July 2008-September 2008. Revenue has not challenged the refund claim on merits before the first appellate authority. This would mean that the appellants are eligible for the refund of the amount of service tax paid by them and claimed by them. On perusal of the clause 2(f), the said clause talks about submission of refund claim accompanied by the documents evidencing (i) export of goods, (ii) payment of service tax on the specified services for which claim for refund of service tax and (iii) wherever applicable, a copy of the written agreement entered into by the exporter with the buyer of the goods. The only proof, which the appellant could not produce or submit when they filed refund claim was in respect of payment of service tax. Subsequently it has been rectified and informed that the appellant had been able to submit proof of payment of service tax along with bank realization certificate, I find that the view taken by the first appellate authority is incorrect, unsustainable as substantive benefit should not be denied to an assessee if conditions are fullfilled. - Decided in favour of assessee.
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2014 (6) TMI 166
Receipt of commission - Business Auxiliary Service - activity of preparing Octroi form and depositing the same before the authorities for their clients - Held that:- activity undertaken by the applicant is not covered under Business Auxiliary Services, therefore, the applicant has made out a case for total waiver of service tax, interest and penalties. Accordingly, we waive the requirement of pre-deposit of service tax, interest and penalty and recovery thereof stayed during tine pendency of the appeal - Stay granted.
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2014 (6) TMI 165
Waiver of pre-deposit and stay of recovery - commercial or industrial construction services - Held that:- the proposed levy is on the amounts collected by the appellant from M/s. Andhra Pradesh Tourism Development Corporation for construction of certain guest houses and for providing electrical power and water supply to a certain religious shrine - work done by the appellant under the agreement with Tourism Development Corporation was in the nature of commercial or industrial construction. The appellant has failed to make out prima facie case on merits. They do not plead any financial hardships either. In these circumstances, there will be a direction to the appellant to pre-deposit the Service Tax amount within six weeks - Conditional stay granted.
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Central Excise
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2014 (6) TMI 164
Duty demand - Revenue contends that consumption of input/ raw material (Arjocast paper) was much more than the production of goods falling under Chapter 48 of the CETA recorded in the appellants RG 1 Register - Daily Stock Account Register - Held that:- Entire allegations against the appellant are that there is a shortfall in the production meaning thereby that they have produced less number of bottles than the standard input output norms. We are afraid that the above, cannot be made the basis for confirmation of demand of duty. If there is shortfall in production, Revenue cannot confirm demand of duty in respect of goods not produced by the assessee. There is no other evidence on record showing that the appellants have cleared the said goods clandestinely. The entire case of the Revenue is based only on inferences involving unwarranted assumptions and cannot be upheld. - Decided in favour of assessee.
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2014 (6) TMI 163
Refund of amount deposited under protest - allegation of clandestine removal - Incorrect entry in Central excise records - Held that:- The appellants during the course of adjudication has explained the discrepancies and have contended that there was no actual shortages and submitted that in the absence of any other evidences as regards the procurement of the raw material, manufacture of the final product and removal of the goods from the appellants premises, the findings of clandestine removal are not sustainable - The entire case of the Revenue is based upon the audit objection, which is based on the comparison of entries made in the statutory records vis-a-vis the balance sheet. The appellants have explained such differences by referring to the numbers of their final product as entered in ER-I returns as also on balance sheets. Apart from that I find that there is virtually no other evidence on record to indicate and establish the clandestine manufacture and removal of the goods. It is well settled law that the onus to prove clandestine activities is upon the Revenue and is required to be discharged by production of positive evidences. The demand on the basis of clandestine removal cannot be confirmed on assumptions and presumptions. There being no evidence in the present case to establish any such clandestine activity, I find no reasons to uphold the impugned orders - refund allowed - Decided in favour of assessee.
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2014 (6) TMI 162
Demand of differential duty - Interest - valuation of cars sold to dealers - Indica cars are smaller compared to Indigo cars and at the relevant time, they carried lower a rate of duty, compared to Indigo cars and utility vehicles - reduction in the assessable value of Indigo cars (except Indigo CS Model) in the guise of 'Special discount' - Whether the so called 'special discount' claimed to have been passed on by the appellant to its dealers can be treated as a permissible trade discount or not - Held that:- article preceding the expression "goods" and "price" in the said section 4 is the definite article "the" and not an indefinite article. The use of the definite article implies that section 4 envisages determination of value in respect of the goods under removal for each removal of the goods. Therefore, if the valuation has to be done in respect of Indica cars which are removed and on which discounts are being offered on sale, the benefit of such reduction has to be made by reducing the price of Indica cars and determination of value has to be made for each removal of Indica cars. It is an admitted fact in the case before us that this has not been done. The price reduction has been effected not on the goods to which it applies but by reducing the price of some other goods (other models of cars) which were cleared at a subsequent point of time. Thus the provisions of section 4 have not been adhered to or complies with on the transactions with which we are concerned with in this appeal. If for some reason, the appellant was not able to determine the value at the time of removal of goods, the appellant could have and should have opted for provisional assessment of the goods under removal as it provided for in Rule 7 of the Central Excise Rules, 2002. Thus the appellant did not choose to comply with the provisions mandated by law but chose to adopt a practice which was not provided for in the law - benefit provided under the law cannot be claimed when the conditions prescribed are not complied with or adhered to. It is a well-settled statutory principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and no other. It can be seen that the Car Target Schemes do not specify or spell out in what form and in what manner the incentive amounts will be given to the dealers. It is on record that each dealer has a running account maintained with M/s. TML. Therefore, as a matter of accounting, in the normal course, the incentive amounts should have been credited to the dealer's running account maintained with M/s. TML. However, instead of doing so, M/s. TML chose to pass on the incentive amounts to the dealers in the guise of 'Special Discount' by reducing the transaction value of only the Indigo Cars purchased by the dealers during the subsequent months. These incentive amounts earned by the dealers by achieving the targets fixed by M/s. TML cannot be termed as a 'Special Discount' for the following reasons. The so-called 'Special Discount' has no relation to the goods under assessment and has not been passed on by reducing the price of the goods under assessment. Further, it has not been shown by M/s. TML that this is the normal prevalent trade practice. M/s. TML is not the only assessee engaged in the business of manufacture and sale of Passenger Cars. There are many other manufacturers of Passenger Cars in the country. It has not been shown that similar practice is being followed by other manufacturers as well. The amount paid to the dealers are by way of incentives to achieve the target. The incentives given were TML's contribution to warranty services, insurance services and so on. In spite of the dealers maintaining a running account with TML through which payments to and from were adjusted, as regards the "special discount', the same was passed on not by adjusting the running account but by reducing the price of Indigo cars cleared during the subsequent month. While the Chief Financial Officer (CFO) thought that this policy was authorized by the President (Marketing) of the Passenger Car Business Unit, the latter has completely denied the same and has admitted that there was no such formal policy for grant of incentives/discounts. So-called "special discount" offered by the appellant does not conform to any of the requirements of the trade discount. That is, it is not known at or prior to the removal of the goods; it is not in accordance with any established trade practice; it is not in accordance with any established trade practice; it is uniform within the same class of buyers; it is purely arbitrary; it is a compensation for the services rendered by the dealers on behalf of the manufacturer, masqueraded as a discount; it is not passed on to the end customers; and it is not passed on as a price reduction of the goods to which it pertains to. Thus the so called special discount claimed to have been passed on by the appellant to the dealers is not a trade discount at all so as to be eligible for exclusion from the assessable value of the goods removed as per the provisions of section 4 of the Central Excise Act. Therefore, denial of abatement of the said discount from the assessable value of the goods sold is clearly sustainable in law and accordingly, we uphold the demand for differential duty confirmed in the impugned order, Arguments to the contrary made by the appellant in this regard merits total rejection - Decided against assessee.
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2014 (6) TMI 161
Classification of goods - Whether the boiler ash is an excisable goods or by-product which comes into existence during the manufacture of sugarcane - Held that:- in the case of Union of India v. Ahmedabad Electricity Co. Ltd. - [2003 (10) TMI 47 - SUPREME COURT OF INDIA] wherein the Honble Supreme Court held that Cinder is unburnt or partly burnt coal which is left out in the boiler is not excisable goods hence, is not liable to duty. The ratio of the above decision is applicable to the present case also - Decided in favour of assessee.
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2014 (6) TMI 160
Stay application filed by the revenue to stay the operation of order allowing cenvat credit - Held that:- Cenvat credit of Special Additional Duty (SAD-Section 3(5) of the Customs Tariff Act, 1975) paid by the importer by making use of TPS (Target Plus Scheme) scrips, has been allowed by the lower appellate authority. The impugned order shows that the appellate authority relied on the Boards Circular No. 18/2006-Cus., dated 15-6-2006 wherein it was clarified that an importer paying SAD by making use of DEPB/TPS scrips was entitled to claim Cenvat credit thereof or, alternatively, drawback - no stay - decided against the revenue.
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Indian Laws
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2014 (6) TMI 155
Withdrawal of order framing the issues - proceedings under section 34 of the Arbitration and Conciliation Act, 1996 - Opportunity for leading evidence - respondent contended that, contended that whatever evidence is required to be led, this should have been led before the Arbitrator and it cannot be allowed to be brought before learned District Judge. - Held that:- Section 34 of the Arbitration and Conciliation Act, 1996 are not civil proceeding like in a civil suit, rather the same are summary proceedings. In such proceedings, neither issues are required to be framed, nor it is permissible that such proceedings should follow the provisions of Code of Civil Procedure in respect of leading evidence. The Court can only frame the legal points for determination and may afford opportunity to lead evidence by way of affidavits to both the parties. There is no provision for wholesale or automatic import of all the provisions of the Code of Civil Procedure. - Decided against appellant.
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