TMI Tax Updates - e-Newsletter
July 16, 2014
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Addition u/s 68 - Where the loan creditors have shown the amount advanced to the assessee in the income tax return filed with the Income Tax Department and the Department has accepted the same, then the credits are prima facie genuine - AT
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Income Tax:
The brought forward business loss is to be allowed set off of against the speculation income assessable for the current year - AT
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Income Tax:
Partner’s remuneration u/s 40(b) - The manner of computing the remuneration is not specified - the remuneration payable is left to future mutual agreement between the partners - no deduction - AT
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Corporate Law:
Dishonour of cheques - prosecution of directors - complaint u/s 138 r.w.s 141 of the Negotiable Instruments Act, 1881 - for maintaining the prosecution u/s 141, arraigning of a company as an accused is imperative. - SC
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Wealth-tax:
AO was justified in holding that it was not practicable to apply Rule 3 in the instant case and rightly referred the matter to the Valuation Officer u/s 16A of wealth tax act - SC
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Service Tax:
Waiver of penalty u/s 80 - Tribunal was in error holding that there would be no occasion to establish a reasonable cause within the meaning of section 78, once, the extended period of limitation had been validly invoked under the proviso to section 73(1) - HC
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Service Tax:
Tour and travel services - levy and collection of service tax from the assessee where principal tour operator has paid service tax - assessee failed to prove its case - extended period of limitation invoked - demand confirm but penalty waived - HC
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Service Tax:
Renting of buildings used for the purpose of accommodation including hotels, meaning thereby renting of a building for a hotel, is covered by the exclusionary clause and not taxable - AT
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Service Tax:
Appeal before commissioner (Appeals) - appeal was singed by the brother of assessee - the same is a rectifiable defect and the applicant can sign the last page of the appeal, even subsequently and can rectify the defect. - AT
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Central Excise:
Cenvat Credit - Availing credit without receipt of inputs being pet coke - revenue failed to substantial its claim - credit allowed - AT
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Central Excise:
CENVAT Credit - torage of goods outside the factory premises at nearby premises own by the assessee - storage beyond the excisable area - difference of opinion - matter referred to larger bench - AT
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Central Excise:
Shifting of factory - transfer of unitlized cenvat credit to another factory - lower authority have not referred to any provisions of law requiring prior permissions - credit allowed - AT
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Central Excise:
Benefit of CENVAT credit - even if process undertaking by the assessee is not amounting to manufacture since duty has been paid after value addition, which is higher than CEVNAT Credit, no demand can be made - AT
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VAT:
Levy of tax and interest - incentives to mega projects - assessee instead of depositing tax adjusted the same with refund entitlement - no interest liability - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (7) TMI 522
Acceptance of loan in Cash - violation of section 269SS - Penalty u/s 271D of the Act – Purpose of loan – Business or not - The claim of the assessee is that he has accepted loans from various persons by way of cash and returned the same to the persons from whom the loans were availed - Held that:- On verification of the bank accounts of the assessee with South Indian Bank and Dhanalashmi Bank, the AO found that those persons have given loans to the assessee for clearing the account payee cheques issued by the assessee through their bank account - there existed no reasonable cause for accepting loans/deposits or aggregate of such loans/deposits of ₹ 20,000 or more from various persons otherwise than crossed cheques and drafts and as such committed contravention of the provisions of s. 269SS, therefore, the penalty under s. 271D is attracted in this case and has rightly been imposed by the AO and CIT(A) was not factually or legally correct in directing to delete the same – thus, the order of the AO is restored – Decided in favour of Revenue.
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2014 (7) TMI 521
Dismissal of appeal on technical ground – Application for reference - Whether the Tribunal is justified in dismissing the appeal on technical ground considering CBDT instruction dated 9.2.2011 read with Section 268A of the Act – Held that:- If revenue is of the opinion that this aspect has not been dealt with and considered by the Tribunal, it will be open for the revenue to prefer/submit rectification application and point out what is stated in the present appeal – thus, the appeal cannot be entertained – Decided against Revenue.
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2014 (7) TMI 520
Eligibility for deduction u/s 80HHC of the Act – Premium purchased to be treated as cash assistance u/s 28(iiib) of the Act – Held that:- The judgment delivered by ITAT does not indicate that the Fifth proviso inserted by Taxation Law (Amendment) Act, 2005, with retrospective effect from April 1, 1992 was noticed by it – the Tribunal relied upon its earlier decision in the case of P. NAVINKUMAR & CO. Versus INCOME TAX OFFICER [1998 (8) TMI 103 - ITAT AHMEDABAD-A] - the matter deserves to be remitted to ITAT for its fresh consideration for the opinion in the light of the Fifth proviso referred to above, as also the amendment made under the Fifth Act 2005 - The matter is accordingly remitted to the ITAT for its fresh consideration - Decided in favour of Assessee. Business of cutting and polishing of rough diamonds - Whether the Tribunal was right in holding that for the purpose of working out deduction u/s. 80HHC, clause (a) of section 80HHC becomes applicable instead of clause (b) as the assessee was engaged in the business of cutting and polishing of rough diamonds which are imported from abroad and then selling out cut and polished diamonds in trading of polished diamonds and the percentage of trading of polished diamonds is more than 50% of the total export sales – Held that:- The decision in Gem Granites v. Commissioner of Income-Tax [2004 (11) TMI 13 - SUPREME Court] followed - in view of the aforesaid 1984 Circular, cut and polished diamonds shall qualify for deduction under sec. 80HHC of the Income-tax Act - polished and processed granite did not fall within the meaning of word "minerals" in 80HHC(2)(b) as it stood before 1991- Decided against Revenue.
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2014 (7) TMI 519
Restriction of agriculture income – AO treated the income as business income - Held that:- No basis has been spelt out by the AO to arrive at the conclusion that out of the total income declared by assessee, part of the income was business income - no enquiry was made by the AO either by himself or through the inspectors to verify and examine the land holding of the Assessee, the nature of crops cultivated on the land, whether the land was irrigated or what were the facilities available for irrigating the land, the yield of the land during the relevant period - no enquiry with Surpanch or Patwari or any other Revenue Authority was made either by AO or CIT(A) nor the Revenue records were called for to ascertain yield of crops and the factual position - the details like the land holding under agriculture, nature of irrigation facilities on the land, the crops grown on the land in the relevant period, record of crops grown in the Revenue records needs to be verified – thus, the matter is remitted back to the AO for examination – Decided in favour of Revenue. Treatment of tax of the profit earned on sale of land - Business income or capital gains - Held that:- Assessee has claimed deduction u/s. 80IB of the Act for the development of housing projects meaning thereby that the Assessee was engaged in the business of development of housing projects in those years. - A.O has rightly treated the profit from sale of land bearing plot no 91 as "business income". - Decided against the assessee. Profit of sale of land not disclosed in the books of accounts - Held that:- The submission of the Assessee that the non recording of land in the individual balance sheets was on account of mistake in accounting was also not accepted by CIT(A). Before us the Assessee could not demonstrate as to how the mistake continued for so many years more so, when the accounts of the firm and the Assessee were audited year after year. - taxable as business income - Decided against the assessee. Addition u/s. 41(1) of the Act - Advance received against land sale - A.O as of the view that when the deed of conveyance proved that the transaction was over and each party had taken over the possession of property/consideration, the liability of ₹ 1,27,83,333/- ceased to exist. - revenue submitted that, CIT(A) has wrongly presumed that against the liability, Assessee would have received the amount and such amount would have been offered for tax as there was no material for arriving at such conclusion. He therefore submitted that in the absence of any evidence, A.O has rightly made the addition. - Held that:- the order of the CIT(A) needs to be re-examined, thus, the matter is remitted back for the fresh adjudication - Decided in favour of Revenue.
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2014 (7) TMI 518
Levy of interest u/s 201(1) and 201(1A) of the Act – TDS not deducted against certain payments - Held that:- Assessee contended that if the tax deducted and the amount deposited into the Government account, the due credit shall be given to that extent - if the details produced in respect of the recipients and the recipient has declared income in their return of income, the assessee cannot be liable for payment of TDS once again – Relying upon Hindustan Coca Cola Beverage P Ltd vs CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] - where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating dedcutor to be assessee in default for short fall in its amount of tax deducted at source – thus, the matter is remitted back to the AO for fresh consideration – Decided partly in favour of Assessee.
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2014 (7) TMI 517
Addition u/s 68 of the Act - Unexplained unsecured loans – Held that:- No specific error in the finding of the CIT(A) could be pointed out by the revenue - all the four creditors were examined by the AO wherein they admitted the fact of advancing of loan in question to the assessee - no material could be brought on record by the Revenue to show that the cash which was deposited in the bank account of the creditors had flown from the assessee or creditors had actually no source of their own - all the four creditors were income tax assessee, advanced the loan to the assessee through banking channel and they all had their independent source of income and the only observation of the AO is that in his subjective opinion, they are persons of small means. Where the loan creditors have shown the amount advanced to the assessee in the income tax return filed with the Income Tax Department and the Department has accepted the same, then the credits are prima facie genuine – Relying upon Jalan Timbers Vs. Commissioner of Income Tax [1996 (8) TMI 83 - GAUHATI High Court] - the phraseology of section 68 of the Income Tax Act, 1961 was clear, that the legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income tax as the income of the assessee of that previous year, that the legislative mandate is not in terms of the words "shall be charged to income tax as the income of the assessee of that previous year", that the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as income of the assessee. The loan creditors who have advanced sum to the assessee were income tax assessees and have disclosed the sum advanced to the assessee in their return of income filed with the Income Tax Department and also admitted to above facts in their statement recorded u/s. 131 of the Act - the loans were received by the assessee through cheques drawn on the bank accounts of the creditors - the assessee has discharged its burden of proving the identity of the creditors, genuineness of the transactions and creditworthiness of the loan creditors – CIT(A) was fully justified in deleting the addition and there was no reason to interfere with the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 516
Payments of commission to petty persons – Unverified payments – Held that:- CIT(A) was of the view that the services rendered by commission agent included procurement of order/indent from various CMOs of Distt. Hospitals spread all over the state of Uttar Pradesh, supply of goods to such district hospitals, collection of payments against supplies and carrying on such follow up works which were essential subsequent to supplies - the assessee has furnished the confirmations and affidavits of these 12 persons also along with the proof of identity such as addresses, copy of PAN, ration card, driving license, copy of return etc. - the assessee has also furnished the details of payment of commission giving the details of particulars of bill, date of bill, order/indent no., amount, of commission, mode of payment, payee name and their addresses to the AO during the assessment proceedings – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue. TDS not deducted on commission on sales and remuneration u/s 40(a)(ia) of the Act – Held that:- CIT(A) followed the decision rendered in CIT vs. Vector Shipping Services Pvt. Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] – the provision of 40(a)(ia) was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head 'Income from Business and Profession' in case the assessee does not deduct TDS on such expenses and the default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible - no finding was given by the CIT(A) on merit with regard to the nature of payments – thus, the order of the CIT(A) is set aside and the matter is remitted back with the direction to adjudicate the issue on merit as to whether the provisions of section 194C are applicable to the present case and for the remaining issue, whether the provision of section 40(a)(ia) is applicable in respect of such amounts, which are payable as on 31st of March of the year under consideration – the disallowance made by the AO u/s 40(a)(ia) cannot be deleted on this basis alone that the amount in question was not unpaid/payable on the last date of the previous year relevant to the present assessment year – Decided in favour of Revenue. CIT(A) noted that 15 employees who have been paid liasioner remuneration are listed as marketing staff and their daily attendances have been marked on a register. He has also given a finding that they have been paid monthly salary - Since the total income was below taxable limit, the appellant was not required to deduct any tax u/s 192 of the Act - although disallowance was made by the AO under the provisions of section 40(a)(ia) of the Act, the AO has failed to comment under which section the assessee was liable to deduct TDS so as to attract section 40(a)(ia) of the Act – AO has simply mentioned that the payment of lisisoner remuneration is in the nature of contract without conducting any enquiry - the AO has failed to place any material on record to demonstrate that the payments made to the marketing staff was in pursuance of any contract and was covered by section 194C of the Act – thus, there was no reason to interfere in the order of the CIT(A) – Decided partly in favour of Revenue. Addition of non-confirmation of creditors – Held that:- The disallowance was made by the AO on account of non-receipt of reply from the creditor M/s Balaji Furnishers to the notice served on him u/s 133 (6)/131 of the Act - in respect of creditor, addition can be made on two basis - First basis can be that a liability has ceased to exist and this addition can be made by invoking the provisions of section 41 (1) of the Act - it is not the case of the AO that the liability has ceased to exist - the assessee has also furnished the copies of invoices of M/s. Balaji Furnishers most of which were related to purchase of chairs, tables and other furnitures - the furnitures so purchased have been supplied to various hospitals - if sale is there, corresponding purchase cannot be said to be bogus - the AO has not brought on record any adverse material even in course of remand proceedings – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 515
Sustenance of addition @ 8% - Other clearing expenses - Whether some profit rate can be applied on the amount received by the assessee under the head 'Other clearing expenses' to form part of total income - Held that:- All the amounts listed in invoice raised on Aksh Optifibre Ltd. represent the reimbursement of expenses without any profit element - The amount of remuneration has been credited by the assessee to its Profit & Loss Account - the amount as per invoice is reimbursement of expenses claimed by the assessee from Aksh Optifibre Ltd. - there is no element of income in the reimbursement of expenses, this amount was neither claimed as deduction nor offered as income - As the total sum including 'Other clearing expenses' is in the nature of expenses incurred by the assessee in getting the goods cleared from customs in the first go, which were paid by the clients as such in terms of the agreements as discussed above, naturally there is no element of income requiring inclusion of this amount as such or in part thereof, in the total income - none of the items culminating into 'Reimbursement of expenses' contained any profit element – thus, there is no logic in applying 8% or any other profit rate on 'Other clearing expenses' which is a part of the total 'Reimbursement'. Non deduction of TDS on rent paid on behalf of its clients - Godown charges paid and added back to income u/s 40(a)(ia) of the Act – whether the provisions of section 40(a)(ia) are magnetized on the amount of Godown rent paid by the assessee on behalf of its clients - Held that:- In order to qualify as income or expenditure, it is of paramount importance that the assessee must have earned the income or incurred the expenditure in his own right - The expenditure should be directed towards the earning of income and the income should ordinarily be the result of incurring of expenditure - If the expenditure is incurred or income is earned not in own capacity, but as representative of some third person, then it is the expenditure or income of such third person and not that of the assessee. Neither any expenditure was claimed towards payment of godown rent nor any income was offered on this account - The transaction of actually paying godown rent was for and on behalf of its customers - It was for these customers to claim deduction for the payment of godown rent etc. in their accounts - Relying upon Expeditors International (India) (P) Ltd. VS. CIT [2008 (8) TMI 399 - ITAT DELHI-F] - Decided partly in favour of Assessee.
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2014 (7) TMI 514
Interest u/s 36(1)(iii) of the Act - disallowance of motorcar expenses and depreciation on motorcar on ad-hoc basis @ 20% towards personal use – Held that:- The net interest of ₹ 11,38,490, was shown on the credit side of Profit & Loss account - The assessee’s claim of interest of ₹ 5,66,188, paid on overdraft account has been claimed as business expenditure u/s 36(1)(iii) - it is not borne out, whether the fund flow of overdraft account has been examined or not to ascertain, how much overdraft credit has been used for business purpose and how much for the personal user - If the overdraft facility has been used for the purpose of business, then the interest paid has to be allowed under section 36(1)(iii) – thus, the matter is to be remitted back to the AO for examination of the nature of the overdraft account and the fund flow of such account to examine the utilization of overdraft account for the business purpose – Decided in favour of Assessee. As regards the disallowance of motorcar expenditure and depreciation on motorcar, it is seen that the disallowance has been made on account of personal user - the assessee has not been maintaining a log book for his business purpose, therefore, personal element of usage of motorcar cannot be ruled out - disallowance @ 20% is slightly on higher side, thus, the disallowance is restricted on account of motorcar expenses and depreciation @ 10% - Decided partly in favour of Assessee.
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2014 (7) TMI 513
Claim of bad debts discount - settlement of invoice value - AO disallowed the same as shame transaction – Held that:- CIT(A) rightly of the view that a sum of ₹ 10,83,639/- debited to the P & L account was actually a bad debt which has arisen in the course of business transaction and it is to be allowed as a deduction - assessee had made sale of valves to Mawana Sugar Mill group of concerns by three sales invoices during the financial year relevant to A.Y. 2007-08 - The assessee had filed the contract entered by it with Mawana group before the AO - assessee had also filed before the AO the account copies of both the assessee and Mawana group, wherein, the details of sales of valves during the AY 2007-08 and the amounts outstanding from Mawana group as on 31.3.2008 are clearly depicted - revenue has not disputed the one time settlement entered between the assessee and Mawana group of concern as a sham agreement - the write off of ₹ 10,83,639/- has arisen in the course of assessee’s business transaction and necessarily, it is to be allowed as bad debt or business loss - the CIT(A) order is correct and in accordance with law and there was no infirmity in the order – Decided against Revenue.
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2014 (7) TMI 512
Disallowance u/s 40(a)(ia) of the Act – TDS provision u/s 194C of the Act not complied – Held that:- The AO disallowed expenses out of the total expenses claimed by the assessee under the head ‘shipping and forwarding expenses’ on the ground that the assessee failed to deduct tax at source u/s. 194C of the Act - the assessee has raised a plea that the assessee was not liable to deduct tax at source from ₹ 27,14,737/- as the same was reimbursement of expenses made by the assessee to the clearing agent of the assessee - This plea of the assessee was not adjudicated by the CIT(A) – thus, the order of the CIT(A) is set aside and the matter is remitted back for fresh adjudication as to whether the assessee was liable to deduct tax at source on amount of ₹ 27,14,737/- paid as reimbursement of expenses to the clearing agent or not – Decided in favour of Revenue. Addition as GP on estimated rate of 25% - Suppressed sale – Held that:- The decision in Prima Ceramics Pvt. Ltd. Vs. DCIT [2014 (7) TMI 203 - ITAT AHMEDABAD] followed - The issue of addition made in the income tax case is based on addition made in excise case of the assessee, which is pending in appeal before the Excise and Custom Tribunal - it would be justified to restore the issue in the grounds of the appeal of the assessee to the file of the CIT(A) with direction to decide the afresh in accordance with law on merit in the light of the order of the Excise and Custom Tribunal – Decided in favor of Revenue.
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2014 (7) TMI 511
Non-set off of the brought forward business loss against the speculation income – Held that:- The Revenue’s objection to the assessee’s claim as misplaced - The section governing the carry forward and set off of business loss, other than of a speculation business, is covered by section 72 and not by section 73, which is only qua the carry forward and set off of speculation loss, i.e., loss of a speculation business, which stands, to the extent brought forward, already allowed set off by the AO – it would include speculation business as well, whether it is so by virtue of section 43(5) read with Explanation to s. 28 or Explanation 2 to section 73 - The brought forward business loss is to be allowed set off of against the speculation income assessable for the current year - the quantum of the brought forward loss liable to be set off is that assessed for the relevant years, and not that as returned - the figures of the brought forward business loss adopted by the assessee include (unabsorbed) depreciation as well – thus, the matter is remitted back to the AO – Decided in favour of Assessee.
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2014 (7) TMI 510
Enhancement of fair rental value – Let out property u/s 23(1)(a) of the Act - The rent shown to be received by the assessee is supported by the evidence in the shape of lease deeds, copy of which was duly filed before AO and is forming part of the paper book - The rent shown to have been received by the assessee is mentioned in the lease deed - assessee has been able to show that the ratable value in respect of Malabar Hill flat was less than the actual rent received by the assessee and according to the facts of the present case the annual ratable value of Malabar Hill flat is much less than the actual rent received by the assessee - any addition to actual rent will be contrary to the provisions of the Act. - No addition can be made in respect of Malabar Hill Flat In respect of Andheri Flat - if the AO is able to bring on record the evidence that annual ratable value of the Andheri flat is more than the actual rent received by the assessee, then he will be entitled to take annual ratable value in place of actual rent received by the assessee – Decided in favour of Assessee. Disallowance of interest – Held that:- Assessee could not establish nexus between the interest bearing funds and interest free advances - Relying upon CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - if there were funds available both interest free and over draft and/or loans taken, then a presumption would arise that investment would be out of interest free funds generated or available with the company, if interest free funds were sufficient to meet the investment - Revenue was not able to point out that how the shareholder funds was utilized for the purpose of fixed assets as profit and loss account and balance sheet would not show whether the shareholder funds have been utilized for investment – Decided in favour of Assessee. Capital gain on sale of flat – LTCG or STCG – period of holding - from the date of allotment or from the date of last payment of installments - Held that:- As it has been held in CIT vs. Jindas Panchand Gandhi [2005 (9) TMI 69 - GUJARAT High Court] that the assessee will be considered to be owner of the flat on the date of allotment - facts are supported by documentary evidence filed by the assessee with the letter in the shape of possession letter, details of payments made and sale deed - the gain was assessable as long term capital gain - It could not be assessed as short term capital gain simply on the basis of so called offer by the assessee - Even the writing in the letter dated 6/12/2010 would not suggest that it was offered by the assessee - AO has insisted the assessee to write such words – Decided in favour of Assessee.
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2014 (7) TMI 509
Levy of penalty u/s 271(1)(c) of the Act – Invocation of section 68 of the Act – Held that:- The onus to prove the credit on the parameters is on the assessee, the discharge or not so thereof in the facts and circumstances of the case is largely a matter and, consequently, subject to a finding, of fact - the assessee’s case as totally unproved - The only ‘reason’ advanced by the assessee for the gifts is that he being a young man of 28 years, on the threshold of his career as a real estate developer, was helped with these funds - True, it could be, but only from very close and near and dear ones who would completely identify themselves with the assessee and his success - Surely, a gift under these circumstances would not be made to a strangers or relative stranger or perhaps even acquaintance but only to one with whom the donor enjoys a high level of personal relationship and emotional bonding - No relationship, however, has been specified in the instant case for any donor. Even the immediate source of the funds with the donors has not been explained, except in the case of Ram Lakhan Singh, Mumbai, in which case the same, i.e., the retirement funds, in almost their totality, disprove the assessee’s case rather than establishing the creditworthiness - for the three members of the Verma family, the amount gifted, as apparent from the bank accounts furnished, are sourced from loan funds - Apart from the legal issue of whether the same would qualify as a gift, which could only be of one’s own property, i.e., over which one has absolute rights, including of disposition, as well as the proprietary issue in-as-much as the bank had advanced funds only for business purposes, it raises serious doubts qua the genuineness of the gifts, besides in no manner establishing the credit-worthiness of the donors, if not actually disproving it – the credits claimed to be gifts, as unproved on the anvil of section 68 of the Act – Decided against Assessee. Inaccurate particulars furnished – Penalty u/s 271(1)(c) of the Act – Held that:- The genuineness of the gifts, again, remain completely unproved in the absence of any personal relationship being claimed, much less proved - the credits only represent laundering of his money by the assessee, masqueraded as gifts - The statutory presumption u/s. 68 is that the receipt is of income nature - no exception is forthcoming on the basis that the income, so brought to tax, is deemed as the assessee’s income, section 68 being in fact only a rule of evidence – thus, the levy of penalty is upheld – Decided against Assessee.
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2014 (7) TMI 508
Rejection of books of account – Fall in the gross profit not explained – Held that:- The initial onus to explain and substantiate its accounts, which is only its’ evidence in support of its return of income (ROI), is on the assessee - It is not that the assessee had not explained the decline in its profit in any manner - The same being on account of a variety of factors impinging thereon, including market rates of various inputs and outputs, which are variable, could not possibly be explained to the last rupee - there is no finding that the decline in profit remains unsubstantiated or unexplained by the assessee - what is envisaged by law is a satisfaction, on an overall verification and examination of the accounts, of the same being not correct or complete and, thus, accordingly, not reliable for the purpose of computation of income under the said heads of income - no cause/s to have been located which could form the basis of the AO’s dissatisfaction with the assessee’s accounts in terms of section 145(3) - CIT(A) has thus rightly held that there was no warrant for the application of section 145(3) of the Act – Decided against Revenue. Disallowance of detention charges – Held that:- The documents of the clearing agent supplied in substantiation were however for the year 2005, and also did not match with the figures in respect of weight, name of ship, delivery point, etc. per the copies of the documents with regard to the purchase, as furnished by the assessee - The transaction appeared to be relating to financial year 2005-06 - The assessee being unable to substantiate its claim of having incurred the relevant expenditure wholly and exclusively for the purpose of its business, the same was disallowed - the assessee being unable to improve its case before the FAA – Decided partly in favour of Assessee.
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2014 (7) TMI 507
Treatment of sale of shares – Business income or capital gains - Whether the income arising out of sale of shares is to be treated as business income or it has to be assessed as capital gains – Held that:- The decision in ACIT Vs. Smt. Vijaya Srinivasan [2014 (7) TMI 124 - ITAT CHENNAI] followed - the profit arising from shares held for more than 30 days is to be considered as short or long term capital gain depending upon the period of holding and that where shares have been purchased and sold in less than 30 days, the profit has to be considered as business income - The Income Tax Act only recognizes the period for determining short term or long term capital gain - The criteria of 30 days for determining business income or capital gain is neither recognized nor acceptable under the provisions of the Income Tax Act - The intention of the assessee in purchasing the shares was clearly to earn profits from sale and not to earn dividend or investment - the shares held by the assessee for longer period may be treated as investment and the profit arising to be treated as long term capital gain - as regards shares held for short duration are concerned, the magnitude, frequency and volume of transactions gives flavor of business income and the same is considered to be income from business – Decided partly in favour of Revenue.
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2014 (7) TMI 506
Rectification of appeal u/s 154 of the Act – Modification in the grounds of appeal - Held that:- The grounds for both the years were similar - assessee submitted that the Tribunal had restored both these appeals back to the file of CIT(A) for fresh adjudication – after considering the totality of the facts and perusing the material available on record, the order is modified and the grounds of the appeal are redefined – Decided in favour of Assessee.
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2014 (7) TMI 505
Validity of reassessment u/s 147/148 of the Act – Held that:- The decision in ACIT, Circle 37(1), New Delhi Versus Sood Brij & Associates [2014 (7) TMI 496 - ITAT DELHI] followed - the reasons were recorded on 30th March, 2010 and on the same date notice u/s 148 was issued - The reason were supplied to the assessee - the re-assessment proceedings cannot be held to be bad in law - the notice was served on the assessee - the reasons recorded by the respondent were supplied to the assessee - the contention of the assessee is assessee cannot be accepted that reassessment was bad in absence of reasons to reopen being supplied to it after limitation period prescribed by the Act – Decided against Assessee. Partner’s remuneration u/s 40(b) of the Act – Held that:- The decision in ACIT, Circle 37(1), New Delhi Versus Sood Brij & Associates [2014 (7) TMI 496 - ITAT DELHI] followed - clause (iii) and other clauses in Section 40 (b) specifically use the expression "in accordance with the terms of the partnership deed" - the quantum of remuneration or the manner of computing the quantum of remuneration should be stipulated in the partnership deed - The expression "in accordance with the terms of the partner deed" read with clause (iii) of section 40 (b), requires and mandates that the quantum of remuneration or the manner of computation of quantum of remuneration should be stated in the partnership deed and should not be left undermined, undecided or to be determined or decided on a future date - the remuneration is not specified - The manner of computing the remuneration is not specified - the remuneration payable is left to future mutual agreement between the partners who are entitled to decide and quantify the quantum - Remuneration can be any amount or figure but not more than the maximum amount stated in Section 40 (b) (v) of the Act – thus, the order of the CIT(A) is upheld – Decided against Assessee. Non-consideration of the payment of advance tax paid by the partners on the Partners’ Remuneration – Computation of interest u/s 234B r.w. section 155 (IA) of the Act – Held that:- CIT(A) has not adjudicated the issue saying that charging of interest u/s 234 of the Act is consequential - as per the provision of section 155(IA) of the Act wherein respect of any completed assessment of a firm, it is found that any remuneration of any partners is not deductible under clause (b) of section 40 of the Act - the AO may amend the order of assessment of the partner with a view to adjusting the income of the partner to the extend of the amount not deductible - the AO has not done this exercise in respect to the partner’s income inconsequence to the disallowance of remuneration in the hands of the assessee firm and as stated earlier the CIT(A) has not dealt - thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (7) TMI 504
Deletion of unexplained capital – Capital introduced by partners of firm – Held that:- The source of funds cannot be held as unexplained only because the name as appearing in the balance sheet of Shri Hiteshbhai D.' Patel shows loan from Shri Jagdish Vasania (Indl.) whereas it has been actually given by Shri Jagdish Vasania & Co., firm - The bank statement shows that the funds came from Shri Jagdish Vasania & Co., a fact not disproved by the AO and therefore it cannot be considered as unexplained in the hands of the assessee firm - sources of capital introduction by Shri Hiteshbhai D. Patel is held as explained in view of the evidences produced - As regards, Shri Maganlal Jhaviya, it is seen that he has introduced an amount of ₹ 2,00,000/- as capital into the firm - no other sources of income on fund has been shown as available to him for introduction - 3 acres of land, however, fertile will not be able to generate income leave alone any savings so as to enable this person to introduce capital of ₹ 2,00,000 - source of fund introduced by this partner is not explained, and addition made u/s.68 of the Act is therefore upheld - The addition u/s 68 of the Act treating capital introduction as unexplained is therefore sustained to the extent of ₹ 2,00,000/- only - CIT(A) after considering the submissions of the Assessee and the Remand Report received from AO, by reasoned and detailed order granted substantial relief to the Assessee - Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue.
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2014 (7) TMI 503
Disallowance u/s 14A r.w. Rule 8D of the Rules - Net worth of the company far exceeds its investments capable of yielding exempted income - Held that:- The AO has worked out the disallowance u/s 14A as per rule 8D after taking interest cost and administrative cost – assessee submitted that if any disallowance is called for, then it should be made on that basis only - the assessee’s networth and availability of funds is far more than investment which are capable of yielding exempt income and, therefore, no interest cost should be attributed for working out the disallowance - availability of interest free funds and investments which are capable of yielding exempt income, has not been examined properly either by the AO or by the CIT(A) – the decision in The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] – the AO is directed to re–examine the nexus of interest free funds and investment made – Decided partly in favour of Assessee.
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Corporate Laws
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2014 (7) TMI 545
Dishonour of cheques - prosecution of directors - complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - Held that:- for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. - Decision in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. [2012 (5) TMI 83 - SUPREME COURT OF INDIA] followed. The High Court by impugned judgment dated 13th August, 2007 held that the complaint against respondent no.2-Company was not maintainable and quashed the summon issued by the Trial Court against respondent no.2-Company. Thereby, the Company being not a party to the proceedings under Section 138 read with Section 141 of the Act and in view of the fact that part of the judgment referred to by the High Court in Anil Hada [1999 (11) TMI 808 - SUPREME COURT OF INDIA] has been overruled by three Judge Bench of this Court in Aneeta Hada, we have no other option but to set aside the rest part of the impugned judgment whereby the High Court held that the proceedings against the appellant can be continued even in absence of the Company. - Decided in favor of appellant.
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Service Tax
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2014 (7) TMI 542
Tour and travel services - levy and collection of service tax from the assessee where principal tour operator has paid service tax - double taxation - foreigner tourists - packaged tour - valuation - inclusion of reimbursement of expenses - amounts received by the appellant from Principal Tour Operator (PTO) as reimbursement of actual expenses - validity of circular creating the service tax liability - extended period of limitation - levy of penalty - Held that:- the appellant is not able to adduce any evidence in the form of assessment order of the Principal Tour Operator or any other documents issued by the service tax authorities to substantiate the claim that service tax has been paid on the entire amount by the Principal Tour Operator, which includes the amount paid to the appellant. Merely on the basis of the certificates issued by the Principal Tour Operator enclosed with the memorandum of appeal, the claim of the appellant cannot be accepted inasmuch as it is doubtful whether these certificates have been filed before the authorities below. Extended period of limitation - Held that:- The position regarding the taxable services provided to any person in relation to a tour has already been explained in the year 1997 and in 2001 itself. Therefore, the appellant ought to have given the information about the supplementary services being provided in ST-3 return or otherwise. In any view of the matter, such information without any doubt ought to have been given after 10.9.2004 when the definition of Tour Operator has been amended, but the appellant wilfully failed to disclose such information. Further, appellant has availed the benefit of abatement/exemption under the Notification No. 39/97-ST to the extent of 60% of the total amount charged treating the entire services provided as a package tour, including the facilities such as Air and Railway Tickets, porterage, fooding and lodging, monuments visit services, guide services, and general assistance services etc. This clearly shows that the appellant was fully aware that it is a package tour in which supplementary services are also included, but failed to disclose the receipts towards supplementary service - Decided against the assessee. Supplementary services claimed to have been received by way of reimbursement, on actual basis - Held that:- the amount paid to the appellant towards supplementary services, apart from the payments received towards transport services are liable to be included in the gross amount and are the value of taxable service which are liable to service tax. Waiver of penalty levied u/s 78 invoking the provisions of section 80 - Held that:- Tribunal was in error in coming to the conclusion that there would be no occasion to establish a reasonable cause within the meaning of section 78, once, the extended period of limitation had been validly invoked under the proviso to section 73(1). If the analogy which has been used by the Tribunal is extended, it would have to be held that section 80 would have no application whatsoever to a case which falls within the purview of section 78 since as we have noted, the language of section 78 is similar to the language which is used in the proviso to section 73(1). Accepting such an interpretation would involve re-writing the provisions of section 80 by excluding the provisions of section 78 from the non-obstante clause which is contained in section 80. - therefore while confirming the levy of service tax, penalty set aside - Decided partly in favor of assessee.
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2014 (7) TMI 541
Utilisation of cenvat credit for payment of service tax on GTA services - reverse charge - The appellants are availing the services of goods transport agency - period 01.01.2005 to 30.09.2005 and 01.10.2007 to 29.02.2008 - Held that:- assessee, a manufacturing unit paying Service tax on goods transport services, fall within the definition of ‘provider of taxable service’ under Rule 2(r) of Cenvat Credit Rules, 2004 which includes a person liable for paying Service tax. As such, it was held that payment of Service tax in respect of services rendered by Goods Transport Agency through Cenvat Credit was appropriate - Cenvat credit can be utilised towards payment of Service Tax in respect of services received from Goods Transport Agency inasmuch as by a deemed fiction of law service recipient is held to be output service provider - payment of service tax liability of GTA service by appellants through CENVAT Credit is as per law. As, there is no demand of service tax against the appellants, the penalties imposed on them under Section 76 & 77 of the Finance Act, 1994, and under Rule 15(3) of the CENVAT Credit Rules, 2004 are set aside - Following decision of Shree Rajasthan Syntex Limited Vs. Commissioner of Central Excise, Jaipur [2011 (8) TMI 265 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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2014 (7) TMI 540
Demand of service tax - renting of immovable property - Leasing of buildings to Hotals - Held that:- The taxable service falling within the scope of Section 65(90a) and enumerated to be a taxable service under Section 65(105) (zzzz) is the renting of immovable property. A reading of clause (90a) and clause (zzzz) would indicate that a complex drafting methodology is adopted. Even in clause (90a) there are inclusionary and exclusionary clauses. Under this provision renting of immovable property or similar arrangement for use in course of or furtherance of business or commerce but excluding renting of immovable property by a religious body or to a religions body; renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, are excluded. The Explanation under clause (90a) further defines the expression for use in the course or business or commerce and also incorporate a clarificatory clause for removal of doubts, not necessary for the purposes of these appeals. Similarly, in clause (zzzz) there are inclusionary or exclusionary clauses embedded. Renting of immovable proper for a hotel is expressly excluded from the ambit of the taxable service in Section 65(105) (zzzz) - Following decision of Ambience Construction India Ltd. vs. Commr. of S.T. Hyderabad [2012 (11) TMI 653 - CESTAT BANGALORE] Renting of buildings used for the purpose of accommodation including hotels, meaning thereby renting of a building for a hotel, is covered by the exclusionary clause and does not amount to an "immovable property", falling within the ambit of the taxable service in issue - Decided in favour of assessee.
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2014 (7) TMI 539
Disallowance of CENVAT Credit - Invocation of extended period of limitation - Held that:- This is a case where the benefit of Rule 9(2) of CENVAT Credit Rules, was to be considered. In fact, the appellants had requested for this benefit. However, we find that this request has not at all been considered and ignored and has not been discussed also. In our opinion, the Commissioner should have considered the invoices/documents where the benefit of Rule 9(2) of CENVAT Credit Rules could have been extended and if the appellant was found to be eligible, given the benefit and thereafter denial of credit in respect of other cases should have been made. In the absence of any consideration of the request made by the appellant for the benefit of Rule 9(2), we consider it appropriate that the matter should be remanded at this stage for fresh adjudication after giving reasonable opportunity to the appellants to present their case. - Decided in favour of assessee.
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2014 (7) TMI 538
Appeal before commissioner (Appeals) - appeal was singed by the brother of assessee - non delivery of order to the assessee - Non observance of procedure prescribed in Section 37C - it is a fact, admitted by the Appellant himself, that he was neither residing at the old address nor having any contact with the persons residing there and it was for this reason that the pasted O-I-O did not come to his knowledge - Held that:- Commissioner (appeal’s) observation are in the nature of assumption and presumption. Even if the sending of the order would not have resulted in any other situation, as observed by Commissioner (Appeals), even then the Revenue was required to follow due procedure of law. It is not open to the Revenue to deviate from the law laid down under procedure of Rule 37C, even though following of the same would not have served any purpose. It has to be kept in mind that all the creations of the statue are required to follow the law in deciding the legal issues and there is no scope for any personal assumptive conclusions. As the appellant received the order in July and during the relevant period, he was in jail, the appeal memorandum was signed by his brother - If the appellant was able to give the authorization to his brother, he could have very well signed the appeal papers himself. As the appellant, during the relevant period was in jail, as supported by his affidavit, filing of appeal under the signatures of his brother, may not be a serious objection, inasmuch as the same is a rectifiable defect and the applicant can sign the last page of the appeal, even subsequently and can rectify the defect. The procedure prescribed under the Manual is not procedure prescribed by the legislation and is meant for convenience of litigants and in the given case can be deviated from - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 537
Waiver of pre-deposit - business support service - Held that:- as the applicants are receiving certain amounts regarding registration of motor vehicles sold by them, prima facie the applicants have a strong case in their favour. Therefore, the pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeals - Stay granted.
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Central Excise
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2014 (7) TMI 532
Cenvat Credit - Availing credit without receipt of inputs being pet coke - manufacturing of Cement and Clinker - the case of the Revenue is mainly based on two evidences i.e. the Test Report of NSIC and the statements of suppliers of Pet coke and of the out-station buyers of Pet coke who were allegedly interested in only getting Pet coke without any Cenvatable invoice. - Confiscation of goods - Redemption fine - Penalty - Held that:- having rejected cross-examination, it was not open to the Commissioner to place reliance upon the statements. Revenue has failed to bring anything on record to clarify which specific invoices were given to New Kishan Cement and Major Cement without supply of ‘pet coke’. - the allegation of non-receipt of pet coke from Radhey Vyapar Ltd, is totally presumptuous. The inference drawn in the impugned order regarding non-receipt of pet coke, therefore, is not supported by the evidence on record. Regarding non-receipt of pet coke from Jayshree Vyapar Ltd, we find that the only documentary evidence is in the form of Daily Dispatch Register prepared by Pratham Transport, Jamnagar. We find from the record that entries made in the Daily Dispatch Register shows diversion only in respect of 8 trucks. The said entries show supplies being made to Major Cement and not to New Kishan Cement. Supplies made to New Kishan Cement cannot be disputed in any event. However, while examining the issue as to whether the entries made in the Daily Dispatch Register with regard to supplies made to Major Cement could be accepted as correct, we find that there is no tangible evidence to support the said entries. Moreover, it is not the case of the Revenue that the said entries were made under the instruction of New Kishan Cement and Major Cement. New Kishan and Major Cement have absolutely no control over the said records. Therefore, we accordingly hold that the allegation of only receiving invoices from Radhey Vyapar Ltd without physically receiving pet coke, cannot be sustained. Commissioner while ordering for confiscation, imposing redemption fine and penalty, in connection with the Show Cause Notice dated 21.10.08, has not entered any categorical finding to sustain the said order - Impugned order is set aside - Decided in favour of assessee. Issue of Corrigendum show cause notice after 2 years to deny the test report - Held that:- Corrigendum to Show Cause Notice (as referred hereinabove) was issued almost after a period of two years. Moreover, the Corrigendum was issued for deleting the para on which New Kishan Cement and Major Cement was strongly relying upon. It appears as though the corrigendum was issued to defeat the stand taken by New Kishan Cement and Major Cement. Issuance of Corrigendum at a belated stage also fortifies the stand of New Kishan Cement and Major Cement that the test report of the samples drawn on 26.4.08 was apparently in their favour. - Decided in favor of assessee.
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2014 (7) TMI 531
CENVAT Credit - Credit in respect of generation of electricity - appellant have availed the cenvat credit in respect of various input services used in or in relation to the generation of electricity and also in respect of inputs such as lubricants, grease, chemicals, etc. used in or in relation to the generation of electricity and since separate account and inventory of the inputs/input services meant for dutiable final products and exempted final products have not been maintained - Held that:- electricity is not an excisable good and hence, in respect of the sale of the electricity to U.P. Power Corporation Ltd., the provisions of Rule 6(3) of the Cenvat Credit Rules would not be applicable. In view of judgment of the Gularia Chini Mils, Gularia & Ors. Vs. Union of India [2013 (7) TMI 159 - ALLAHABAD HIGH COURT], the impugned order demanding the amount under Rule 6(3) of the Cenvat Credit Rules, 2004 would not be sustainable. There may have been a case for denial of proportionate credit in respect of the cenvated inputs or input services to the extent the same have been used in or in relation to the generation of power sold to U.P. Power Corporation Ltd., but the show cause notice is silent on this point. It does not even mention as to which common input or input service were being used and if so, how much is the cenvat credit taken - appellant, therefore, have strong prima facie case in their favour. The requirement of pre-deposit of cenvat credit demand under Rule 6(3) of the Cenvat Credit Rules, 2004, interest thereon and penalty is, therefore, waived for hearing of their appeal and recovery thereof is stayed - Stay granted.
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2014 (7) TMI 530
CENVAT Credit - removal of inputs from the registered premises to the adjacent unregistered premises - storage of goods outside the factory premises at nearby premises own by the assessee - storage beyond the excisable area - the facts were noticed during physical verification by the department - Difference of opinion - Matter referred to larger bench with following questions of law:- Whether no pre-deposit is to be ordered as held by Member (Judicial). OR Whether pre-deposit by respective appellants to the extent directed by learned Technical Member should be ordered.
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2014 (7) TMI 529
Shifting of factory - transfer of unitlized cenvat credit to another factory - Penalty under Rule 25 of Central Excise Rules as also under Rule 15(1)of Cenvat Credit Rules, 2004 - contravention of the provisions of Cenvat credit Rule - Held that:- As such there is no dispute on record that the appellant filed due intimation with the Revenue for removal of the inputs, finished goods, semi-finished goods and capital goods to their Agra Unit. The only grievance of the revenue is that no prior permission was taken by them. It is not understood that when the intimations were being given, why the revenue did not take action and stopped the appellant from shifting till the permission is granted by them. Further the lower authority have not referred to any provisions of law requiring prior permissions. When the due intimation stand given by the appellant, the subsequent stand of the revenue they should have removed the goods only after due permission, without any reference to any rule, cannot be appreciated. The revenue was free to check the inventory of the goods, even at the time of filing of intimation. In any case, inasmuch as there are no alleged discrepancies, I do not find it to be a case for fit imposition of penalty on the appellant - Decided in favour of assessee.
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2014 (7) TMI 528
CENVAT Credit - whether construction of residential colony near the factory as also of cleaning services obtained for the residential colony and guest house would be cenvatable input services or not - Held that:- Following decision of CCE vs. ITC reported as [2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT] - This decision was followed in assessee's own previous case also therefor, Decided in favour of assessee.
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2014 (7) TMI 527
Waiver of pre-deposit - Clandestine removal - yield ratio / burning loss - manufacturer of MS Ingots, MS Riser/Runner and Re-rolling products - Suppression of the production - Held that:- raw material suppliers have not issued any test report indicating the grade of Sponge Iron supplied - in a statement, Shri Arif Ali, Manager of the Company categorically stated that the entire data, subsequent to the period, December, 2008, was incorrect. - This shows that the entire records were manipulated. - Further, Applicant has been maintaining the records, consistently showing the fixed ratio of production of MS Ingots as 72.8% during the period, 2007-08, irrespective of the ratio of the consumption of MS Scrap and the Sponge Iron, which cannot be the same, as variation is bound to happen - no specific reasons produced for low yield in case of the Applicant have been cited, except that raw materials obtained were of low yield. Applicant has not been able to make out a case for full waiver of the dues adjudged. - appellant directed to make 25% as pre-deposit - stay granted partly.
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2014 (7) TMI 526
Duty demand - Clandestine removal of goods - Excess receipt of raw material - Violation of principles of natural justice - Allegation based upon recovery of the transporters documents from their place read with railway receipts - Held that:- Neither the railway receipts nor the transporters documents have been supplied to the appellants. Instead, a tabulated chart prepared by the Revenue, on the basis of the said recovered documents stands given. Similarly, instead of railway receipts, only the covering letter of the General Divisional Manager along with the chart of list of railway receipts stand apply to the appellants - Following decision of Satya Power and Ispat Pvt. Ltd. Vs. CCE&ST, Raipur [2014 (7) TMI 502 - CESTAT NEW DELHI] - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 525
Claim of cenvat credit refund in cash - whether an amount paid by debiting cenvat credit from RG 23A Part II can be refunded in cash subsequently when appellant's factory is closed - Held that:- In absence of express provision to grant refund, that is difficult to entertain except in the case of export. There cannot be presumption that in the absence of debarment to make refund in other cases that is permissible. Refund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable - Following decision of Steel Strips vs. CCE Ludhiana [2012 (8) TMI 565 - CESTAT, NEW DELHI] - Decided against assessee.
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2014 (7) TMI 524
Clandestine remvaol - Assessee showed physical loss in balance sheet - Assessee contends that goods were destroyed on 9.3.01 on account of leakage of water from chilling plant and water bath of tape plant during the holiday festival in 2001 and intimation is given to police station - held that:- As regards the intimation to the police authorities, I have been shown the receipted intimation dated 10.3.2001 addressed to the Station Incharge, Police Station Faridpur, Faridpur Bareli intimating that on 10.3.01, the factory was opened and it was found that the same was flooded and approximately 200 MT material lying in the factory got damaged due to water. As such, observation of Commissioner (Appeals) that no intimation was filed with Police cannot be appreciated - Police officer informend Revenue that report of loss of material was given however, since he was not present therefore, there is no record of it. Revenue's entire case is based upon the factum of work-in-progress goods shown as physical loss in the balance sheet. Apart from contending that such loss is much on the higher lower side, and as such creates doubt and there is virtually no evidence to show that said goods were fully manufactured by the appellant and were cleared without payment of duty. The charges of clandestine removal being serious charges are required to be assessed by production of inevitable evidence. It is well settled that demands on the basis of charges of clandestine removal cannot be confirmed on the basis of doubts being entertained by the Excise officer. - Decided in favour of assessee.
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2014 (7) TMI 523
Benefit of CENVAT credit - Revenue contends that activity of de-coiling the sheets, cutting to length, shearing and other activity like de-greasing, cleaning, etc. did not amount to manufacture and amounted to removal of inputs as such and accordingly the CENVAT credit availed was proposed to be disallowed - Held that:- There is no loss of revenue as the appellant had cleared the goods with value addition which have resulted in payment of excess duty to the tune of ₹ 50,40,102. The next ground taken is that the allegation in the show cause notice is self-contradictory as on the one hand it is alleged that the activity of de-coiling, cutting, slitting, cleaning, etc. does not amount to manufacture whereas on the other hand, in para 17 of the show cause notice it is observed that the average value of the inputs in question i.e., GP coils was ₹ 35,779/- PMT and slit coils was ₹ 38,609/- PMT whereas the average assessable value of the GP coils sheets and cut to length sheets was ₹ 38,015/- PMT and ₹ 38,763/- PMT respectively. It is further observed that the appellant cleared the goods in question after value addition on the inputs and also observed that the credit of input was availed at rate less than the duty rate at which the final products were cleared by the appellant. Thus, on the facts of the case, this itself proves that the inputs having subjected to processing resulting in value addition as the same have been cleared at appropriate rate of duty which is higher and it cannot be said that the inputs are cleared as such. There is definitely some value addition involved as the goods in question have been removed at a higher rate of duty resulting into additional duty to the exchequer of ₹ 50.40 lakhs. Further, we find that the facts and circumstances of the present case are squarely covered by the ruling of the Hon'ble Bombay High Court in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT) - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 536
Detention of goods - respondent detained the goods in the lorry stating that the goods were transported from Kerala to Erode without the invoice or the agreement copy - Held that:- impugned order is only a notice, for which, the petitioner has to necessarily submit its reply, this Court only directs that the petitioner shall give a detailed reply, for which, fifteen days time is granted. In the mean while, the petitioner shall pay a sum of ₹ 30,000/- [Rupees thirty thousand only] out of the amount to be assessed by the respondent as contemplated under the Act and on such payment, being made, the respondent is directed to release the goods detained, to the petitioner Company, forthwith. It is made clear that the petitioner Company has to subject themselves to the adjudication proceedings that may be initiated by the respondent - Decided against assessee.
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2014 (7) TMI 535
Cancellation of registration - Non filing or belated filing of return - Whether looking to the facts and circumstances of the case, the order for cancellation of registration dated May 23, 2008 passed by the respondent No. 3 is justified merely on the basis of non-filing of the returns while as per provision of section 17(1)(d) of the VAT Act, the registration can be cancelled only in case of arrears of tax liability of the petitioner - Held that:- appellant has filed, annexure P/5, disclosing the details of the return submitted by him to show that the appellant had subsequently submitted the return in annexure P/5. The appellant has also disclosed that in terms of the return no tax was payable, whereas the Board has taken the view that though the appellant had submitted the return belatedly but no proof of payment of tax has been filed. It is also found that the order of cancellation of the registration certificate is an ex parte order and the fact relating to the submission of return and the liability/non-liability of the appellant in terms of the return needs consideration and proper opportunity is required to be given to the appellant before taking any action. - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 534
Validity of re opening of assessment - Tax on broken glass - Authorities held that assessee should be referred as manufacturer and liable to tax - Therefore, authorities reopened assessment - Held that:- A bare perusal of the impugned 11 order would show that it is based on hypothesis that broken glass in huge quantity cannot be found out except from filling factories. This approach is wholly conjectural and is not based upon any material - the petitioner is a trader and is not a manufacturer actual or deemed and his case that he has purchased the broken glass from Kabaries, has not been disputed either in the original assessment proceedings or in the reasons recorded in the impugned order - reasons recorded in the impugned order are not sufficient to form an opinion that the turnover of the peti tioner has escaped assessment. It is based on conjecture and surmises. The sanction granted by the impugned order to reopen the assessment cannot be allowed to stand. - Decided in favour of assessee.
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2014 (7) TMI 533
Levy of tax and interest - incentives to mega projects - assessee instead of depositing tax adjusted the same with refund entitlement - conditions of the notification mandatory or not - whether the petitioner is liable to pay interest on delayed payment or non-payment of tax collected under the KVAT Act in terms of the notification - Held that:- petitioner-industrial unit is entitled to tax exemption limited to unavailed portion of the period and extent of tax exempted, but is required to collect the tax applicable under the KVAT Act on the sale of goods manufactured by it and pay the net tax along with the return prescribed under the said Act to the jurisdictional authority, while, the State Government is obliged to refund the said amount within the time specified under section 35 of the KVAT Act or within 15 days from the date of filing of the return and failure to do so, would entail the State Government to pay interest for the period of delay. Even if payment of the tax collected by the petitioner is made to the State in terms of condition No. 4, it is more of a formality of accounting that amount as against the total amount of exemption from payment of tax during the relevant period and nothing more. If that is so, there cannot be a failure of the object or purpose of the notification if the petitioner did not make payment of tax collected in order to account for the amounts to be adjusted as against the entitlement. Though the petitioner filed its monthly returns, nevertheless is inconsequential in the light of the clause 5 of the notification, annexure A, the compliance of which would sequentially enable the Revenue to adjust the amounts as against the entitlement. The law laid down in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA] supports the case of the petitioner in the matter of whether the conditions imposed in annexure A notification are to be construed strictly or otherwise. The apex court, having observed that mandatory requirements of conditions while seeking exemption must be obeyed or fulfilled exactly, nevertheless stated that at times, some latitude can be shown if there is failure to comply with some requirements, which are directory in nature and non-compliance of which "would not affect the essence or substance of the notification granting exemption". A reading of the statement of objections filed by the Revenue does not indicate that the non-compliance of the payment of tax collected by the petitioner under the KVAT Act, apparently would not affect the essence or substance of the notification, annexure A, granting exemption from payment of tax. Petitioner though did not make payment of the tax collected under the KVAT Act along with some of the monthly returns submitted and for some months having made delayed payments, the Revenue could not have imposed interest by exercising a jurisdiction under section 36 of the KVAT Act - Decided in favour of assessee.
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Wealth tax
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2014 (7) TMI 543
Valuation of assets being a residential flat - Rule 3 to 7 of Schedule III of the Wealth-Tax Act, 1957 - scope of the term 'practicable' - wide variation between alleged market value as determined by the Departmental Valuation Officer and the value as disclosed by the assessee - Held that:- the word "practicable" is to be construed widely - if in the opinion of the AO, if the value determined by the tax payer on the basis of Rules 3 to 7 is absurd or has no correlation to the fair market value or otherwise not practicable, in such a case, it is open to the AO to invoke Rule 8 of Schedule III and determine the value of the asset either under Rule 20 or refer under Section 16A, for determination of the valuation of the asset. It is true that the invocation of Rule 8(a) cannot based on ipsi dipsi of the AO. The discretion vested in the AO to discard the value determined as per Rules 3 has to be judicially exercised. It must be reasonable, based on subjective satisfaction; the power must be shown to be objectively exercised and is open to judicial scrutiny. In the present case, the AO refused to accept self assessment for the following reasons: - (i) There is a wide variation between the market value and the valuation done by the assessee as per municipal taxes. - (ii) The property is used as a guest house. - (iii) The value for levy of municipal tax is very low, as the total ratable value of the assessee is done by the municipal authorities @ ₹ 6,573/- per annum. - (iv) The assessee was a tenant of the property @ ₹ 500/- per month. After purchase of the property a lot of expenditure was incurred from time to time on improvement of the property which is very difficult to ascertain. - (v) The value of the building is grossly understated as the assessee himself entered into an agreement to sell the same in the year 1995 for a sum of ₹ 10,26,00,000/-. Considering the above factors, the AO assessed the value of the property at ₹ 2,60,73,000/- as valued by the Departmental Valuation Officer. AO was justified in holding that it was not practicable to apply Rule 3 in the instant case and rightly referred the matter to the Valuation Officer under Section 16A for determination of value of the asset. The AO, thereafter, has rightly assessed the wealth tax on the basis of such value determined by the Valuation Officer. - Decided against the assessee.
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Indian Laws
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2014 (7) TMI 544
Appointment of arbitrator - The case of the appellant is that the Company had completed a major part of the work. This was disputed by the respondents. According to them, only 41% of the work was completed as on 22.12.2007, based on the original contract price. - Held that:- In view of stand taken by the parties and as they mutually agreed for arbitration by retired Hon’ble Judge of the Kerala High Court, without going into the question of merit, we set aside the impugned order dated 19th July, 2010 and refer the matter to Hon’ble Mr. Justice K. John Mathew (retired). The parties will negotiate and settle the terms and conditions of arbitration. It is expected that the arbitration proceeding will be concluded at an early date.
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