TMI Tax Updates - e-Newsletter
July 24, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Exemption u/s 10B - Transfer or sale of undertaking -The successor would be entitled to benefit of the unexpired period of five years provided the undertaking was taken over as a running concern - HC
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Income Tax:
Sale of property - adoption of value as per stamp value u/s 50C - applicability of provision of section 50C to section 69 - AO should have referred the issue of valuation to the valuation officer as per the provisions of section 50C(2) - AT
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Income Tax:
FBT Single contribution towards pension fund made for all its employees - contribution made to the fund under this benefit scheme cannot be considered as the amount to be considered under the provisions of section 115WB(1)(c) for the purpose of FBT - AT
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Income Tax:
Wharfage/port dues - whether in the nature of tax, duty, cess or fee u/s 43B section 43B of the Act is not attracted in the case - AT
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Income Tax:
Deduction u/s 10B(7) r.w. section 80IA(10) reimbursement of cost of employees of PCEPL which were hired by assessee (PEPL) for doing the work - deduction cannot be denied - AT
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Income Tax:
When the very basis of levy is subject matter of appeal, the CIT could not have invoke the jurisdiction u/s 263 in opining that higher amount should have been considered for levy of interest - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (7) TMI 819
Restriction of labour charges Held that:- A reasonable rate should have been applied by CIT(A) - it would be fair and reasonable to allow labour charges @ ₹ 270 per carat, instead of ₹ 300 per carat as claimed by the assessee - to settle the issue being very old it is appropriate to adopt an average rate which comes to ₹ 270/- per carat - This rate can be applied on the total diamonds in carats meant for the labour charges Decided partly in favour of Revenue. Undervaluation of closing stock on polished diamonds Held that:- The valuation of the polished diamond could have been made by adopting the basis of the sale of the last month of the accounting period - This figure can thus be a starting point for the calculation - by comparing the sale price of the last month a reasonable view can be adopted about the exact position of the valuation of the closing stock - it is correct to disturb the valuation at least for the year under consideration so that the discrepancy as noted in respect of the quality of the diamond can to some extent be rectified - this year can be treated as a demarcating year from the past years it is a reasonable and fair approach to compute the value of the stock of the polished diamond at ₹ 6448/- per carat as an average value of the closing stock - Closing stock of the diamond was 12909.74 Ct. and by applying the rate of ₹ 6,448/- the value to be worked out is ₹ 8,32,42,003/-, out which the value declared as per assessee is to be reduced of ₹ 6,00,30,337/; thus the balance comes to ₹ 2,32,11,666 Decided partly in favour of Revenue. Under valuation of closing stock of rough diamonds Held that;- The valuation of the stock is to be made at the market price or the cost price, whichever is lower - when the complete information about the quality of the stock is not made available then to resolve the issue a middle path is to be adopted - the assessee was in possession of the rough diamond - the difference of the two, i.e., purchase cost (- minus) sale cost is the correct method for determining the valuation of the rough diamond - The average of the two is ₹ 803 per carat, is required to be adopted by replacing the closing stock of diamonds calculated by adopting the average rate at ₹ 734.73 per carat Decided partly in favour of Revenue. Rejection of books of accounts Held that:- CIT(A) was rightly of the view that the labour payment was not verifiable in the assessment order and that the day to day consumption and production record of quantity and quality is not maintained - Even in survey complete records were not available the AO is justified in applying section 145(3) of the Act - merely because in the earlier years the book results are accepted and no addition is made, it does not justify the assessees plea that the same status should be applied for the subsequent year - there was no fallacy in rejecting the books of account by the Revenue Authorities Decided against Revenue. Labour charges disallowed Held that:- The labour charges are different from lot to lot depending upon the quality of the diamond manufactured - the assessee himself had taken a plea that the diamonds are of two qualities, a superior quality and inferior quality - the valuation of such type of diamonds effect the overall valuation of the closing stock - it was impractical to pay an identical rate of job charges to all the job workers - Certain other doubts have also been raised such as a huge amount of labour charges remain outstanding at the end of the financial year - labour charges @ ₹ 270 per carat is allowed - the AO is directed to recompute the disallowance Decided partly in favour of Assessee. Valuation of closing stock of polished diamond Held that:- The assessee was in possession of 31945.14 carat of polished diamonds in the closing stock. The assessee had valued the polished diamonds @ ₹ 8790 per carat, the total value of the closing stock - in the absence of any other factor to determine the exact valuation of the polished diamond the valuation could be determined by considering the sales of the last month of the accounting period - The assessee had adopted the average value of the polished diamond in the closing stock at ₹ 8,790/- per carat, this can be said to be a reasonable and fair approach to resolve the issue as well as to compute the value of the closing stock of the polished diamond at ₹ 9378/- per carat as an average value of the entire stock thus, the value of the unaccounted closing stock of the polished diamond as determined by the AO is modified Decided partly in favour of Assessee.
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2014 (7) TMI 810
Interpretation of section 10B - Transfer or sale of undertaking - Whether there is any prohibition in Section 10B on transfer or sale of the undertaking by the assessee, who has formed or established the same, to another assessee and whether the purchaser/acquirer assessee can be denied benefit u/s 10B of the Act Held that:- The undertaking was formed or created by HICS and there is no allegation or finding by the AO that on the date of formation of the undertaking, there was violation of clause (ii) and (iii) to Section 10B(2) - relying upon Commissioner of Income Tax-I, Coimbatore Vs. Heartland KG Information Ltd. [2013 (9) TMI 375 - MADRAS HIGH COURT]. In case, the Legislature wanted to retain the prohibition contained in sub-section (9), it would have retained the said sub-section clear and categorical, and not omitted it - Sub-section (7A) would then have been a proviso and explanation to the prohibition in sub-section (9) like (9A) - Sub-section (9) would have then continued to apply to all other transfers by any mode other than the modes specified in sub-section (9A) or (7A) - This was not the intention of the Legislature because sub-section (9) and (9A) to Section 10B were deleted/omitted by Finance Act, 2003 with effect from 1st April, 2004 - Sub-section (9A) applied to different factual matrix and situations, which may not be covered by sub-section (7A) it is not a case of transfer by way of amalgamation or demerger. The assessee is well recognised and too apparent to be ignored and, therefore, when the Legislature in sub-section (1) and other sub-sections used the term undertaking as distinct from its owner/proprietor, the assessee, the effect thereof must be given full play - Way back in 1963, Circular F.No. 15/15/63-IT(A1) was issued with reference to Section 84 of the Act stating that the Board, i.e., the Central Board of Direct Taxes had agreed that benefit of the Section attaches itself to the undertaking and not to the owner - The successor would be entitled to benefit of the unexpired period of five years provided the undertaking was taken over as a running concern - It is pursuant to the circular that for the AY 2005-06, the AO in the case of assessee did not file any appeal before the tribunal after the first appellate authority had allowed the deduction to the assesse u/s 10A - for the AY 2006-07, AO wanted to deny the deduction, but DRP issued directions to allow the deduction - For AY 2007-08, the position is similar to AY 2005-06 and the AO has not filed any appeal against the decision in favour of the assessee by the first appellate authority Decided against Revenue.
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2014 (7) TMI 809
Subscription made to U.P. Co-operative Cane Federation u/s 40(a)(ia) Failure to deduct TDS u/s 194J Held that:- The appropriate course of action would be to restore the proceedings back to the CIT(A) for a fresh evaluation - it is not necessary for the Court to express any conclusion on whether the provisions of Section 194J were attracted - The Tribunal has merely followed its earlier decision - on a perusal of the order passed by the CIT (A) has adopted virtually the same reasoning which was commented upon by the Court in its earlier decision while remanding the proceedings back to the CIT (A) - there is no independent application of mind either by the CIT (A) or by the Tribunal Following Commissioner of Income Tax Vs. Kisan Sahkari Chini Mill Ltd.[ 2014 (5) TMI 671 - ALLAHABAD HIGH COURT] the matter is remitted back to the CIT(A) for fresh consideration Decided in favour of assessee.
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2014 (7) TMI 808
Penalty u/s 271D cash transaction with OSFC a unit of assessee - Cash deposits received more than ₹ 10,000 Violation of provisions of section 269SS - Held that:- OSFC is not different from the assessee firm and the AO assessed the income/loss and considered the transactions of OSFC in the assessment of the assessee firm - transactions also cannot be considered as loan or advance and the provisions of Sec.269SS are not applicable - it is not a fit case to levy penalty u/s 271D of the Act there was no reason to interfere with the orders of the CIT(A) as it is basically on appreciation of facts as available in the books of accounts Decided against Revenue.
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2014 (7) TMI 807
Reference made to DVO sale of property - adoption of value as per stamp value u/s 50C - applicability of provision of section 50C to section 69 - Held that:- Procedure as per sec. 50C is to be adhered in its totality which mandated that in the event of dispute by the assessee as to the adoption of value as per SRO, a reference to be made by the AO to the valuation cell - The decision in ITO vs. Shri Harinath Choudary [2014 (4) TMI 399 - ITAT HYDERABAD] followed - the AO should have referred the issue of valuation to the valuation officer as per the provisions of section 50C(2) Decided in favour of Assessee. Addition u/s 68 and 69 Unexplained deposits in bank account Held that:- The extract of accounts that there is opening balance of ₹ 15 lakhs as on 1.4.2008 and cheque for ₹ 20 lakhs was received on 3.4.2008 - The total amount of ₹ 35 lakhs was accounted in the books of account - the amount of ₹ 20 lakhs was received by cheque and the creditor has confirmed by a letter of confirmation that he has given that amount and the creditor is also an assessee of income-tax, PAN have been given to the AO by the assessee, the AO is not justified in making the addition of ₹ 20 lakhs as cash credit - considering the explanation given by the assessee that the person who had given the credit has passed away on 28.7.2011 and could not be produced before the AO and the CIT(A) - the AO is not justified in making the addition and the CIT(A) also erred in confirming the addition of ₹ 20 lakhs Decided partly in favour of Assessee.
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2014 (7) TMI 806
Revision u/s 263 - 100% EOU - Claim of exemption made u/s 10B instead of 10A due to inadvertence CIT observed that, assessee had not obtained statutory approval from the Board appointed in that behalf by the Central Government as required under S.14 of the Industries (Development and Regulation) Act, 1951 for claiming status of an 100% Export Oriented Undertaking - Held that:- The assessment made allowing the claim under S.10B of the Act may render the assessment to be erroneous - in the absence of any finding by the CIT that the assessee is not eligible for relief u/s 10A, under which the assessee should have made the claim, it cannot be said that the assessment is also prejudicial to the interests of Revenue. Relying upon Malabar Industrial Co. Ltd. Versus Commissioner of Income-Tax [2000 (2) TMI 10 - SUPREME Court] - the pre-requisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the AO is erroneous in so far as it is prejudicial to the interests of the Revenue - Commissioner having not arrived at the conclusion that the assessment was not only erroneous but also prejudicial to the interests of the Revenue, the order of the CIT cannot be sustained Decided in favour of Assessee.
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2014 (7) TMI 805
Estimation of the income from business Non-allowance of depreciation Held that:- The assessee contended that the rate of 1% adopted by the CIT(A) for estimation of income of the assessee is on the higher side, since adoption of a rate of 0.5% would be reasonable - non-allowance of depreciation from such estimated income is against the instructions of the CBDT - as it has already been decided in assessees own case that one more opportunity is allowed to the assessee for production of its books of accounts and other documents before the AO to substantiate its claim thus, the matter is remitted back to the AO for fresh consideration - the AO is directed to re-examine the matter, after giving reasonable opportunity to the assessee to produce the books of account and other information, and re-determine the income Decided in favour of Assessee.
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2014 (7) TMI 804
Value of FBT u/s 115WB(1)(c) Single contribution towards pension fund made for all its employees - lump sum amount - details of contribution pertaining to each employee are not available in the Actuarial Valuation Report Held that:- The contribution paid by the assessee bank is mainly made up of two components, firstly to meet the cost of the accruing benefits during the year and secondly, an adjustment for any deficit or surplus in the scheme at the time for the past year(s) - it is not possible to derive the contribution on a per employees basis which may be used for income tax purposes Relying upon CIT vs. L.W. Russel [1964 (4) TMI 4 - SUPREME Court] - the amount paid during the year cannot be considered as a contribution to superannuation fund as contemplated under the provisions of section 115WB(1)(c) - the amount is not paid to the benefit of any individual employee, the lump sum contribution made under the defined benefit scheme does not attract provisions of 115WB(1)(c) - as per the definition of contribution, no individual employee had any benefit earmarked the payment cannot be considered as covered by the provisions of 115WB(1)(c) thus, the contribution made to the fund under this benefit scheme cannot be considered as the amount to be considered under the provisions of section 115WB(1)(c) for the purpose of FBT Decided in favour of Assessee.
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2014 (7) TMI 803
Wharfage/port dues - whether in the nature of tax, duty, cess or fee u/s 43B Held that:- Wharfage/port dues payable by the assessee to the MMB as royalty for cargo handling at Dighi Port as per the contract between the parties - dues were not payable by way of tax, duty, cess or fee the decision in CIT vs. McDowell & Co. Ltd. [2009 (5) TMI 28 - SUPREME COURT] followed - section 43B of the Act is not attracted in the case - the disallowance made/confirmed by the lower authorities u/s 43B was not called for and the finding of the CIT(A) is set aside Decided in favour of Assessee. Non-reconciliation in TDS certificate - Held that:- Assessee neither before the AO nor before the CIT(A) had been able to reconcile the amounts relating to the rent received from Ashapura Minechem Ltd. there was no force in the contention of the assessee that the excess amount received by the assessee cannot be assessed as income of the assessee especially when the Ashapura Minechem Ltd. has debited the same in its accounts on account of rent paid to the assessee and TDS deducted Decided against Assessee. Wharfage payment of claim u/s 37(1) Disallowance u/s 43B Held that:- CIT(A) was right in holding that it was the assessee who as SPV was constructing, operating and managing the port and was also having income from cargo handling and thus was liable to claim corresponding expenditure relating to the said income in the shape of wharfage/port dues expenditure payable as royalty to the MMB - it was the assessee who was entitled to develop, manage and operate the Dighi Port and the assessee has also offered income from the cargo handling at Dighi Port and even the disputed dues, for which the provision was made, have been offered as income in the subsequent assessment year after the settlement of dispute - it was the assessee who was liable to pay the port dues and the expenditure was rightly claimed by the assessee in its return of income - the AO is directed to verify as to whether the assessee has offered the expenditure Decided against Revenue. Unexplained investment in plant and machinery u/s 69 Genuineness of purchase not established Held that:- It was the assessee who as SPV was constructing, operating and managing the port there was no infirmity in the order of the CIT(A) holding that the plant and machinery belonged to the assessee - the disallowance was rightly deleted by the CIT(A) Decided against Revenue. General expenses Held that:- The assessee during the appellate proceedings before the CIT(A), had produced all the details and supporting evidence in respect of general expenses claimed by it - it requires verification by the AO thus, the matter is remitted back to the AO for verification of details and evidences submitted by the assessee Decided in favour of Revenue.
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2014 (7) TMI 802
Stay application Addition u/s 68 Held that:- The merits of the various additions shall be appropriately examined only during the course of hearing of the appeal yet in so far as it is necessary to evaluate a prima facie case for the purposes of adjudicating the petition - the assessee company is facing financial difficulties as its net worth is eroded, having been referred to the BIFR - the assessed income is substantially in variance with income returned by the assessee - assessee returned a loss in its return of income whereas the assessment has been made at a positive figure which represents addition made u/s 68 of the Act and against such income the business loss carried forward has also not been allowed to be set-off - the balance outstanding demand deserves to be stayed Say granted.
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2014 (7) TMI 801
Claim for bad debts written off Held that:- It is clearly is in the nature of business loss, allowable in the year in which it stands incurred - details of redemption furnished reveal a claim arising for the current year - there being no examination and, consequently, finding in the matter by the authorities, the issue relating to the deductibility of claim for the current year is remitted back to the AO Decided in favour of Assessee. Employees contribution to PF Held that:- In Jt. CIT v. ITC Ltd. [2007 (9) TMI 295 - ITAT CALCUTTA] it has been clarified that section 43B is only in respect of employers contribution to the relevant fund/s and not the employees contribution - The deduction qua the employees contribution stands squarely covered by section 36(1)(va) r/w.s. 2(24) all the payments is to be made after 20th of the following month the disallowance is confirmed Decided against Assessee. Interest and expenses u/s 14A investment in shares of companies and mutual fund units - Held that:- If a direct nexus between the investment and own funds cannot be shown by the assessee with reference to its accounts, the presumption would only be of the loans as financing proportionately all the assets, including assets yielding income not forming part of the total income - CIT(A) has given a clear and specific direction for applying the proportionate formula and, further, only in respect of the tax free securities - onus to show which of its securities are tax-free, i.e., income from which, whether on holding or on transfer, would not form part of total income, is on the assessee thus, the matter is to be remitted back to the AO for adjudication Decided in favour of Assessee.
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2014 (7) TMI 800
Penalty u/s 271(1)(c) Nature of fees paid to ROC - Held that:- The ROC fees were duly disclosed - there is no case of concealment - the assessee's plea that there was an inadvertent error deserves to be accepted - There was no concealment of income on the part of the assessee - The expenditure made was duly disclosed - Only the treatment thereof as capital or revenue - penalty u/s 271(1)(c) of the Act is not exigible Relying uponCOMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] -non acceptance of a claim made by the assessee cannot result in automatic levy of penalty u/s 271(1)(c) Decided against Revenue. Stamp duty and registration charges paid on leasehold property CIT(A) deleted the addition by holding that since the ownership of the asset was not with the assessee company hence the expenditure involved was revenue in nature. - Held that:- where the matter pertains to treatment of brokerage of stamp duty paid for acquisition of lease hold properties - it must also be noted that the expenditure was in respect of stamp duty, registration charges and professional fee - There was no element of the premium in the amount claimed as expenditure - this expenditure would have been the same even if the lease had been of a shorter duration provided the period of lease was more than one year - The decision in CIT vs Bombay Cycle & Motor Agency [1979 (1) TMI 64 - BOMBAY High Court] followed Decided against Revenue. FBT on internet charges Held that:- CBDT Circular are binding upon the revenue the appeal has been filed in contravention of the Circular issued by the CBDT regarding the monetary limit for filing the appeal before ITAT Decided against Revenue.
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2014 (7) TMI 799
Penalty u/s 271(1)(c) Inaccurate particulars furnished Held that:- Assessee had purchased various plots of land and in some cases along with building from the year 2002 to 2005 - the assessee has not carried out any repeated transactions of sale and purchase but all the plots were sold - it was not a regular activity of the assessee and there is no prior or subsequent instance of purchase and sale of property by the assessee the rejection of claim by taking a different view does not ipso facto warrant levy of penalty when there is no finding that the claim of the assessee is a bogus claim or absolutely impossible/inaccurate claim - assessee has furnished all the relevant particulars regarding purchase as well as sale of property in question - assessee let out some of the property after acquisition which shows the assessees intention was to retain property for a longer period and not to hold simply to resell at the earliest possible occasion Relying upon CIT vs. Bennett Coleman & Co. Ltd. [2013 (3) TMI 373 - BOMBAY HIGH COURT] - there is only a change of head of income and in the absence of the fact that the claim of assessee was not bonafide the Tribunal deleted the penalty imposed under section 271(1)(c) of the Act and there is no reason to interfere with the order of the Tribunal - rejection of capital gain/loss in the case of the assessee does not warrant levy of penalty is set aside Decide in favour of Assessee.
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2014 (7) TMI 798
Deduction u/s 10B(7) r.w. section 80IA(10) reimbursement of cost of employees of PCEPL which were hired by assessee (PEPL) for doing the work - shown as professional fee given to sister concern - Held that:- For applying the provisions of section 10B(7) r.w.s 80IA(10), AO has first to show that cost of hiring employees by the assessee had resulted into more than ordinary profit - This could happen only if the assessee had paid less than the market value to the sister concern on account of hired employees - There is no material on record to show that sister concern had hired the employees at less than market price because only in that case it could be said that the assessee had paid less than the market price - The decision in Pyramid Entek P. Ltd Versus Assistant CIT RG 3. Thane [2014 (7) TMI 751 - ITAT MUMBAI] followed - the AO has not given any finding that by hiring the employees/professionals from the sister concern the assessee had paid less than market price resulting in shifting of profit from its non-eligible unit to eligible unit u/s 10B Decided against Revenue. Restriction of disallowance u/s 40(a)(ia) of the Act TDS not deducted on professional charges paid to sister concern Held that:- Following the decision in CIT vs. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - the deduction u/s 10B is allowed in respect of disallowance made u/s 40(a)(ia) thus, there was no illegality in the order of CIT(A) Decided against Revenue.
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2014 (7) TMI 797
Jurisdiction of CIT u/s 263 to revise an order - principle of merger - omission in calculation of interest income assessee contended that, the very levy of interest as was done by the A.O. was subject matter of appeal before the Ld. CIT(A) and subsequently by the ITAT. - Held that:- Assessee has advanced funds to Satyam Computers Services Ltd. - assessee has not advanced the funds on interest basis and subsequently, it filed recovery of principal amount with interest at 18% by filing a suit in City Civil Court, Hyderabad - the amount of interest can be brought to tax in the year in which the City Civil Court considered and decided the liability to repay the amounts of advance and interest and also rate of interest on which, advance should be repaid - the question of bringing to tax interest on different amounts as directed by the CIT does not arise - when the very basis of levy is subject matter of appeal, the CIT could not have invoke the jurisdiction u/s 263 in opining that higher amount should have been considered for levy of interest - there is no basis for CIT invoking jurisdiction u/s 263 - thus, the order of the CIT is set aside Decided in favour of Assessee.
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2014 (7) TMI 796
Jurisdiction of CIT u/s 263 to revise an order - principle of merger - omission in calculation of interest income assessee contended that, the very levy of interest as was done by the A.O. was subject matter of appeal before the Ld. CIT(A) and subsequently by the ITAT. - Held that:- Assessee has advanced funds to the said Satyam Computers Services Ltd. - assessee has not advanced the funds on interest basis and subsequently, it filed recovery of principal amount with interest at 18% by filing a suit in City Civil Court, Hyderabad - the amount of interest can be brought to tax in the year in which the City Civil Court considered and decided the liability to repay the amounts of advance and interest and also rate of interest on which, advance should be repaid - the question of bringing to tax interest on different amounts as directed by the CIT does not arise - when the very basis of levy is subject matter of appeal, the CIT could not have invoke the jurisdiction u/s 263 in opining that higher amount should have been considered for levy of interest - there is no basis for CIT invoking jurisdiction u/s 263 - thus, the order of the CIT is set aside Decided in favour of Assessee.
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Customs
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2014 (7) TMI 815
Prohibition to operate as customs house brokers - license under the Customs Agents Licensing Regulations, 2004 - Pending the parent Commissionerate's action and under Regulation 20, the Commissioner of Customs (General) Mumbai, has chosen to propose a prohibition order. - Held that:- When the proceedings are pending and the client is yet to be saddled with any liability of payment of duty, or penalty, then, the impugned order could not have been passed. Despite, such a matter being taken up with the parent Commissionerate, the Customs Commissioner at Mumbai, thought it fit to invoke Regulation 23 is something which has not been clarified leave alone explained to us. There was, therefore, a clear haste and arbitrariness in proceeding against the petitioner. There was no reason to keep aside the adjudication proceedings and only proceed in terms of Regulation 23. For all these reasons and finding that the action is only based on the allegations in the show cause notice issued to the importer/client that we are of the opinion that the impugned order cannot be sustained. The power under Regulation 23 which is discretionary and coupled with a duty could not have been exercised in the given facts and circumstances and for the reasons that we have set out above. The Commissioner is free to take such steps against the importer/client as also the petitioner in terms of the pending adjudication proceedings or otherwise but in accordance with law - parent Commissionerate at Cochin may take appropriate action - decided in favor of petitioner.
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2014 (7) TMI 814
Seizure of vehicles carrying betel nuts - writ petition for release of vehicle - Import of betel nuts under the guise of cashew nuts - Held that:- earlier in a writ petition specific direction were issued to the petitioner to furnish his reply within a period of two weeks - When there is a specific direction that has been given by this Court as early as on 20.02.2012 to the petitioner to cooperate with the respondents, the petitioner has not given any reply even to the show cause notice itself. Thus, it is clear that he is not cooperating with the respondents in the adjudication proceedings. When the petitioner is not prepared to comply with the direction given by this Court, this Court is not inclined to grant the relief sought for by the petitioner.
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2014 (7) TMI 813
Levy of penalty based on statement of a person which was later retracted by that person - recovery of foreign currency equivalent - corroborative evidence - Tribunal found that the present Appellants were in the Security Staff of the Oman Airways. They were, thus, obliged to prevent any illegal activities or anything being carried in the aircraft, illegally. One I. Y. Suleman was apprehended while boarding the flight and foreign currency was recovered. It is in these circumstances that the action as against the Appellants has been upheld. - Held that:- All that we are suppose to find out is whether there is any perversity in the findings of the authorities or whether the concurrent findings of fact are vitiated by any error of law apparent on the face of record. We do not find that the Tribunal or the authorities have proceeded contrary to law or have in any manner misdirected themselves. - appeals dismissed - decided against the appellants.
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2014 (7) TMI 812
Violation of principle of natural justice - petitioner is prohibited from working as custom house agent (CHA) - Held that:- The Apex Court in the case of Uma Nath Pandey vs. State of U.P. [2009 (3) TMI 526 - SUPREME COURT] held that violation of principles of natural justice is opposed to the fair adjudication and conscience. The party should be made aware of the allegations made against him which may result into a penal order and any infraction shall entail the action liable to be struck down for violation of principles of natural justice. Since the order impugned is passed without affording an opportunity of hearing and the allegations as indicated in the impugned order does not appear to this Court to be so emergent and exceptional where the order of prohibition is inevitable. - order set aside - Commissioner of Customs (Preventive) to decide the matter affording an opportunity of personal hearing to the petitioner - decided in favor of CHA.
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Corporate Laws
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2014 (7) TMI 811
Scheme of Amalgamation - No objection has been received to the Scheme from any other party. Mr. Pawan Kumar Mittal, Director of the Transferee Company, has filed an affidavit confirming that neither the Petitioner Companies nor their counsel has received any objection pursuant to citations published in the newspapers. - In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, affidavit/report filed by the Regional Director, Northern Region and the Official Liquidator, attached with this court to the proposed Scheme, there appears to be no impediment to the grant of sanction in the scheme. - approval granted to the scheme.
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Service Tax
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2014 (7) TMI 830
Refund claim of service tax paid earlier - unjust enrichment - assessee is entitled for self adjustment u/r 6(3) of excess service tax paid - revenue argued that assessee did not opt for provisional assessment u/s 6(4) - appellant has already refunded the excess service tax along with credit bill to its customers. - Period of limitation for self adjustment - Held that:- Rule 6(3) is applicable not only to the case of excess payment of service which can be made good in subsequent period and bit also to the case where taxable values are not ascertainable for longer period - sub-rule 6(3) is not dependent on provision of sub-rule 6(4). Moreover there is no time limit prescribed under sub-rule 6(3) for making adjustment - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 829
Extension of stay order - power of tribunal to extend stay beyond 365 days - appeals could not be disposed of within time specified in Section 35C (2A) - Held that:- High Court ruling in Maruti Suzuki (2014 (2) TMI 1037 - DELHI HIGH COURT), declare this legal position, unequivocally; and after analysis of the amended provisions of the Income Tax Act (which are in pari materia provisions of the Excise Act) and duly considering the judgement of the Supreme Court in Kumar Cotton Mills Pvt. Ltd. [2005 (1) TMI 114 - SUPREME COURT OF INDIA] - In light of exposition of the legal position qua the judgement in Maruti Suzuki, it must be concluded that the provisions of Section 35C (2A) of the Central Excise Act eviscerate the power of (CESTAT) to extend operation of a stay granted and extended beyond a total period of 365 days. Delhi High Courts distinguished the judgement of the Bombay High Court in Income Tax Vs. Ronak Industries - [2010 (11) TMI 461 - Bombay High Court] which followed its earlier judgment in Narang Overseas P. Ltd. Vs. ITAT & Others - [2007 (7) TMI 5 - HIGH COURT, BOMBAY] - Extension of stay denied.
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2014 (7) TMI 828
Condonation of delay - Tribunal declined to condone delay holding gross negligence on part of assessee - Held that:- a perusal of the typed set of papers would reveal that the relevant papers pertaining to the application filed before the Tribunal for condonation of delay is not enclosed therein. This attitude of the appellant would only go to show that the appellant is not serious in pursuing the matter and is only trying to drag on the proceedings - document, viz., the application for condonation of delay, is a very relevant document, which is very much required for adjudicating the present appeal, as the said document alone would show the stand taken by the appellant before the Tribunal for condoning the delay. In the absence of the said vital document, the veracity of the stand taken by the appellant before this Court itself becomes questionable. The non-furnishing of the abovesaid document along with the typed set of papers would by itself show the callousness with which the appellant is dealing with the matter, which would stand proof of the fact that the appellant is not interested in pursuing the matter - Decided against assessee.
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2014 (7) TMI 827
Waiver of pre deposit of ₹ 6,50,00,000 - booking commission, service commission and warranty services - Availment of CENVAT Credit - Held that:- Though the adjudicating authority has raised the demand against the said services, the Tribunal has rightly not analysed in detail the provisions related to such services, leaving it to be decided at the time of substantive adjudication. The question raised is that of interpretation of statutory provisions. Therefore, any observation either way by the Tribunal or by this court may prejudice the parties to the lis. Therefore, a detailed examination on the question of interpretation of statutes not be commented upon at the stage of waiver of pre-deposit. The appellant has already been granted complete waiver of annual maintenance charges and 50 per cent. of the duty demanded against booking commission, service commission and warranty services. The discretion exercised by the Tribunal cannot be said to be unjust or irrational which may give rise to any substantial question of law. We may notice that the appellant has not setup a case of financial hardship - appellant is permitted to deposit the said amount within a period of six weeks. - Further relief in stay denied.
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2014 (7) TMI 826
Valuation - Whether the value of free supply of materials like cement, steel etc. by the service receiver, be included for the discharge of service tax liability or not - Held that:- Following decision of Bhayana Builders (P) Limited [2013 (9) TMI 294 - CESTAT NEW DELHI] - Order passed is unsustainable - Decided in favour of assessee.
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2014 (7) TMI 825
Condonation of delay for filing of an appeal before commissioner (appeals) - Inordinate delay of 228 days - Held that:- As per the provisions of Section 85 (3A) of the Finance Act, 1994, an appeal is required to be presented within two months from the date of receipt of the impugned order before the Commissioner, Central Excise (Appeals), after the amendment which took place by the Finance Act, 2012, made effective from 28.05.2012 - impugned order dated 16.07.2012 issued on 20.07.2012 was received by the appellant on 26.7.2012 and accordingly an appeal was required to be presented on 15.03.2013, which resulted into delay of 5 months and 18 days. Commissioner, Central Excise (Appeals) can condone the delay of maximum one month if sufficient cause has been shown by the appellant. As period of delay in filing appeal in the present case is 5 months and 18 days, hence it is beyond the powers vested to me under the statute (Proviso to Section 85(3A) of the Finance Act, 1994) under which a maximum period of one month of delay can be condoned by the Appellate Authority - No reason to condone the delay in filing the same and thus, hold the appeal filed by the appellant as time barred - Following decision of Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Condonation denied.
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2014 (7) TMI 824
Levy of penalty - benefit of reduced penalty u/s 78 whereas service tax was deposited without interest before issue of SCN - Held that:- no reason to reduce the same as the appellant has failed to deposit the interest amount along with service tax before the issue of show-cause notice or within the time-limit prescribed under the Act. In such a case, no infirmity in the order of the Commissioner (Appeals) - Decided against assessee.
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2014 (7) TMI 823
Demand of service tax - Wrong mention of taxable services - Reflection of excess tax liability - Commissioner remanded matter back - Held that:- orders of the Assistant Commissioner in implementing the remand order and dropping the demand and refunding the pre-deposit would show that there is either lack of coordination between the offices of the Department or the Assistant Commissioner has been negligent. When an appeal has been filed against the remand order, the proper course for the Assistant Commissioner was to keep the matter pending till the appeal filed by the Revenue was decided. Even if the matter is remanded to the Commissioner (Appeals) now, if no appeal has been filed by the Revenue against the Assistant Commissioner's order, the order of the Tribunal cannot be implemented. In any case, no harm has been caused since if the Revenue was aggrieved on merits of the Department, appeal would have been and may have been already filed against the Assistant Commissioner's order which would in due course get decided finally in its turn. Therefore any decision taken in this remand order is not going to affect the Revenue adversely. In this case also what was required to be done by the original adjudicating authority was to verify and quantify the value of taxable services and service tax payable after going through the certificate issued by chartered accountant. Therefore in this case also it can be said that the remand is for the purpose of quantification. Decided against Revenue.
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2014 (7) TMI 822
Waiver of pre-deposit - Receipt of IPR service from U.S. firm - Revenue distinguished case law relied upon by assessee - Held that:- transfer of technical know-how took place when it was not a taxable services and the consideration was paid when the activity became taxable. As such, the service cannot be held to have been rendered at the time when it became taxable - the fact that the payment was made one time in the case of Denso Haryana Pvt. Ltd. case whereas royalty is being paid on the yearly basis in the present case cannot be adopted as a criteria to distinguish the ratio of law declared in the case of Denso Haryana Pvt. Ltd. Admittedly the royalty is being paid in terms of contract entered in the year 2002 when IPR was not a taxable service. As such, the appellant has a strong prima facie case in his favour, requiring dispensation of pre-deposit - Following decision of Denso Haryana Pvt. Ltd. v. CCE, Delhi-III reported in [2014 (7) TMI 752 - CESTAT NEW DELHI] - Stay granted.
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2014 (7) TMI 821
Waiver of pre-deposit - Intellectual property rights - Purchase of trademark of foreign company under permission obtained from RBI - Held that:- appellant has made out a prima facie case against the impugned demand - It was found that there was no actual purchase of brand. This finding was recorded after a reading of the Deed of Transaction dated 12-9-2006, which we have also perused. The recitals of that document prima facie indicate absolute transfer of trademarks and Fosters Brand Intellectual Property from the foreign company to the assessee. It is also on record that the appellant qua owner of the trademarks obtained registration in India under the Trademarks Act. It is also on record that they paid stamp duty on the entire consideration paid by the appellant-company for purchase of trademarks. The RBIs permission was also for such purchase of the trademarks. Thus the documentary evidence in this case is abundantly in support of the appellants case. Hence there will be waiver of pre-deposit and stay of recovery in respect of the adjudged dues - Stay granted.
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Central Excise
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2014 (7) TMI 835
Waiver of pre-deposit - tribunal directed the appellant to make pre-deposit - assessee sought additional time to deposit the amount - Held that:- further time to make pre-deposit as per the order of tribunal granted - On depositing of the aforesaid balance amount of ₹ 8 lacs on, or before, 9th August, 2014, with the adjudicating authority, it is to decide the matters in accordance with law and on merits, at the earliest. It goes without saying that, if, the aforesaid balance amount of ₹ 8 lacs is not deposited with the adjudicating authority by 9th August, 2014, necessary CONSEQUENCE shall follow. - tax appeals are DISPOSED OF.
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2014 (7) TMI 834
Writ petition - Manufacture - process of Hot Dip Galvanisation of M.S. Fabricated items - process of galvanisation or process of manufacture - Job work - Notification no/ 214/86 - Held that:- the question as to whether the petitioners are entitled for exemption under the notification no.214 dated 25 March, 1986 with regard to supplying the material by those suppliers who are not paying Central Excise Duty on their final product is again a question where evidence is required to be led by the parties which can not be adjudicated nor appreciated in a writ jurisdiction. Since the appeal has to be filed within three months which has expired, we dismiss the writ petition giving liberty to the petitioners to file an appeal before the Appellate Authority under Section 35-B of the Act within eight weeks from today. - the petitioners were directed to deposit a sum of Rs. one crore and directed that the recovery of the balance amount pursuant to the Assessment Order will remain stayed. - Decided partly in favor of assessee.
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2014 (7) TMI 833
Restoration of appeal - tribunal dismissed the appeal for failure to pre-deposit the amount - Held that:- the Tribunal, after hearing the learned counsel on either side; perusing the records and keeping in mind the undue hardship that would be caused to the appellant and the interest of the Revenue, had shown sufficient indulgence to the appellant by granting time to deposit a part of the tax demanded. The appellant has not chosen to seek modification of the said order or extension of time and in fact, failed to comply with the conditional order. - tribunal has rightly dismissed the appeal - Decided against the assessee.
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2014 (7) TMI 832
Goods lost due to fire - reversal of cenvat credit - effect of insertion sub-rule (5C) into rule 3 of the cenvat credit - Remission of duty under Rule 21 - Held that:- The present case relates to a period prior to the introduction of rule 3(5C) and is, therefore, not covered by the modified provision. Prior to the introduction of rule 3(5C), there was no such restriction to the effect that the Cenvat credit which is taken on inputs used in the manufacture or production of goods in respect of which duty is remitted under rule 21 would have to be reversed. - The law at the relevant point of time was governed by the decision of the larger bench of the Tribunal in Grasim Industries [2006 (8) TMI 69 - CESTAT,NEW DELHI] - Decided in favor of assessee.
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2014 (7) TMI 831
Revenue appeal against the decision of tribunal - Respondents have filed the affidavitcumundertaking dated 30.06.2014 stating therein that they shall not claim the refund of duty which was paid by the Respondent at the factory at Bangalore and Kurkumbh (supplier factories) in respect of the goods cleared to their factories at (i) Kurkumbh, Pune, (ii) Vikhroli, Mumbai, (iii) Patalganga, Raigad, (iv) Verna, Goa and (v) Bangalore in the State of Karnataka (recipient factories). It is submitted that the Respondent/recipient factories have taken the credit of duty paid by the said two factories at Bangalore and Kurkumbh. Once we find that there is additional protection of interest of the Revenue by the undertakings and which we have accepted, then, all the more this is not a fit case for entertaining the Appeals. - no substantial question law - revenue appeal dismissed.
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CST, VAT & Sales Tax
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2014 (7) TMI 820
Reassessment - Input Tax Credit (ITC) - sale of material to 100% EOU and SEZ units - Assessee claims that once the petitioner's Company purchases raw material for manufacture of craft paper and sells the same to 100% export oriented unit as well as dealers in the special economic zone it is squarely covered under Section 13(1)(a) of the Act and it had rightly claimed the ITC to the extent of tax paid by it in purchase of raw materials - Held that:- The Section 29(7) relates to assessment of tax of turnover which has escaped from assessment. Sub-clause 7 of Section 29 provides that the Commissioner on his own or on the basis of reasons recorded by the Assessing Authority can authorize the Assessing Authority for reassessment within a period of 8 years after expiry of assessment year. The provision requires recording of reasons by the Commissioner. The reason has been recorded by the Commissioner in the impugned order which is already quoted herein above. Therefore to argue that the impugned order suffers from illegality of having no reasons therein cannot be accepted. From the perusal of the orders passed by the Assessing Authority, First Appellate Authority and the Second Appellate Authority it is quite apparent that the reason given in the impugned order for reassessment have not been considered in any of those orders to the effect that sale was to units established in the special economic zone and could not be given any ITC under Section 13(7) of the Act whereas the petitioner has claimed it. The provisions of Section 29(7) of the Act squarely applied to the facts and circumstances of the present case since assessment of tax of turnover had escaped assessment in the orders passed by the Assessing Authority the First Appellate Authority as also the Second Appellate Authority. Therefore, the fact that the order of the Second Appellate Authority was not challenged by the department or the petitioner and that it attained finality would not be a bar for the Authority to exercise its jurisdiction under Section 29(7) of the Act. - Decided against assessee.
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2014 (7) TMI 818
Denial of benefit under the Sales Tax Incentive Scheme - Held that:- initially operation of the judgment of the Division Bench was stayed and that stay was granted by the honourable apex court on April 4, 1994, by mentioning this fact, came to the conclusion that the respondents (traders) cannot be discriminated against and, there fore, a cut-off date was fixed as April 4, 1994 and it was directed that the respondents will be allowed to retain the benefit, if any, enjoyed at least up to April 4, 1994, just as the other oil industries have been allowed to retain benefits up to April 4, 1994 and it was clarified that the benefit cannot be extended beyond April 4, 1994 or up to April 20, 1999. Therefore, by the aforesaid two judgments of the honourable apex court, it was directed that the bene fits flowing from issuance of certificate or/and incentive scheme was not correct and ultimately the notification of May 7, 1990 was upheld as valid. It is apparent that the explanation answers the present controversy which makes it very clear that any mistake apparent from the record by a judgment of the Supreme Court, Rajasthan High Court or the Rajasthan Tax Board, therefore, in my view, in the light of the judgment of the honourable apex court, the rectification, insofar as the present facts and circumstances, are concerned, have been correctly made by the assessing officer. It is a matter of fact that when benefit has been extended by the honourable apex court, considering the hardship faced by the similarly situated traders, up to the period when the operation of the judgment of this court was stayed, i.e., April 4, 1994 and when benefit has been denied to all such assessees, who were before the honourable apex court, then by no stretch of imagination, such a benefit beyond April 4, 1994 can be extended to the present respondents. The benefit for all assessees or for all similarly situated assessees would be extended only up to April 4, 1994 as upheld by honourable the apex court and, therefore, in my view, both, i.e., the Tax Board as well as the DC (A) have erred in holding it otherwise. - Decided in favour of Revenue.
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2014 (7) TMI 817
Excersice of power under section 12A of the Karnataka Sales Tax Act - Merger of order of the original authority with the order of the Appellate Authority - Rejection of returns filed - Whether the order of the Tribunal holding that the orders passed by the lower authorities is hit by the doctrine of merger and therefore it requires to be set aside, is correct - Held that:- where the subject matter of the original proceedings and the subject matter of the appeal proceedings is one and the same and the Appellate Authority pronounces on the said subject matter, then the order of the original authority fuses or merges with the appellate order and therefore, it ceases to be in existence - the application of doctrine of merger depends on the nature of jurisdiction exercised by the superior forum and the content or subject matter of challenge led or capable of being led, it shall be determinative of the applicability of merger. If the subject matter of the original proceedings is not the subject matter of the appellate proceedings, the doctrine of merger has no application. Then, if on that aspect the original order is to be modified or altered, the power is conferred on the original authority to do so. The said authority is at liberty to initiate proceedings for modification or alteration of the said order as the said order has not merged with the appellate order. The question whether the deductions given to the assessee in the earlier order is legal or not, was not the subject matter of appeal in an appeal preferred by the assessee on other aspects and therefore, if the Assessing Authority wants to reassess and rectify the mistake by initiating proceedings under section 12A of the Act, it cannot be said that he has no jurisdiction to do so on the ground that the order passed by the original authority is merged with the appellate order. The Tribunal has not properly understood the concept of merger and the express words used by the Apex Court, on which reliance is placed and committed a serious error in allowing the appeal. Therefore, the orders of the Tribunal is not sustainable - Decided in favour of Revenue.
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2014 (7) TMI 816
Writ petition - alternative remedy - Works Contract - inter state sale - divisible and indivisible nature of different customers - exemption as claimed on such inter-State sales turnover was disallowed holding that there could not be any such transaction in respect of client order to be of works contract nature - Held that:- Admittedly, the petitioner has an alternative remedy of filing an appeal, under the VAT Act. The petitioner's pleas, in essence, are that the impugned order is erroneous on facts, and in law. A due consideration of the arguments reveals that the impugned order may, at best, disclose an erroneous exercise of jurisdiction but does not disclose an assumption of jurisdiction where there is none. Where a statute confers an alternative remedy, power under article 226 of the Constitution may be exercised if the impugned order discloses an assumption of jurisdiction, where there is none. Where, however, the impugned order, prima facie, discloses an erroneous exercise of jurisdiction, the party aggrieved would be required to approach the appellate forum. The petitioner's case pertains to an erroneous exercise of jurisdiction, namely, exigibility to sales tax of 'slump sale', applicability of the Full Bench judgment of the Andhra Pradesh High Court and legality of the penalty and, therefore, can be validly urged before the appellate forum. The petitioner has approached this court, as a precondition to the filing of an appeal is the requirement to predeposit a part of amount claimed by the Revenue. We are not inclined, to entertain the appeal merely because the petitioner is statutorily required to pre-deposit tax and penalty. - Decided against assessee.
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