TMI Tax Updates - e-Newsletter
July 17, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
Income Tax
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Bad debts - it is difficult to accept that on the mere score of reference to the BIFR - the recovery of interest or accruing of interest on the debtor company had become too difficult and bad to be realized - HC
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Penalty u/s 271B - delay in filing an audit report u/s 44AB - The delay of 29 days in filing of the tax audit report under section 44AB merited to be condoned - no penalty - HC
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Accrued income - whether a sum which represented retention money for fulfillment of the contract by the assessee should be treated as accrued income – Held No - HC
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Deduction u/s 80IA(4)(iii) - Towers in the Industrial Park rented out for software concern - deduction allowed - HC
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Application of Section 70 and 74 - set off of losses - Exemption u/s 50EC - priority - For taking benefit under Section 54E, it is not necessary that one should first apply Section 70(3) - HC
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Income u/s 41(1) - Bank waived the interest portion - Returns filed for A.Y. in which deduction claimed was held non-est - Unless the amount had been allowed as a deduction in the earlier years, the question of invoking Section 41(1) does not arise - HC
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Computation of capital gain - property received under gift - Section 48, 49 - CII to be taken from the date of transfer while cost of acquisition would be the cost for which the previous owner of the property acquired it - HC
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Penalty u/s 271(1)(c) - Adhoc disallowance of 50% out of miscellaneous expenses was made by the A.O. on estimated basis - said estimate was revised by the CIT(A) to 10% - No penalty - AT
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Deduction u/s 10A - allocation of expenses on the basis of the turnover made by the CIT(A) is reasonable and has to be upheld. - AT
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Re opening of assessment second time - it is only to circumvent the illegality committed by the AO in the fist assessment proceedings - proceedings dropped - AT
Customs
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Valuation of imported goods - Transaction Price - Grant of territorial commission/discount cannot be arbitrary/or discriminatory - It does not affect the normal trade discount given to buyers in any way - AT
Service Tax
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Refund of claim - Claim filed beyond period of 1 year - Export - Notification No. 17/2009 - all conditions are mandatory - refund claim filed beyond one year rejected - AT
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Constitutional validity of levy of service tax on sale of food and drinks (restaurants) - Legislative competency of Parliament - only state govt. are empowered to levy tax - levy of service tax is not valid - HC
Central Excise
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Denial of credit - Goods received on stock transfer basis - Revenue denied credit on the basis that it was stock transfer and not sale - credit allowed - AT
VAT
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The single judge dismissed the writ petition; substance of the order is under Article 227 and no power under Article 226 of the Constitution has been exercised - the writ appeal is not maintainable - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (7) TMI 424
Bad debts - Whether the ITAT was right in holding that even though the assessee has not treated the principal as irrecoverable, the interest accrued on the loan advanced to another public limited company need not be included in the total income for the A.Y.1992-93 - reading of the order of the Calcutta High Court shows the contrary to the assertion of the assessee that the debtor company could not make the amount on account of its difficult financial position, on the reference to the BIFR, the debtor company had taken a stand as to the solvency position – in the absence of any material to substantiate that the interest on the borrowed amount could not be recovered - it is difficult to accept the case of the assessee that on the mere score of reference to the BIFR - the recovery of interest or accruing of interest on the debtor company had become too difficult and bad to be realized – appeal allowed in favour of department.
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2013 (7) TMI 423
Penalty u/s 271B - delay in filing an audit report u/s 44AB - The fact that the surgery was performed in the year 1993 does not mean that the case of the assessee put forth through the chartered accountant that the chartered accountant was unwell to complete the tax audit in time could not be lightly rejected on the mere fact that the chartered accountant produced records as to his hospitalization for surgery in the year 1993 - going by the nature of illness that the chartered accountant had and considering the fact that he had been in-charge of the auditing of the assessee's accounts and had filed the tax audit report promptly for the earlier years which fact could not be controverted. The delay of 29 days in filing of the tax audit report under section 44AB merited to be condoned – court did not agree with the Tribunal on the question of reasonable cause and that going by the materials explaining the delay – the condonation should be allowed – order of the tribunal set aside – penalty imposed upon the assessee to be cancelled - appeal allowed in the favour of assessee.
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2013 (7) TMI 422
Condonation of delay - High Court rejected appeal - Held that:- High Court ought not to have been too technical in rejecting the Notice of Motion filed by the Revenue, since the Revenue could not obtain the certified copy of the order passed by this Court well within time - Delay condoned - Decided in favour of Revenue.
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2013 (7) TMI 421
Accrued income - whether a sum which represented retention money for fulfillment of the contract by the assessee should be treated as accrued income – Held that:- The assessee had not to receive the sum and therefore it cannot be said that the amount had accrued to the assesse - unless and until a debt is created in favour of the assessee, which is due by somebody, it cannot be said that the assessee has acquired a right to receive the income or that the income has accrued to him - A debt must have come into existence and the assessee must have acquired a right to receive the payment - assessee did not get any right to receive the sum which could have been retained in pursuance of the contract - One has to look at the contract and not at the entries made in the books of account - by no stretch of imagination it can be said that the said amount had accrued by way of income to the assessee in the previous year in question. As decided in C.I.T. v. Simplex Concrete Piles (India) Pvt. Ltd., (1988 (12) TMI 52 - CALCUTTA High Court) (Cal.) it was held that case that when there is a clause with regard to retention money, the assessee gets no right to claim any part of the retention money till the verification of satisfactory execution of the contract is concluded and, therefore, if there is no immediate right to receive the retention money, the said amount cannot be said to have accrued to the assesse – appeal decided against revenue.
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2013 (7) TMI 420
Deduction u/s 80IA(4)(iii) - Towers in the Industrial Park rented out for software concern - CIT[A] held that irrespective of the character of the receipt, the deduction was available to assessee - Tribunal rejected the deduction - Held that:- First Appellate Authority held that income received by the assessee was to be assessed as income from business only - Commissioner of Income Tax (Appeals) pointed out that the approval of the Ministry stated that the assessee was eligible for deduction under Section 80IA (4)(iii) - Head under which income is assessed is not relevant for the purpose of claiming exemption under the Act - When the Revenue had accepted the view of the Commissioner of Income Tax (Appeals) on Section 80IA that the assessee had complied with Section 80IA(4)(iii) of the Act, there remains nothing for an enquiry either as to the nature of the receipt or for that matter the facilities developed to be treated as an industrial park to consider the question of deduction under Section 80IA(4)(iii) of the Act - Order of the Tribunal is set aside - Following decision of COMMR. OF INC. TAX v. COCANADA RADHASWAMI BANK LTD [1965 (4) TMI 11 - SUPREME Court] - Decided in favour of assessee.
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2013 (7) TMI 419
Block assessment - Notice u/s 158BD not issued - Undisclosed income - Tribunal made addition on account of undisclosed income - Held that:- Two search warrants have been issued - First warrant was issued in the name of a company and the second one was issued without any name - Consequently, no search warrant was issued in the name of the Assessee - It is not as if the authorities have obtained search warrant in the name of the appellant or its Proprietary concern and on search they found the receipts in the name of the assessee. When the search of the business place of the appellant is a consequential one, i.e. after the first search of, Section 158BC would not be applicable since the appellant, at best, can be called only as 'other person' - During the first search the authorities have found and seized 18 blank agreements along with four receipts signed by the assessee in his letter-head. After seizure of such receipts, the authorities proceeded to the business place of the appellant without search warrant and 'found' some undisclosed income of the assessee - Tribunal also accepted that no warrant was issued in the individual name of the appellant - appellant being a 'person other than the person with respect to whom the search was conducted', if at all, only the provisions under Section 158BD would apply and the provisions of Section 158 BC have no application - Decided in favour of Assessee. Rectification of irregularity - whether the assessment order passed by the Assessing Officer invoking Section 158BC suffers from any procedural irregularities as contemplated under Section 292B so as to make such assessment order valid - Held that:- Section 292B itself is having its own limitations of applications with three exceptions - passing an order of assessment under Section 158BC instead of Section 158BD would not amount to a mistake, a defect or an omission, much less a curable one - When different contingencies are dealt with under different Sections of the Act, allowing an illegality to be perpetrated and then taking a plea by the Revenue that such an action adopted on their part would not nullify the proceedings, cannot be appreciated since by virtue of such actions, the Revenue has attempted to nullify the scheme of things of limitations legally propounded - Following decision of Monga Metals (P) Ltd. vs. Asst. Commissioner of Income Tax [1999 (6) TMI 47 - ALLAHABAD HIGH COURT] - Decided in favour of Assessee. Limitation period - Whether assessment is barred by limitation as per Section 158BE(1)(a) or saved by limitation as per Section 158BE(2)(a) - Held that:- When the provisions of Section 158BC alone have been invoked, then automatically the period of limitation contemplated under Section 158BE(1)(a) alone are applicable and not the period of limitation provided under Section 158BE(2)(a) since the said period of limitation is applicable to the 'other person' referred to in Section 158BD - One cannot be allowed to follow a particular procedure contemplated in one Section and borrow the limitation contemplated in the other Section - The assessment order passed in this case, under Section 158BC, is invalid as it has not been passed within the prescribed period of limitation - Decided in favour of assessee. Violation of principle of natural justice - Held that:- Tribunal directed to afford an opportunity to the appellant to cross-examine was not at all complied with by the Assessing Officer - But Tribunal simply thrown liability on assessee that it was utilized by the assessee - Therefore, order passed by the authorities as well as the Tribunal is against the principles of natural justice and liable to be set aside - Decided in favour of assessee. Benami Transaction - Application of Section 68 - Held that:- Assessing Officer, in spite of clear explanations and production of voluminous documents by the appellant, has held that the assessee has not explained the cash credits - Tribunal has confirmed the order of addition on account of benami transaction made by the AO, on the ground that it is the primary onus of the assessee to make out a prima facie case that he did not receive the sums from genuine sources - Therefore, Tribunal has, unjustifiably and illegally, fixed onus on the assessee to establish such credits - Following decision of CIT vs. Orissa Corporation [1986 (3) TMI 3 - SUPREME Court] and CIT vs. Mohim Udma [1999 (10) TMI 45 - KERALA High Court] - Decided in favour of Assessee.
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2013 (7) TMI 418
Penalty u/s 271(1)(c) - Unsustainable claim - Tribunal deleted penalty following previous decisions - Held that:- Claim made by the respondent assessee that the amount attributable to the goodwill amount which was written off is not chargeable to tax was not accepted by the revenue - Mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - Following decision of CIT v/s. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] - Decided against Revenue.
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2013 (7) TMI 417
Application of Section 70 and 74 - set off of losses - Exemption u/s 50EC - priority - Whether provisions of Section 70 can only be applied when computation of capital gain is done first - Held that:- Insertion of Section 54EC is only a substitute in the place of Section 54EA and Section 54EB to cover cases of transfer of long term capital asset on and from 2001 - As per Section 54EC(1)(a) on the capital gains arising from the transfer of long term capital asset invested in accordance with the said Section, capital gains shall not be charged under Section 45 - Section 54EC does not specifically mention about specified nature of transfer or of any specified long term capital asset - It merely speaks about the "capital gain arising out of a long term capital asset". A reading of Section 70(3) shows that the loss that has to be looked at first is not with reference to the loss arising in respect of any new capital asset, but in the totality of the loss suffered on the sale of capital asset chargeable to tax under Section 45 - Section 54EC is specific with reference to investment in specified bonds as regards the capital gain arising from and out of a long term capital asset. For taking benefit under Section 54E, it is not necessary that one should first apply Section 70(3) and thereafter only, the assessee could invest the capital gain arising from the long term capital asset to any specified bond as specified under Section 54EC - Decided against Revenue.
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2013 (7) TMI 416
Income u/s 41(1) - Bank waived the interest portion accrued and payable by the assessee - Returns filed for A.Y. in which deduction claimed was held non-est - Tribunal held that since returns were non-est therefore, there could be no addition under Section 41(1) - Held that:- For the applicability of Section 41(1) of the Act, the prerequisite condition is that an allowance or deduction has been made in the assessment for any of the years in respect of an expenditure, loss or trading liability incurred by the assessee and subsequently during any previous year, the assessee has received remission or obtained refund of the said amount - Unless the amount had been allowed as a deduction in the earlier years, the question of invoking Section 41(1) does not arise - No interference in Tribunal's order - Following decisions of Tirunelveli Motor Bus Service Co. P. Ltd. Vs. Commissioner of Income Tax, Madras [1970 (8) TMI 2 - SUPREME Court], Narayanan Chettiary Industries v. Income-tax Officer [2005 (7) TMI 71 - MADRAS High Court] - Decided against Revenue.
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2013 (7) TMI 415
Deduction u/s 80HHC - Premium of transfer of the export license - CIT allowed partial deduction of 10% to assessee whereas Tribunal allowed full benefit - Held that:- In order to qualify for benefit under Section 80HHC, the profit earned should have a nexus to the export of the goods directly merchandised - In the case of premium payment received on transferring export quotas, it does not involve any earnings of foreign exchange and does not result in profits attributable to an export activity for the purpose of Section 80HHC and no deduction under Section 80HHC can be claimed - entitlement to a quota and a premium or price for the transfer of a quota may be incidental to the export activity carried on by the assessee earlier but has no direct nexus in the sense that no export is found in the hands of the assessee in respect of subject amount - Order of the appellate tribunal is set-aside - Following decisions of ANIL DANG vs THE INCOME TAX OFFICER [2010 (12) TMI 944 - Karnataka High Court] and COMMISSIONER OF INCOME TAX vs NAGESH KNITWEARS P.LTD. [2012 (6) TMI 65 - DELHI HIGH COURT] - Decided in favour of Revenue.
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2013 (7) TMI 414
Deduction for contributions under EPF and ESI Act u/s 36 - whether the Assessing Authority and the revision authority were correct in disallowing the deduction towards contributions remitted by the assessee under the EPF and ESI Act, though some of which were remitted beyond the stipulated periods prescribed under the said statutes and the mandatory provisions of Sec.36(1)(va) r/w Sec.2(24)(x) and Sec. A3B of the Act, while the said payments were effected by the assessee before the due date for filing returns of income under Sec. 139(1) - Relying on the judgement of CIT v. Sabari Enterprises (2007 (7) TMI 169 - KARNATAKA HIGH COURT) – held that:- It is further observed that in order to bring about uniformity in allowing deductions to contributions to welfare funds, the amendment was necessitated, while the reason not to extend such deduction appeared to be that the employer should not sit on the collected contributions and deprive the workman of the rightful benefits under the social welfare legislations by delaying payment, of contribution - regard being had to the words "due date" there can be no more doubt that the Assessing Officer as well as the revision authority fell in error in disallowing the deduction being the employees' contribution remitted by the assessee both under the ESI and EPF Act, partly before 31/3/2006 in the financial year concerned and the balance before the filing of the returns under Sec. 139(1) of the Act, as extended upto 30/ 11/2006 – petition is decided in the favour of the assesse
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2013 (7) TMI 413
Computation of capital gain - Mode of computation u/s 48 - cost of acquisition versus CII - receipt of property under gift or will - Whether on the facts and in the circumstances of the case, the Tribunal has erred substantially in law in not recognizing that the “cost of acquisition of an asset” and “cost inflation index” are two different legal concepts and are mutually exclusive – Whether the Appellate Tribunal erred in law in not applying the provisions of section 48, Explanation(iii) which clearly states that inflation index would apply for the first year when the asset was first held by the assesse. Held that:- Tribunal was right when stating that the indexed cost of acquisition shall have to be worked out with reference to 1.4.1981 - in the present case the asset was acquired by the previous owner of the property - an asset acquired prior to 1.4.1981 the indexed cost of acquisition would be the cost of acquisition multiplied by the ratio of the Cost Inflation Index in the year in which assessee’s asset is transferred to the Cost of Inflation Index for the year beginning on 1.4.1981 - by virtue of a deeming fiction provided in sub-section(1) of section 49, cost of acquisition in hands of the assessee would be the cost for which the previous owner of the property acquired it - It is for this purpose that we need to fall back on computation provision of section 48 - When we do so, we work out the cost of acquisition of the asset in the hands of previous owner. While doing so, we cannot transpose the assessee in explanation (iii) of section 48 - Doing so, would amount to falling short of giving full effect to the deeming fiction contained in sub-section(1) of section 49. The interpretation sought to be given by the Revenue would be unacceptable because there is no provision under which the cost of acquisition in the hands of the assessee in cases such as gift on the date of acquisition of the property can be made and found in the Act. A Serious road-block would be created if such property is acquired through Will and would therefore have no reference to its actual cost on the date of operation of the Will. - decided against the department.
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2013 (7) TMI 412
Penalty u/s 271(1)(c) - as per AO income from commission/consultancy etc. received from his employer is business income instead of salary income - CIT(A) deleted the penalty as the corresponding addition made to the total income of the assessee was merely as a result of change of head of income - Held that:- As decided in case of Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] merely making a claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. As noted by the CIT(A) in his impugned orders that full disclosure was made by the assessee regarding the nature of his income which was also reflected in the certificate issued by the employer. Even the genuineness of the expenditure claimed to be incurred by the assessee for earning commission income etc. was not doubted by the A.O. The assessee thus cannot be said to be guilty of furnishing inaccurate particulars of his income - In favour of assessee.
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2013 (7) TMI 411
Penalty u/s 271(1)(c) - disallowance of repairs and maintenance expenses treating the same as capital in nature - Held that:- The action of the A.O. in allowing the depreciation on the said expenses clearly shows that genuineness of the same was not disputed by him and the fact that the said expenses were related to the business of the assessee was also accepted by him. In the similar facts and circumstances involved in the case of DCIT vs. Shivalik Global Ltd. (2009 (12) TMI 695 - ITAT DELHI) wherein the penalty imposed by the A.O. deleted holding that penalty u/s 271(1)(c) was not justifiable because the issue as to whether the particular repair expenses are of revenue nature or of capital nature was highly debatable one and there was no case of furnishing of inaccurate particulars of income by the assessee in treating repair expenses to be of revenue in nature. Penalty deleted.In favour of assessee. Disallowance out of miscellaneous expenses to the extent of 10% for want of supporting voucher - Held that:- Adhoc disallowance of 50% out of miscellaneous expenses was made by the A.O. on estimated basis and the said estimate was revised by the CIT(A) while restricting the disallowance to 10%. It was thus a case of disallowance made on estimated basis for want of supporting voucher and there was no case that any bogus expenses not relating to its business were claimed by the assessee under the head miscellaneous expenses. See DCIT vs. Eagle Iron and Metal Industries Ltd. (2009 (12) TMI 696 - ITAT MUMBAI) wherein held that where disallowance had been made purely on the basis of difference of opinion and on adhoc basis, there was no case made out for concealment of income or furnishing inaccurate particulars of income to justify imposition of penalty u/s 271(1)(c) - In favour of assessee.
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2013 (7) TMI 410
Penalty u/s. 271(1)(c) - computation of Long term capital loss at Rs.1,62,52,952/- as against 3,36,50,113/- claimed by the assessee - CIT(A) deleted the levy holding that the assessee had rightly claimed LTCL of Rs.3,36,50,113/- holding that Explanation (iii) to section 48 has to be read to mean that the indexed cost of acquisition has to be computed by taking into account the period for which the asset was held by the previous owner - Held that:- Without going into the controversy as to whether the disallowance was rightly or wrongly made by the AO in the assessment order, we are in agreement with the observation of the CIT(A) to the extent that where two views are possible and the assessee has taken one of the possible views but the AO has not agreed to that view that itself is not a ground for levy of penalty. The view taken by the assessee in this case is one of the possible views and the issue was also debatable hence, under such circumstances it cannot be said that the assessee had furnished inaccurate particulars of income to conceal her income. In favour of assessee.
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2013 (7) TMI 409
Deduction u/s 10A - assessee has claimed deduction from its STP unit admitting its inability to bifurcate and provide the P/L Account of the units - as per AO assessee has booked all the expenses which should have been allocated to all units in the non-STP units only thereby increasing the profits of the Unit which claimed exemption - Since loss deduction u/s 10A was not allowed similar adjustment was also made u/s 115JB - Held that:- As seen from the 10A report submitted, the profits are arrived at notional basis having regard to the information and explanation given by the company and also relied on companies representation that approximately 24.2 sq.mtr. of area of the second floor was occupied by the STP unit. The report also qualifies that they relied upon the data submitted by the assessee to STP Bangalore and some of the other costs were also taken on the basis of the exertions made by the company. Even the current year's addition to fixed assets have been allocated to STP/non-STP units on the basis of area for which these are procured. Further, in note No. 9 it was also qualified that the Auditors are relied upon assessee's representations that Bangalore unit is self-sufficient unit and therefore no portion of common expenses are need to be attributed thereto in computing profits of the unit. These notes to the audit report do indicate that the claim of the assessee was not based on any reliable data while claiming the deduction. Even before the CIT(A) alternative submission was made that the profit that could be said to be derived would be at Rs.4,21,21,410/- as against Rs.5,25,96,228/- shown in the return of income. These indicate that the basis for arriving at the profit by the assessee is not correct and cannot be accepted at face value. Therefore allocation of expenses on the basis of the turnover made by the CIT(A) is reasonable and has to be upheld. Even though assessee tried to explain allocation of expenses made by the company including the past losses in other units, in the absence of any direct allocation of expenditure and preparation of separate P& L account of the unit reject assessee's ground.
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2013 (7) TMI 408
Assessment of income - gain on sale of shares - Short term capital gain v/s business income - assessee is a investor in equity stocks - Held that:- Assessee had shown net long term capital gain from sale of shares, which has been claimed as exempt. This long term capital gain has been accepted by the AO. Around fifty percent of scrips have been held for a period ranging between six months to one year, the other scrips have been held for the period ranging mostly between 2 to 6 months. There are only few scrips which has been held up to the period of 30 days on which short term capital gain has been shown. The portfolio of the shares shows that the same have been held under the head 'investment' in the balance sheet. In case of speculative transactions the assessee has dealt only in three scrips which has resulted into loss and in case of futures & options, the assessee has dealt only with one scrip of Allahabad Bank of 1500 shares on 31st October 2005, which was sold on 15th May 2006. Except for the transaction of these few scrips, the assessee has not carried out any non-delivery based transaction or future & options transaction. Thus CIT(A) that the assessee was actively involved mostly in intra-day speculative transaction and future options, appears not to be correct. Assessee has not borrowed any funds for making the investment in shares and separate portfolio has been maintained for the purpose of investment. Also in the earlier years similar nature of transaction and income from sale of shares was shown under the head short term capital gains and long term capital gains and the same has not been disturbed, though return of income has been accepted u/s 143(1). From these facts, it can definitely be gathered that the intention of the assessee in undertaking purchase and sale of shares were not for the purpose of trading but as an investor to get gain from the escalation of the share prices. Thus as per the material on record, it cannot be held that the assessee was doing trading in shares but has had held the shares for the purpose of investment - income earned from sale and purchase of shares in the case of the assessee can very well be held as income from short term capital gains - appeal of the assessee is allowed.
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2013 (7) TMI 407
Re opening of assessment second time - illegalities committed in the first reassessment - AO initiated proceedings for consideration of provisions of section 2(22)(e) - deemed dividend - tax the capital gains on sale of property - reference of matter to valuation officer - Held that:- The assessee objected to for considering this head of income in that proceedings which the AO, vide detailed discussion rejected in that order. Therefore, as far as the issue of capital gains is concerned this also was subject matter of assessment vide order dated 24.03.2006. There is also no dispute that the AO referred the value of property sold to the DVO and left a note in the order itself that the sale consideration will be revised after receipt of DVO's report. This order of the AO was, however, quashed by the CIT(A) on 07.02.2007 on the reason that there are no valid reasons for reopening the assessment. This order of the CIT(A) was not challenged and was accepted by the Revenue. Therefore reopening the assessment again on 13.03.2007 (within two months or so of CIT(A) order) and issuance of notice dated 26.03.2007, just before the limitation of time getting barred, is only to overcome the first proceedings which were not held to be valid. Thus as seen from the facts of the case it is only to circumvent the illegality committed by the AO in the fist assessment proceedings he has recorded the reasons for initiating second time on an issue which was subject matter of assessment in the first reassessment proceedings. Once a proceeding in respect of an item other than the one mentioned in the notice u/s 148 has been taken into consideration and the same is subsequently not upheld in appeal, it is not possible to restart the proceedings in respect of the same item afresh. See Smt. Anchi Devi vs. CIT [2008 (3) TMI 49 - HIGH COURT PUNJAB AND HARYANA] & Durgamba [1997 (7) TMI 49 - MADRAS High Court]. There is merit in assessee's contention that the AO cannot refer the matter to substitute 'fair market value' for 'full value of consideration received' in the assessment order as provisions of section 50C are not applicable. Be that as it may, since the entire proceedings are considered to be bad in law, there is no need to adjudicate the grounds on merits and the additional grounds raised & the consequential order under section 154 by AO to substitute valuation officer's fair market value. In favour of assessee.
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Customs
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2013 (7) TMI 406
Valuation of imported goods - Transaction Price - inclusion of Trade Discount - Held that:- purpose of appointing a distributor is to sell the goods within the specified territory - If the goods are supplied to others, then the purpose of appointing a distributor itself will be defeated - Unrelated importers were getting a discount of 35% earlier - It logically follows that after the appointment of distributor, he would also eligible for the same discount earlier given to unrelated distributors - Assessing officer came to the conclusion that 35% discount from the price list given to the appellant is a normal trade discount and it is not a discriminatory discount available only to the appellant - Grant of territorial commission/discount cannot be arbitrary/or discriminatory - It does not affect the normal trade discount given to buyers in any way - Decided in favour of assessee.
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Service Tax
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2013 (7) TMI 431
Constitutional validity of levy of service tax on restaurants - Validity of sub clause (zzzzv) of clause 105 of Section 65 of the Finance Act, 1994 - Legislative competency of Parliament - Sale of food and drinks - Whether "taxes on the sale and purchase of goods" in Entry 54 of List II of the seventh schedule covers service in the light of the definition of "tax on sale and purchase of goods" under Article 366 (29A) (f) of the Constitution of India - Held that:- The supply can be by way of a service or as part of a service or it can be in any other manner whatsoever. The supply or service can be for cash or deferred payment or other valuable consideration. The tax, therefore, is on the supply of food or drink and it is not of relevance that the supply is by way of a service or as part of a service - price that the customer pays for the supply of food in a restaurant cannot be split up - under Article 246(1) of the Constitution, Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution. As per Article 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List II - first limb of the Article 366(29-A) says that the tax on sale or purchase of goods includes a tax on transactions specified in sub Clauses (a) to (f). It was also found that the said Article is brought in to expand the tax base which should narrow down because of certain judgments of the Court. The deemed sale is therefore brought into effect as a concept in the constitutional definition. Very purpose of incorporating the definition of tax on sale or purchase of goods in Article 366 was to empower the State Governments to impose tax on the supply, whether it is by way of or as a part of any service of goods either being food or any other article for human consumption or any drink either intoxicating or not intoxicating whether such supply or service is for cash, deferred payment or other valuable consideration - transfer is during the course of a service and when the deeming provision permits the State Government to impose a tax on such transfer, there cannot be a different component of service which could be imposed with any service tax in exercise of the residuary power of the Central Government. If the constitution permits sale of goods during service as taxable, necessarily Entry 54 has to be read giving the meaning of sale of goods as stated in the Constitution - service forms part of sale of goods and State Government alone will have the legislative competence to enact the law imposing a tax on the service element forming part of sale of goods as well, which they have apparently imposed - Follpwing decision of K. Damodarasamy Naidu & Bros. v. State of T.N. [1999 (10) TMI 598 - SUPREME COURT OF INDIA] - Decided in favour of assessee. Validity of sub clause (zzzzw) of clause 105 of Section 65 of the Finance Act, 1994 - Legislative competency of Parliament - Service in hotel, inn, guest house, club - Whether the service provided in a hotel, inn, guest house, club etc. imposed with luxury tax under State Act in terms of Entry 62 of List II can be separately assessed and imposed by the Union with service tax, invoking the residuary powers at Entry 97 of List I of the Constitution - Held that:- luxuries is an activity of enjoyment or indulgence which is costly or which is generally recognised as being beyond the necessary requirements of an average member of the society - service tax is imposed on services provided in a hotel and other similar establishments when State Legislature had enacted the Kerala Tax on Luxuries Act by exercising their legislative power under Entry 62 of List II - Amendment now made to the service tax trenches upon the legislative function of the State under Entry 62 of List II - Following decision of Godfrey Phillips India Ltd. v. State of U.P. [2005 (1) TMI 391 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2013 (7) TMI 429
Penalty u/s 77, 78 - Petitioner failed to remit service tax within stipulated period but remitted the service tax along with corollary interest during audit by revenue and before show cause notice - Petitioner claimed immunity under Section 73 (3) - Held that:- in the absence of any circumstances justifying exclusion of this provision and invocation of provisions of Section 73 (4) of the Act, there being no such circumstances adverted to in the adjudication or the appellate order, initiation of proceedings for imposition of penalties is unwarranted - Proceedings for penalty quashed.
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2013 (7) TMI 428
Refund of claim - Claim filed beyond period of 1 year - Export - Notification No. 17/2009 - Department allowed only partial refund to assessee - Held that:- On a true and fair construction of the provisions of Notification No. 17/2009, the conclusion is compelling that several conditionalities enumerated therein are with regard to delineation of the taxable services in respect of which the exemption is applicable, the circumstances in which and the persons who are entitled/ disentitled to the claim for exemption and stage at which the exemption should be claimed; the time frame within which the claim for exemption could be presented, are all mandatory requirements for presenting a claim for exemption - No reason to fault with concurrent conclusion - Decided against Assessee.
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2013 (7) TMI 427
Rent a cab service – scheduled rate contract - department contended that the vehicle was given to National Fertilizer Limited (NFL) thus tax liability does not diminish – held that:- there is no condition of providing of vehicles on term basis to NFL but was on call basis i.e. one hour from booking time for local duties and with suitable notice time for outside journey. - there was only a permanent arrangement of providing transport service without renting the vehicles - there is no condition of providing of vehicles on term basis to NFL but was on call basis - Without running or without any call or demand no service was available to NFL – decide against the department.
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2013 (7) TMI 426
Period of limitation - Proof of delivery of show cause notice - Non-discharge of Service Tax on air travel agent services – Held that:- none of the entries pertain to the dispatch of the said OIO - not relevant for the purpose of verification - appellant’s request under RTI was for providing the copy of the dispatch register for the year 2008-2009, while the lower authorities have provided him a copy of dispatch register for the year 2009-2010 - investigation report of the ld. Commissioner also indicates that they could not trace the dispatch records for the period December 2008 to January 2009 – lower authorities have not considered the merits of the case - matter remanded back – appeal allowed in the favour of the assessee
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2013 (7) TMI 425
Stay - extension of time for making pre-deposit – Held that:- There was no valid reason for granting the extension - illness of the appellant is just a rhetoric and the same is not supported by evidence – earlier also the appellant had took the grant for extension on medical grounds - appellant did not represented before the Bench despite notice – appeal decided against the assessee.
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Central Excise
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2013 (7) TMI 432
Cenvat Credit on GTA Service - transportation of sugar cane - The adjudicating authority has found a nexus between the said service and the generation of electricity in the captive power plant maintained by the appellant. It is the case of the Revenue, that as the bagasse generated as waste in the manufacture of sugar from sugar cane was used as fuel for generating steam, which was, in turn, used to turn turbine for generating electricity, which, in turn, was partly used captively for running the sugar manufacturing plant and partly sold outside, there was no nexus between the said input service and the manufacture of sugar and, therefore, the CENVAT credit taken on that service was not admissible to the appellant. - Held that:- prima facie the view taken by the adjudicating authority is not sustainable - stay grated.
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2013 (7) TMI 405
Section 11A(2), 11A read with Section 11A(1A) – Main Respondent is manufacturer of MS Ingots - M.S. Ingots alleged to have been cleared without payment of duty and also for imposition of penalty - under Section 11AC and the imposition of penalty under Rule 26 of Central Excise Rules, 2002 on Director and also on broker and buyer in the transaction – Main Respondent had paid the entire disputed amount of duty along with interest and 25% of the duty towards penalty within 30 days of the issue of the Show Cause Notice, in term of the provisions of Sub-Section (1A) of Section 11A of the Central Excise Act – Held that:- the words "other persons" used in first proviso to Sub-Section (2) would cover the co-noticees/persons who face the allegations of contravention of Central Excise Rules, which are linked with the allegation of deliberate/fraudulent short payment, non-payment or erroneous refund of duty against the person chargeable with duty facing the duty demand i.e. the person who are alleged to have knowingly dealt with the excisable goods, liable for confiscation in the manner mentioned in Rule 26 (1) of the Central Excise Rules, 2002 and for this reason have been Show Caused for imposition of penalty under this Rule, either in the notice under section 11A (1) issued to the person chargeable with duty or by separate notices issued in this regard - as when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods, transporters who had transported the goods cleared by manufacturer/assessee, the Directors/employees of the manufacturer/assessee company. Observation made by the Hon’ble Tribunal:- Under Section 32M, every order of settlement passed under section 32F(5) shall be "conclusive as to the matters stated therein" and no matter covered by said order shall, save as otherwise provided in this chapter, can be reopened in any proceedings under this Act or under any other law for the time being in force - Tribunal in case of Shitala Prasad Sharma Vs. Commissioner of Central Excise, Mumbai-I, reported in [2004 (12) TMI 195 - CESTAT, MUMBAI] and also the Tribunal's judgment in case of D.P.Kothari reported in [ 2001 (3) TMI 183 - CEGAT, COURT NO. II, NEW DELHI] has held that when the matter has been settled by the settlement commission against the main party and settlement commission has granted immunity to him from penalty, the co-accused can not be penalized under Rules, 209A of Central Excise Rules, 1944 as he can not face a penalty greater than the penalty on the main accused – Appeal dismissed – Decided against the Revenue.
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2013 (7) TMI 404
Denial of credit - Goods received on stock transfer basis - Revenue denied credit on the basis that it was stock transfer and not sale - Held that:- applicant received duty paid raw material on stock transfer basis - credit is available in respect of duty paid on inputs received on stock transfer basis - Following decision of Exide Industries Ltd. vs. Commissioner of C.EX. Haldia [2008 (1) TMI 190 - CESTAT, KOLKATA] and Shivagrico Implements Ltd. vs. Commissioner of C. EX [2008 (2) TMI 369 - RAJASTHAN HIGH COURT] - Decided against Revenue.
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2013 (7) TMI 403
Stay Application – Waiver of pre-deposit - The applicant received certain inputs from a 100% EOU and availed the credit as per the provisions of Rule 3(7) of CENVAT Credit Rules - The demand is in respect of special additional duty paid by a 100% EOU - Prior to 07.09.2009, the applicants are not entitled for such credit – Held that:- By Notification No.22/2009, dt.07.09.2009 CENVAT Credit of 4% Special Additional Duty charged under Section 3(5) of Customs Tariff Act is admissible – Relying upon the decision of Sri Venkaeshwara Precision Components [2010 (8) TMI 243 - CESTAT, CHENNAI], to submit that the Tribunal allowed the credit in respect of Special Additional Duty even prior to issuance of Notification No.22/2009, dt. 07.09.2009 – Waiver of Pre-deposit allowed – Decided in favor of Assessee.
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2013 (7) TMI 402
Stay Application – Waiver of Pre-deposit – envat Credit on GTA Service - transportation of sugar cane - use of bagasse in generation of electricity - Held that:- Relying upon the stay order passed in Shree Renuka Sugars Ltd. Vs. CCE, Belgaum [2013 (7) TMI 432 - CESTAT BANGALORE], granted waiver of Pre-deposit – Remanded the case back to Commissioner(A) with a request to dispose the case on its merits without insisting on any predeposit – Decided in favor of Assessee.
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2013 (7) TMI 401
Distribution of Cenvat credit on input service by corporate office to its sister concerns – Corporate office not registered as input service distributor - appellant-company recognized as a LTU, the provisions of Rule 12A are squarely applicable to them – Credit transferred on the basis of transfer challan – Held that:- Appropriate entry has to be made in the record maintained under Rule 9 (See sub-rules (5) and (6) of this Rule). The transfer of credit has to be effected by issue of transfer challan containing the registration number, name and address of the transferor-premises (sender-premises) as well as the registration number, name and address of the transferee-premises (recipient-premises), the amount of credit transferred and also the particulars of the entry made in the record maintained under Rule 9. The CENVAT credit on the basis of transfer challans can be taken at the transferee (recipient) premises. Nowhere in sub-rule (4) of Rule 12A is there any requirement of any ISD registration number to be mentioned in a transfer challan. What the sub-rule requires, inter alia, is the mention of "registration number" i.e. Central Excise registration number or Service Tax registration number - The admissibility of the credits to the three manufacturing units will be subject to the conditions and limitations prescribed under Rule 12A – Appeal allowed by way of remand with a request to the Commissioner to undertake de novo adjudication of the dispute in accordance with law and the principles of natural justice - Adjudicating authority should proceed on the premise that Rule 12A of the CCR, 2004 is applicable to the appellant – Decided in favor of Assessee.
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2013 (7) TMI 400
Chapter 72 items - Denial of cenvat credit on MS Plates, HR Sheets etc. on the ground that these items fall under Chapter-72 and are not capital goods - Certificate issued by the Chartered Engineers, clearly indicates that the MS plates, HR Sheets etc. are utilized for fabrication of various parts of ducts for Chimney at their HAG plant. The Chartered Engineer’s certificate also indicates that the material is used for fabrication of new Chloro Tank etc. - Rejection of credit only on the ground that the Jurisdictional Assistant Commissioner filed report that the assessee had no record to justify their claim – Held that:- Rule 2(k) of the Cenvat Credit Rules, 2004 will come to the rescue of the appellant - The decisions in the case of Rajasthan Spinning & Weaving Mills Ltd. [ 2010 (7) TMI 12 - SUPREME COURT OF INDIA] and in the case of L. H. Sugar Factories Ltd.[ 2009 (9) TMI 431 - CESTAT, NEW DELHI] etc are directly applicable and it is to be held that the appellant herein is eligible to avail cenvat credit of the duty paid on the items i.e. MS plates and HR sheets, which according to Chartered Engineer’s certificate are mostly used for fabrication of machinery – Decided in favor of Assessee.
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2013 (7) TMI 399
Reversal of Cenvat Credit – goods damaged due to flood - Non-reversal of Cenvat Credit on plant and machinery and work in process goods - Respondents had received insurance claim for damages of raw materials, finished goods and spares due to flood – Show-cause Notice issued for recovery of wrongly taken CENVAT Credit of under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944, recovery of interest under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11AB ibid and for imposition of penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC ibid – Held that:- Relying upon the judgment of Voltamp Transformers Ltd. [2009 (12) TMI 743 - CESTAT AHMEDABAD], the appeal filed by Revenue is rejected. The High Court dismissed the Revenue appeal in the abovementioned case following the larger bench decision by Hon’ble High Court in the case of Intas Pharmaceuticals Ltd [2013 (4) TMI 532 - GUJARAT HIGH COURT], which was delivered on 29.08.2012. - Decided against the Revenue.
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2013 (7) TMI 398
Stay Application – Waiver of Pre-deposit - The CENVAT credits in question were denied on steel rounds, alloy steel rounds etc., which were fed into the manufacturing stream but rejected midway. The cost of such materials was recovered from the supplier - Department required the appellant to reverse the CENVAT credit which was taken on the said materials by the appellant treating them as inputs – Held that:- Two essential conditions of CENVAT credit on inputs are that the duty-paid nature of the goods should be established and that the goods should be shown to have been used in the manufacture of the finished products (final Products) - Materials were rejected midway and were not contained in the finished products - cannot be held to have been used in the manufacture of the final products – Also, cost of the rejected materials was recovered by the assessee from their suppliers – Moreover, the appellant not pleaded financial hardship - Directed to predeposit an amount of Rs.1,50,000/- (rupees one lakh fifty thousand only) - Waiver and stay in respect of the penalties imposed on them and the balance amount of CENVAT credit till the final disposal of the appeal.
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CST, VAT & Sales Tax
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2013 (7) TMI 430
Power of Commissioner u/s 70 of Chhattisgarh Value Added Tax Act 2005 - determination of rate of tax - Held that:- procedure prescribed under rule 79 of Chhattisgarh Value Added Tax Rules, 2006 shows that the proceedings before the Commissioner are quasi judicial in nature; he exercises quasi judicial power and not administrative power - Under sub-section (2) of section 70 {70(2)} of the Act, the decision of the Commissioner is final as no appeal or revision lies under the Act. It is also binding upon all the authorities mentioned in section 3 of the Act except when they are deciding the appeals - the power exercised by the Commissioner is quasijudicial in nature and not administrative. The single judge after considering the submissions of the parties has dismissed the writ petition; substance of the order is under Article 227 and no power under Article 226 of the Constitution has been exercised. - the writ appeal is not maintainable. Following decision of State of Kerala and others Versus Travancore Chemicals and Manufacturing Co. and another [1998 (11) TMI 526 - SUPREME COURT OF INDIA], Commissioner of Sales Tax, UP Lucknow Vs M/s Super Cotton Bowl Refilling Works [1989 (2) TMI 115 - SUPREME COURT OF INDIA] and Manmohan Singh Jaitla vs Commissioner Union Territory of Chandigarh and Others [1984 (12) TMI 269 - SUPREME COURT] - Decided against Assessee.
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