TMI Tax Updates - e-Newsletter
July 20, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Revision u/s 263 by CIT(A) - The reasons for non deduction of TDS stated by the assessee that the company was going through the process of demerger does not impress us at all. The provision of deduction on TDS are mandatory and strict in nature and cannot be given a go-by as done by the assessee - revision upheld - AT
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Income Tax:
Depreciation on goodwill account - Even if the cost of shares allotted to the shareholders of JKSL is considered to be the cost of goodwill acquired by the assessee, as it was shown as part of means of finance, even then it is eligible for depreciation - AT
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Income Tax:
Determination of income - manufacture of tea out of green leaf - Disallowance made on account of bifurcation of expenses by application of Rule 8D - CIT(A) deleted addition - the formula adopted by the AO gives distorted figures for profit made out of the assessee’s own leaf and bought leaf - AT
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Income Tax:
Penalty u/s.271(1)(c) - undisclosed investment - The assessee cannot shift his responsibility to its Chartered Accountant. Further the assessee stated it was ill advised by the Chartered Accountant without mentioning the name of the Chartered Accountant - levy of penalty confirmed - AT
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Income Tax:
Whether the reassessment were time barred as per provision u/s.149? - With all the stop having been pulled out, the Assessing Officer under section 153A/153C has been entrusted with the duty of bringing to tax the total income of an assessee who case is covered by section 153A/153C, by even making reassessments subject to provision u/s. 153B - AT
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Income Tax:
Transfer pricing adjustment - TPO has made addition of notional interest till the date of passing of order (i.e. 28 January 2013) which is incorrect and against the basic principle of taxation as laid down by Income Tax Act. - AT
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Income Tax:
Minimum Alternate Tax (MAT) u/s 115JB - AO directed to make adjustment for the Impairment loss in the Book Profit derived from the activities of a tonnage tax company also; and the so computed book profit shall be liable to be excluded from the Book Profits - AT
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Income Tax:
Disallowance of loss - rejection of books of accounts - A.O. has brought no material on record after examining the parties to whom the sales were made by the assessee to show that the assessee has under invoiced the sale of diamonds or that the sales invoiced do not reflect the correct sale-price of the diamond. - AT
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Income Tax:
Estimation of business income of owning fleet and operating as a transport contractor - @ 3% of the gross receipts as against 8% estimated by the AO - the past history in Assessee’s case would not be the appropriate yardstick to estimate income. - AT
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Service Tax:
Forced Recovery of service tax - Since the petitioner have stated that the authorized representative was compelled to sign on the said letter and issued two cheques covering the said amount, this Court cannot decide whether the same was taken forcibly or was issued voluntarily. - HC
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Service Tax:
Refund claim - no service tax is leviable for the service - Thus, the writ petition is maintainable when the amount is arbitrarily withheld without any justification under law as the refund claimed by the petitioner is not relatable to Section 11B of the Central Excise Act. - HC
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Service Tax:
Imposition of late fees - Section 77 r.w.r 7C - Delay in filing of returns - looking to the service tax involved during the period October, 2011 to March, 2012 the late fee imposed upon the appellant is required to be reduced to ₹ 500/- - AT
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Service Tax:
Advertising agency service - Denial of CENVAT credit - Merely because the appellants stand reimbursed part cost of the advertising expenses from their parent company, does not mean that the appellants would become disentitled to the Service Tax actually paid by them - AT
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Central Excise:
Exemption to specified goods of chapters 50 to 63 - Exemption will be allowed only if textile goods manufactured out of inputs on which appropriate duty of excise leviable has been paid and no cenvat credit avalied - Notification
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Central Excise:
Effective rate of duty @2% on certain items - Exemption will be allowed only if such goods manufactured out of inputs on which appropriate duty of excise leviable has been paid and no cenvat credit avalied - Notification
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Central Excise:
Effective rate of duty - Exemption shall be grated to certain items eligible Nil rate of duty or concessional rate of duty only if such goods manufactured out of inputs on which appropriate duty of excise leviable has been paid and no cenvat credit avalied - Notification
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Central Excise:
Benefit of the area based exemption Notification No. 50/2003-C.E. - two units in single premises - the word ‘industrial unit’ cannot be used in the sense of a factory as a factory may have more than one industrial units. The duty exemption under the exemption Notification No. 50/2003-C.E. is in respect of the goods cleared from an “industrial unit” - AT
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Central Excise:
Classification of Lays - fried and salted potato wafers packaged in retail packing - just because such mithais, namkeens, etc., though in ready to eat form are in retail packs, the same would not be ceased to be covered by the Sl. No. 29 of the Notification. - appellant have prima facie case in their favour - AT
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Central Excise:
Cenvat Credit - Demand of 5%/10% value of exempted goods - The waste cannot be considered as a bye-product and hence it cannot be said that common inputs on input services are utilized for seeking reversal of 5% or 10% of the value of waste products. - AT
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Central Excise:
CENVAT Credit - Security Service, Telephone Service and Manpower Service - Nexus with input service - Unlike in the case of inputs where credit can be taken only when it is received in the factory, in respect of input service there is no such restriction - credit allowed - AT
Articles
Notifications
Case Laws:
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Income Tax
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2015 (7) TMI 637
Assessment of Long term capital gain as income from other sources - Held that:- Evidences furnished by the assessee with regard to the purchase and sale of shares of M/s Robinson Worldwide Trade Ltd. should have been discreetly examined and then a holistic view of the matter should have been taken by the tax authorities. The Tribunal in the said case has restored the matter for fresh examination to the assessing officer. The Tribunal has also directed the AO to take into account the decision rendered by the co-ordinate bench in the case of “Shri Arvind M Kariya” [2011 (12) TMI 509 - ITAT MUMBAI]. Thus we set aside the order of Ld CIT(A) and restore all the issues to the file of the AO to decide the same a fresh - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 620
Depreciation on goodwill account - Held that:- HC examined this issue in the light of legal provisions of the Act and various judgments of the Hon'ble Apex Court and finally concluded that specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation. [(2012 (4) TMI 79 - DELHI HIGH COURT] Special Leave Petition is dismissed on the ground of delay as well as on merits. - Decided in favour of assessee.
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2015 (7) TMI 619
Penalty u/s 271(1)(c) - Assessee in it's accounts, had shown borrowed funds and interest free advances to it's sister concerns - Tribunal accepted the reasoning of the Commissioner that the penalty cannot be levied merely because the claim of the Assessee is found to be incorrect - Held that:- In the present case when the Assessee had bonafide pleaded that it was covered by a particular position of law and that one authority i.e. the Tribunal had passed certain orders in it's favour during the assessment proceedings, it could not be said that the Assessee fell within the ambit of Section 271(1)(c). The assertion of the Assessee that it was not served with a notice and therefore cannot be blamed for not filing a reply, has gone uncontroverted. This being the position we do not find any perversity with the decision of the Commissioner (Appeals) and the Tribunal in deleting the penalty imposed by the Assessing Officer. In any case this is a possible view of the matter upon appreciating the evidence. In the circumstances, both the grounds urged by the Revenue cannot be termed as substantial questions of law. - Decided against revenue.
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2015 (7) TMI 618
Addition under Section 43B - Tribunal deleting the addition concluding that second proviso to Section 43B stands omitted w.e.f. 1.4.2004 - Held that:- When similar view has already been taken by this Court on the identical question of law, then there is no reason to deviate with the findings and question of law answered in the case of Commissioner of Income Tax Vs. M/s State Bank of Bikaner & Jaipur (2014 (5) TMI 222 - RAJASTHAN HIGH COURT) and since no distinguishing facts have been brought on record, therefore, in our view, the present appeal is liable to be dismissed. - Decided in favour of assessee.
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2015 (7) TMI 617
Reopening of assessment - assessment was reopened for assessment years 2001-02 to 2004-05 on the basis of the ADIT and DDIT report in which it has been stated that there are cash deposits in the bank accounts of the assessee - Held that:- Having relied upon the said report, the assessment was reopened under section 147 of the Act after issuance of notice under section 148 of the Act which was responded by the assessee. In assessment years 2000-01 to 2002-03, where the reopening was done on the same facts, the Tribunal has held the reopening to be bad and invalid and quashed the assessment framed consequent thereto. Therefore, in the impugned assessment year, we do not find any justification to take a contrary view. So far as the applicability of principle of res-judicata in Income-tax proceedings are concerned, we agree with the finding of the ld. CIT(A) that principle of res-judicata are not applicable in the Income-tax proceedings and every assessment year is independent assessment year, but it has been repeatedly held through various judicial pronouncements that rule of consistency must invariably be followed in Income-tax proceedings. If a particular view is taken in one assessment year, the same should be followed in other assessment year or succeeding assessment year unless and until contrary facts are brought on record. The order of the Tribunal in the immediately preceding years, where the reopening made on the same facts under section 147 of the Act was held to be invalid by the Tribunal repeatedly in three assessment years, should be followed in the instant assessment year. We accordingly, following the said order of the Tribunal, hold that the reopening of assessment is bad and accordingly the assessment framed consequent thereto deserves to be quashed. Accordingly we annul the assessments for assessment years 2003-04 and 2004-05 framed consequent to the bad reopening. Since the assessment is annulled, we find no justification to decide the issues on merit. - Decided in favour of assessee. Addition on account of cash deposit in different bank accounts of the assessee - Held that:- Assessing Officer has made addition of the cash deposits in the bank accounts of the assessee having placed strong reliance upon the statement of Shri. Mukesh Rajani, Auditor of the assessee-company who deposed that the books of account of the company were produced before him in the form of computer printout. But this statement was never confronted to the assessee nor the assessee was allowed to cross-examine the same. Therefore, the statement of Shri. Mukesh Rajani cannot be relied on for making the addition. But the assessee has also not produced the details of the persons/debtors from whom he received cash for its deposits in the bank. From the totality of the facts and circumstances of the case, we are of the view that this issue was not properly examined by the lower authorities. Before us the assessee has also furnished the details of various persons from who cash was received, but it requires a proper verification by the Assessing Officer. In the light of these facts, we are of the view that this issue requires a fresh adjudication by the Assessing Officer and we accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to re-adjudicate the issue after affording an opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of expenditure incurred on deposit of earnest money with the Bombay Stock Exchange - CIT(A) deleted disallowance - Held that:- The assessee has taken the decision in the interest of business to allow Bombay Stock Exchange to forfeit its earnest money, as the assessee was not in a position to deposit the balance amount in the interest of business. In any case, the assessee has suffered a loss of ₹ 5 lakhs and the same should be allowed as revenue expenditure. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order on this issue.- Decided in favour of assessee. Addition on account of advance as on 31.3.2006 and debited in the profit and loss account during the year - CIT(A) deleted addition - Held that:- The liability was crystalised in the impugned assessment year therefore, the assessee has rightly debited the said amount in the profit and loss account and there is no infirmity therein. Having agreed with the order of the ld. CIT(A), we confirm the same. Accordingly the appeal of the Revenue is dismissed. - Decided in favour of assessee.
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2015 (7) TMI 616
Revision u/s 263 by CIT(A) - claim of deduction on account of interest was allowed u/s 24 of the Act against the “income from house property” and was disputed by the CIT by observing that the same is not allowable as per third proviso to section 24B of the Act as the assessee had not furnished required certificate from the party or parties to whom this amount of interest was paid - Held that:- On careful consideration of orders of the Tribunal as related by the ld. counsel of the assessee and provisions of section 153D of the Act and hierarchy of the income tax department, we are of the considered view that admittedly, the impugned assessment order which was demolished by the CIT by invoking provisions of section 263 of the Act was passed with prior approval of ACIT, Central Range-2, New Delhi vide F.No.153A-03-Mahesh Mehta/11-12/607 dated 28.12.11. The CIT in any terms cannot be equated with ACIT because CIT holds higher position in the hierarchy of the department. In this situation, benefit of the ratio of the orders of the Tribunal as relied by the ld. counsel of the assessee is not available and hence legal contention of the assessee is hereby jettisoned. Under third proviso to section 24(b) of the Act, the assessee is required to submit a certificate for making claim of interest under this provision and there is no prescribed form of certificate. During the assessment proceedings on the specific query of the AO, the assessee furnished detailed explanation supported by repayment schedule, copy of the bank statement to substantiate its claim and the amount of interest has not been disputed either by the AO or by the CIT. In this situation, merely non-compliance of directory provisions of the Act cannot make assessment order as erroneous and prejudicial to the interest of revenue, especially when the claim of the assessee regarding interest u/s 24(b) of the Act is accepted as genuine and no incorrectness or infirmity has been brought out by the ld. CIT or any other revenue authorities therein. If for a moment it is accepted that order is erroneous on account of required certificate but at the same time, the same cannot be held as prejudicial to the interest of the revenue as the claim of interest paid by the assessee has not been alleged as bogus or not correct or not genuine by the ld. CIT. Thus we are inclined to note that the view taken by the AO was a reasonable and plausible view which cannot be said as unsustainable or not in accordance with law and other relevant provisions of the Act on the issue of allowability of deduction or interest paid by the assessee. Unaccounted cash payment on purchase of property - Held that:- While the assessee has shown unaccounted consideration in the statement of capital gain filed along with the return of income, then it further explains the source of unaccounted payment of consideration of purchase of property bearing no. 56/7, DG Gupta Road, hence, no addition pertaining to undisclosed investment could have been made. However, as a vigilant tax collecting authority, the AO adopted a conservative approach and deducted ₹ 1 crore from capital gain and taxed the same under the head of income from other sources which obviously attracts higher tax rate, then this action of the AO is more favourable to the revenue which cannot be held as erroneous and prejudicial to the interest of revenue. At this juncture, it would be appropriate to consider the ratio of the decision of Jurisdictional High Court of Delhi in the case of CIT vs DG Housing (2012 (3) TMI 227 - DELHI HIGH COURT ) wherein it was held that the Commissioner cannot remit the matter for a fresh decision to the AO to conduct further inquiries without a finding that the order is erroneous as a condition precedent for exercise of jurisdiction us/ 263 of the Act. From operative part of the order of the CIT we note that the CIT has held that the assessment on the issues raised in the show cause notice was made without proper examination, inquiry and verification, therefore, revisional jurisdiction u/s 263 of the Act is warranted in a case where assessment has been made without inquiry or verification. In this para, the CIT contradicts himself in the first sentence. He mentions that the assessment was framed without proper examination, inquiry and verification whereas in the second sentence, he writes that the assessment has been made without inquiry or verification which vitiate the impugned order. Sale of several other properties during the relevant previous year - Held that:- The tax liability on capital gain attracts which was placed by the assessee along with her return of income available at page 10 of the paper book. The AO after consideration of capital gain statement accepted the amount of ₹ 1 crore as unaccounted consideration received by the assessee on sale of property and paid by the assessee on purchase of property on the very same date and the AO instead of taxing the capital gain taxed ₹ 1 crore under the head of income from other sources which is a more favourable view for the revenue. In this situation, view taken by the AO in framing assessment order on all three issues cannot be held as unsustainable and not in accordance with law. In this situation, while the CIT himself is not sure about the issue of erroneousness of impugned assessment order, which is vivid from the contents of the notice issued to the assessee u/s 263 of the Act and in totality of the facts and allegations mentioned in the notice u/s 263 of the Act and in the impugned order passed u/s 263 of the Act, we note that the CIT simply alleged conclusion of the AO and held that the AO has failed to conduct proper inquiry and verification on the issues cited above and without holding any specific erroneousness and without any finding that the views taken by the AO on all three are unsustainable and not in accordance with law. The CIT cannot remit the matter for reassessment to AO. Thus invoking of provision of section 263 of the Act by issuance of notice and passing impugned order, directing the AO to revisit the issue and to make further inquiry cannot be held as valid. Thus impugned order passed u/s 263 of the Act are quashed. - Decided in favour of assessee.
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2015 (7) TMI 615
Disallowing the depreciation - assessee is a trust - Held that:- As relying on the Anjuman-E-Himayath-E-Islam [2015 (7) TMI 594 - ITAT CHENNAI] the assessee will not be entitled to claim the benefit of depreciation while computing income for the purpose of Section-11 of the Act. However, if the benefit of section-11 is denied and when the income of the assessee trust is computed under the other heads of the Act, then of course the benefit of depreciation can be availed by the assessee in accordance with relevant provisions of the Act. Decided against the assessee. Disallowance of benefit of carry forward of the excess expenditure of the previous year for setting off the same in the current year's income for the purpose of section-11 - Held that:- When the Trust applies its funds from its Corpus, accumulated fund, Sundry creditors or from the loan obtained by the Trust, then such funds which are applied cannot be said to be funds applied from the income of the Trust. Therefore, there cannot be a case where the trust can apply its income more than the income received by it for the purpose of Section-11(1)(a)&(b) of the Act. Thus excess application of fund over and above the income of the Trust can arise only when funds are applied from the Corpus of the Trust, accumulated fund, Loan obtained by the Trust or goods and services received from Sundry Creditors. It can be logical to deduce that when funds are applied from borrowed funds or by way of Sundry creditors the same can be treated as application of fund in the year in which such Loan/Sundry creditors are repaid from the income of the Trust. However when amount is applied from the corpus fund or accumulated fund the same cannot be treated as application of fund for the purpose of Section 11 of the Act, because such fund have already been exempt from the income of the Trust in the year in which it is received or such amount is set aside and therefore once again treating the same as application of fund will amount to double deduction. Similarly voluntary contribution received toward Corpus is exempt from income of the trust in the year in which it is received and therefore when it is utilized for the objects of the Trust it cannot be considered as application of fund otherwise it will amount to double deduction. From the above factual and mathematical matrix it is evident that carry forward of excess application of fund in the commercial principles cannot be allowed as per the provisions of the Act because it would result in notional application of income in the subsequent year. Thus we hereby hold that the claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commercial principles - Decided against assessee.
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2015 (7) TMI 614
TDS on payments made to members on time and other deposits where the payment exceeded ₹ 10,000 per annum in the case of each of such depositor u/s.194A - Assessee is a Co-operative Bank carrying on the business of banking - Held that:- Tribunal in the case of Bagalkot District Central Co-operative Bank (2015 (1) TMI 1005 - ITAT BANGALORE ) dealt with identical issue and identical stand taken by the revenue and the Assessee in the case of co-operative society engaged in banking business and have upheld identical order of CIT(A) to hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section - Decided in favour of assessee.
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2015 (7) TMI 613
Levy of penalty u/s.158BFA(2) - suppressed capital gain - Held that:- We find out of addition of ₹ 63,79,104/- made by the Assessing Officer on account of suppressed capital gain on sale of plot of land situated at 208, Yerawada, Pune, the CIT(A) had granted relief of ₹ 30,71,741/- and sustained addition of ₹ 33,07,363/-. We find the Assessing Officer levied the penalty on account of suppressed capital gain of ₹ 36,24,695/- for the purpose of levy of penalty. It is the submission of the Ld. Counsel for the assessee that in the order giving appeal effect after the order of the CIT(A) the Assessing Officer himself has made addition of ₹ 33,07,363/-. Therefore, penalty if any u/s.158BFA (2) has to be restricted to the addition finally sustained at ₹ 33,07,363/- and not on ₹ 36,24,695/-. It is a matter of fact that in view of enhanced claim of section 54F the addition confirmed comes to ₹ 33,07,363/- only as pointed out by the Assessing Officer in the penalty order at page 4 para 8(i). Since the addition sustained is only to the extent of ₹ 33,07,363/-, therefore, we find merit in the argument of Ld. Counsel for the assessee that penalty u/s.158BFA(2) should be levied only on ₹ 33,07,363/- and not on ₹ 36,24,695/-. - Decided in favour of assessee. Unexplained expenditure on education expenses of son of the assessee - submission of the assessee that if telescoping effect is given to the various additions sustained by the CIT(A) the assessee is still left with an amount of ₹ 23,52,702/- which is available to him for meeting the expenditure out of the addition of ₹ 47,04,520/- and penalty can be levied only on the balance amount of ₹ 23,51,818/- (i.e. 47-04,520 – 23,52,702) - Held that:- Since the addition on account of on-money has been confirmed, therefore, the said amount is available to the assessee to meet the unaccounted expenditure apart from meeting the amount paid towards bungalow. Further, cash receipt to the tune of ₹ 14,50,000/- has been accepted by the assessee. Since, telescoping effect has been given only for ₹ 16,81,591/-, therefore, we find some force in the argument of the Ld. Counsel for the assessee that for levying penalty u/s.158BFA(2) penalty can be levied only on the balance amount, i.e. ₹ 23,51,818/- as against ₹ 47,04,520/-. It is the settled proposition of law that penalty proceedings and assessment proceedings are separate and distinct. An assessee can advance fresh argument during penalty proceedings for non-levy of penalty or penalty of a lesser amount. However, the above details furnished by the Ld. Counsel for the assessee requires verification at the level of the AO. We therefore remit this issue to verify as to whether the assessee has taken any benefit out of the on-money received as well as the cash receipt of ₹ 14.50 lakhs and adjustment at ₹ 10.40 lakhs. The AO shall compute the penalty on the balance amount. - Decided partly in favour of assessee for statistical purposes. Unexplained investments - it is the submission of the assessee that there was no investment in shares during the block period and all those shares were bonus shares out of the holding of shares prior to the block period. However, this fact was also stated before the CIT(A) - Held that:- The Ld.CIT(A) confirmed the addition on the ground that no evidence was put forth to indicate that the shares acquired during the block period were actually the conversion of debentures held in the pre block period or accrual in the form of bonus shares. We find although a specific ground was taken before the Tribunal however the same remained unadjudicated. The assessee has neither moved any Miscellaneous Application for adjudication of the above ground by the Tribunal nor challenged the same before the higher forum. It is the submission of the Ld. Counsel for the assessee that given an opportunity he can prove that the shares are not purchased during the impugned block period and are on account of bonus shares issued out of the debentures or shares held prior to the block period. However, nothing was produced before us to substantiate that the investments are out of bonus shares on shares or debentures held prior to the block period. The assessee has already expressed his inability before CIT(A) to substantiate the same. No purpose will be served by remitting this issue to the file of the AO at this juncture. The penalty levied by the AO on this amount of ₹ 1,37,500/- is accordingly upheld. Decided against assessee.
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2015 (7) TMI 612
Revision proceedings under section 263 by CIT(A) - assessee has not deducted TDS on management service fee and royalty, the debit to the profit and loss account, within the time frame prescribed u/s 40(a)(ia) of the Act, the expenses should have been disallowed - The assessee submits that as it had deducted and deposited TDS before the due date of filing of return, the provision of section 40(a)(ia) of the Act are not attracted - Held that:- We are not in agreement with the contentions raised by the assessee. The amendment made by the Finance Act 2010 extended the time of payment of tax deducted to the due date of filing of return u/s 139(1) of the Act. The tax had to be deducted only in the previous year only to avail the benefit of the amendment. Admittedly in the present case, tax had not been deducted by the assessee during the previous year and therefore disallowances ought to have been made for the payments made for management service fee as well as for royalty. The reasons stated by the assessee that the company was going through the process of demerger does not impress us at all. The provision of deduction on TDS are mandatory and strict in nature and cannot be given a go-by as done by the assessee. We are in agreement with the reasoning given in the impugned order of the ld. CIT that the assessee had failed to deduct TDS during the previous year on payments of management service fee and royalty debited to the profit and loss account. The order passed by the AO is therefore erroneous and prejudicial to the interest of the revenue. The twin conditions as laid down by the Hon’ble Supreme Court in the case of Malabar Industrial Co.Ltd vs CIT (2000 (2) TMI 10 - SUPREME Court) and the Hon’ble Delhi High Court in the case of CIT vs Vikash Polymers (2010 (8) TMI 745 - Delhi High Court ) are satisfied simultaneously in the present case. The Order passed by the AO suffers from non application of mind in as much as the mandatory statutory provision of section 40(a)(ia) of the Act were ignored. The ld. CIT was within its jurisdiction to invoke powers u/s 263 of the Act. The object of the provision is to correct the erroneous order which is prejudicial to the interest of the revenue, as the department has no right to file an appeal against the order of AO. Whether the ingradients of the section are satisfied will depend on the facts of each case. - Decided against assessee.
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2015 (7) TMI 611
Eligibility for deduction u/s.80IB(10) - CIT(A) allowed claim - assessee is engaged in the business of real estate development and construction - Held that:- All the conditions for claiming deduction u/s.80IB has been fulfilled and the CIT(A) has denied the claim in respect of flat No.1602 & 1603 on the plea that their area was more than 1000 sq.ft. We had verified the copies of the relevant pages of the agreement for sale in respect of flat no.1602 wherein the area is mentioned at page no.9 and the relevant clause no.(j) relied on by AO and ld.CIT(A) is as under :- "Flat 1602 admeasuring 921 sq.ft. built up (including area of balconies where applicable) (with the adjoining terrace if applicable) on the 16th floor in the said building being constructed on the said property and also car parking space admeasuring (nil. Sq.ft. thereabout)." On page No.20, the plan of the flat is also attached with the agreement which shows that terrace is separate and not attached with the flat and that has not marked as the area sold. For Flat No.1603, similar clause (j) is on page no.28 and the similar plan attached with the agreement is also at page no.39 which also indicates that area of the terrace is not sold to the flat owner and further from the plan it is clear that terrace is not openable from the flat while the way to the terrace is from the passage of the 16th floor. We had also verified the sanctioned plan of the building placed at page 2 of the paper book from which it is also clear that flat no.1602 and 1603 are separate and the terrace is not openable from inside of any flat and access to the terrace is from the staircase and passage of the 16th floor. The terrace is not part of the built-up area, though balcony is part of the built-up area; terrace is a common area shared with the other residential areas, and accordingly, the finding of the AO and CIT(A) merely relying on the higher sale price of flat no.1603, that the terrace has been exclusively given to flat no.1603 is not correct as, from the agreement and the plan and the certificate of the architect, it is clear that terrace is neither attached with the flat nor this has been given to flat no.1603 for exclusive use and it is for the use of all the members. Furthermore, the amended provision with regard to calculating the area of flat is not applicable in respect of the projects approved and started prior to 01.04.2005 and it is very clear that the commencement certificate for the project was issued on 11-6-2001 when the construction was started and it was completed on 5.11.2004. Thus following the proposition of law laid down in the case of Saroj Sales Corp. [2008 (1) TMI 420 - ITAT BOMBAY-E ] we direct the AO to allow assessee's claim of deduction u/s.80IB in respect of all the 61 flats in Ganga Tower II. - Decided in favour of assessee. Disallowance u/s.40A(2) - Held that:- Respectfully following the decision of the Tribunal in group cases of the assessee vis-à-vis the finding recorded by the CIT(A), we do not find any reason to interfere in the order of CIT(A) with regard to deletion of disallowance made u/s.40A(2). Distribution of proportionate indirect expenses on the basis of work-in-progress in place of profit of each year - The tribunal in assessee's own case for the assessment year 1994-95 dismissed revenue's appeal by relying on the finding of CIT(A) to the effect that assessee had not diverted its interest bearing funds for advancing interest free loans to sister concern, by relying on the decision of Bombay Samachar Ltd. [1969 (6) TMI 2 - BOMBAY High Court] and Indian Explosive Ltd. [1990 (12) TMI 21 - CALCUTTA High Court ]. In view of the above, we restore the matter with regard to disallowance of interest to the file of AO with a direction to decide afresh keeping in view the proposition of law laid down by jurisdictional High Court in the case of Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY], wherein it was held that in case of availability of interest free funds presumption is that the same has been utilized for advancing interest free loans, therefore, no disallowance is to be made. The AO is directed to decide the issue after verifying interest free funds available with the assessee in terms of decision of Hon'ble jurisdictional High Court as well as other High Courts cited hereinabove. - Decided in favour of assessee for statistical purposes. Disallowance of sales promotion expenses - CIT(A) restricted the disallowance to 25% - Held that:- The hotel is situated at New Bombay and the assessee has paid cash to auto rickshaw and taxi drivers to get customers to the hotel. These expenses are genuine. Keeping in view the totality of facts and circumstances of the case, we restrict the disallowance to the extent of 10% of the expenses. - Decided partly in favour of assessee.
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2015 (7) TMI 610
Addition on account of inadequate house hold expenses - validity of assessment u/s 153A - Held that:- It is true that no addition can be made in respect of unabated assessments, if no incriminating material is found during the course of search. The recent judgment of the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (2015 (5) TMI 656 - BOMBAY HIGH COURT ) supports that the argument of the assessee. In this case during the course of search, certain valuables were found. A list of the same is found in the panchnama. There valuable assets include billiards table, piano, expensive paintings, chandlier, centrally air conditioner system etc. Thus in our view the ld. CIT(A) is correct in coming to a conclusion that, certain material was found during the course of search, based on which assessment can be done, even in the case of the abated assessments. Owning luxurious cars etc. indicate that the monthly expenditure on maintenance would be higher than the personal drawing disclosed. In our view, the valuable found during the course of search, indicate the standard of living the assessee and his other members and these are material based on which an addition can be made for low drawing. Thus this legal argument of the assessee is dismissed on the issue of addition made u/s 153A r.w.s. 143(3) on abated assessments. Taking into consideration all the facts and circumstances and also the fact that the appellant is avoiding in giving the requisite details viz. details of insurance policies, electricity expenses, copy of passport and also considering that the appellant is having a luxurious life style (refer to valuables which were found during the search and the copy of Annexure A-6 of Panchnama is part of this order), inevitable conclusion reaches that the appellant cannot survive on a monthly expenditure of ₹ 32,000 approximately which is just around approximately ₹ 4500 per family member p.m. Accordingly, AO is right in making an addition on account of low household withdrawals to the extent of ₹ 2,40,000 in appellant’s hands in the year under consideration, and the addition made by him is therefore upheld.We find no infirmity in these findings of the ld. CIT(A). The argument of the ld. Counsel for the assessee the two HUF have been considered as adult members, do not help his case. The AO in our view is justified in estimating this household expenditure. Further in this case, the assessee did not provide the details as sought by the first appellate authority. This lead to adverse inference. - Decided against assessee.
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2015 (7) TMI 609
Depreciation on goodwill account - CIT(A) allowed the claim - as per revenue the company has issued 74,26,950 equity shares of ₹ 10/- each to the shareholders of J.K. Synthetics Ltd. (hereinafter called in short as JKSL) free of cost by debiting to goodwill account and the company has created goodwill account and declared it in fixed assets as per schedule IV to the annual report of the company - Held that:- First of all the cost of shares allotted to the shareholders of JKSL is part of payment of purchase consideration towards the cost of acquisition of cement undertaking on which assessee is eligible for depreciation. Even in the alternative, if the cost of shares allotted to the shareholders of JKSL is considered to be the cost of goodwill acquired by the assessee, as it was shown as part of means of finance, even then it is eligible for depreciation in the light of the judgments of Areva T and D India Ltd. vs. DCIT (2012 (4) TMI 79 - DELHI HIGH COURT) where in HC examined this issue in the light of legal provisions of the Act and various judgments of the Hon'ble Apex Court and finally concluded that specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation and also confirmed by the Hon'ble Apex Court. Therefore, we are of the considered opinion that the ld. CIT(A) has rightly adjudicated the issue and we do not find any infirmity therein. Also see CIT vs. Manipal Universal Learning Pvt. Ltd. (2013 (7) TMI 169 - KARNATAKA HIGH COURT ) by holding that Explanation 3 to section 32(1) of the Act defines expression “asset” to include intangible asset like goodwill and goodwill is an asset under Explanation 3(b) to section 32(1) of the Act, therefore, depreciation is allowable even on the goodwill. - Decided against revenue.
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2015 (7) TMI 608
Increase in stock - Disallowance made on account of bifurcation of expenses by application of Rule 8D - CIT(A) deleted addition - Held that:- The formula adopted by the AO is non-scientific and irrational. We find from the facts of the case that while completing the assessment the AO has made an addition of ₹ 51,12,814/- on account of increase in closing stock. The above addition on account of increase in stock is neither permitted under the principle of accountancy nor under the law. Closing stock is always valued under the settled principle of law and accountancy i.e, cost or market value whichever is lower. The auditor of assessee has already certified the value of closing of assessee in his audit report and the said value has been taken in trading and profit and loss account in arriving at the gross profit of the business of the assessee. The increase or decrease in closing stock as compared with the last year cannot be a basis for making any addition under the above head and assessed income is at ₹ 62,91,510/- and the addition on account of increase in closing stock is ₹ 51,12,814/- and if this addition is deleted then the assessed income will stand at ₹ 11,78,696/- and the returned income of assessee was at ₹ 20,28,108/-. Ld. counsel for the assessee strongly raised that the formula adopted by the AO is unscientific and CIT(A) did not accept the said formula but for argument sake if the formula accepted then the net profit as per the above formula will be much lesser then the returned income of assessee and in that case there will be a revenue loss to the government. Total expenditure incurred for manufacture of tea out of green leaf purchased by assessee as per calculation of the AO is erroneous, hence profit on tea manufacture out of our own leaf is also erroneous. And the formula adopted by the AO gives distorted figures for profit made out of the assessee’s own leaf and bought leaf. In the field of agriculture particularly in produce of green tea leaf there is no mechanism to divide the profit as agriculture and nonagriculture i.e. while after giving deep thought to the point and after taking expert opinion on this subject the government introduce Rule 8 of IT Rules for arriving the income and dividing the same at 60:40 ratio for agriculture and non-agriculture income and assessee also applied the same in its computation from long paste years and it was accepted by the Department. CIT(A) has rightly deleted the addition and we confirm the same. - Decided against revenue. Rebate u/s 33AB of the Act - AO did not allow the rebate in view of the fact that there was a loss after determination of composite income of the assessee - CIT(A) allowed the rebate - Held that:- We find that assessee in its return income claimed deduction of ₹ 12 lakhs u/s 33AB of the act and assessee filed a receipt dated 1809.2008 evidencing deposit of ₹ 12 lakh with NABARD in Tea Development Scheme in 2007. In view of this, CIT(A) directed the AO to allow the rebate to the assessee. We find no infirmity in the order of CIT(A) and same is confirmed. - Decided against revenue.
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2015 (7) TMI 607
Penalty u/s.271(1)(c) - treating part of agricultural income disclosed by the assessee as non agricultural income on estimation basis - Held that:- Assessing Officer was not sure what the exact income of the assessee from agricultural income. In other words, the Assessing Officer has estimated the agricultural income. As there is no material to suggest any undisclosed income as such levy of penalty cannot be sustained on estimated basis. This is not normal assessment and assessment was made consequent to search action and that is also by estimating portion of the agricultural income as non agricultural income. Had it been undisclosed income based upon concrete evidence recovered from search action, then our opinion would have been different. In the present case, the estimation of portion of the agricultural income as non agricultural income, consequent to search cannot be reason to levy penalty u/s.271(1)(c) of the Act. Accordingly, we inclined to delete the penalty on this count treating part of agricultural income disclosed by the assessee as non agricultural income on estimation basis. - Decided in favour of assessee. Addition in respect of unexplained bank deposits - Levy of penalty - Held that:- Any amount deposited in bank account of the assessee, the assessee has to explain the source from which it was deposited. In the present case, the assessee is not able to explain the deposits. According to the assessee, the assessee is not educated and return subsequent to the search was filed by a Chartered Accountant who obviously has not made out a proper disclosure. The intention of the assessee was to make a proper disclosure, come out clean and pay the taxes. However, it was submitted that it was only the mistake of the Chartered Accountant and not of the assessee in proper disclosure. Later the assessee accepted for the addition to purchase peace and to avoid prolonged litigation. In our opinion, this contention of the assessee is totally misconceived. It is the duty of the assessee to disclose truly and fully while filing the return of income. The assessee cannot shift his responsibility to its Chartered Accountant. Further the assessee stated it was ill advised by the Chartered Accountant without mentioning the name of the Chartered Accountant. It is not brought on record what advice was given by the Chartered Accountant on this issue. In our opinion, the assessee has concealed particulars of income and also not given any bonafide explanation for this. The Assessing Officer had recorded a categorical finding that he was satisfied that the assessee had concealed the true particulars of income and was liable for penalty proceedings under section 271 read with section 274 of the Act. See Mak Data (Pvt) Ltd. vs. CIT [2013 (11) TMI 14 - SUPREME COURT ] - Decided against assessee. Levy of penalty for deemed dividend - Held that:- The only contention of the assessee’s counsel is that this addition was voluntarily offered to buy peace and to avoid litigation and penalty cannot be levied. In our opinion, this cannot be a bonafide explanation so as to go out of the rigours of penalty proceedings. As held by the Supreme Court in the case of Mak Data Pvt. Ltd. vs. CIT (supra), that penalty is leviable. In our opinion, the assessee failed to substantiate non offering of G10,00,000/- as income which was received by the assessee from the company where the assessee is having substantial interest. Being so, in the absence of the explanation of the assessee, we are not in a position to delete the penalty. - Decided against assessee.
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2015 (7) TMI 606
Validity of reopening of assessment - whether there is a bar on reopening all the assessments which was completed u/s. 153A/153C r.w.s. 143(3) ? - unreported gross receipts - Held that:- There is escapement of income while framing original assessment order u/s.153C r.w.s 143(3) of the Act. It is apparent that the omission of the assessee to bring it to the Assessing Officer’s notice those particulars of seized material, will amount to omission to disclose fully and truly all materials facts necessary for its assessment. The assessee having failed to draw the attention of the Assessing Officer regarding seized documents, it cannot be said that there is no violation of provisions of the Act. Further, when no opinion has been expressed in the assessment order and no details or explanation in relation to the seized document has been called for by the Assessing Officer, it is not possible to accept the contention of the assessee that the Assessing Officer has applied his mind to the said aspect. In the light of the aforesaid discussion, we are of the view that in the light of the reasons recorded by the Assessing Officer, there was sufficient material for Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration. The assumption of jurisdiction under section 147 by issuance of notice under section 148 of the Act is valid and legal and as such no case is made out for intervention by this Tribunal. Therefore, the assessee fails in this ground. This ground is rejected. Whether the reassessment were time barred as per provision u/s.149? - Held that:- The time limit within which the notice under section 148 can be issued, as provided in section 149 has also been made in applicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under section 148 has also been excluded in a case covered by section 153A/153C of the Act. The time limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stop having been pulled out, the Assessing Officer under section 153A/153C has been entrusted with the duty of bringing to tax the total income of an assessee who case is covered by section 153A/153C, by even making reassessments subject to provision u/s.153B of the Act. Accordingly, the contention of the ld. Authorised Representative for assessee is that the assessment is time barred is rejected. It is not appropriate to consider the entire unaccounted gross receipts as income of the assessee. The assessee has to incur certain expenditure for the unaccounted receipts also. Being so, in our opinion, it is appropriate to consider only gross profits on this unaccounted contact receipts as the income of the assessee. The Assessing Officer is directed to adopt the last three years average gross profits rate disclosed by the assessee in immediate preceding years to determine the income from unaccounted contract receipts. Further, we make it clear that the assessee shall be given an opportunity to go through the seized materials on the basis of which the Assessing Officer determine the unaccounted gross receipts of the assessee before arriving the unaccounted gross contract receipts. With these observations, this issue for limited purpose is remitted back to the file of the Assessing Officer for quantification of income in all these three assessment years. - Decided partly in favour of assessee for statistical purposes.
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2015 (7) TMI 605
Addition for long term capital gains - CIT(A) deleted the addition - Held that:- In the present case, there was however no such contract in writing entered into in the previous year 1994-1995 in respect of land in Survey Nos.668 and 671 singed by the assessees from which the terms necessary to constitute the transfer could be ascertained with reasonable certainty and the oral agreements stated to be entered into by the assessees, in our opinion, cannot be said to have resulted in transfer of the land as envisaged in the provisions of section 2(47)(v) of the Income Tax Act read with section 53A of Transfer of Property Act even though it is accepted that the possession of the said land was taken by the transferee in that year. At the time of hearing before us, Ld. Counsel for the assessee has not been able to raise any material contention to dispute this position. We uphold the impugned orders of the Ld. CIT(A) passed in the case of Smt. Allam Maisamma and Mr. Allam Ayalaiah (L.R. of late Allam Adavaiah) holding that their respective lands in survey Nos.662 and 663 having been transferred in the previous year relevant to A.Y. 1995-1996 within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act, the addition made by the A.O. on account of capital gain in the year under consideration was not sustainable. The impugned order of the Ld. CIT(A) passed in the case of Mr. Allam Krishna holding that there was a similar transfer of the land belonging to him in survey No.668 and 671 in A.Y. 1995-1996 however is set aside in the absence of any contract for transfer in writing and the matter is restored to the file of the A.O. for the limited purpose of examining and deciding the new issue raised by the assessee for the first time before the Tribunal by way of additional grounds. In so far as the case of Mr. Alam Ayaliah L.R. of late Allam Adavaiah is concerned, the impugned order passed by the Ld. CIT(A) is upheld only to the extent whereby she held that there was a transfer of land belonging to him in survey No.662 and 663 within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act in the previous year relevant to A.Y. 1995-1996 and therefore, the capital gain attributable to such transfer was not chargeable to tax in the year under consideration. The said order of the Ld. CIT(A) holding that there was similar transfer of land belonging to assessee in survey No.671 in A.Y. 1995-96, however, is set aside in the absence of any contract for transfer in writing and this matter is restored to the file of the A.O. for the limited purpose of examining and deciding the new issue raised by the assessee for the first time before the Tribunal. - Decided against revenue.
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2015 (7) TMI 604
Validity of proceedings u/s. 158BD - Held that:- The provisions of section 158BD can be invoked where the Assessing Officer is satisfied that any undisclosed income of a person other than one against whom search was conducted is reflected in the books of accounts/documents of the person searched. We find that after recording of satisfaction notice u/s. 158BD was issued to the assessees by the Assessing Officer on 29-09-2004. The ld. AR of the assessees has contended that the entire income has been accounted for and is reflected in the balance sheet of the assessees. However, no documentary evidence has been placed on record in support of such contentions. Further, the ld. AR has not been able to show that the assessees have disclosed Capital Gains on sale of shares in any of the impugned assessment years. Thus, we are not inclined to accept the contentions of the assessees that invoking of jurisdiction u/s. 158BD is unjustified. Accordingly, we reject the same. Computation of LTCG - Consideration for transfer of shares - CIT(A) adopting sale consideration for transfer of 400 shares at ₹ 22,50,000/- as against ₹ 5,00,000/- - contentions of the assessees is that they have received only ₹ 10,00,000/- and the remaining amount of ₹ 35,00,000/- has not been received by the assessees from Shri Prakash Laddha till date - Held that:- We do not concur with the submissions of the assessees that the consideration of ₹ 45,00,000/- is towards transfer of shares and repayment of cost of improvement of site. The assessees till date have not brought on record any document to show the terms and conditions and the allocation of consideration for transfer of company from assessees to Laddha Group. In the absence of any documentary evidence the only inevitable inference that can be drawn is that ₹ 45,00,000/- is sale consideration for transfer of shares alone. To treat ₹ 17,49,617/- as part of sale consideration is nothing but an attempt to reduce the capital gains arising on sale of shares. A perusal of the above letter of Shri Prakash P. Laddha shows that an amount of ₹ 40,000/- was allegedly paid to Shri Janardan R. Kapse against purchase of shares. The claim made by the assessee and the statement given by Shri Prakash P. Laddha are not congruent. Shri Prakash P. Laddha during the course of assessment further admitted that payment to the extent of ₹ 17,89,000/- in cash and ₹ 40,000/- by cheque out of the total of ₹ 41,50,000/- as appearing in seized documents. Thus, in view of seized documents and the admission of Shri Prakash P. Laddha regarding the payment of consideration and also the fact that share of M/s. Vastukrupa Construction (India) Pvt. Ltd. have been transferred in the name of Shri Prakash P. Laddha and his wife, we are of the considered opinion that the entire sale consideration has to be taxed in the hands of the assessees as Long Term Capital Gain. - Decided against assessee.
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2015 (7) TMI 603
Unexplained investment u/s.69 - assessee failed to substantiate that the jewellery worth ₹ 11,00,996/- belonged to the said ladies staying at his residence - Held that:- In view of the Instruction of the CBDT bearing No.1916 dated 11th May, 1994 the gold jewellery found from the premises of the assessee from five female members ought to have been accepted as explained as the same is much lesser than the limit of gold ornaments not to be seized in a case of a person not assessed to wealth-tax. This has been recognised in a catena of cases including the recent case Of Ashok Chhada (2011 (7) TMI 142 - DELHI HIGH COURT ), wherein over 900 gms of gold jewellery were accepted in the case of lady married for over 20-25 years, in view of her status and background. As per Instruction No.1916 of CBDT, the acceptable/explained Jewellery in the case of the assessee would be 3050 gms, as against 1372 gms found during the search. In view of the above facts and the mandatory instructions of the CBDT, the AO was not justified in adding the sum of ₹ 8,50,996/- to the income of the assessee on account of gold jewellery which represents Streedhan of family members of the assessee’s family. Accordingly, we direct the AO to delete the same. The AO has also made an addition of ₹ 2,75,773/- on account of cash found during the course of search. From the record we found that during the said search action, cash of ₹ 3,05,773/- was found, It was stated that ₹ 2,25,000/· belonged to the appellant's married daughter who was then staying with him, The balance ₹ 80,773/- belonged to his nephew Anil Vanani, from whose bank account it was withdrawn and was reflected in the books of account of M/s Niru Impex. However, no confirmation from Nidhi Devani or evidence with regard to source of generation of cash in her hands has been filed. The AO also observed that she is not assessed to tax and has not definite source of income. Accordingly, we confirm the addition of ₹ 2,25,000/- treated by the AO as unexplained cash. In respect of ₹ 80,773/-, we found that this amount was withdrawn by Anil Vanani, nephew of assessee from his bank account and was reflected in his books of account of M/s Niru Impex. Accordingly, we direct the AO to delete the addition of ₹ 80,773/- which was duly explained by documentary evidence. - Decided partly in favour of assessee.
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2015 (7) TMI 602
Transfer pricing adjustment - adjustment by charging notional interest for delayed recovery of export receivables and delayed recovery of expenses from AE’s till the date of transfer pricing order - Held that:- The addition on account of interest should be computed only till the end of financial year (i.e. till 31 march 2009 and not till the date of passing of transfer pricing order (i.e. 28 January 2013). It is trite law that income tax has to be computed with reference to previous year and as per Section 5 of the Act explains the scope of total income to be considered earned by any person during the previous year. In the present case, the TPO has made addition of notional interest till the date of passing of order (i.e. 28 January 2013) which is incorrect and against the basic principle of taxation as laid down by Income Tax Act. Hence, interest adjustment on delayed accounts receivables, if any, should be computed only upto 31 March 2009. We also found that during the year under consideration, the assessee has received advances from AE's for the purpose of export, therefore computation of interest, if any, on delayed recovery of export receivables should be after reducing the advances received from AE's for the purpose of export. From the record, we found that so called delay repatriation from foreign AE's, TPO/ AO, while working out deemed notional interest has considered interest rate of 12.25% p.a. (SBI PLR). As per our considered view the notional interest has to be worked out for so called amount receivable from AE, by applying LIBOR interest rate for the purpose of computation of transfer pricing adjustment, if any. Thus computation of interest is restored back to the file of AO for recomputing the interest on delayed payment of receivables, keeping in view our above observation. In respect of the expenditure incurred on behalf of the AEs and which was reimbursed by the AE, the AO also levied interest thereon. We found that the recovery of expenses was beyond the normal period of 60 days. Recovery of expenses beyond the normal period was in the nature of deemed loan in the hands of AEs and require transfer pricing adjustment. Accordingly, we do not find any infirmity in the transfer pricing adjustment made. However, we direct the AO to charge interest by applying LIBOR rate. - Decided partly in favour of assesse statistical purposes.
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2015 (7) TMI 601
Penalty u/s. 271(1)(c) - interest so earned by the assessee had not been offered to tax by the assessee in the returns of income filed for A.Ys. 2004-05 to 2008-09. Similarly, the assessee also did not declare interest received on SB account for A.Ys. 2004-05 to 2008-09 - Held that:- The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. In our view, the aforesaid defect cannot be said to be curable u/s. 292BB of the Act, as the defect cannot be said to be a notice which is in substance and effect in conformity with or according to the intent and purpose of the Act. Following the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ], we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.
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2015 (7) TMI 600
Transfer pricing adjustment - determination of the assessee’s profit margin from the international transaction of `Provision of marketing support services’ - Held that:- We find from the asessee’s Profit & Loss Account that the amount of Revenue received from AEs stands at ₹ 28,89,60,870/-. As against that, the assessee calculated its margin at 17.90% by considering operating revenue at ₹ 28,99,33,453/-. It is self evident that the gross revenue received by the assessee from its AE from this international transaction is actually ₹ 28,89,60.870/-, which the assessee erroneously took as ₹ 28,99,33,453/-, thereby increasing the revenue and the resultant operating profit margin from the international transaction to this extent. The ld. AR was fair enough to concede that the revenue should be correctly taken at ₹ 28,89,60,870/- instead of the inflated figure given in its TP study report. It is observed that the TPO also followed the suit by erroneously taking such an inflated figure of the revenue. We, ergo, set aside the impugned order to this extent and direct the TPO to adopt the correct figure of operating revenue at ₹ 28,89,60,870/-. Selection of comparable - inclusion of three comparables in the final set of comparables viz., Engineers India Ltd., RITES Ltd., and WAPCOS Ltd - Held that:- It has been brought to our notice that the matter of the preceding year is still pending before the TPO and no final decision has so far been taken on the comparability or otherwise of these three companies. Under such circumstances and respectfully following the precedent, we also set aside the impugned order and remit the matter to the file of TPO/AO for deciding the comparability or otherwise of the above referred three companies in line with his decision pursuant to the tribunal order for the AY 2005-06. Apart from considering the question of inclusion or exclusion of these three companies in the final set of comparables, the TPO will also go into the issue of working capital adjustment as has been directed by the Tribunal in its aforequoted order. Transfer pricing adjustment is against not allowing any risk adjustment - Held that:- Adverting to the facts of the instant case, we find that there is no material worth the name justifying the claim of risk adjustment by comparatively showing particular risks undertaken or not undertaken by the assessee vis à-vis the comparables. A generalized submission about the assessee assuming low/no risk vis-à-vis its comparables, cannot be countenanced. The assessee has to expressly exhibit that the specific risks undertaken by the comparables were absent in its case and vice versa. In the absence of any such working available either before the authorities below or us, we are disinclined to direct the granting of any risk adjustment. This contention of the ld. AR, therefore, fails - Decided partly in favour of assessee for statistical purposes.
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2015 (7) TMI 599
Penalty levied u/s. 271(1)(c) - unaccounted loan advancing - CIT(A) deleted penalty levy - Held that:- In the quantum order, it has been found by the Tribunal that the confirmation of the addition by the learned CIT(A) was based on incorrect facts. Therefore, the quantum was set aside to the file of the AO. The relevant observations of the Tribunal have already been reproduced in the above part of this order. The assessee has filed ample evidence in respect of each person from whom she has received her amount back. Considering the explanation of the assessee and the evidence filed by the assessee and also the fact that the addition was wrongly sustained by the CIT(A) on incorrect facts, we are of the opinion that the learned CIT(A) did not commit any error in deleting the penalty. We decline to interfere with the findings of the CIT(A). - Decided against revenue.
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2015 (7) TMI 598
Disallowance u/s. 14A r.w. Rule 8d - CIT(A) deleted addition - assessee into shipping business - Held that:- In view of the precedent dated 30.11.2011 [2011 (11) TMI 370 - ITAT MUMBAI ], we find that the impugned disallowance made by the Assessing Officer has been rightly deleted by the CIT(A) wherein held that if at all the assessee has claimed any such expenditure in computation of profit of business of shipping, the same are to be taken as disallowed when the income of the said business is finally computed in accordance with the provisions of Chapter XIIG and no separate disallowance on account of such expenditure u/s 14A can be made. We, therefore, delete the disallowance made by the AO u/s 14A and confirmed by the CIT(Appeals). - Decided in favour of assessee. Addition of Impairment loss on certain ships to the book profit of the Appellant u/s l15JB - Held that:- Quite clearly, the impugned addition of Impairment loss on certain ships by the Assessing Officer for the purposes of determining the Book Profit of the assessee company u/s 115JB of the Act related to the activities of a tonnage tax company and it is also not disputed by the Revenue that such amount was reduced by the assessee while computing the ‘Book Profits’ from the activities of a tonnage tax company. Therefore, if the stand of the Assessing Officer is to be upheld then similar amount ought to be added back for the purposes of computing Book Profits derived from the activities of a tonnage tax company, because such book profit from the activities of a tonnage tax company are liable for exclusion from the ‘Book Profits’ for the purposes of section 115JB of the Act, in view of the specific enactment contained in section 115VO of the Act. Therefore, we find it expedient to set aside the impugned order of CIT(A) on this aspect and direct the Assessing Officer to make adjustment for the Impairment loss in the Book Profit derived from the activities of a tonnage tax company also; and the so computed book profit shall be liable to be excluded from the Book Profits of the assessee company for the purposes of section 115JB of the Act, in view of section 115VO of the Act. - Decided in favour of assessee. Enhancing the Book Profit u/s 115JB on account of the disallowance made u/s 14A - Held that:- The amount disallowed u/s 14A of the Act cannot be considered while computing the book profit u/s 115JB of the Act. In the absence of any decision to the contrary brought out by the Revenue, we decide the issue in favour of the assessee following the aforesaid precedent. i.e Goetze (India) Pvt. Ltd. [2009 (5) TMI 615 - ITAT DELHI ] and M/s Bengal Finance & Investments Vs. The Asstt. Commissioner of Income-tax [2013 (5) TMI 117 - ITAT MUMBAI] - Decided in favour of assessee.
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2015 (7) TMI 597
Disallowance of loss - rejection of books of accounts - the assessee sold the diamonds worth ₹ 3,76,70,953/- out of the opening stock of the year for an amount of ₹ 2,40,08,065/- and had claimed loss of ₹ 1,36,62,888/- - Held that:- Disallowance of loss cannot be made on the ground that in the preceeding assessment year, the assessee accepted the disallowance of loss on sale of diamonds as each assessment year is a separate unit of assessment. The Assessing Officer is expected to carry out verificationof the claim of the assessee with the evidences produced before him and thereafter arrive at the independent conclusion about the allowability or disallowability of the claim expenditure or loss. Further, in the year under consideration the assessee filed copies of sales invoices with the complete address of the parties and their PAN Nos., No adverse material was brought on record by making due inquiry. Further the contention of the assessee is also that the sale consideration was received by the assessee through banking channel. The A.O. has brought no material on record after examining the parties to whom the sales were made by the assessee to show that the assessee has under invoiced the sale of diamonds or that the sales invoiced do not reflect the correct sale-price of the diamond. Thus A.O. as well as the CIT (A) were not justified in disallowing the loss of ₹ 1,36,62,888/- to the assessee. - Decided in favour of assessee. Addition under section 50C - A.O. made an addition on the ground that the assessee sold property during the year and the sale proceeds was shown at ₹ 55,000/-. A.O. observe that the assessee did not submit copy of saledeed and therefore, he made a reverse calculation by taking the percentage of Stamp Duty at 4.9% as based in sale as per Stamp Valuation Authority and arrived at the value of ₹ 3,38,755/- and thereby made addition for difference amount of ₹ 2,83,775/- - Held that:- We find that the contention of the assessee was that no show cause notice was issued to the assessee and therefore, the assessee was prevented from explaining its case before the A.O. It was the argument that there was violation of principle of natural justice by the A.O. and hence the addition made by the A.O. and confirmed by the CIT (A) was not justified in the above facts and circumstances of the case we are of the considered opinion that the matter should be restored back to the file of the A.O. to readjudicate the issue afresh after allowing reasonable and proper opportunity of hearing to the assessee. The assessee is also directed to file all the relevant details and documents before the A.O. as and when called upon by the A.O. - Decided in favour of assessee for statistical purpose.
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2015 (7) TMI 596
Estimation of business income of owning fleet and operating as a transport contractor - @ 3% of the gross receipts as against 8% estimated by the AO - According to the assessee, the profit of assessee ought to have been determined at 1.03% which was the income declared in the return of income and which is comparable with the past history of profits declared in its case - Held that:- the fact that the assessee’s returns in the past was accepted without any scrutiny or verification because those returns were accepted u/s. 143(1) of the Act, was a proper basis not to rely on the past history of profits in assessee’s own case. Therefore, the past history of income in assessee’s own case cannot be the sole basis on which income of the assessee can be determined. Besides the above, as pointed out by the ld. DR in the course of his arguments, at the time of survey u/s. 133A of the Act, no books of account of assessee were found, nor was the assessee able to produce evidence in the form of vouchers in support of expenses debited to the P&L account. As to whether similar state of affairs prevailed in the past for the AYs 2004-05 to 2008-09 in assessee’s case cannot be said with certainty. According to the ld. DR, similar state of affairs would have prevailed in the past assessment years also. The profits earned by the assessees in similar line of business could therefore be considered by the AO in determining the income of assessee. When books of accounts are rejected and income is estimated, the best yardstick for such estimation is the past history in Assessee’s own case, provided such past history is accepted by the revenue in assessments completed after due enquiry u/s.143(3) of the Act. When assessment is completed u/s.143(1) of the Act, the return filed by the Assessee is accepted as it is. The scheme of assessment under section 143(1) of the Income-tax Act, 1961, is the policy of tax administrations across countries to adopt a two-stage procedure of assessment as part of risk management strategy. In the first stage, all tax returns are processed to correct arithmetical mistakes, internal inconsistencies, tax calculation and verification of tax payment. At this stage, no verification of income is undertaken. In the second stage, a certain percentage of the tax returns are selected for scrutiny/audit on the basis of the probability of detecting tax evasion. At this stage, the tax administration is concerned with the verification of the income In our view, therefore, the past history in Assessee’s case would not be the appropriate yardstick to estimate income. We are therefore of the view that it would be just and appropriate to set aside the order of the CIT(Appeals) on this issue and remand the question of estimation the income of the assessee to the Assessing Officer for fresh consideration, keeping in view the profits earned by the assessees in similar line of business. The AO will make necessary enquiries in this regard and also afford opportunity of being heard to the assessee and thereafter estimate the income of assessee - Decided in favour of assessee for statistical purposes.
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Corporate Laws
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2015 (7) TMI 622
Application u/s 398 read with section 402 and 403 of the Companies Act, 1956 - Dispute in relation to sale deeds - Appointment of an Administrator forthwith to take charge of the assets of the company - To Convene a general body meeting of the shareholders - Authenticity of Equitable mortgage - Held that:- Appointment of an Administrator - The status of the company is not aware to the Bench whether the company is functioning and carrying out any business and whether the company is having any Assets. The petitioner has not produced any documents with regard to the functioning of the company and the Assets standing in the name of the company. In absence of the documents in relation to status of the company and its Assets, it is too late to appoint an Administrator to take charge of assets of the company in absence of the details of the assets whether moveable or immoveable which the company holds and possess. Authenticity of Equitable mortgage & holding of general body meeting - This Bench does not have the jurisdiction to go into the veracity of the mortgage Deed. In respect to the holding of general body meeting, the company is duty bound to convene its meetings as per law, however non holding of meetings as required under law is violation of the provisions of the Companies Act, and the company and its officers will be in default. In this regard sufficient provisions have been made in the Companies Act, 1956 to take necessary action against the company and its officers in default. The petitioner has not made out any prima facie case regarding to this relief. Other allegations / reliefs requested - I do not see any malafides with respect to the transaction between the R1 Company and R8. Even the petitioner has admitted the fact that the 8th respondent had advanced the amounts to M/s. Maxworth Home Ltd. Therefore the allegations made by the petitioner against these respondents are baseless and liable to be rejected. With regard to the appointment of respondents 5 to 7 as directors of the R1 Company is concerned, the company stated that the respondents 5 to 7 have been appointed by the company as directors as per the procedure and necessary Form 29 and 32 have been filed with the concerned ROC. The petitioner has not made out any case with regard to the illegality in appointment of respondents 5 to 7 and no documents have been produced to establish the said allegation. The 9th respondent is a Nationalized Bank. It is stated that they are not aware of the civil suit filed by the 8th respondent and stated that the 9th respondent is a bonafide purchaser of the plots and paid the entire sale consideration and the R1 has executed the sale deeds in its favour even prior to the suit filed by the 8th respondent. Since the counter affidavit has been filed by the authorised persons of the 9th respondent the averments made in the counter affidavit cannot be disputed. Being a Nationalized Bank the R9 could have been verified all the documents before purchasing the property from the R1 Company. The respondent No.9 admittedly purchased the property and got registered the property in its favour even prior to filing of the suit. The Bench is of the view that the transaction between the R1 and R9 is a concluded contract. With regard to the other sale deeds executed by the company and its authorised persons are concerned. the petitioner has not made out any prima facie case against the respondents. Therefore the averments and allegations made by the petitioner cannot be sustained on mere statement without producing any documents in its support. Further the sale deeds executed in favour of 9th respondent and respondents 13 to 15 are to be declared as null and void is concerned, apparently the sale deeds have been executed in the year 2004 and in the year 2002. As per section 402 of the Companies Act, 1956 this Bench has power to set aside the sale deeds if found illegal after adjudication of the matter. However as per sub section (f) of Section 402 one has to challenge the said sale/ transaction within a period of three months from the date of the said sale execution before the Bench. The Bench after adjudicating the matter under section 397 or 398 may pass the order provided, the Bench comes to a conclusion that the said sale is within time and proved as illegal and void. In the instant case even this criteria has not been fulfilled in the petition. Therefore the petitioner has not made out any case on mismanagement and the petition is miserably failed and liable to he dismissed. - Decided against the appellant.
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2015 (7) TMI 621
Penalty u/s Sections 15A and 15HB of the SEBI Act, 1992 - Non compliance with the provisions of SEBI’s circular dated December 3, 2009 - Quarterly settlement of funds and securities - Circular issued by SEBI directive in nature or mandatory - Supremacy of SEBI’s circular, rules or regulations - Held that:- We have minutely perused the contents of SEBI’s circular in question as well as the three clarifications issued by NSE and we do not subscribe to the view advanced by the learned counsel for the appellant. The concept of monthly or quarterly running settlement of clients’ accounts by the brokers is incorporated in the said circular dated December 3, 2009 with a view to instill greater transparency and discipline in the dealings between clients and the broker. This circular was issued by SEBI after detailed consultation with various quarters including Investors Association, Secondary Market Advising Committee of SEBI (SMAC), Market Participants and major stock exchanges. Therefore, it cannot be said that SEBI issued this circular dated December 3, 2009 as a directive only and not as a mandatory one. We have also perused the three subsequent clarifications issued by NSE on February 3, 2010, September 7, 2012 and October 29, 2013. None of the circulars, in any way, tends to dilute the concept of monthly/ quarterly running settlements of clients’ accounts by the brokers as envisaged in the circular dated December 3, 2009 by the SEBI. Moreover, no stock exchange can supersede or make a SEBI’s circular infructuous or ineffective by subsequent mere clarifications. The whole scheme of SCRA, 1956 read with the provisions of SEBI Act, 1992 does not contemplate such a situation which could be very harmful to the orderly and regulated growth of capital market. A larger task is assigned to SEBI and the stock exchanges supplement the efforts of SEBI in implementation of larger policy matters and they are not supposed to lay down their own parameters which may have the effect of diluting the provisions of SEBI’s circular, rules or regulations. We also note it from the records that the appellant in response to the initial queries/questionnaires raised by SEBI had categorically stated that it was complying with the provisions of circulars dated December 3, 2009 in its email/letter dated 11th/17th August 2012. Suddenly, on January 18, 2013 the appellant, in order to come out of the clutches of SEBI, took a summersault and stated that it had started complying with the provisions of SEBI circular in question. This false reporting of the actual affairs of the appellant company can hardly be appreciated and this tendency of companies needs to be curbed at the threshold. Principles of natural justice have been duly complied with. - Decided against the appellant.
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Service Tax
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2015 (7) TMI 636
Forced Recovery of service tax - Search & seizure - Seizure of certain very important business documents - whether the Court should set aside the summons issued in course of the search and seizure being wholly without jurisdiction and in excess of the power prescribed under Section 82 of the Finance Act, 1994 - Held that:- The scrutiny of the Writ Court in a challenge to an action for search and seizure is very microscopic and limited and is not meant for roving scrutiny on the satisfaction on "reason to believe" upon looking the various documents and the information. If the satisfaction has been placed before the Court which may remotely suggest that the same may form the "reason to believe", the Writ Court should not embark its journey further to find out whether it amounts to an evasion of the service tax or not. It is an authority before whom the proceeding is pending to take a decision on merit. - According to the petitioner, two cheques covering ₹ 2,00,00,000/- were taken at the time of search and seizure by using force which is impermissible and beyond the authority, power and competence of the authority concerned. Since the petitioner have stated that the authorized representative was compelled to sign on the said letter and issued two cheques covering the said amount, this Court cannot decide whether the same was taken forcibly or was issued voluntarily. Furthermore, a sum of ₹ 1,00,00,000/- has already been deposited with the respondent authorities through RTGS and in terms of the interim order passed on 12th August, 2013, this Court extended the time for deposit for further sum of ₹ 1,00,00,000 - letter dated 7th June, 2013 issued by the authorized representative of the petitioner-company records the handing over of the two cheques after admitting the service tax liability. Even in the letter dated 27th June, 2013, the petitioner did not raise any objection against the collection of the said amount rather it admitted to have issued such cheques and further recorded that a sum of ₹ 1,00,00,000/- has already been paid as a part payment of service tax on 17th June, 2013 and prayed for the installments to liquidate the balance liabilities. - Decided against assessee.
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2015 (7) TMI 635
Refund claim - no service tax is leviable for the service - whether the petitioner is entitled for refund of the amount claimed after one year from the relevant date apart from the question relating to alternate remedy available to the petitioner. - Held that:- The question of alternative remedy would arise if service tax is otherwise leviable under the Central Excise Act. Herein, in this case, there is no dispute with regard to the fact that no service tax is leviable for the service extended by the petitioner to the Muscat Bank SAOG. Thus, the writ petition is maintainable when the amount is arbitrarily withheld without any justification under law as the refund claimed by the petitioner is not relatable to Section 11B of the Central Excise Act. Similar view was also taken by the Karnataka High Court in K.V.R. Constructions v. Commissioner of Central Excise (Appeals) and another [2009 (8) TMI 150 - KARNATAKA HIGH COURT] and by the Madras High Court in Natraj and Venkat Associates v. Asst.Commr. Of S.T., Chennai-II [2009 (10) TMI 36 - MADRAS HIGH COURT] - refund allowed - Decided in favour of assessee.
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2015 (7) TMI 634
Imposition of late fees - Section 77 - Delay in filing of returns - Held that:- Service tax for the period October, 2011 to March, 2012 was already paid by the appellant which was approximately ₹ 1400/- for the period April, 2012 to June, 2012 as no services were provided. Therefore, service for the latter period tax liability was NIL. - It is not case of demand of service tax which was paid by the appellant before the issue of Show Cause Notice. Therefore, appellant was required to pay the late fees under Section 17 of the Finance Act, 1994. However looking to the service tax involved during the period October, 2011 to March, 2012 the late fee imposed upon the appellant is required to be reduced to ₹ 500/-, as the amount of penalty has to be appropriate to the service tax liability which was also paid by the appellant in time. - Decided partly in favour of assessee.
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2015 (7) TMI 633
Advertising agency service - Denial of CENVAT credit - The Revenue’s only objection for denial of Cenvat credit of Service Tax paid by the appellant is that their parent company has reimbursed the part of the cost of advertisement expenses and as such, they have not incurred the entire advertisement expenses from their pocket. - Held that:- Merely because the appellants stand reimbursed part cost of the advertising expenses from their parent company, does not mean that the appellants would become disentitled to the Service Tax actually paid by them. As rightly pleaded before us, the financial arrangement between the subsidiary company and the parent company has no connection or relevance for the purpose of availability of credit of Service Tax paid by the assessee. - Credit allowed - Decided in favour of assessee.
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2015 (7) TMI 632
Denial of input credit services - Improper documents - Held that:- In insurance policy, the registration no. as well as component of services tax has been indicated by the insurance company. All the sufficient information as required under Rule 9(2) of the Cenvat Credit Rules, 2004 has been provided in the policy. Therefore, I hold that appellant is entitled to take Cenvat credit on the said service tax. As marine insurance services have been received by the appellant in the course of the business of export of goods. Therefore, I hold that they are entitled to avail input service credit on the service as held by the Hon’ble High Court of Bombay in the case of Ultratech Cement Ltd. v. C.C.E., Nagpur - [2010 (12) TMI 90 - CESTAT, MUMBAI]. - Decided in favour of assessee.
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2015 (7) TMI 631
Denial of refund claim - Simultaneous drawback claim - Whether the Service Tax suffered on cargo handling service at the time of export of goods shall be simultaneously refunded when there is a drawback claim on the input suffering Excise duty is made by the respondent - Held that:- drawback is against credit availed on the inputs used for manufacture of excisable goods, whereas cargo handling service is availed after the goods were cleared and in the course of export. There is a distinction between these two levies. The drawback is confined to the levy under Central Excise Law, which is before the clearance of the excisable goods. But the Service Tax paid on the services availed to export the goods is not subject matter of excise law for refund when the tax so paid relate to export. - drawback claim on input suffering duty when gave rise to exportable goods, that input duty is also refundable - Decided against Revenue.
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2015 (7) TMI 595
Recovery of Service tax - Section 73 - Freezinf of bank account - Held that:- The contention that Section 87(b )( iii) of the Act is applicable, in my considered opinion, is without merit, since it applies only after a proceeding under Section 73 is concluded by an order determining the amount due and payable by the petitioner. Such a situation having not arisen as there is no conclusion of the proceeding, Section 87 is inapplicable. - 2nd respondent was not justified in invoking Section 87(b )( iii) of the Act to direct the Banks not to permit withdrawal of monies from the Accounts of the petitioner maintained in ING Vysya Bank, Hyderabad and a Branch at Bangalore by the impugned communications. - Decided in favour of assessee.
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Central Excise
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2015 (7) TMI 628
Waiver of pre deposit - Benefit of the area based exemption Notification No. 50/2003-C.E. - exemption for unit II which was in same compound as Unit I - Denial on the ground that Unit I is not availing exemption, therefore, unit II would not be eligible - Held that:- there are two units in a factory and both the units manufacturing Automobile parts but different parts. The appellant company, however, has obtained central excise registration in respect of the Unit I and the site plan enclosed with the registration certificate shows the location of the Unit I as well as Unit II. The appellant in respect of the Unit II have filed the required declaration for availing exemption Notification No. 50/2003-C.E. on 21-4-2008 and in respect of Unit II, they have also filed a declaration for exemption from obtaining registration and thus, while in respect of Unit II, there is no central excise registration, in respect of Unit II the department has issued a separate central excise registration. Thus, the department itself has treated the appellant’s factory as consisting of two units Unit I for which the central excise registration has been issued and Unit II for which the appellant have claimed exemption from obtaining registration. In respect of Unit I, the appellant has paid the duty and cleared the goods for export under rebate claim. In respect of Unit II, full duty exemption under Notification No. 50/2003-C.E. has been claimed. - the term ‘factory’ and ‘industrial unit’ have to be interpreted keeping in view the Central Excise Department’s practice to treat each section or part of a factory manufacturing different commodity as separate manufacturing units for purpose of L-4 licence and that each section or part of the factory is to be treated as separate industrial unit. Therefore, the word ‘industrial unit’ cannot be used in the sense of a factory as a factory may have more than one industrial units. The duty exemption under the exemption Notification No. 50/2003-C.E. is in respect of the goods cleared from an “industrial unit”. Thus it is very much possible for an assessee manufacturing different products located in the area specified under Notification No. 50/2003-C.E. to claim exemption in respect of the goods cleared from one industrial unit in the factory and opt to pay duty in respect of the goods cleared from another industrial unit in the same factory. - Stay granted.
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2015 (7) TMI 627
Classification of Lays - benefit of exemption - ready to eat packaged food or not - whether the fried and salted potato wafers packaged in retail packing for sale and which are sold under the brand name ‘Lays” are classifiable under sub-heading No. 2005 20 00 as “potatoes prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of Heading 2006” or the same are classifiable under Heading No. 2006 90 99 as “food preparations not elsewhere specified or included” - Held that:- If the goods are held to be classifiable under Chapter 20, the same would be fully exempt from duty under Notification No. 3/2006-C.E. as Sl. No. 22 of this notification covers all the goods of Chapter 20 and prescribes a nil rate of duty. The Commissioner by classifying the goods, in question, under sub-heading No. 2106 90 99 has held that the same are “ready to eat packaged food” covered by Sl. No. 30 of the Notification No. 3/06-C.E. for which the rate of duty is 8% adv. There is no difference between Chapter 20 of the Central Excise Tariff prior to 1-1-2005 and Chapter 20 of the Central Excise Tariff w.e.f. 1-1-2005, except that the 8-digit tariff is more detailed and specifically covers a large number of commodities in the General Group of the “preparations of vegetable, fruits, nuts or other parts of the plants”. In our prima facie view, therefore, Board’s Circular dated 6-2-88 clarifying that the potato slices fried in edible oil, salted and packed in printed plastic pouches (or other unit containers) are classifiable under Chapter 20 is applicable Commissioner in the impugned order has held that the goods, in question, are not covered by SI. No. 29 of the Notification No. 3/2006 but are covered by Sl. No. 30, which covers “ready to eat food preparation”. However, in this regard the Board vide Circular No. 841/18/06-EX, dated 6-12-2006 has clearly clarified that the “namkeens” and “mithai” covered by Sl. No. 29 of the Notification No. 3/2006-C.E. would continue to be fully exempted from duty even if the same are in packaged forms. We find that this circular of the Board has been totally ignored by the Commissioner. In any case, when Sl. No. 29 of the Notification No. 3/06-C.E. covers, “Sweetmeats (known as ‘misthans’ or ‘mithai’ or by any other name) namkeen, bhujia, mixture, chabena and similar edible preparation in ready for consumption form” for which nil rate of duty is prescribed, just because such mithais, namkeens, etc., though in ready to eat form are in retail packs, the same would not be ceased to be covered by the Sl. No. 29 of the Notification. - appellant have prima facie case in their favour - stay granted.
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2015 (7) TMI 626
Denial of CENVAT credit - Goods received from 100% EOU - The Department is of the view that since the goods had been received by the appellant are from a 100% EOU, they were required to determine the quantum of Cenvat credit available to them in terms of the formula prescribed in Rule 3 (7) (a) of the Cenvat Credit Rules, 2004. - Held that:- it is seen that in terms of the Commissioner (Appeals)'s order the appellant were also eligible for cenvat credit of Special Additional Customs Duty (SAD) paid on by the goods, while admittedly, the appellant have not taken the cenvat credit of SAD, and if they are eligible for SAD credit and its quantum is considered, the quantum of excess credit alleged to have been taken may come down, It is also the appellant's plea is that there is no suppression of any facts on their part and hence longer limitation period is not available to the departments. But no findings on this point has been given by the Commissioner (Appeals), probably because the matter was decided ex-parte. In view of this, the impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 625
Cenvat Credit - Demand of 5%/10% value of exempted goods - Non maintenance of separate accounts - whether the appellant is liable to pay amount 5%/10% of the value of Bagasse, Press mud and Fly Ash cleared by them as waste - Held that:- Final order of this Bench in appellant's own case vide order (2014 (2) TMI 1180 - CESTAT MUMBAI) has held that press mud is waste and non-excisable. This view of the Tribunal is binding on me and accordingly if the appellant has paid an amount under protest entertaining a view that he is not liable to pay the same it needs to be refunded to him. I also find strong force in contentions raised by the appellant that decision of Hon'ble High Court of Allahabad in the case of Balampur Chini Mills (2013 (1) TMI 525 - ALLAHABAD HIGH COURT) squarely covers the issuee in their favour. The waste cannot be considered as a bye-product and hence it cannot be said that common inputs on input services are utilized for seeking reversal of 5% or 10% of the value of waste products. Accordingly, in my view, the impugned order is liable to be set aside - Decided in favour of assessee.
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2015 (7) TMI 624
CENVAT Credit - Capital goods - Imposition of penalty - the appellant took the stand that these items have been used as inputs. However, they were not able to produce any evidence to show as to where exactly these items have been used and which components / accessories have been manufactured out of these inputs and used in their factory. - Held that:- There is a difference between Bajaj Hindusthan Ltd. case and the present case. In the case of Bajaj Hindusthan Ltd. (2013 (3) TMI 365 - ALLAHABAD HIGH COURT), it was the claim of the appellants that they had maintained proper records but on verification it was found that this was not so. In this case, I also take note of the fact that total amount involved is less than ₹ 1.40 lakhs. It was also submitted by learned counsel that credit was taken during construction of factory and therefore, some mistake could have happened. Having regard to the facts and circumstances, I consider that in this case, it may not be necessary to impose penalty. - Demand for Cenvat credit with interest is upheld. Penalty imposed on the appellant is set aside. - Decided in favour of assessee.
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2015 (7) TMI 623
Denial of CENVAT Credit - Security Service, Telephone Service and Manpower Service - Nexus with input service - Held that:- According to proviso to Rule 3, a manufacturer or purchaser of final product can take credit of duty paid on any input service received by him. Unlike in the case of inputs where credit can be taken only when it is received in the factory, in respect of input service there is no such restriction. Under the circumstances, the credit is admissible to the appellant so long as he is a manufacturer or purchaser of final products and such final products are liable to duty and cleared on payment of duty. Further it can also be said that such input services have been used in or in relation to a manufacture of final product. Therefore credit is admissible - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 630
Validity of Assessment order - The petitioner's case is that, he was not aware of the assessment order. Considering the fact that no notice has been addressed to the petitioner and the petitioner is a registered dealer who otherwise submits accounts in regular interval, I am of the view that, an opportunity of hearing should be given to the petitioner. - matter restored before the AO.
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2015 (7) TMI 629
Levy of vat on construction of residential apartments - valuation - Alternative remedy - claime of deduction on the value of the undivided interest (immovable property) in the project - Held that:- petitioner has already paid a sum of ₹ 5.00 crores pursuant to an interim order passed by this Court - while the writ petitions are dismissed as not maintainable on account of availability of alternative remedy, liberty is reserved to the petitioner to avail the alternative remedy, if so advised. However, respondents are directed not to make any fresh demand pending disposal of the appeal/appeals, if any, to be filed by the petitioner. The First Appellate Authority to consider the issues raised on the aspect of the applicability of the Circular dated 7.12.2009, with an open mind and having regard to the facts of the present case decide the appeal/appeals within a period of two months from the date of filing of the appeal/appeals.
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