TMI Tax Updates - e-Newsletter
July 25, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
One time vehicle tax paid on purchase of vehicle - the tax levied by the Act would form part of the actual cost of the motor car, a capital asset, on which the same is levied, and exigible to depreciation as a part to the actual cost - AT
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Income Tax:
Acquisition of brand - Payment made for Legal and professional fees – expenditure were in the nature of revenue and could not be disallowed as capital expenditure - AT
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Income Tax:
Expenses on purchase on new items - Acquisition of new assets for replacement of existing assets as current repairs - 10% of items listed by the AO are held to be of capital - AT
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Customs:
Import of car subject to actual user condition - revenue contended that car imported under EPCG scheme was registered as private vehicle in non-transport/non commercial category - demand confirmed - AT
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Service Tax:
Health and Fitness service - sale of booklet - activity of teaching the art of yoga - ppellants are clearly providing a service as covered under ‘health and fitness service' - AT
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Service Tax:
Reversal of wrongly taken credit done - whether interest is chargeable from the date when it was taken upto the date of its reversal - demand of interest set aside - AT
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Service Tax:
Security services provided by Superintendent of police - service provided for IPL match - Payment not received - stay granted - AT
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VAT:
Levy of tax on import of goods - liability to pay tax arises on the entry of the dumpers into the State and the liability gets fastened on the person who brings the same for use or sale into the State - HC
Articles
Notifications
Customs-
35/2014 - dated
24-7-2014
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ADD
Seeks to impose definitive anti-dumping duty on imports of Rubber Chemicals originating in or exported from from China PR and Korea
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34/2014 - dated
23-7-2014
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ADD
Seeks to extend the validity the notification No. 61/2009-Cus dated 10.06.2009 for a further period of 1 year i.e. upto and inclusive of 9.6.2015. - Regarding anti-dumping duty on Potassium Carbonate, originating in, or exported from, the European Union, the Peoples Republic of China, Korea RP and Taiwan
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33/2014 - dated
23-7-2014
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ADD
Seeks to extend the validity of notification No. 67/2009-Cus dated 16.06.2009 for a further period of 1 year i.e upto and inclusive of 15.06.2015. - Regarding anti-dumping duty on Vitamin C, originating in, or exported from the Peoples Republic of China
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32/2014 - dated
23-7-2014
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ADD
Seeks to extend the validity of notification No. 140/2009-Cus dated 12.12.2009 for a further period of 1 year ie. upto and inclusive of 21.06.2015. - Regarding anti dumping duty on Phosphoric Acid of all grades and all concentration originating in, or exported from, Korea RP
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31/2014 - dated
23-7-2014
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ADD
Seeks to extend the validity of notification No. 9/2013-Cus (ADD) dated 26.04.2103 for a further period of 1 year ie. upto and inclusive of 29.07.2015 - anti-dumping duty on Carbon black used in rubber applications, originating in, or exported from the People s Republic of China, Thailand, Russia and Australia
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30/2014 - dated
23-7-2014
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ADD
Seeks to extend the validity of notification No. 50/2010-Cus dated 12.04.2010 for a further period of 1 year i.e. upto and inclusive of 14.06.2015. - Regarding anti dumping duty on Front Axle Beam and Steering Knuckles originating in, or exported from the People's Republic of China
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (7) TMI 840
One time vehicle tax paid on purchase of vehicle - Capital or revenue expenditure - eligible for deduction u/s 37(1) or depreciation u/s 32 – Held that:- The assessee has been guided by the law as it stood prior to its amendment in 1995, misled itself - the amendment/s has the effect of altering the nature of the levy in-as-much as the pre-amended tax could be regarded as an annual charge for the user of the vehicle for one year at a time - the levy of tax is towards the use of the vehicle in-as-much as it makes the registered owner (of the vehicle) liable to interest and the user of the vehicle as subject to the payment of tax and interest, making the vehicle liable to seizure - Tax is chargeable even if the vehicle is kept for use, so that it becomes due and, thus, liable to be recovered, even where the vehicle is not actually used or used even for a single day - Interest is a compensatory levy, for which a reasonable period of 30 days has been allowed for the payment of tax without interest - the tax levied by the Act would form part of the actual cost of the motor car, a capital asset, on which the same is levied, and exigible to depreciation as a part to the actual cost – the order of the CIT(A) is upheld- Decided against Assessee.
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2014 (7) TMI 839
Indexed cost of improvement – computation of long term capital gain on development right - Held that:- The assessee has discharged the onus by providing the details of expenditure and payments made during the assessment proceedings - the assessee cannot be compelled to produce original bills/vouchers/books of accounts of M/s. Ramesh Builders to examine the claim and the personal presence of the developer – there was no justification on the part of the authorities to deny/disallow the expenditure claimed by the assessee. - Decided in favor of assessee. As regard the additional indexed cost of improvement claimed by the assessee, it is relevant to point out that the assessee, during the course of the assessment proceedings, has revised the claim of deduction claimed in the return of income - , according to the Ld.CIT(A), there was no binding obligation on the assessee to sign an agreement with the builder for his efforts to release the property from the State Government acquisition. Thus, the Ld.CIT(A) was of the view that the claim of development charges by the assessee was after thought and the said expenditure was not spent by the assessee and thereby confirmed the disallowance made by the AO. - Held that:- CIT(A) are justified for denying the additional claim, there was no reason to interfere with the decision of the CIT(A) – Decided against Assessee. Income from house property – Held that:- CIT(A) determined the value per month which he considered to be a reasonable value - Neither the AO nor the CIT(A) has estimated the value of property on any reasonable basis - estimation by both the authorities is based on assumptions and presumptions which is not legally tenable - the AO is directed to accept the value shown by the assessee in respect of the property – Decided in favour of Assessee. Expenses of rental & electricity, repairs & maintenances and office expenses – Held that:- The authorities were of the view that the assessee was running the business of bill discounting from the assessee’s house and due to the involvement of personal use, the disallowance has been made/confirmed by the AO/CIT(A) - similar expenses have been accepted in the past and subsequent AYs, no disallowance is warranted on this count - the assessee is running the business of bill discounting from her house and therefore the involvement of personal use cannot be ruled out - similar expenses have been allowed in the earlier and subsequent AYs - the ad hoc disallowances are restricted to 1/3 of the expenditure claimed by the assessee – Decided partly in favour of Assessee. Regarding the adhoc disallowance of office expenses, assessee has claimed the expenses under various head - assessee has not produced proper voucher for the expenditure and personal expenditure of the proprietor, CIT(A) is justified in confirming the ad hoc disallowance – Decided against Assessee.
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2014 (7) TMI 838
Acquisition of brand - Payment made for Legal and professional fees – revenue expenses or capital expenses – Held that:- The “brand” expenditure incurred by the assessee has been treated as capital expenditure - The expenditure incurred on the feasibility report paid to M/s J Sagar Associates constitutes legal expenses incurred by the assessee to ensure about the proper acquisition of the “Brand” - This is in the nature of consultancy - assessee is already in the line of chain of restaurants and food joints - The acquisition relating to “brand” of M/s Blue Foods Pvt Ltd is also with respect to food chain, is expenditure is incurred by the assessee in the existing line of its business - the expenditure incurred on consultancy have been held in COMMISSIONER OF INCOME TAX Versus M/s. SHELL BITUMEN INDIA (P) LTD. [2010 (8) TMI 19 - DELHI HIGH COURT] on account of revenue expenditure – there was no infirmity in the order of CIT(A) which it has been held that the expenditure were in the nature of revenue and could not be disallowed as capital expenditure – Decided against Revenue.
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2014 (7) TMI 837
Expenses on purchase on new items - Acquisition of new assets for replacement of existing assets as current repairs - Held that:- AO has mentioned various items and no doubt the wooden paneling, wooden partition, some small items of steel or purchase of cement etc. may fall under repair but at the same time purchase of almirah in AY 2008-09 amounting to ₹ 102600/-, installation of board etc. cannot be termed as repair and maintenance - the assessee has shown purchase of Orissa type W.C along with G.I. Flush bend, C.I Pee Trap etc. which shows construction of new bath room. The Ld. Counsel for the assessee could not give any answer in respect of these items - At the same time there is no purpose if the issue is set aside - if 10% of items listed by the AO are held to be of capital nature – Decided partly in favor of Revenue. Disallowance u/s 14A r.w. Rule 8D – Held that:- In earlier years before AY 2008-09 Rule 8D was not applicable – Relying upon Godrej & Boyce Manufacturing Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D has no retrospective application and is applicable only from Assessment year 2008-09 - it cannot be said that no expenditure is required to be incurred for making investments and receiving dividends - All the activities require involvement of various management and finance personnel which involves expenditure - Rule 8D has been rightly invoked by the AO – Decided partly in favour of Assessee.
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2014 (7) TMI 836
Rejection of books of accounts - Principles of natural justice – Held that:- The matter should go back to the file of the AO to pass a fresh order, for rejecting the books of account, the AO has not given any valid reasons as no specific defect has been pointed out in. the books of account, the AO should go through the books for determining the income on the basis of books accounts – AO has to bring on record specific evidence or defect to prove falsity of books of account as no falsity has been proved in the assessment order passed by the AO – revenue has to provide all the details and material on which basis the addition have been made earlier - the AO is directed to provide the copies of all information on which basis, the AO wanted to made additions in the hands of the assessee and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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Customs
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2014 (7) TMI 844
Condonation of delay - sufficient cause - delay of more than tree years - review section of the department sought copy of order from CESTAT - tribunal took about one year to supply certified copy of the order - Held that:- the explanation afforded in the memorandum of appeal, in the extracts of the pleadings reproduced above, hardly can be stated to constitute "sufficient cause". Even if one accepts the earliest point of time when the knowledge of the impugned order was derived by the revenue, the explanation for further delay of more than one year ten months is not adequate. - appeal dismissed as belated and time barred - decided against the revenue.
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2014 (7) TMI 843
Principle of natural justice - refusal to grant adjournment - Prohibited goods - seizure of the Red Sanders Wood - Held that:- authorities acted in the contravention of the provisions contained under Section 122A of the said Act in not granting the adjournment though provided for. Furthermore, the petitioner was unheard as the reply came to be filed on the next day of the impugned order which was not allowed to be taken on the Court. - order impugned is set aside to the extent it operates against the petitioner - matter remanded back for re-adjudication - decided in favor of assessee.
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2014 (7) TMI 842
Import of car subject to actual user condition - revenue contended that car imported under EPCG scheme was registered as private vehicle in non-transport/non commercial category - allegation that cars were not used for tour and travels to earn foreign exchange - appellant contended that transport authority did not register the car as taxi - Held that:- When the car was not used for the purpose it was meant, there was no foreign exchange earning made by the appellant for which it failed to discharge export obligation. Investigation brought out entire truth of the import and gross violation of the import condition in para 12 of the show cause notice. No use of the car for commercial purpose came to record. - Appeal is dismissed accordingly on first principle noticing abuse of the EPCG licence. - Decided against the assessee.
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Corporate Laws
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2014 (7) TMI 841
Company under winding up proceedings - application for revival of the company - Locus standi of the applicants - applications for convening meetings of creditors to consider their respective schemes of arrangement for revival of the company. - Held that:- In the case of a company which is being wound up, it would be binding on the company and its contributories. - There is no question of invocation of Section 391 of the Companies Act, 1956 because the Official Liquidator has not come up with any application requesting the court to convene a meeting of creditors or members of the company. - This section makes it explicit that in the case of a company being wound up a meeting can only be convened at the instance of the Official Liquidator. The section does not say that an application may be made by the Official Liquidator “also”. It just says “Official Liquidator”, so as to exclude all other persons including creditors and contributories. The scheme proposed by the applicant is equally unimpressive. No fund is brought into the company. Nothing is shown how the mill would be re-opened and run. There is no market survey, projection of sales etc.. Only tall promises are made in the scheme, for payment to creditors. LOCUS STANDI - Held that:- None of the applicants, who made applications for convening meetings of creditors for the purpose of consideration of their respective schemes for revival of the company, impressed me with regard to their locus standi. - The applicants who held themselves out to be the creditors of the company could not furnish any proof of the company’s debt towards them. No evidence of supply of goods like delivery receipts, challans, contract papers etc between them and the company were produced before the court. Ownership of shares - transfer of shares after order of winding up - Held that:- in the case of winding up any disposition of shares after commencement of winding up shall be void unless otherwise ordered by the court. - If the transaction is void there is no value of the shares certificates. Neither can it be said that the property in the shares has passed. The transferee gets no title. Equally flawed is the argument that the transferors’ in such cases are trustees for the transferees. If the transfer is void ab initio the relationship of trustee and beneficiary does not arise. Therefore, all these arguments fail. - all applications dismissed.
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Service Tax
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2014 (7) TMI 852
Health and Fitness service - sale of booklet - activity of teaching the art of yoga - Held that:- The booklet which is part of the appeal, titled as "Lifesaver" only gives the benefits of yoga and also gives the names of 20 asanas which were being taught in the Institution. Further we find that in the present appeal, in the brief facts which were duly verified by the appellants, it has been specifically mentioned that the appellants are a Trust registered under the Maharashtra State to teach the art of yoga as the yoga is therapeutic and restorative. In view of these facts, we find that the appellants are clearly providing a service as covered under ‘health and fitness service' - Decided against assessee.
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2014 (7) TMI 851
Penalty u/s 76 & 78 - Simultaneous penalty - Held that:- While High Courts of Kerala and Delhi opined that prior to the amendment w.e.f . 10.5.2008 by a proviso introduced to Section 78, by the Finance Act, 2008, penalties under Sections 76 and 78, which operate on different aspects could be imposed vide Assistant Commissioner of Central Excise Vs. Krishna Poduval - [2005 (10) TMI 279 - Kerala High Court] and Bajaj Travels Ltd. Vs. CST [2011 (8) TMI 423 - DELHI HIGH COURT], the Punjab & Haryana High Court in CCE Vs. First Flight Couriers Ltd. - [2011 (1) TMI 52 - High Court of Punjab and Haryana] recorded a contrary view, following its earlier judgement in CCE Vs. Pannu Property dealers [2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT] and on the ground that since Section 78 is more comprehensive and provide for a higher quantum of penalty, though technically the scope of Section 76 and 77 are different, penalty under Section 76 may not be justified where penalty is already imposed under Section 78. - Decided against Revenue.
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2014 (7) TMI 850
Waiver of predeposit of Service Tax - quantification/computation of the demand - Held that:- from the records it is found that the CAs Certificate and other evidences now produced by the ld. CA for the Applicant, were not placed before the ld. Commissioner. In the result, in the interest of justice, at this stage, the offer to deposit ₹ 10.00 lakh seems to be reasonable. Consequently, we direct the Appellant to deposit ₹ 10.00 lakh within a period of four weeks from today and report compliance directly, to the ld. Commissioner. matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 849
Reversal of wrongly taken credit done - whether interest is chargeable from the date when it was taken upto the date of its reversal - CENVAT Credit taken on dumpers - Held that:- Cenvat Credit was reversed before utilization is not in dispute - Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly - Following decision of Commissioner of Central Excise & ST, LTU Bangalore Vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] and U.O.I. Vs. Indo Swift Laboratories [2011 (2) TMI 6 - Supreme Court] - Decided in favour of assessee. Valuation - Inclusion of Value of free supplies of diesel - Held that:- As regards the demand of Service Tax on the value of the free supplies of diesel is concerned, the Larger Bench of this Tribunal in the case of M/s. Bhayana Builders Pvt. Ltd. Vs. Commissioner Service Tax, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI] has held that the value of free supplies is not includible in the gross consideration received by the Service provider for rendition of taxable service. Consequently the demand of ₹ 78,17,056/- relating to free supplies of diesel is not sustainable. - Decided in favour of assessee.
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2014 (7) TMI 848
Waiver of pre deposit - Demand of service tax - Security services provided by Superintendent of police - service provided for IPL match - Payment not received for services received - Held that:- during the impugned period, service tax liability arises at the time of remuneration received towards service provided as no amount has been received by the appellant, therefore, appellant has made out a case for waiver of pre-deposit - matter remanded back - Commissioner (Appeals) to decide the issue on merits without insisting on pre-deposit - stay granted.
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CST, VAT & Sales Tax
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2014 (7) TMI 847
Waiver of pre deposit - collection of tax from transporter - Tribunal which makes it apparent that upon survey and seizure of GRs in respect of goods in the possession of the transporter, the VAT authorities were of the opinion that the dealers of the goods/consignments were not paying tax for the last two years - Held that:- It is apparent that the VAT authorities assumed that the transporter was in some way responsible for the payment of VAT. The Revenue undoubtedly relies upon Section 3(9) of the DVAT Act, 2004. Yet, none of the orders made by the Revenue in this case have actually cited or raised the presumption which is sought to be raised on its behalf in the Court - direction to pre-deposit any amount as a condition for the hearing of the appeal ‘ be it towards the primary tax liability or penalty, is not justified. In these circumstances, the direction to pre- deposit 40% of the tax liability and 20% of the penalty is hereby set- aside - Decided in favour of assessee.
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2014 (7) TMI 846
Condonation of delay - delay caused on account of misguidance of the chartered accountant which misguided itself with provision of section 33(6) instead of section 33(5) of the Act that the appeal can be filed in 180 days instead of 60 days - Tribunal denied condonation - Whether the Tribunal was right in declining to condone the delay of 70 days in filing the appeal by the appellant - Held that:- it emerges that the law of limitation has been enacted which is based on public policy so as to prescribe time-limit for availing of legal remedy for redressal of the injury caused. The purpose behind enacting law of limitation is not to destroy the rights of the parties but to see that the uncertainty should not prevail for unlimited period. Under section 5 of the 1963 Act, the courts are empowered to condone the delay where a party approaching the court belatedly shows sufficient cause for not availing the remedy within the prescribed period. The meaning to be assigned to the expression "sufficient cause" occurring in section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. The plea taken by the appellant was that there is a different period of limitation prescribed under the Act. Learned counsel for the appellant submitted that the limitation for filing the appeal where the assessee was aggrieved by the first appellate authority was 60 days whereas in case of the Department is 180 days. It was wrongly advised to the appellant that the delay in filing the appeal was 180 days. It was under those circumstances that the delay of 70 days had occurred in filing the appeal. Accordingly, the explanation furnished by the appellant being plausible leads to the conclusion that there was sufficient cause for delay in filing the appeal. Once that was so, the application for condonation of delay ought to have been allowed. - Tribunal was not right in refusing to condone the delay in filing the appeal. Accordingly, the substantial questions of law are answered by holding that there was sufficient cause for condonation of delay in filing the appeal before the Tribunal. As a sequel, the appeal is allowed and the matter is remitted to the Tribunal - Delay condoned.
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2014 (7) TMI 845
Levy of tax on import of goods - levy of tax on owner or lessee - it is lessee who had brought the goods into local area - Bar of limitation - Held that:- Tax is payable by the importer and it is the duty of the court to discover who is the importer for the purpose of section 3 of the Act. Section 3(3) of the Act elucidates that a person who causes the entry of the vehicle into the local area for use or sale especially deemed to be the importer who is liable to pay the tax. In other words merely because an owner of the vehicle satisfied the definition as importer in the context of section 3 of the Act the "word" importer need not necessarily be the owner and in the context the importer has to be considered to be the person who is responsible or who causes the entry of the motor vehicle into any local area for use or sale. It was the lessee of the petitioner, viz., M/s. VPR Mining Infrastructure Private Limited who had brought the dumpers in question into the local area situated within the State for use and utilization. Applying section 3(3) of the Act to the facts of the case though the petitioner being the owner of the dumpers may satisfy the definition of "importer" yet for the purpose of section 3(3) of the Act, the liability to pay tax arises on the entry of the dumpers into the State and the liability gets fastened on the person who brings the same for use or sale into the State. In this case, the customer of the petitioner, M/s. VPR Mining Infrastructure Private Limited, was also satisfied the definition of "importer" inasmuch as the customer is the one which having taken the delivery of the dumpers in Chennai has caused the vehicles to movie to the local area of the State for the purpose of use in its works and thus became liable to pay the tax. Decided in favour of assessee.
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