TMI Tax Updates - e-Newsletter
July 10, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Validity of reopening of assessment - payment of purchase price in excess to the SMP - there must be some further inquiry and/or tangible material with the AO - notices under Section 148 is not sustainable - HC
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Income Tax:
Disallowance of expenditure - commission paid for doing liaisoning work to get the contract - we have not been shown any law, under which, the commission paid was prohibited - claim of expenditure allowed - HC
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Income Tax:
The ld. CIT(A) confirmed the addition of ₹ 1 lac on estimated basis when commission payments are specified amount, the CIT(A) should have confirmed the whole commission payment - Therefore, in absence of proper evidence with the assessee for claiming the expenditure as incurred wholly and exclusively for the business purposes, we confirm the addition of whole amount - AT
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Income Tax:
Profit from sale of flat - treated as income from capital gain OR business income - The assessee has not incurred any expenses towards construction of building nor it had carried out any activity for the construction of the building - to be assessed as capital gain and not as business income - AT
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Income Tax:
Transactions of purchase and sales of shares - In the year under consideration the assessee has carried out repetitive transactions in the same script as well as same day transactions of purchase and sale therefore, the earlier orders would not operate as res-judicata or applied as rule of consistency - held as business income - AT
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Income Tax:
Assessee had failed to pay tax due on the income returned at the time of filing the return or even before filing of appeal or even at the time when appeal was heard by the ld CIT(A) - CIT(A) rightly refused to admit Appeal since requirements of section 249(4)(a) not fulfilled - AT
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Income Tax:
Disallowance of cost of construction - Since only provisions of 40A(3) are invoked, there is no question of treating the expenditure as 'non-genuine' as no amount was disallowed u/s. 37(1). Provisions of Section 40A(3) can only be invoked on the expenditure which was paid in cash - AT
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Income Tax:
Disallowance under Section 14A - it is mandatory for the AO to adopt the method prescribed in Rule 8D(2) - CIT(Appeals) is not justified in accepting the ad hoc expenditure on estimation of 10% of the income - AT
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Customs:
Waiver of pre deposit - Once the case is arguable and the Tribunal is required to consider several grounds and indepth, then we do not see justification for imposition of such conditions - HC
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Corporate Law:
Jurisdiction of SEBI under SEBI Act, 1992 in relation to Global Depository Receipts (GDRs) issued outside India - the exercise of jurisdiction by SEBI against the respondents, having regard to the nature of allegations, listed out in paragraph 74 is well founded - SC
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Service Tax:
Extension of stay order - stay orders are in force beyond 7.8.2014 - there is no need for filing any further applications for extension of the orders granting stay either fully or partially in these cases. - AT
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Service Tax:
Penalty under Section 76, 77 & 78 - earlier Injunction was received from court in respect to demand of tax - it is a fit case to invoke Section 80 of the Act, 1994 and no penal provision should be invoked. - AT
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Service Tax:
Input services - cenvat credit in respect of services of certification of pollution level is admissible, even though the service in the hands of service provider is not taxable but the service tax was admittedly paid by the service provider. - AT
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Service Tax:
Mandatory pre-deposit - Petitioner would not be justified in urging that the amended provisions of Section 35F(1) of the Act would not apply merely on the ground that the notice to show cause was issued prior to the enforcement of Finance (No.2) Act, 2014 - HC
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Central Excise:
Valuation of goods in the hands of Job Worker - principal manufacturer is not discharging excise duty liability - provisions of Rule 10A would not apply to job worker who has completed job work and returned to the principal manufacturer. - AT
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Central Excise:
Condonation of delay - delay in filing an appeal before Commissioner (Appeals) - limitation provided under section 35 of the Act cannot be condoned in filing the appeal beyond the period of 30 days as provided by the proviso nor the appeal can be filed beyond the period of 90 days - HC
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Central Excise:
Effective Date of beneficiary provisions - whether should be retrospective - once the co-relation could not be established, then the Petitioners derive no benefit of the Constitutional provisions and selection of the date, namely, 1st April 1996 for they being brought into effect. - HC
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VAT:
Denial of refund claim - Bar of limitation - Even on belated production of statutory forms (‘C’ Forms and ‘H’ Forms), the statutory authority is bound to take into consideration the same and give the benefit of reduction of the tax. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (7) TMI 297
Validity of reopening of assessment - payment of purchase price in excess to the SMP - petitioners are Sugarcane Factory Societies - Held that:- In absence of any allegation in the notice under Section 148 of the Act that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, considering first proviso to Section 147 of the Act, the assumption of jurisdiction is absolutely wholly without jurisdiction and illegal. Under the circumstances, impugned notices under Section 148 of the Act beyond the period of 4 years cannot be sustained on the aforesaid ground alone and the same deserve to be quashed and set aside. So far as the initiation of impugned reassessment proceedings and the impugned notices under Section 148 of the Act within 4 years is concerned, it appears that the reopening has taken place only on one ground that the assessee has paid price of sugarcane more than the SMP. It is required to be noted that in all these cases the assessments were completed under Section 143(3) of the Act after holding necessary inquiry by the Assessing Officer. It also appears that the inquiry was made and the issue was gone into detail. It is also required to be noted that in some of the cases the practice of paying more prices to the cane growers than the SMP declared by the Government has been consistently followed since many years and the same has been accepted and no objection has been raised at any point of time earlier. It appears that the reason to believe and/or formation of the opinion by the Assessing Officer that the income chargeable to tax has escaped assessment is on the ground that the assessee has paid more price than the price determined / declared by the Government and therefore, the same is nothing but distribution of profits and/or passing of profits on the basis of the decision of the Hon'ble Supreme Court in the case of Shri Satpuda Tapi Parishar SSK Ltd. (2010 (1) TMI 117 - SUPREME COURT ). However it is required to be noted that once at the time of original assessment under Section 143(3) of the Act the Assessing Officer after applying the mind accepted the return, thereafter reopening of the assessment can be said to be on mere change of opinion of the Assessing Officer and as per the catena of decisions of the Hon'ble Supreme Court as well as this Court mere on change of opinion of the Assessing Officer, reassessment proceedings are not permissible. It is also required to be noted that even the Control Order provides for additional price for sugarcane purchased and it also further provides that no additional price determined under sub-clause (2) or sub-clause (3) of Section 5A shall become payable by a producer of sugar who pays a price higher than the minimum sugarcane price fixed under Clause (3) to the sugarcane growers, provided that the price so paid shall in no case be less than the total price comprising the minimum sugarcane price fixed under clause (3) and the additional price determined under sub-clause (2) or subclause (3) as the case may be of Clause 5A. Therefore, even in the Control Order itself there is a reference to the additional purchase price which can be more than the purchase price fixed under clause (3). However, as observed hereinabove, in a given case after holding inquiry if it is found that the purchase price paid in excess to the SMP is so exorbitant and/or unreasonable it can be said to be distributing the profits and/or passing of the profits. However, for that purpose there must be some further inquiry and/or tangible material with the Assessing Officer. Under the circumstances, the impugned notices under Section 148 of the Act to reopen the proceedings beyond 4 years and within 4 years on the aforesaid ground i.e. on the ground that the payment of purchase price in excess to the SMP has escaped the assessment cannot be sustained and the same deserves to be quashed and set aside. - Decided in favour of assessee.
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2015 (7) TMI 296
Disallowance of expenditure - ITAT held Payment was not illegal expenditure and was a regular business expenditure - assessee was assured of 28% commission for doing liaisoning work to get the contract in favour of M/s Pharma Ventures International Private Limited. In turn, the respondent assessee paid 13% commission to M/s K.P. Steel Products (P) Ltd. for getting the contact and it is in such circumstances, the amount was claimed as revenue expenditure.- Held that:- Undoubtedly, under Section 37 of the Act, with a view to prevent claim of revenue expenditure which is inter alia prohibited by any law, the explanation has come into effect from 01.04.1962. As far as this case is concerned, the payment of the commission by the respondent assessee, who had entered into a contract with the M/s Pharma Ventures International Private Limited, apparently to liaison and, thereby, ending up paying commission to M/s K.P. Steel Products (P) Ltd., by which, the parties, apparently, succeeded in getting a contract awarded in favour of M/s Pharma Ventures International Private Limited. It cannot be found faulted with in the context of the explanation as being one which is prohibited by any law; no law has been bought to our notice also by the learned counsel for the Revenue prohibiting the kind of activities, which the respondent assessee indulged in. The only obstacle in the path of the respondent assessee claiming it as revenue expenditure is the premise that it is illegal. As already noted, we have not been shown any law, under which, the commission paid was prohibited. In the light of this, we would think that the view taken by the Tribunal is justified and we answer the question of law against the appellant. - Decided in favour of assessee.
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2015 (7) TMI 295
Penalty under Section 271(1)(c) - disallowance of deduction in respect of the work done on the roof of the factory - ITAT delted penalty levy - Held that:- Though the quantum appeal has been decided against the assessee, there is nothing to indicate that the respondent suppressed any fact or that the respondent misled the authorities. It was a legal contention. In these circumstances, the Tribunal’s reliance upon the judgement of the Supreme Court in CIT Vs Reliance Petroproducts Pvt. Ltd., [2010 (3) TMI 80 - SUPREME COURT] was well founded. Decided against revenue.
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2015 (7) TMI 294
Penalty under Section 271(1)(c) - Tribunal setting aside the penalty levied - assessee wrongly claimed rebate under Section 88 E - Held that:- No reason to interfere with the concurrent findings of the CIT (Appeals) and the Tribunal that the erroneous claim was on account of the return filed on behalf of the respondent by his consultant. They have decided not to visit the assessee with the drastic consequences of a penalty on account of the accountant’s default. In these circumstances, no question of law arises. - Decided against revenue.
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2015 (7) TMI 293
Eligibility for deduction u/s 80IB(10) - CIT(A) observed that AO failed to consider and appreciate the detailed explanation given by the assessee during the course of assessment proceedings highlighting the facts that he fulfilled all the requisite conditions for eligibility of claim u/s 80IB(10) and allowed claim - Held that:- The terms and conditions entered into between the assessee and the society as per the development agreements provided all the dominant control and rights over the land to the assessee and the assessee developed and constructed the housing project at its own cost and would remain owner of the building without any interference from the society. The development agreements in question did not provide that the assessee would be working as a contractor or agent on behalf of the society. The assessee acquired the land in question and has developed the housing project at its own cost as per requirement of section 80IB(10) of the Act. The assessee has developed and constructed the housing project as per the development agreements by incurring total expenditure and received the sale consideration. The assessee satisfied the requirements of provisions of section 80(IB)(10). Moreover once plan is approved by AUDA on papers submitted by assessee and others, it would be deemed approval of construction of housing units in favour of the assessee, more so, when assessee entered into agreements for developing the whole of the property. In view of the above, CIT(A) was justified in granting deduction because assessee has acquired right of developing housing project, incurring total expenditure and taking all risks thereof. There is no infirmity in the order of CIT(A). So we are inclined to uphold the same. - Decided against revenue. Disallowance u/s 40(a)(ia) - Non deduction of TDS on labour/transport charges - CIT(A) deleted the disallowance - Held that:- there is no infirmity order of CIT(A) who has allowed the disallowance by following the decision of the Tribunal in the case of Kanubhai Ramjibhai Makwana (2010 (12) TMI 172 - ITAT, AHMEDABAD) wherein it has been held that in case TDS has been deposited on or before due date of filing of return, the same is allowable. - Decided against revenue.
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2015 (7) TMI 292
Addition on account of under valuation of closing stock - CIT(A) deleted the addition - Held that:- The assessee had valued the closing stock consistently on the sale method as followed during the year i.e. 50% fresh material and 50% inferior material. In past, similar additions were made by the Assessing Officer, which has been deleted by the Coordinate Bench in A.Y. 2008-09 and 2005-06. The assessee has maintained quantitative details and no specific defects has been pointed out by the ld Assessing Officer. The ld. DR has also not controverted the finding given by the ld CIT(A). Being identical issue decided by the Coordinate Bench in preceding year, we have no reason to intervene in the order of ld. CIT(A). Accordingly, we uphold the order of the ld. CIT(A). - Decided against revenue. Disallowance of commission and dalali expenses - CIT(A) deleted part addition - Held that:- The assessee has filed complete name, address, PAN and TDS deducted on the commission and also explained the nature of service rendered by them. It also filed copy of account of the old commission old agent and new commission agent before the Assessing Officer. The assessee made payment through account payee cheque and recipients had been disclosed these commissions in their respective returns. The ld AR explained the discrepancy mentioned by the ld. Assessing Officer on service rendered and commission payment to 25 parties and particular invoice number mentioned in assessment order in case of commission paid to Uma Agarwal. The AR argued that during the year sale through the commission agent has increased and direct sale has been decreased. The Ld. Assessing Officer had not provided the facts and figure of comparable case i.e. Agarwal Marble Pvt. Ltd. to the assessee. The case laws relied by the assessee squarely applicable in the case of the appellant. However, the assessee could not furnish the confirmation in case of commission payment of ₹ 95,707/- to Mahesh Kumar and ₹ 1,66,133/- paid to Naresh Bhawani before the lower authorities as well as before us. The ld. CIT(A) confirmed the addition of ₹ 1 lac on estimated basis when commission payments are specified amount, the CIT(A) should have confirmed the whole commission payment of ₹ 2,61,840/-. Therefore, in absence of proper evidence with the assessee for claiming the expenditure as incurred wholly and exclusively for the business purposes, we confirm the addition of ₹ 2,61,840/-. - Decided against assessee.
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2015 (7) TMI 291
Addition made to the price to the international transaction - Determination of arm's length price - CIT(A) deleted addition - Held that:- Out of the total revenue earned by the parent company from India activity, it has transferred 76% of the revenue to the Appellant and has incurred about 20.6% of the revenue towards sales, marketing, general and administration allocable to India operations. In other words, it retains only 3.38% of the revenue which it has earned from India operations and which is the operating profit. Whereas, the Appellant has earned an operating profit of 6.63%.In respect to the finding of the TPO that the parent company is only preferring the functions of marketing and the tax payer performs all other functions, is not correct. A perusal of the chart of the ld CIT(A) clearly reveals that the parent company is exposed to Market Risk, service liability risk, technology risk, credit risk and price risk and the parent company is engaged in Research and Development (R&D) of new process/ service. So we concur with the ld CIT(A) that TPO has incorrectly stated parent company is only performing the functions of marketing. We take note that during the course of the appellate proceedings before the ld CIT(A), the assessee had filed a copy of the, transfer pricing audit conducted by the Internal Revenue Service, Department of the Treasury US. The assessee was audited by Internal Revenue Service- International Division US for the calendar years 2003, 2004 and 2005. The arithmetical mean of the weighted averages of the comparable companies as compiled by the assessee and as also referred to and accepted by the TPO in his order is 10.25%. Since the assessee’s operating margins falls within (+1) 5% of the arithmetical mean of comparable prices, Ld. CIT(A) has rightly held that the assessee’s International Transactions with its associated enterprises during the year to be at Arm's Length. Consequently the addition of ₹ 3,00,60,788/-made to the price of international transaction was directed to be deleted by the ld CIT(A). For the reasons enumerated above by the ld CIT(A), she rightly deleted the addition made by the Assessing Officer on account of difference in arm's length price of ₹ 3,00,60,788/-. In the background of the aforesaid discussions, the impugned order of Ld. CIT(A) does not need any interference on our part, hence, we uphold the same - Decided against revenue.
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2015 (7) TMI 290
Bogus expenditure - commodity transactions in grey market - CIT(A) deleted the addition - Held that:- CIT(A) has rightly observed that the assessee had declared a sum of ₹ 5 crores for the year under consideration. The said disclosure was on account of various discrepancies/deficiencies that may be noted in relation to claim of additions to the fixed assets in the case of M/s. Nitin Cylinders Ltd. and also to take care of other issues. So far the contention of the department that the assessee had stated the same as unaccounted income in relation to commodity transactions in grey market is concerned, it may be observed that neither any evidence in this regard was found during the course of search action nor in the investigations during assessment proceedings. The AO had made no enquiries in this respect. He has just relied upon the statement of the assessee made during search action, that in these type of transactions, no evidence generally is available. When there was no evidence found or detected nor there is any contention of the revenue that any evidence in this respect has been concealed by the assessee, then under such circumstances, it has not been explained by the Department as to what prompted the assessee to make such a declaration in respect of income from commodity transactions. It has also not been explained as to even why the AO had not made any enquiries in this respect during the assessment proceedings. The facts on the file clearly reveal that the declaration was made by the assessee in relation to discrepancies found during the search action in the case of Nitin Cylinders Ltd. The naming the disclosure as from commodity trading in the grey market was made as was then advised to the assessee. It is evident on the file that disclosure of ₹ 5.36 crores as per the return of income was to cover ₹ 3.51 crores capitalized in M/s Nitin Cylinders considered as bogus purchase and further the sum of ₹ 1.82 Crores for covering various issues as explained by the assessee in his letter dated 22.12.2009. The assessee has also claimed that the disclosure be also considered for difference in purchase of steel in M/s Nitin Cylinders Ltd. The Ld. CIT(A) though has held that the sum totally accounted for was at ₹ 4,97,00,000/-, however he has not allowed the claim of the remaining amount towards difference in purchase of steel. He has confirmed the addition of ₹ 2,66,03,042/- in relation to difference in purchase of steel as unaccounted income of the assessee. The assessee has however, not preferred any appeal in this respect. We therefore do not find any infirmity in the order of the Ld. CIT(A) in deleting the further additions made by the AO on account of bogus purchases capitalized in the account of Nitin Cylinders as the same have already been covered in the income declared of ₹ 5 crore by the assessee for the year under consideration - Decided against revenue.
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2015 (7) TMI 289
Differences in accounting the purchases and sales in the books of account - Held that:- On an appreciation of the material on record, we find it difficult to accept the contention of the assessee that the audited books of account have to be disregarded and the re-cast accounts are to be accepted. It is the finding emanating from the survey on 9.3.2007, that there were unaccounted purchases and sales made in the period June, 2006 to August, 2006 which has not been controverted by the assessee. Whatever may be the reasons for the unaccounted purchase and sales; the fact that there were such purchases and sales which were not reflected in the audited books of account has been fairly accepted by the assessee. We, therefore, agree with the action of the Assessing Officer in treating the unaccounted purchases and unaccounted sales as being outside the audited books of account. - Decided against assessee. How to assess the income from out of the unaccounted purchases and sales - AO determined the addition at ₹ 25,64,032 as the difference between the unaccounted sales and purchases - CIT (Appeals) had taken the profit element on the unaccounted sales at ₹ 1,69,281 (i.e. at 1% of unaccounted sales of ₹ 1,69,28,140) and considered the balance amount of the difference as unexplained investment and adjusted the same in the closing stock - Held that:- In our view, this approach of the learned CIT (Appeals) cannot be faulted as the assessee itself has adjusted the closing stock in the re-cast accounts. In this view of the matter, we concur with the findings of the learned CIT (Appeals) that the difference between the unaccounted sales and purchases would include an amount of ₹ 1,69,289 towards suppressed profits from the unaccounted transactions and the balance amount represents the undisclosed investment in unaccounted purchases.- Decided against assessee.
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2015 (7) TMI 288
Dismissal of appeal as un-admitted - payment of tax before filing of the appeal - CIT(A) noticed that the taxes due on the income returned u/s 153A of the Act were not paid by the assessee on the date of filing of the appeal and as a consequence, he invoked the provisions of section 249(4) of the Act and dismissed the appeal - assessee pointed out that though the taxes due on the income returned were not paid by the assessee prior to the date of filing of appeal with the CIT(A) i.e. 27.01.2009 but the same were duly paid much before the CIT(A) passed the impugned order - Held that:- the Mumbai Bench of the Tribunal in the case of Bhumiraj Construction (2010 (4) TMI 754 - ITAT MUMBAI ) has in extenso considered the objective behind the insertion of section 249(4) of the Act, as it stood for the assessment year under consideration, and held that whereas the payment of tax due on the income returned is a mandatory condition but the requirement of paying such tax before filing of the appeal is essentially directory in nature. According to the Tribunal, where such defect in appeal, being non-payment of tax prior to filing of appeal, has been removed then the earlier filed defective appeal becomes a valid appeal. Notably, the Tribunal has also referred to the Judgment of Hon’ble Karnataka High Court in the case of D. Komalakshi V. DCIT [2006 (11) TMI 155 - KARNATAKA High Court ] in holding that on removal of defect, the earlier defective appeal becomes valid. Applying the similar parity of reasoning to the facts of the instant case, we find that herein the assessee made good the defect of nonpayment of tax due on the income returned before the CIT(A) passed the impugned order. Therefore, in our view, the CIT(A) ought not to have dismissed the appeal as un-admitted by invoking the provisions of section 249(4) of the Act, and instead the removal of defect by the assessee should have been recognized and the appeal filed by the assessee should have been determined on its merits. Therefore, in the facts and circumstances of the case, we hereby set aside the order of CIT(A) and restore the appeal back to his file for adjudication afresh on merits. - Decided in favour of assessee.
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2015 (7) TMI 287
Profit from sale of flat - treated as income from capital gain OR business income - Held that:- In the present case the assessee held the plot of land as capital asset and all along had been declaring as capital asset and had no intention to convert into stock in trade. In the agreement for developing the property the assessee is shown as the owner. As per the agreement the assessee is parting with part of the land and in lieu thereof, he has received 49.29% of the constructed area without carrying out any task towards development. The assessee has not incurred any expenses towards construction of building nor it had carried out any activity for the construction of the building. No infirmity in the order of ld. CIT(A), who has rightly held that the said income has to be assessed as capital gain and not as business income. - Decided against revenue. Addition of deemed dividend u/s 2(22)(e) - assessee had taken loan from M/s.Rungta Engineering Pvt. Ltd. and the AO further observed that one of the shareholder of the assessee company was holding more than 10% shares in the lender company had reserves and surplus in its balance sheet - CIT(A) deleted the addition - Held that:- As per section 2(22)(e) of the I.T.Act the payment must be to a person who is a registered share holder. The word "share-holder" existed in section 2(22)(e) and has been interpreted to mean a registered shareholder. In the present case it is true that Mr.S.N.Rungta, a shareholder is having more than 20% share in the assessee company and also 10% share in M/s.Rungta Engineering Pvt. Ltd wherefrom the assessee has taken loans. The recipient company does not hold any share in the lender company in view of the decision of Special Bench of Mumbai Tribunal in the case of ACIT vs.Bhaumik Colour Pvt. Ltd. (2008 (11) TMI 273 - ITAT BOMBAY-E) where it has been held that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender and not in the hands of the person other than the shareholders. Therefore the AO is not justified in treating the same as deemed dividend in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of assessee. - Decided against revenue. Treatment to loss as bogus - CIT(A) allowed assessee claim - Held that:- As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied upon the decisions of various courts of law. As observed herein above AO disallowed the loss of ₹ 25,30,396/- only on the basis of information submitted by the Stock exchange. AO has himself has not brought on record that the transaction as false or fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information given by the Calcutta Stock Exchange and submissions made by the company representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee - Decided in favour of assessee.
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2015 (7) TMI 286
Transactions of purchase and sales of shares - Treatment of short term capital gain or business income - Held that:- It is clear that the overall holding period of the shares ranges from 4days to 4 months. The volume of purchase and sale is almost equal which shows that the intention of the assessee is not to retain the shares but disposed off at the earliest possible time. Further the assessee is having OD facility with ICICI Bank. The outstanding liability at the end of the year in the OD account is ₹ 2.59 crores. The own fund claimed by the assessee is nothing but deposit received from the tenant therefore it was not his own fund but was to be refunded to the tenant. One more important feature of the transactions is repetitive purchases and sale in the same script and also in some cases same day transactions of purchase and sales. From the details of purchase and sale shown in the investment portfolios we find that the assessee has carried out repetitive transactions of same share The Activity of repetitive purchase and sale of same script manifest the intention of the assessee to book the profit on every swing of the stock market and then again entered into the same script to re-book the profit on the next swing. Thus the assessee is running with the movement of the stock market. Therefore, the facts and circumstances of the case clearly show that assessee was doing the transactions of trading in shares. The assessee contended that the AO accepted the investment in the earlier, therefore, cannot take a different view for the year under consideration. It is pertinent to note that rule of consistency is applied only when the facts are identical and not distinguishable. In the year under consideration the assessee has carried out repetitive transactions in the same script as well as same day transactions of purchase and sale therefore, the earlier orders would not operate as res-judicata or applied as rule of consistency. Hence, we do not find any error or illegality in the impugned order of the CIT(A) confirming the income as business income - Decided against assessee.
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2015 (7) TMI 285
Disallowance of ‘Royalty’ paid to Nike to use the brand name - CIT(A) deleted the addition - Held that:- CIT(A) has rightly observed that it is settled law that if expenditure brings into existence a capital asset or gives any advantage of enduring nature to an assessee, it can be treated as capital expenditure as relying on CIT-XIII, New Delhi Vs Sierra Industrial Enterprises [2010 (7) TMI 70 - DELHI HIGH COURT] i.e, assessee's predecessor in business from whom such license was acquired upon the merger of the company with the assessee. - Decided in favour of assessee. Addition being interest payment u/s. 40A(2)(b) - CIT(A) deleted the addition - Held that:- CIT(A) took in to consideration the fact that similar disallowance of the interest which the assessee paid @15% where in respect of the very same persons were also made in the preceding assessment year 2007-08 for the same reason that such persons are paid interest @ 15% whereas in the opinion of the AO interest payment ought to have been @ 12%. Ld. CIT(A) while deciding in favour of assessee took note of the fact that that the said persons were not the only parties to whom interest @ 15% were paid by the assessee and therefore it cannot be said that the assessee in any manner tried to pass on benefit to a class of close associates as its cost and deleted the disallowance.CIT(A) has observed that in order to make a disallowance u/s 40A(2)(b) it is necessary that the Assessing Officer should establish that the benefits given to the related parties are more than the fair market value and if the assessee is making payments to other persons @ 15% then there is no special favour which is being given to the related parties and then disallowance is not warranted. Further, the ld CIT(A) has taken note that the Assessing Officer has not been able to establish as to what was the market rate of interest thus, he opines that there is no justification in making a disallowance of ₹ 4,64,757/- u/s 40A(2)(b) and ordered it’s deletion. - Decided against revenue. Addition on account of advertisement and promotion expenses - CIT(A) deleted the addition - Held that:- CIT(A) rightly relied on the decision of case of Adidas (2009 (9) TMI 918 - DELHI HIGH COURT) wherein AO disallowed the advertisement expenses by holding that by advertising is promoting/building the Brand of the Licensor and thus it is not wholly and exclusively for the benefit of the assessee. The Tribunal deleted the disallowance by holding that it was a commercially accepted practice and incurred on grounds of commercial expediency.to arrive at the impugned decision, which needs no interference, so the decision of the Ld CIT(A) deleting the ad-hoc disallowance is upheld - Decided against revenue. Addition on account of foreign travel expenses - CIT(A) deleted the addition - Held that:- AO has made the ad-hoc disallowance simply by stating that there may be personal element involved in the said expenditure which is purely a guess work, when the assessee has submitted the list of employees and the purpose of visit was clearly mentioned in it. In such circumstances the AO could not have made the adhoc disallowance without making out a case to disprove the claim of the assessee that it’s employees had gone to foreign country for the purpose of business. Therefore we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same - Decided against revenue.
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2015 (7) TMI 284
Condition of payment of tax before filing of an appeal - Stay - Rejection of appeals on the ground of maintainability in the light of section 249(4) - Held that: - The assessee has failed to comply with the mandatory requirement of section 249(4) of the Act. In the instant case, ld CIT(A) has categorically observed that "from the perusal of assessment order and calculation of tax there was no valuable assets seized in the hands of the appellant or even belonging in the name of the appellant. In fact, provision u/s. 158BD was initiated in this case. Neither any assets belonging in the appellant had been seized nor there is any scope for application of seized assets u/s. 132B of the I. T.Act. The seizure made in any other person and assets belonging to other person could not have been adjusted with the tax due on the income returned by the appellant. The appellant had not paid any tax due on the income returned at the time of filing or before the filing of appeal or even at the time when appeal was in heard." There is no material on record to controvert the above observations of ld CIT(A). Admittedly, the assessee has furnished the return of income for the block period under consideration declaring 'undisclosed income' at ₹ 26,73,303/- as it is evident from the copy of return dated 11.5.2001 submitted before the Assessing officer. It appears that the assessee filed an application dated 9.5.2001 alongwith return of income stating that the cash and other valuables standing in her name and/or admitted as in the return may be adjusted against her admitted tax liability. However, there is no truth in the said application. It is observed that during the course of search no cash and other valuables were seized belonging to the assessee. It is apparent from the record that the assessee had failed to pay tax due on the income returned at the time of filing the return or even before filing of appeal or even at the time when appeal was heard by the ld CIT(A). Thus, as per the requirements of section 249(4)(a) of the Act, paying of tax due on income returned at the time of filing was not complied with by the assessee and, therefore, the ld CIT(A) has correctly refused to admit the appeal of the assessee as per the provisions of section 249(4) of the Act. See D. Komalakshi v. Dy. CIT [2006 (11) TMI 155 - KARNATAKA High Court ] - Decided against assessee.
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2015 (7) TMI 283
Reopening of assessment - absence of notice u/s 143(2) issued while making the impugned assessment under section 143(3) r.w.s 147 - Held that:- The entire material on record does not establish that any notice u/s 143(2) of the Act was issued while completing the impugned assessment. In fact, leave alone any proof of issuance of notice u/s 143(2), Revenue has not even asserted that the requisite notice u/s 143(2) was issued while making the impugned assessment. Therefore, factually speaking, one has to proceed on the basis that no notice u/s 143(2) had been issued while making assessment u/s 143(3), r.w.s 147 of the Act. Thus, in the above factual background, considering the ratio of the judgment of the Hon’ble Bombay High Court in the case of Geno Pharmaceuticals Ltd. (2013 (10) TMI 218 - BOMBAY HIGH COURT) the impugned assessment order is non-maintainable in law. We hold so. - Decided in favour of assessee.
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2015 (7) TMI 282
Payment of royalty to Govt - addition made on account of undisclosed investment in the expenses under the head of transportation and labor charges for obtaining illegal stock - CIT(A) allowed part relief - Held that:- On vigilant reading of the order of the Tribunal in the case of M/s Swastik Stone Enterprises (2013 (1) TMI 737 - ITAT DELHI), we observe that in the similar facts and circumstances, the issue of expenses under the head of transportation and labour charges for obtaining illegal stock was remitted to the file of AO for a fresh consideration in accordance with the appellate orders of the District Magistrate, Nainital on this issue. Thus remit the issue to the file of AO to consider the same afresh after examining and considering the appellate orders of the higher authorities on this issue. The matter for adjudication is pending before the Divisional Commissioner, Nainital. Both the authorities have totally relied upon the order of the DM, Nainital. Since the same is pending before the DM, Nainital, the same cannot be said to be final and conclusive. - Decided in favour of revenue for statistical purposes. Disallowance of depreciation on vehicle - whether the depreciation cannot be allowable merely because the assessee has acquired the vehicle during the year but it should have been put to use for business for availing the depreciation - CIT(A) allowed claim - Held that:- The asset was undisputedly purchased and came in the possession of assessee within the financial year relevant to assessment year under consideration in this appeal. The AO has not disputed this fact that the vehicle was purchased during the financial year under consideration for the purpose of business of the assessee and in this situation, it can safely be presumed that the vehicle was put to use and ready for use in the assessee’s business organization and hence, CIT(A) was right in allowing depreciation to the assessee deleting the impugned addition made by the AO - Decided against revenue.
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2015 (7) TMI 281
Validity of the assessment framed u/s 153Ar.w.s. 153C & 143(3) - Held that:- As relying on case of Rajesh Rajora vs. Union of India [2015 (7) TMI 194 - MADHYA PRADESH HIGH COURT] wherein held that section 132 of the Income-tax Act, 1961 –Search and seizure (Validity of search) –Search and seizure proceedings were conducted in premises of a Government Officer on warrant issued by Director, on basis of a document found during search conducted in premises of another person about 9 months before –Whether, since section 132 does not confer any arbitrary authority upon revenue officers, they must have in consequence of information, reason to believe that statutory conditions for exercise of power to order search existed – Held, yes- Whether, where entire basis of recording satisfaction in assessee’s case was a document found during search conducted in premises of another person, which neither bore assessee’s name nor indicated that it was related to assessee, warrant of authorization was issued merely on hypothecated grounds, and therefore, issuance of warrant of authorization and subsequent search and seizure proceedings were liable to be quashed –Held, yes - Decided in favour of assessee.
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2015 (7) TMI 280
Treatment to gain on sale of property - 'Capital Gains' or under the head 'Business' as an adventure in the nature of trade - CIT(A) held it is not in the nature of adventure in nature of trade, but only of exploiting the existing asset which should be considered under the head 'Capital Gains' only.Held that:- We notice that the building permission filed before the CIT(A) is not the building permission required to establish that assessee intended to construct a residential building. As seen from the building permission, the permission was in the name of Shri D. Ram Mohan Rao, who incidentally was the owner of the plot which was purchased by assessee in the year 2005. As can be seen from the permission also the building permission was granted on 19-11-2005 i.e., much before the purchase of adjacent property by assessee's brother and brother-in-law in 2006. Subsequently, only by August, 2008, entire property became property of assessee. Therefore, the building permission granted to the erstwhile owner of the plot No. 60 cannot be considered to be the intention of assessee, in constructing a residential building on the entire property in 2008. There must be some other plans sanctioned by the Municipal authorities for the construction on the above property on Plot No. 60 & 61A. Therefore, Ld.CIT(A) wrongly classified the building as that of a residential building as against the observation of the AO, that assessee has constructed a commercial building. Since the later approvals were not placed on record and copies of the 25 sale deeds are also not before us, we are not in a position to give any finding that assessee has intended to construct either a residential property or a commercial property. Since the basic information was not available on record, it is very difficult for this forum to approve either the action of AO who relied on Canadian Case Law as against various principle laid down by the Hon'ble Supreme Court in the case of G. Venkataswamy & Co Vs. CIT (1958 (11) TMI 5 - SUPREME Court). Moreover, there seems to be no examination of plans, investments, correspondence by the AO in coming to a conclusion that it is in the ‘nature of business’. Therefore, the matter can be remitted back to AO to examine the necessary permissions and actions of assessee and examine whether the transaction would come as an adventure in the nature of trade or to be assessed under 'Capital Gains - Decided in favour of revenue for statistical purposes. Disallowance of cost of construction - Held that:- We agree with the Ld.CIT(A) that the expenditure which was otherwise held genuine, cannot be disallowed under the provisions of Section 40A(3). As seen from the orders, an amount of ₹ 45.50 Lakhs was disallowed on the reason that assessee has not furnished the details of payments whereas it is on record that assessee has furnished necessary bills and vouchers. Moreover, with reference to ₹ 2,86,71,752/- disallowed u/s. 40A(3), AO gives finding that entire payment was in cash. As seen from the Ledger A/c filed only part of the expenditure was in cash i.e., particularly for labour and purchase of sand etc. AO treated the payment made to purchase of lift also as that of cash, whereas the bill itself indicate that assessee has paid by various cheques. Since only provisions of 40A(3) are invoked, there is no question of treating the expenditure as 'non-genuine' as no amount was disallowed u/s. 37(1). Provisions of Section 40A(3) can only be invoked on the expenditure which was paid in cash, otherwise not disallowable u/s. 37(1). Since AO has not disallowed anything u/s. 37(1) we are of the opinion that CIT(A) is correct in treating the amount as 'genuine expenditure' - Decided in favour of assessee Unexplained cash deposit - Held that:- The facts indicate that assessee has withdrawn an amount of ₹ 8.5 Lakhs, 3 Lakhs and 1 Lakh from 05-04-2010 to 24-04-2010 and amounts were deposited in two installments i.e., ₹ 8.5 Lakhs on 10-06-2010 and ₹ 4 Lakhs on 11- 06-2010. As seen from the bank account, there are no other transactions of withdrawal of cash, therefore, assessee's explanation that the deposit of cash was from out of the withdrawals of the cash earlier can be accepted as a genuine explanation. In the absence of any contrary evidence that assessee has utilized these amounts which were earlier withdrawn. Assessee's contentions are to be accepted. - Decided in favour of assessee
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2015 (7) TMI 279
Penalty u/s. 271(1)(c) - disallowance of expenditure/ claims and additions made on the basis of un-reconciled amounts or unconfirmed creditors - CIT(A) deleted penalty levy - Held that:- The Hon'ble Supreme Court in the case of B.A. Balasubramaniam and Bros. Co., Vs. CIT [1998 (1) TMI 7 - SUPREME Court] in fact was considering the presumption of concealment where the returned income was less than 80% of income assessed. It was held that Explanation to Section 271(1)(c) became applicable and Income Tax Officer was justified in imposing penalty because, assessee had not been able to discharge the onus which was on it under the Explanation1 to Section 271(1)(c). This case law also is in fact supporting assessee's case wherein, there is no presumption of concealment as the law was amended and further assessee's bonafide explanation was not proved to be bogus. As already stated above, there were some disallowances of the claims made in the P&L A/c and addition on the basis of non-furnishing reconciliations or non-furnishing of confirmations. As seen from the balance sheet, there are many more credits which the AO has accepted as assessee was in a position to furnish the confirmation letters. Just because he could not confirm the two of the credits occurred during the year and two of the credits carried over from earlier year, it cannot be held that assessee's case come under concealment of Income. CIT(A) was correct cancelling the penalty - Decided against revenue.
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2015 (7) TMI 278
Disallowance under Section 14A - investments made in the capital account of the partnership firm - CIT(Appeals) accepting the ad hoc expenditure on estimation of 10% of the incomec- Held that:- The assessee itself claimed before the Assessing Officer that it had made a disallowance of ₹ 5,67,277/- being 10% of the income earned from the partnership firm, under Rule 8D. Therefore, it is an admitted position of the assessee that a disallowance has to be made. This Tribunal is of the considered opinion that when the assessee itself admitted that a disallowance has to be made with regard to earning of the income which is exempted from taxation under the Income-tax Act in view of the language employed by the Parliament in Section 14A(2) that an Assessing Officer “shall determine” and the Rule 8D(1), this Tribunal is of the considered opinion that the method prescribed in sub-Rule (2) of Rule 8D has to be adopted. Since the Parliament and Rule making authority employed the language “shall determine”, it is obligatory on the part of the Assessing Officer to determine the expenditure as provided in sub-Rule (2) of Rule 8D. Therefore, estimation of expenditure at 10% may not be in accordance with provisions of sub-Rule (2) of Rule 8D. Also carefully gone through the order of this Tribunal in the assessee's own case this Tribunal found that the assessee has interest-free own funds to the extent of ₹ 42.95 Crores and out of these, the investments were made. Therefore, this Tribunal found that the investments were made from the interest free funds, therefore, no disallowance is required. However, the provisions of Section 14A and Rule 8D and the language employed by the Parliament “shall determine” were not brought to the notice of the earlier Bench. Therefore, this Tribunal confirmed the order of the Assessing Officer wherein 10% of the income from the firm was disallowed. Thus it is mandatory for the Assessing Officer to adopt the method prescribed in Rule 8D(2) of the Act. Therefore, the CIT(Appeals) is not justified in accepting the ad hoc expenditure on estimation of 10% of the income. Thus the entire issue of Rule 14A r.w. Rule 8D is remitted back to the Assessing Officer to determine the expenditure incurred by the assessee as per the method prescribed in the second limb of Rule 8D(2) of the Income-tax Rules, 1962 - Decided in favour of revenue for statistical purposes.
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Customs
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2015 (7) TMI 315
Denial of CENVAT Credit - whether the appellants, who have paid the Additional Custom Duty through DEPB are entitled to avail the CENVAT credit of the same or not - Held that:- Decision of the Larger Bench in the case of ESSAR Steel Ltd., [2004 (8) TMI 123 - CESTAT, NEW DELHI] stands considered by Hon'ble High Court of Madras and by order passed in the case of CCE, Chennai Vs. SPIC Ltd., it does not stand concurred with. It stands held by the Hon'ble High Court that even when the duty stands paid under DEPB pass book entries, the assessee was eligible to claim the credit of the same. - Impugned order is set aside - Decided in favour of assessee.
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2015 (7) TMI 301
Waiver of pre deposit - Whether, Tribunal in passing order of two different amounts by way of predeposit and bank guarantee in the Stay Petition for waiver of predeposit of penalty amounts to non application of mind, self contradictory and therefore, unsustainable in law when the Directorate is already having seized Indian currency which was not confiscated and the foreign currencies could not have been seized through addendum without affording opportunity - Held that:- In the order under challenge at more places than one the Tribunal has observed that the main appeal arising out of the adjudication dated 22.1.2010 and the subsequent addendum dated 15.2.2010 raises several questions of facts and law. After noting the rival contentions, the Tribunal in paragraph 7 has observed that no final view can be expressed at the stage of grant of stay but the grounds would require indepth consideration. Apart from the violation of principles of natural justice, the other aspects on merits also require deeper scrutiny. The Tribunal has observed that it is convinced that the appellant has an arguable case. In the circumstances, we do not think why the conditional order was passed. The direction to deposit 10% of the total amount of penalty and to furnish bank guarantee for the balance 90% of the sum adjudicated and demanded, in effect and in substance means denial of stay. This is clear from the conditions that have been imposed. Once the case is arguable and the Tribunal is required to consider several grounds and indepth, then we do not see justification for imposition of such conditions. - Stay granted.
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2015 (7) TMI 300
Penalty u/s 112 of the Customs Act,1962 read with Section 114A of the Customs Act, 1962 - Held that:- Revenue could not place any judgement contrary to the decision of Tribunal in P. C. Chakraborty's case (2010 (6) TMI 398 - CESTAT, KOLKATA). - Following the same - Penalty is set aside - Decided in favour of Appellant.
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Corporate Laws
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2015 (7) TMI 316
Jurisdiction of SEBI under SEBI Act, 1992 in relation to Global Depository Receipts (GDRs) issued outside India - SEBI debarred the respondent for a period of ten years in dealing with securities acting as Lead Managers relating to the GDRs issued - Held that:- It is common knowledge that in the commercial sector, companies which are in the field of manufacturing or any other business activity are able to gain the confidence of the investors by virtue of their appreciable performance in the respective manufacturing or other business activities and while controlling and developing the growth in their respective field of business, aspire to make further excellence by drawing the attention of foreign investors to make investments and thereby broad base their business venture also endeavour to sustain their development in the concerned business in which they are involved. Any such initiative taken by any entrepreneur would develop an appreciable trend in the share market which would draw the attention of the local investors to stake their claim in such well established, well grown business ventures with a view to earn better profits on whatever investments they wish to make. Therefore, if there is going to be a false pretext or misleading information circulated with a view to lure both the foreign investors as well as Indian investors and in that process the very purpose of creation and trading in GDRs are found to be not true or bona fide, it cannot be said that simply because creation of such GDRs and its trading is in global market, SEBI should keep its mouth shut on the ground that it cannot extend its long statutory arm beyond Indian territory to control any such misdeeds deliberately committed with a view to defraud the Indian investors and thereby their interest in the investment of securities and its protection is at great stake. There is no statutory prohibition either under FEMA or RBI Act preventing SEBI from taking action in exercise of its powers under Section 11, 11B and 12A of the SEBI Act, 1992. That apart under Section 11(3) it is provided that SEBI can exercise its powers under sub-section 2(i) or (ia) or sub-section 2A notwithstanding anything contained in any other law for the time being in force, meaning thereby, the action that can be taken for any of the violation under FEMA or RBI Act, SEBI can validly exercise its powers under SEBI Act, 1992. Even under the 1993 Scheme as well as the 2000 Regulations, there are provisions which make specific reference to the role of SEBI in dealing with the securities. Therefore it is too late in the day for the respondents to contend that action can only be taken for any violation under the FEMA and there is no scope for invoking the provision of SEBI Act, 1992. To support the contention that the SEBI Act, 1992 operates only within Indian territory, reference was made to the provisions contained in other Acts viz., IPC, FERA, FEMA, Companies Act, the Information Technology Act and the Income Tax Act. In the first place, the said reliance placed on the provisions of those enactments providing for extra territorial jurisdiction can have no impact on the action initiated by the appellant, for the simple reason that the violation complained of by the appellant is with reference to such of those provisions contained in SEBI Act, 1992 vis-`-vis the underlying shares of GDRs. Therefore, we are unable to see any violation of exercise of its jurisdiction since the underlying shares of GDR were created and dealt with as well as traded in the stock market of Indian Territory. Any act which caused any infringement in such trading of those underlying shares by virtue of any malfeasance or misfeasance or misdeeds committed by any person under the Act which worked against the interests of the investors in securities and the securities market, the SEBI was entitled to proceed against such persons who are involved in any of those allegations. The learned senior counsel relied upon the decision reported in Chairman, SEBI v. Shriram Mutual Fund and another [2006 (5) TMI 191 - SUPREME COURT OF INDIA]. In particular, reliance was placed upon paragraphs 15, 17, 19 and 33 to 36. Paragraph 19 is relevant for our purpose which explains the scheme of SEBI Act in imposing penalty. The said decision was subsequently approved by a three Judge Bench of this Court reported Union of India and Others v. Dharamendra Textile Processors and Others [2008 (9) TMI 52 - SUPREME COURT ]. The said decision also fully supports the stand of the appellant/SEBI. We have found that the specific provisions of SEBI Act, 1992 provided for necessary powers with the SEBI casting a duty on it to protect the interests of the Indian investors as well as the stock market in India whenever it finds any fraud or other such misdeeds committed by any person which worked against the interests of Indian investors in securities. What is fraud has been sufficiently defined under Regulation 2(1)(c) of the 2003 Regulations as well as under Section 12(A) of the SEBI Act, 1992. Therefore, when such express provisions are contained in the SEBI Act and its regulations apart from specific provisions relating to issuance of GDR based on the underlying shares deposited with the Domestic Custodian Bank under the 1993 Scheme which got a statutory backing under the 2000 Regulations, we are convinced that the exercise of jurisdiction by SEBI against the respondents, having regard to the nature of allegations, listed out in paragraph 74 is well founded. Hold that SEBI had jurisdiction in passing the impugned order dated 20.06.2013 debarring the respondents for a period of 10 years in dealing with the securities while considering the role played by the respondents as Lead Managers relating to the GDRs issued by six companies which issued such GDRs. We, therefore, hold that the Tribunal is bound to examine the correctness or otherwise of the order of SEBI dated 20.06.2013 in the appeal preferred by the respondents in Appeal No.126 of 2013. We, therefore, set aside the impugned order by the majority and hold that the minority view of the Chairman of the Tribunal is perfectly in order. - The appeal stands allowed and the impugned order of the majority is set aside. - The appeal No.126 of 2013 before the Securities Appellate Tribunal at Mumbai shall stand restored and the same shall be disposed of on merits and in accordance with law expeditiously preferably within three months from the date of production of a copy of this order.
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2015 (7) TMI 299
Declaration as a defaulter - Whether the Committee on declaration of Default of National Securities Clearing Corporation Limited (NSCCL) is justified in declaring the appellant to be a defaulter under Bye Laws 1(1), 1(2) & 1(4) of Chapter XI of the Bye Laws of NSCCL (F&O) Segment - Defaulter in the capital market segment - Held that:- Admittedly, the appellant has not discharged that settlement shortfall obligation till date even though NSCCL has discharged that obligation by making payment to counter parties out of its own profits and its accumulated reserves in accordance the Bye-Laws, Rules and Regulations of NSCCL. Thus, the appellant who became defaulter on January 1, 2013 due to failure to make good the margin shortfall, further defaulted in making good the settlement shortage that occurred during March and June 2013 settlement, and the appellant continues to be defaulter as the appellant has failed and neglected to reimburse the settlement shortfall of ₹ 91,49,72,804.51 which is paid by NSCCL to third parties for and on behalf of the appellant. Argument of the appellant that the securities once accepted under the prevailing norms cannot be made ineligible by revising the norms is without any substance, because it is the duty of NSE/NSCCL to constantly monitor the dealings on the Exchange and take suitable steps to preserve the market integrity, if necessary, by amending the prescribed norms. In the present case, even after revising the norms, considerable time was given to the concerned parties to get acclimatized with the revised norms and in fact several meetings were also held in that behalf between the appellant and NSE/NSCCL. Although the said settlement shortfall was brought down to ₹ 3,77,79,826.89 by adjusting the cash collaterals/ adjustment of FDR’s etc, it is an admitted fact that on expiry of rolled over contracts in June 2013, there was once again settlement shortfall to the tune of ₹ 91,01,08,825/-. Thus, the cumulative settlement shortfall rose to ₹ 94,78,88,651.89. As a result of further adjustments made by NSCCL the outstanding settlement shortfall stood reduced to ₹ 91,49,72,804.51. As the appellant failed to discharge that liability, NSCCL was obliged to discharge that liability by paying ₹ 91,49,72,804.51 to third parties from its own profits and the accumulated reserves and settle the trades of the appellant. Admittedly, the appellant has failed to reimburse that amount to NSCCL till date. In these circumstances, no fault can be found with the decision of the Committee in declaring the appellant to be a defaulter under the Bye Laws framed by NSCCL in the F&O Segment. - Decided against the appellant.
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2015 (7) TMI 298
Transfer of shares under the family arrangement - Appointment of additional director in absence of quorum - Construction on land in breach of status quo order issued by board - Held that:- It is a well-settled rule of interpretation that a document required to be interpreted must be read as a whole. While interpreting the family arrangement it must be borne in mind that the situation as prevailing in June, 1996 and not in September, 2002 would have to be considered because the need for family arrangement arose in June, 1996 on account of irreconcilable disputes and differences arising between the two brothers, i.e., RKK and MKK. Considering the intent and purpose of the family arrangement and the fact that MKK accepted the Machinery Division in its entirety to the complete exclusion of RKK it must be held that under the family arrangement resignation by MKK as director in Hanuman Cotton Mills Ltd. (HCM) on 7th June, 2004 and 1 transfer of his 1,025 shares to RKK in 1999 were reciprocal obligations to be performed by MKK. The annual statements for the following years showing RKK as holder 1,025 shares under Folio No. 96 were signed by MMK which shows that MMK was also aware of the transfer of 1,025 shares held by MKK to RKK under the family arrangement. I accordingly hold that pursuant to the family arrangement and as agreed therein, MMK after receiving the Machinery Division to the complete exclusion of RKK had given his 1,025 shares under Folio No. 96 to RKK who in turn delivered the same to MMK who was admittedly the custodian of all the share certificates in HCM for completion of necessary legal formalities relating to transfer of such shares. The fact that under the signature of MMK, i.e., the Patriarch, and the person exercising the supervisory and controlling powers in HCM the annual returns for all subsequent years reflected RKK as the holder of 1,025 shares even though under the same Folio No. 96, the inference that shares held by MKK were agreed to be transferred to RKK is irresistible. I hold accordingly and direct HCM to rectify its register of members and to register transfer of 1,025 shares held by MKK under folio 96 in favour of RKK. In view of the above findings the petition by MKK is, in my considered opinion, actuated by his greed in view of the fact that the value of the land owned by HCM had shot up over the years. No relief, therefore, deserves to be granted to MKK since on the date of the petition he had no locus to file a petition under section 397 of the Act having divested himself of his entire shares in HCM in favour of RKK. Section 300 of the Act prohibits a director of the company from taking part in the discussion at the Board meeting if he is in anyway, whether directly or indirectly, concerned or interested in the resolution sought to be passed. His presence shall also not count at such Board meeting for the purpose of forming a quorum, at any such discussion or vote. RKK being the father of ANK was an interested director in the appointment of ANK and ought to have refrained from participating at such Board meeting held on 10th February, 2004. Therefore, even on this ground apart from there already being a lack of quorum as required by the Articles of Association of HCM the resolution passed at such Board meeting fails to satisfy the test required by law. I therefore, hold that the appointment of ANK as an Additional Director in HCM on 10th February, 2004 and the purported transfer of 60 shares by Shakuntala Kejriwal to ANK are bad in law. There is not an iota of doubt that the construction activity undertaken by RKK through Wellcast Products (P.) Ltd. (WC) on the land of HCM is clearly in breach of the status quo order dated 13th July, 2009 and liable to be removed by RKK and WC as undertaken by them. In view of my finding that the allotment of equity in HCM to WC is bad in law and set aside, R-5 (WC) has, even otherwise no legal right to remain on the land of HCM. I, therefore, direct RKK and WC to remove the entire construction by WC (R- 5) on the land of HCM within two months from the date of this order at their own cost. If this is not done a special officer shall be appointed by this Board for ensuring compliance of this order. - Decided partly in favour of appellant.
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Service Tax
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2015 (7) TMI 313
Waiver of pre deposit - Mandatory pre deposit of 7.5% - whether pre-deposit of 7.5% of the impugned service tax liability in terms of Section 35F (as amended w.e.f. 6.8.2014) of the Central Excise Act 1944 read with Section 83 of the Finance Act, 1994 is required to be made while filings appeal against order-in-original dated 29.8.2014 when the Show Cause notice in respect thereof was issued before 6.8.2014 - Held that:- petitioner in whose case also the lis commenced in 2013 would not be required to deposit the amount of 7.5% as required pursuant to the 2014 amendment and in that respect, he would have efficacious alternate remedy before the Tribunal. Vide the said judgements, Hon'ble Kerala High Court allowed the respective petitioners to file appeal before CESTAT and ordered that the CESTAT shall deal with those appeals in terms of the provisions of Section 35F as they stood prior to 6.8.2014. Thus, Hon'ble Kerala High Court in [2015 (3) TMI 634 - KERALA HIGH COURT] did not lay down any ratio with regard to the general applicability of the provisions of Section 35F as they stood prior to 6.8.2014 in respect of appeals filed on or after the said date and the said orders in respect of respective petitioners were issued in exercise of its writ jurisdiction in the given circumstances after taking note of a prima facie view of the Andhra Pradesh High Court in that regard. Second proviso to amended Section 35F does not leave any scope for interpretational ambiguity with regard to the appeals filed prior to 6.8.2014. Thus the requirement of mandatory pre-deposit is squarely applicable to all appeals filed on or after 6.8.2014 and the amended Section 35F makes no distinction whether the show cause notices in respect of such appeals were issued prior to, on or after 6.8.2014. CESTAT is a creature of the very Act of which the said Section 35F is part and therefore it cannot go beyond the provisions of the Act which has created it. - appellant is required to make the mandatory pre-deposit in terms of Section 35F of Central Excise Act, 1944 as amended with effect from 6.8.2014 and in the absence of such pre-deposit its appeal shall not be entertained - Decided against assessee.
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2015 (7) TMI 312
Waiver of pre deposit - Scientific and Technical Consultancy Service - Held that:- The foreign entities provide the test results to the appellant and this cannot be considered as prima facie covered by the definition of the service provider and further the activity undertaken also cannot be considered as consultancy or advice. Therefore, the appellant has made a prima facie for complete waiver in respect of this demand. Whether the appellants have provided technical testing or analysis service to Ranbaxi - Held that:- Since the issue involved is complicated, it required details to be considered. While appellant is required to be put to terms, it is not necessary to require them to deposit the entire amount - Partial stay granted.
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2015 (7) TMI 311
Extension of stay order - Held that:- stay orders passed by this Tribunal are in force beyond 7.8.2014 and therefore, it would continue till the disposal of the appeals. Therefore, as held by the Tribunal, there is no need for filing any further applications for extension of the orders granting stay either fully or partially in these cases. - Decision in the case of Venkateshwara Filaments Pvt. Ltd. & Others vs. Commissioner of Central Excise and Service Tax, Vapi [2014 (12) TMI 227 - CESTAT AHMEDABAD] - Stay extended.
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2015 (7) TMI 310
Penalty under Section 76, 77 & 78 - earlier Injunction was received from court in respect to demand of tax - development of Mora to Vapi Pipeline Project on EPC basis - Held that:- when the Appellant challenged the levy of tax for the period prior to insertion of Explanation 3 to Section 67 before the High Court and obtained injunction, it would be sufficient to establish that there is a prima facie case in favour of the Appellant. In such situation, there is no scope to doubt the bonafide of the Appellant. Hence, it is a fit case to invoke Section 80 of the Act, 1994 and no penal provision should be invoked. - Decided in favour of assessee.
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2015 (7) TMI 307
Input services - cenvat credit - service tax paid on any service which was not taxable - Held that:- Issue involved in the present case has been dealt by this Tribunal and held that cenvat credit in respect of services of certification of pollution level is admissible, even though the service in the hands of service provider is not taxable but the service tax was admittedly paid by the service provider. - impugned order is not sustainable and hence the same is set aside - Decision in the case of assessee's own previous cases [2010 (12) TMI 1145 - CESTAT MUMBAI] and [2010 (12) TMI 100 - CESTAT, MUMBAI] followed - Decided in favour of assessee.
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2015 (7) TMI 304
Waiver of pre-deposit - Effective date of amendment to Section 35F - mandatory pre-deposit - Recovery of demand u/s 73 - penalty under Sections 70, 76, 77 and 78 - Section 35F - Held that:- right of appeal is a vested right and the right to enter a superior Court or Tribunal accrues to a litigant as on and from the date on which the lis commences although it may actually be exercised when the adverse judgment is pronounced. Such a right is governed by the law which prevails on the date of institution of the suit or proceeding and not by the law that prevails at the date of the decision or on the date of the filing of an appeal. Moreover, the vested right of an appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise. Provisions of the section shall not apply to stay applications and appeals which were pending before any appellate authority prior to the commencement of Finance (No.2) Act 2014. The second proviso is a clear indicator that Parliament has exempted the requirement of complying with the pre-deposit as mandated by Section 35F (1) of the Act as amended only in the case of those stay applications and appeals which were pending before any appellate authority prior to the commencement of Finance (No.2) Act 2014. Consequently, both by virtue of the opening words of Section 35F(1) of the Act as well as by the second proviso to the provision, it is clear that appeals which are filed on and after the enforcement of the amended provision on 6 August 2014 shall be governed by the requirement of pre-deposit as stipulated therein. The only category to which the provision will not apply that would be those where the appeals or, as the case may be, stay applications were pending before the appellate authority prior to the commencement of Finance (No.2) Act 2014. Petitioner would not be justified in urging that the amended provisions of Section 35F(1) of the Act would not apply merely on the ground that the notice to show cause was issued prior to the enforcement of Finance (No.2) Act, 2014. We find no merit in the constitutional challenge - Decided against assessee.
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Central Excise
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2015 (7) TMI 314
Production capacity based duty – application of Rule 5 of the Hot Re-rolling Steels Mills Annual Capacity Determination Rules, 1997 - manufacturer had made changes in installed machinery or any part thereof after seeking approval of the Commissioner of Excise in terms of Rule 4(2) of 1997 Rules – Period involved 01.09.97 to 31.03.2000 - Supreme Court issued notice on the application for condonation of delay as well as on the Special Leave Petition returnable in ten weeks and ordered to connect the appeal with Devta Steel Rolling Mills vs. Commissioner of Central Excise, Chandigarh [2015 (7) TMI 135 - SUPREME COURT]; wherein High Court [2012 (1) TMI 36 - PUNJAB AND HARYANA HIGH COURT ] held that in present case Rule 5 of 1997 Rules would apply and the annual capacity so determined shall be deemed to be actual production during the financial year 1996-97, which is period involved in the present case.
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2015 (7) TMI 308
Waiver of pre deposit - Denial of the benefit of Notification No.10/1997 dt. 01/03/1997 - Direct supply of goods not done - Held that:- Assessee have already paid 5% of the value of the same in terms of the provisions of Rule 6(3) of CENVAT Credit Rules inasmuch as they were availing CENVAT credit in respect of common inputs. The said amount comes to around ₹ 1.22 lakhs (approximately). By treating the same as sufficient, we dispense with the condition of predeposit of balance dues and entire interest and penalty - Stay granted.
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2015 (7) TMI 306
Waiver of pre dpeosit - clearance of goods cleared by an 100% EOU to DTA - Held that:- Appellant an EOU cleared goods on stock transfer to DTA clearance by adopting the price available in their own DTA unit whereas the department enhanced the value by adopting Rule 8 read with CVR. The LAA has relied upon Board’s circular No.268/85-CX-8 dt. 29.9.94 whereas we find that said circular has been withdrawn by the Board vide circular No.933/23/2010 dt. 16.8.2010 and also considering the Tribunal’s decision in the case of Nagreeka Exports Ltd. Vs CCE Pune (2003 (4) TMI 186 - CEGAT, MUMBAI), we find that issue stands decided in favour of appellants. - Considering rescinding of the Board’s circular dt. 29.9.2004 and also taking into consideration Tribunal’s order (supra), prima facie, appellant has made out a case for waiver of predeposit of entire demand. Accordingly, waiver of predeposit and stay of recovery is granted during pendency of appeal - Stay granted.
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2015 (7) TMI 305
Waiver of pre deposit - Valuation of goods in the hands of Job Worker - Rule 10A - duty on the value of materials supplied by the principal manufacturer - Demand of differential duty - Penalty u/s 11AC - principal has not paid the duty of excise nor taken the credit - Held that:- Appellant produced copy of job work challans, delivery receipt of the materials and while returning the goods they paid excise duty on the cost of value addition in respect of carbon lining/facing undertaken by the appellants. The goods were not sold or cleared to any other persons but returned to the principal manufacturer only. We find that Tribunal in the case of Rolastar Pvt. Ltd. Vs CCE Daman [2011 (9) TMI 776 - CESTAT, AHMEDABAD] has held that provisions of Rule 10A would not apply to job worker who has completed job work and returned to the principal manufacturer. Revenue has not disputed the nature of job work undertaken by them and also not disputed the procedure followed by the principal manufacturer. - Prima facie, appellants have made out a case for waiver of total demand. Accordingly, there will be waiver of predeposit and stay of recovery during pendency of appeal - Stay granted.
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2015 (7) TMI 303
Condonation of delay - delay in filing an appeal before Commissioner (Appeals) - Whether the period of limitation provided of 60 days, for filing an appeal under Section 35 of the Central Excise Act, 1944, could be extended only upto 30 days as provided by the proviso or the delay beyond the period of 90 days could also be condoned in filing an appeal - Jurisdiction of High Court - Held that:- No legislation including section 35 of the Act can whittle down or dilute or nullify the power of the constitutional court under Article 226 of the Constitution but the parameter for exercise of the writ of certiorari would be in a case where the Tribunal or the authority has acted without jurisdiction or in excess of jurisdiction or acted in flagrant disregard of the law or the rules of procedure or have acted in violation to the principles of natural justice and thereby, resulting into failure of justice. The certiorari jurisdiction may be exercised when the error if not corrected at the very moment may become incapable of correction at the later stage and refusal to intervene would result travesty of justice. But the jurisdiction of writ of certiorari should not be converted into the court of appeal or indulge into reappreciation of the evidence or evaluation of the evidence or correction of the errors were two views are possible. It is not possible to observe that in a case where the limitation period of preferring appeal or further period of condonation of delay is over, the High Court will have no jurisdiction under Article 226 of the Constitution but the exercise of such power has to be in exceptional cases where gross injustice is satisfactorily demonstrated. Otherwise, in normal circumstances, the High Court would give appropriate weightage to the statutory provisions because the things which cannot be done directly as per the statute can not be permitted to be done indirectly in writ jurisdiction unless a grave and strong case is made out before the High Court that noninterference to the order under challenge would result into a gross injustice to the party suffering the order. - limitation provided under section 35 of the Act cannot be condoned in filing the appeal beyond the period of 30 days as provided by the proviso nor the appeal can be filed beyond the period of 90 days. - petition under Article 226 of the Constitution would not lie for the purpose of condonation of delay in filing the appeal. - Appeal disposed of.
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2015 (7) TMI 302
Effective Date of beneficiary provisions - whether should be retrospective - Disallowance of utilization of the credit of Additional Excise Duty (GSI) on goods of special importance paid after 1 April 1996, but prior to 1 April 2000 for payment of duty for First and Second Schedule to Central Excise Tariff Act, 1985 - violative of Article 14 of the Constitution of India - constitutional validity. Held that:- The amended Rule with effect from 1 March 2003 has permitted utilization of the cenvat credit in respect of Act of 1957 for payment of duty of excise leviable under the First or the Second Schedule of the Tariff Act, 1985. Thus, as per the amended Rule, credit of Additional Excise Duty leviable under section 3 of the 1957 Act may be utilized towards the payment of duty of excise leviable under the First or Second Schedule of the Tariff Act. There is substance in the contention of the Respondents that in the Amendment Act no date was prescribed for availing and utilization of the Cenvat credit of the additional duty of excise paid. With the result that number of manufacturers had utilized cenvat credit lying with them as on 1 March 2003, for payment of cenvat credit duty payable on finished products/goods under section 3 of the 1957 Act. On realizing this, the Government amended the provision of the Cenvat Credit Rules 2000 retrospectively with section 88 of the Finance Act allowing utilization of Cenvat Credit of AED paid on or after 1 April 2000. That is how the explanation was substituted. We do not see how we can uphold the argument of the Petitioners that the restrictions placed by the Explanation should be interfered with any other stipulation as desired by them so as to make the provision operational from 1 April 1996. Manifestly arbitrary exercise of power or manifestly erroneous exercise of power is something which can be interfered with in judicial review. We do not find that any assistance can be derived from the judgment in Sitaram (1990 (3) TMI 358 - SUPREME COURT) and for the purpose of the present case. In the present case, once the co-relation could not be established, then the Petitioners derive no benefit of the Constitutional provisions and selection of the date, namely, 1st April 1996 for they being brought into effect. We have noted as to how the argument based on this is misconceived and untenable. - Decided against assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 309
Denial of refund claim - Bar of limitation - Held that:- In the returns itself, the petitioner had claimed refund of a sum of ₹ 3,56,15,297/-. The opportunity ought to have been given to the petitioner to produce the ‘C’ Forms and ‘H’ Forms. The benefit available under the law cannot be denied on technical ground. The transaction is inter-state transaction. On production of statutory forms issued by the competent authorities, the petitioner is entitled to pay the lesser tax. In the instant case, for non-production of statutory forms, the Assessing Authority levied a higher rate of tax on the turnover, for which, the statutory forms were not produced. Even on belated production of statutory forms, the statutory authority is bound to take into consideration the same and give the benefit of reduction of the tax. The circular dated 7-6-2006 issued by the Commissioner makes it clear that the Assessing Authority should consider the statutory forms which were produced belatedly i.e. subsequent to the completion of the assessment by reopening the assessment. Further, Rule 12(7) of the CST Rules also provide for the same. The statutory forms can also be filed before the First Appellate Authority. - First Appellate Authority without going into the merits of the case dismissed the appeal on the ground that it is barred by limitation - Matter remanded back - Decided in favour of assessee.
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