TMI Tax Updates - e-Newsletter
July 8, 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:
Nature of Government Securities – Notwithstanding that in the balance sheet, it is shown as investment, for the purpose of Income-Tax Act, it is shown as stock-in-trade, issue decided in favor of assessee - HC
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Income Tax:
Jurisdiction u/s 263 of the Act – Exemption u/s 11 and 12 - action of the assessing authority in treating the assessee as an association of persons - HC
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Income Tax:
Payments for the equipment and spare parts – Royalty u/s 9(1)(vi) - there is no transfer of rights - not taxable as royalty - HC
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Income Tax:
Expenditure u/s 37 of the Act - Remuneration and training of working director – assessee could not substantiate the contentions - additions confirmed - HC
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Income Tax:
Addition u/s 69C – Unexplained expenditure - only because parties has given a different accounting treatment in its books of account, it cannot be said that the assessee has 'suppressed the expenditure - AT
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Income Tax:
Income on account of interest treated as income from other sources – Disallowance of remuneration to partners from interest income - deduction allowed considering as business income - AT
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Service Tax:
Commercial training and coaching services - providing computer training which is recognized - The certificate is issued by Maharashtra State Board of Vocational Examination - held as taxable - AT
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Service Tax:
Works contract service - valuation - divisible or indivisible contract - Service of Erection, Commissioning and Installation - valuation to be done according to invoice raised - AT
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Service Tax:
Waiver of pre deposit - dispute would be only of the interest for the period of delay in discharge of tax liability - directing the appellant to deposit 50% of service tax demand is too harsh - AT
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Central Excise:
Valuation - In the absence of any flow-back from the dealer to the respondent-assessee, the question of including PDI and after-sale service charges in the assessable value of the goods sold does not arise at all. - AT
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Central Excise:
Denial of Cenvat credit - capital goods or inputs - Classification of goods - classification of the goods cannot be changed at the hands of the recipients of ‘inputs’ or ‘capital goods’ - AT
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VAT:
Denial of input tax credit - Assessee filed Nil returns - The revised returns were filed only after inspection, etc., and therefore, cannot be accepted as a voluntary return or bona fide return as the assessee has done it after a good deal of persuasion. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (7) TMI 223
Nature of Government Securities – Capital asset or Business asset – valuation of securities – consistent method of accounting - claiming depreciation due to market fluctuations - Held that:- Following Commissioner of Income Tax vs. ING Vysya Bank Ltd. [2013 (6) TMI 43 - KARNATAKA HIGH COURT] - the method of accounting adopted by the tax payer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping the accounts or on valuation - Financial institutions like Bank, are expected to maintain accounts in terms of the RBI Act and its regulations - the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment - But consistently for more than two decades it has been shown as stock-in- trade and depreciation is claimed and allowed. Notwithstanding that in the balance sheet, it is shown as investment, for the purpose of Income-Tax Act, it is shown as stock-in-trade - the value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the Bank has to take into consideration the market value of the shares – Decided in favour of Assessee.
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2014 (7) TMI 222
Jurisdiction u/s 263 – Exemption u/s 11 and 12 of the Act – Assessee charitable Trust or not - treating the assessee as AOP – Held that:- The Tribunal had concluded that the assessment was rightly framed u/s 143(3) of the Act on 21.3.2000 - the donations received by the assessee had been applied for the purpose for which the trust had been created which included the construction of the building and other charitable purposes - the appointment of trustees or the members of the committee was not within the exclusive powers of Shambhu Dayal Shastri as the same was done by the trustees - The plea regarding expenditure having not been incurred for charitable purposes was not accepted as out of the total receipts of ₹ 86 lacs, the trust had incurred ₹ 31 lacs for construction of the building and ₹ 19 lacs for langar expenses - other items of expenditure were those which were incurred by the charitable trust for regular functioning such as salaries, vehicle maintenance and miscellaneous expenses - the trust had also spent on various other items amounting to ₹ 5 lacs. The assessee was a charitable institution and was carrying on activities for charitable purposes - at the relevant time, the assessee trust was required to utilize 75% of its funds for charitable purposes to take benefit u/s 11 and 12 of the Act - more than 75% of the total income during the AY had been applied for charitable purposes as per return - The amounts invested for the construction of immovable property had to be treated as application of income - The requirement of 75% was enhanced to 85% by Finance Act 2002 w.e.f 1.4.2003 - revenue was unable to dislodge the finding of facts recorded by the Tribunal. Relying upon Commissioner Of Income-Tax Versus Barkate Saifiyah Society [1993 (11) TMI 13 - GUJARAT High Court] - the AO was right in framing the assessment on 21.3.2000 and assumption of jurisdiction by CIT u/s 263 of the Act was improper – thus, the registration granted to the assessee u/s 12A of the Act was in accordance with law and the assessee had complied with the requirement of Sections 11 and 12 of the Act, as a necessary corollary, the action of the assessing authority in treating the assessee as an association of persons and also to assess Shri Shambhu Dayal Shastri on protective basis cannot be legally sustained - the action of CIT in invoking provisions of section 263 of the Act cannot be justified – Decided against Revenue.
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2014 (7) TMI 221
Payments for the equipment and spare parts – Royalty u/s 9(1)(vi) of the Act – Held that:- The decision in Haldor Topsoe A/s Denmark Jeevan Vihar Annexure Versus The Addl Commr of Income Tax (International Taxation) [2013 (5) TMI 491 - ITAT MUMBAI] followed - The contention of Mr. Pinto cannot be accepted that the widest possible meaning of the term 'royalty' and as found in the definition of the term in the explanation (2) would include the transaction under which payment has been made for supply of Converters - the agreement postulates the payment for the equipment - The technical information that is provided is related to data plant specification flow sheet which are issued in the installation of the plant - there is no transfer of rights in the nature contemplated by clauses (i) to (v) of the Explanation 2 so as to be termed as 'royalty' - the equipment was supplied to the Indian party and for which the Indian party made payment - The contract in relation to a contract included stipulations for giving all information so as to guide the Indian party to install the equipment at site and thereafter to use it - this is a mixed question and a finding of fact has been rendered considering the peculiar facts and circumstances. The payment was found to be made towards the supply of equipment and that too on 'principal to principal' basis – relying upon Commissioner of Income Tax v/s Gulf Oil (Great Britain) Ltd. [1975 (8) TMI 17 - BOMBAY High Court] – the order is not vitiated by any error of law apparent on the face of the record and/or suffering from any perversity enabling us to entertain the Appeal – thus, no substantial question of law arises for consideration and the order of the Tribunal is upheld – Decided against Revenue.
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2014 (7) TMI 220
Validity of notice served u/s 143(2) – Time-barred notice - regular assessment / scrutiny assessment u/s 143(3) – Held that:- The Tribunal rightly held that the requirement of law is notice to be served - There is no deeming provision under the Act - It is because no acknowledgement was received after issuing of a notice, the authority himself has sent a second notice on 22.7.2005 – the notice is sent beyond the period of limitation, thus, time barred - the assessing authority had no jurisdiction to frame the assessment – the order of the Tribunal is upheld – Decided against Revenue.
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2014 (7) TMI 219
Modification of order u/s 154 of the Act – Deletion of additional tax us 143(1A) of the Act - Adjustment made while computation of book profits u/s 115J of the Act – Held that:- Supreme Court in Assistant Commissioner of Income Tax Vs. J.K. Synthetics Ltd. [2001 (2) TMI 17 - SUPREME Court] held that even where the loss declared by the assessee had been reduced by reasons of adjustments even then additional tax could be imposed - the CIT (A) as well as Tribunal was not justified in holding that no additional tax was chargeable where the net result of adjustment was a negative figure - Additional tax charged u/s 143(1A) of the Act could be deleted u/s 154 - an order passed u/s 250 or 254 of the Act by which the disallowance has been deleted has to be given effect to by a consequential act to be done by the Assessing Authority u/s 154 of the Act - Decided against Revenue.
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2014 (7) TMI 218
Admission of appeal - Deduction u/s 80HHC of the Act – Sale of goods at counter in convertible foreign exchange – Held that:- The decision in Ram Babu and Sons vs. Union of India [1996 (5) TMI 61 - ALLAHABAD High Court] followed - the assessee was entitled to get the deductions u/s 80-HHC in respect of counter sales against foreign currency. Charge of interest – Held that:- The decision in Ranchi Club Ltd. vs. Commissioner of Income Tax and others [2000 (8) TMI 79 - SUPREME Court] - an order of the AO in the assessment order to charge interest has to be specific and clear - the assessee must know that the assessing officer after applying his mind had ordered charging of interest under a particular Section and that a general order directing that interest would be charged as per Rules or directing that charge interest as per Law was not a specific order for levying interest - If interest is leviable under Sections 234-A, 234-B or 234-C of the Act, then such levy of interest is mandatory and compensatory in nature - in order to levy interest under the Sections the AO is specifically required to mention the specific section of charging interest, failing which, no interest could be levied under those Sections - Penal proceedings are totally different and distinct from charging interest - it is not necessary nor obligatory for the AO to direct initiation of penal proceedings and that penal proceedings would be initiated without a specific direction from the AO – Decided against Revenue.
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2014 (7) TMI 217
Expenditure u/s 37 of the Act - Remuneration and training of working director – Held that:- The dispute is purely a factual one - the facts and the evidence brought on record by the assessee have been analysed by all the authorities below and in it’s proper perspective - Tribunal rightly makes note of the entire factual matrix and affirms the orders passed by the AO as well as the CIT (A) in disallowing the claims - although an attempt was made on behalf of the assessee to make out a case that Mr Krishna Kachalia was instrumental in acquiring distributorship of VOLVO, no evidence whatsoever had been filed to support and substantiate the same - sending Mr. Krishna Kachalia, who was a Commerce Graduate and had joined the assessee just a month back, for a management course in marketing at the cost of the assessee without any exposure or experience, could not be justified on the touchstone of commercial expediency - assessee had not been able to satisfactorily explain the services rendered by Mr Krishna Kachalia and whatever explanation that was sought to be given in this regard was also found to be not acceptable by the AO by giving specific reasons - the onus was on the assessee to establish on evidence that the expenditures were incurred wholly and exclusively for the purpose of it’s business - assessee had failed to discharge the onus. The expenses claimed as a deduction by the assessee for the payment of salary to Mr Krishna Kachalia was rightly disallowed – Mr. Krishna Kachalia was doing a management course with S.P. Jain Institute of Management & Research from October 2003 to April 2005 and therefore it was not possible that he was working for the company in the capacity of a Director at the same time when in fact he was a student - during the time Mr Krishna Kachalia was shown to be in-charge of the marketing activities at the assessee’s Borivali Center, another Director of the assessee was also looking after the marketing activities at the very same place and was paid a remuneration of ₹ 10,00,000/- per annum for the work - in no other Center of the assessee was more than one Director assigned and the fact that Mr Krishna Kachalia was assigned to look after the work at Borivali in addition to another Director, his appointment was only for name sake – assessee could not substantiate the contentions as made by him in front of the authorities – thus, no substantial question of law arises for consideration - Decided against Assessee.
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2014 (7) TMI 216
Computation of export incentive u/s 80HHC of the Act - Receipt of job charges treated as part of the "total turnover” – Held that:- Exports profits were required to be computed in the ratio of export turnover to total turnover - there is no difference in the activity relating to export business and job work carried out by the assessee - There is no difference between manufacture and export of jewellery on one hand and manufacture of jewellery for others on job work basis - the receipt by way of job work is an integral part of the dominant business activity - The only difference between regular manufacturing and processing for others is that the assessee did not own the goods processed by it in the case of job work - The expenses and efforts for the job charges were the same in relation to the regular manufacture on assessee's own account - the assessee has not maintained a separate account for manufacturing and sale of jewellery on one hand and job works undertaken by it - the word 'charges' should be read along with the meaning of those specific words forming themselves into a special category - If so, the word 'charges' should be confined to those charges which do not have anything to do with the business and the related activities carried on by the assessee. The charges credited by the assessee in its turnover were the proceeds of the manufacturing and job work charges carried on by the assessee which is part of its principal business - the charges received by the assessee-company for the job works undertaken as in the nature understood could not be held as similar to the word 'charges' provided in sub-clause (1) of clause (baa) of the Explanation given under Section 80 HHC - the word 'charges' appearing in clause (baa) of Explanation given under Section 80HHC needs to be read as charges similar to receipts in the nature of brokerage, commission, interest, rent. etc. - Relying upon CIT Vs. K. Ravindranathan Nair [2007 (11) TMI 10 - Supreme Court of India] - job work charges is the integral part of the business activity of the assessee and charges received by the assessee for the job work undertaken by him cannot be held similar to the word "charges" provided in Explanation (baa) - The job work charges has to be included in the total turnover – There was nothing on record to suggest that the AO did not follow the formula as per the provision of Section 80 HHC while computing the deduction - Decided against Revenue.
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2014 (7) TMI 215
Disallowance u/s 14A r.w. Rule 8D of the Act - Trading in shares – Shares treated as stock in trade – Held that:- The assessee is having income from sale of shares, interest accrued from saving bonds and other interests, which are on account of finance business - the disallowance u/s 14A only pertains to the administrative expenses which have been disallowed by the AO after applying the provisions of rule 8D and the same has been confirmed by the Commissioner (Appeals) - most of the expenditures are directly related to the assessee’s business - the AO without examining the nature of the expenses debited in the accounts of the assessee, has proceeded to apply the provisions of rule 8D - The provisions of rule 8D can only be triggered for the purpose of disallowance, when the AO is not satisfied having regard to the accounts of the assessee the correctness of the claim of the assessee in respect of such expenditure in relation to exempt income – thus, the matter is to be remitted back to the AO and directed to examine the nature of expenditure debited in the accounts, whether they are in any way attributable to the earning of exempt income or not – Decided in favour of Assessee.
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2014 (7) TMI 214
Issuance of notice passed u/s 153C of the Act - Whether the DRP was justified in issuing its directions beyond the time limit specified u/s 144C (12) of the Act and whether the final assessment order passed by the AO u/s 153C of the Act based on the time barred directions of the DRP was tenable in law – Held that:- The issuance of a notice u/s 153C of the Act was in accordance with and according to intent and purpose of the Act - If there were to be any lacunae in the issuance of such notice u/s 153C of the Act, the provisions of section 292B of the Act will take care of the same - there was no any infirmity in the search proceedings and order made u/s 153C of the Act – Decided against Assessee. Validity of reference to TPO – No pending assessment on the date of search/requisition - No incriminating material found during search – Held that:- Since no incriminating materials were found in the course of search/requisition, the AO was not justified in making a reference to the TPO and the transfer pricing adjustment made for assessment years 2003-04 to 2008- 09 are invalid - This contention of the assessee, according to us, is too far-fetched - in view of 2nd proviso to section 153A, normal assessment pending during the proceedings u/s 153A or 153C will abate and only single assessment is to be made both for disclosed and undisclosed income. If the contention of the assessee is accepted, it will lead to absurd situation whereby even reported income in a return of income could not be taxed when the same abate on account of initiation of proceedings u/s 153A or 153C. Such a situation can never be in the contemplation of Legislature and we, out rightly reject the main contention of the assessee - The findings of DRP were not correct as no documents were seized during the search conducted by the Police at the premises of Mr Hisham - Only cash was seized - When an assessment u/s 143(3) has already been made prior to the search proceedings, then such completed proceedings are final and they do not abate - No addition can be made in an assessment u/s 153C in the absence of any incriminating material. What is the scope of assessment or re-assessment of total income u/s 153A (1) (b) and the first proviso – Held that:- If any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of accounts or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision - as per the Circular No.3 of 2012 dated 12.6.2012 which was the supplementary memorandum explaining the Official amendments moved in the Finance Bill, 2012 as reflected in the Finance Act, 2012, it has been made explicit that “The date of effectivity of the provision mentioned in clause 63 of the Finance Bill, 2012 and the Notes on clauses (clause 60) thereof is 1st April, 2009, i.e., the provision would apply to all cases filed before the DRP on or after 1st April, 2009, irrespective of the assessment year - the DRP was within its domain and also justified in exercising the powers conferred under Explanation to s. 144C (8) of the Act - the DRP has no power to treat transactions in respect of which either no adjustment was proposed by the learned TPO or such transaction does not form part of the report u/s 92E - in view of Explanation to s. 144C(8), it is clear that DRP is empowered to take cognizance of any new issue which comes to the notice of the panel during the course of proceedings before it – Decided in favour of Revenue. Jurisdiction of the DRP in considering new grounds – Held that:- The expenditure on AMP was not part of report by the assessee in its 3CEB report - When the issue of expenditure on AMP brought to the notice of DRP, in its fairness, the DRP directed the TPO to look into the issue and submit a report, on the basis of which, the TPO had determined the ALP on AMP expenditure too - Such being the situation, the assessee cannot take a stand that the view expressed by the TPO on a specific direction by the DRP, would amount to review - the non-declaration of AMP expenditure in 3CEB report of the assessee and subsequent difference/grievance with the AO/DRP, the determination of ALP on AMP expenditure on remand from the DRP by the TPO, in our view, was within the sphere of s. 92CA of the Act – Decided against Assessee. Order u/s 153C of the Act was barred by time as per section 153B of the Act – Held that:- Section 153B lays down the time-limit for making an assessment order u/s 153C of the Act. The search was conducted at the premises of Tamiz on 5.8.2008 - The last of the authorization for requisition was executed during August 2008 - the only asset that has been seized was cash of ₹ 9.7 crores - During the course of assessment proceedings u/s 153C, a reference u/s 92CA (1) was made - an order u/s 92CA was passed on 31.10.2011 - the applicable provision which deals with the time-limit for making an assessment order u/s 153C was the fifth proviso to s. 153B(1) prior to its amendment by Finance Act, 2012. Section 144C (13) has been amended by Finance Act, 2012 to provide that the notwithstanding effect shall extend to s. 153B - The extended period of limitation is applicable only to those cases where the normal period of limitation u/s 153B to make assessment u/s 153C has not expired on the date on which the Finance Act, 2012 received the President’s assent. The Finance Act, 2012 received the President’s assent on 28.5.2012 - the period of limitation to pass an order u/s 153C had already expired on 31.12.2011 which was much earlier to the date on which the Finance Act, 2012 received the President’s assent and, hence, the re-assessment orders u/s 153C were barred by limitation. Relying upon S.S. Gadgil v. Lal & Co [1964 (4) TMI 19 - SUPREME Court] - the time within which notice could be issued against a person deemed to be an agent of a non-resident was extended to two years from the end of the assessment year - Now the notice issued on 27th March, 1957 was clearly within a period of two years from the end of the AY 1954-55 and if the amended provision applied, the notice would be a valid notice - the notice was not a valid notice inasmuch as the right of the ITO to re-open the assessment of the assessee under the un-amended provision became barred on 31st March, 1956, and the amended provision did not operate against him so as to authorise the ITO to commence proceedings for re-opening the assessment of the assessee in a case where before the amended provision came into force, the proceedings had become barred under the amended provision. It was intended to make the amendment to remove any omission or flaws in the Statute and as such, it was neither clarificatory nor procedural in nature - there was no trace of any mention in the Memorandum to illustrate that it applies to objection/application filed on or after 1.10.2009 - the time-limit to pass the orders u/s 153C r.w.s. 153B of the Act has expired on 31.12.2011 itself and that the Finance Act, 2012 received the President’s nod (assent) only on 28.5.2012 - the re-assessments orders passed u/s 153C of the Act on 29.10.2012 were barred by limitation - the re-assessment orders for all the AY is to be set aside – Decided in favor of Assessee.
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2014 (7) TMI 213
Deemed dividend u/s 2(22)(e) of the Act - Excess advances received against the services to be rendered from another company - on person is holding 90% share or voting right in both the companies. - Held that:- Similar issue came up for consideration before the coordinate bench in assessee’s own case Dy. Commissioner of Income-tax Versus M/s Margadarshi Marketing (P) Ltd. [2013 (10) TMI 476 - ITAT HYDERABAD] wherein it was held that loan or advance given under the conditions specified u/s 2(22)(e) of the Act would also be treated as dividend - The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction - the recipient would be a shareholder by way of deeming provision - if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend u/s 2(22)(e) of the Act. The provision for deduction of tax at source and adjustment of tax is only in respect of the payments to the' shareholder would clearly indicate that even after the amendment, the effect of clause (e) of sub section (22) of Sec. 2 would apply only when the payment is made to shareholder - Wherever, the tax is to be deducted at source from a dividend or deemed dividend and the consequential effect of giving effect to such deduction of tax at source, etc., reference was made only to the payments to the shareholder - This would indicate clearly that clause (e) would apply only in case of payments to the shareholder and not to others - the advances cannot be treated as deemed dividend coming within the ambit of section 2(22)(e) of the Act. CIT(A) has come to the conclusion that the amounts received by the assessee from M/s Ushodaya Enterprises is in regular course of trade is outside the purview of section 2(22)(e) of the Act - AO has brought any materials to establish the fact that the amount received was not in regular course of trade but in the nature of loan and advance as envisaged u/s 2(22)(e) of the Act – there was no reason to interfere with the order passed by the CIT(A) in all the AYs - the order of the CIT(A) is upheld in deleting the addition made by the AO towards deemed dividend u/s 2(22)(e) of the IT Act – Decided against Revenue.
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2014 (7) TMI 212
Addition u/s 69C of the Act – Unexplained expenditure - Revenue was of the view that when both the assessee and M/s SEL are following mercantile system of accounting, there should not be any difference between the payment and receipts by the assessee and SEL respectively in their books of accounts - Whether the actual payment made by the assessee during the year to M/s SEL is ₹ 22,60,62,390 after TDS. as shown by the assessee in its books or an amount of ₹ 45,16,69,046 shown as contract receipts by M/s. SEL for the year under consideration - Held that:- The assessee was awarded contract work for construction of Nellore Bye pass Road Project on NH- 5,section linking the metros of Kolkata and Chennai - the assessee sub-contracted certain portion of the work of the value of ₹ 68 crores to its sister concern M/s. SEL - there is no difference between the payment of ₹ 68 lakh and receipt of the same amount as appearing in the books of both the assessee and M/s SEL in the assessment years 2003-04, 2004-05 and 2005-06. However, the only difference is with regard to the year wise payment. The difference as noted by the AO is only an imaginary one and on that basis addition cannot be made - When it has been proved that the assessee has made the payments as per the entries made in the books of accounts, which is also corroborated by the bank statement furnished before the departmental authorities, only because M/s SEL has given a different accounting treatment in its books of account, it cannot be said that the assessee has 'suppressed the expenditure - the reconciliation made by the assessee with supporting evidence though has been forwarded to the AO, he has not been able to controvert the same with any reasonable argument – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 211
Income on account of interest treated as income from other sources – Disallowance of remuneration to partners from interest income - Held that:- Both the interest paid and earned arising from a common pool of funds - where there are earmarked funds, yielding interest income, even though it is open in such a case to be argued that such funds form part of the business funds, dedicated to meet some defined business purpose, while the interest income is only incidental - the interest income, which acquires its character from the surrounding circumstances - Relying upon CIT vs. Govinda Choudhury & Sons [1992 (4) TMI 8 - SUPREME Court] - ‘income from other sources’ is hardly tenable on the basis of the facts on record - it is even not possible to say conclusively if any interest income has at all been earned, except perhaps for the interest realized at rate/s in excess of that at which the moneys are borrowed – Decided in favour of Assessee.
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2014 (7) TMI 210
Valuation of purchases and sales of goods and inventory – Increase in value of closing stock – Balance under CENVAT account added - Held that:- The decision in COMMISSIONER OF INCOME-TAX Versus MAHALAXMI GLASS WORKS P. LTD. [2009 (4) TMI 182 - BOMBAY HIGH COURT] followed - to give effect to Section 145A, if there is any change at the closing stock at the end of the year due to inclusion of CENVAT credit available then there must necessarily be a corresponding adjustment made in the opening stock of that year and this would not amount to give double benefit to the assessee and would be necessary to compute the true and correct profit for the purpose of assessment. As per provisions of sec.145A adjustment is to be done in the opening and closing stock of the year under consideration so as to ascertain the true profits – thus, the AO is directed not to disturb the closing stock of past years and to make adjustment in the opening and closing stock of the year under consideration by the amount of value of Cenvat credit available to the assessee as at the beginning and at the end of the year – thus, the order of the CIT(A) is modified – Decided partly in favour of assessee.
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2014 (7) TMI 209
Interest levied u/s 220(2) of the Act - Whether interest u/s 220(2) shall arise on a demand, originally satisfied and, accordingly, refunded to the assessee following the order/s by an appellate forum, since revived by an order/s by a higher forum – Held that:- The matter has been settled by the decision in Vikrant Tyres Ltd vs. ITO [2001 (2) TMI 129 - SUPREME Court] - the condition precedent for invocation of section 220(2) is that there should be a demand notice (DN) and, further, a default in paying the amount so demanded - the demand notice stands satisfied in full within the time stipulated, there is no revival of demand upon a subsequent restoration by a higher appellate forum of the assessment in whole or in part, and a fresh notice of demand would be required to be issued toward recovery of the demand reviving subsequently - there is no question of levy of interest from the date immediately following the due date of payment as per the original demand notice. Where a demand notice has not been discharged in full, interest from an anterior date shall arise only to the extent the demand as finally arising is relatable to such unpaid/un-discharged demand - the liability to interest u/s 220(2) arises for such period, i.e., for which the demand actually outstands, when the whole or a part of the said demand becomes due for the payment in subsequent proceedings –thus, the working of interest u/s 220(2) of the Act is directed – Decided in favour of assessee.
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2014 (7) TMI 208
Income from house property – Quantum of rent subjudice to HC - Income from letting out of office at commercial premises – Held that:- The matter with regard to the quantification of the rent payable to the assessee is subjudice before the Bombay high court, even as the assessee alleges of no continuing arrangement with NIACL in-as-much as the lease agreement expired on 13.05.1994, and which has not been extended further - the standard rent stands fixed by the Small Causes Court at a much lower sum - it needs to be appreciated that the original agreement has expired, and which has not been extended, and which could only be at the instance of and upon agreement between the parties thereto - The standard rent could apply only to a tenant and not to one who occupies the property illegally - the compensation or rent toward the same, even from any illegal tenant, would stand to be assessed as ‘income from house property’ - the income continues to be assessed at the returned sum of ₹ 30.264 lacs being in terms of the original agreement. - it shall be subject to any downward revision that may be directed by the high court, before whom the matter is subjudice – Decided partly in favour of Assessee.
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2014 (7) TMI 207
Application for grant of certificate u/s 80G of the Act – No charitable activity from last three years – Held that:- The assessee has been recognised as charitable trust u/s 12A by the Department – assessee contended that it has not received the donation during the period; therefore, no such charitable activity could be carried out - The conditions for granting of approval of section 80G, has been provided in sub–section 5 of section 80G - If these conditions are not fulfilled, then the approval cannot be granted - though the reason given by the DIT(E) for rejecting the approval u/s 80G, is quite an appreciable ground, however, he is also required to see whether the conditions given in sub–section 5 of section 80G, has been fulfilled or not - DIT(E) has also not examined the assessee’s contention that it has carried out the charitable activities from the financial year 2010–11, wherein it has received the donation and also utilised it for the medical aid – thus, the matter is liable to be remitted back to the DIT(E) for fresh examination in accordance with the conditions laid down in sub–section 5 of section 80G – Decided partly in favour of Assessee.
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2014 (7) TMI 206
Understatement of income or not - less booking of maturity value of Certificate of deposits – Held that:- The assessee explained that it had sold the deposits prematurely in the secondary market, so that there is no basis for assuming the assessee to have realized a total of ₹ 42.09 cr., as assumed by the AO - even though there was a dispute in relation to the deposits, it is related to the return of the securities held with the custodian and it did not impact the accrual of income arising on the deposits, which had been accounted for from year to year - The book value of the deposits, accordingly, as on 31.03.1997 stood at ₹ 40.16 cr - assessee have realized ₹ 41.05 cr. on the sale of the securities during the relevant previous year - the excess stands accounted for as income for the current year, i.e., by way of interest for the period 01.04.1997 to the date of sale (Rs.70.54 lacs) and profit on sale of securities (Rs.18.30 lacs) – there was no case for suppression or understatement of income having been made out by the Revenue – thus, there is no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 205
Opening balance of capital treated as unexplained – Held that:- CIT(A) was of the view that AO should not have added the opening capital to the total Income of the assessee - expectation of the AO to maintain books of account by an agriculturist is too much - It is practically not seen anywhere that an agriculturist maintains books of account until & unless he/she has other sources of taxable income for which filing of return of income is mandatory - capital shown by the assessee cannot be said to on higher side by any stretch of imagination - the source of capital stands reasonably explained – the order of the CIT(A) is upheld – Decided against Revenue. Unsecured loan from brother staying in same house – Held that:- CIT(A) rightly was of the view that the source of the brother's income is from agriculture and looking into the details of income, it can be reasonably concluded that, the loan stands explained - the addition is rightly set aside by the CIT(A) – Decided against Revenue. Income from agricultural activity treated as income from undisclosed sources – Held that:- CIT(A) was of the view that the submission of the assessee is self-explanatory and does not further elaboration - AO should have at least estimated the reasonable agricultural income which may be earned from such land holding even though no details related to agricultural activity - the agricultural income from so much of land holding is very much reasonable does not require any interference by the revenue - the addition made on account of treating the agricultural income as undisclosed income is rightly set aside by the CIT(A) – Decided against Revenue.
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2014 (7) TMI 204
Reopening of assessment u/s 147 of the Act – Reason to believe – Held that:- The decision in RANBAXY LABORATORIES LIMITED Versus COMMISSIONER OF INCOME TAX [2011 (6) TMI 4 - DELHI HIGH COURT] followed - AO formed an opinion that there was escapement of income being the exemption allowed to the assessee u/s 54 – there was no factual finding corroborating to the reasons for reopening of assessment - In the assessment order, the AO has nowhere recorded that the property sold by the assessee was agricultural land and not a residential house, so, the assessee is not entitled to exemption u/s 54 - the property sold by the assessee was the residential house and not the agricultural land - the very basis of initiation of proceedings on the basis of which the AO formed an opinion for escapement of income was not existing - The basis for reopening of assessment was that the assessee is not entitled to exemption u/s 54 because the property transferred by the assessee was agricultural land and not residential house - the AO reduced the exemption u/s 54 on the ground that the properties purchased by the assessee were two residential houses and not one - this was not the basis for reopening of assessment - reopening of assessment was not valid – the additions made in the order of reassessment do not survive - Decided in favour of Assessee.
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2014 (7) TMI 203
GP @ 25% on unaccounted sales – Matter pending before Excise Tribunal – Held that:- The issue of addition made in the income tax case is based on addition made in excise case of the assessee, which is pending in appeal before the Excise and Custom Tribunal – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.
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Customs
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2014 (7) TMI 225
Waiver of pre-deposit of penalty u/s 114 and 117 - penalty on steamer agent - Export of prohibited goods - Assessee had no knowledge of bad deeds of exporter - Held that:- There is no finding to show that the applicants were aware of the fact regarding export of prohibited goods. The applicant only supplied a container at the request of M/s. J.A. Maritime. In these circumstances, prima facie the applicants have a strong case in their favour. Therefore, pre-deposit of the penalty is waived and recovery of the same is stayed - Matter remanded back - Stay granted.
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Corporate Laws
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2014 (7) TMI 224
Oppression and mismanagement in the affairs of the Respondent Company - diversion of the rights issue funds - refund of the capital contribution made in the firm from the firm's account to the company account - Held that:- Admittedly, the scheme of rights issue was brought for the purpose of discharging the liabilities of the Company and to improve its net-worth. There is nothing on record to show that the liabilities of the Company stands discharge or its net-worth has improved by making investment/utilization of the rights fund by the then Directors. Therefore, the fund received under the rights issue has not been invested for the purpose for which it was meant. - it is also not disputed that the other object of the letter of offer which inter alia states that "besides the present rights issue, the company also needs to redeem its existing preference shares having nominal value of ₹ 50 lakhs for which the company proposes to reissue the said shares to the existing shareholders in future" has not been complied with. Major subscribers to the rights issue wrote a letter to the then Directors to maintain status quo in respect of all immovable and movable assets of the company, yet they did not pay any heed to it. It is pertinent to note here that earlier directors knowing fully well that they are being removed from the Board of Directors constituted their own partnership firm and diverted the entire rights issue funds of the shareholders. It is, also undisputed fact that son of the one of the erstwhile Director is also a partner in the partnership firm which supports the case of the Petitioners that the diversion of the funds of the company has been solely for the personal gains of the erstwhile Directors. Answering Respondents have not even given any data to show that the company is getting the profits, if any, earned by the said partnership firm in which the investment has been made. It will not be out of place to mention here that the Ld. Counsel appearing for the Answering Respondents, upon a query raised by the Board, had answered that the total annual return on the said investment in the partnership firm is approx. 6% p.a which in my considered view, is absolutely inadequate. Therefore, in the absence of any material on record and in direct contravention of the purpose and object for which the scheme of rights issue was issued, making investment by the erstwhile Directors of the Company in the partnership firm-in-dispute is patently mala fide. - Decided in favour of petitioner.
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Service Tax
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2014 (7) TMI 244
Denial of CENVAT Credit - Garden Maintenance Service - Credit denied on the premise that it does not fall under the definition of Rule 2(l) of CENVAT Credit Rules, 2004 - Held that:- In the light of decision in Ultra Tech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], wherein the Hon'ble High Court has held that any service availed by a manufacturer of excisable goods in the course of their business activity is entitled for input service credit. Admittedly, the Garden maintenance Service has been availed by the appellant, as a manufacturer of excisable goods in the course of their business. Therefore, I hold that the appellants are entitled to take input service credit on Garden Maintenance Service. - Decided in favour of assessee.
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2014 (7) TMI 243
CENVAT Credit - Credit on Transportation of employees, taxi bills, photo copier, maintenance, repair and servicing, insurance, sales promotion activities - Commissioner allowed credit - Held that:- In the light of the decision of Ultra Tech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] wherein the Hon'ble High Court has held that any service availed by a manufacturer of excisable goods in the course of their business activity is entitled for input service credit. In these circumstances, issue is no more res integra. Accordingly, no infirmity in the impugned order. - Decided against Revenue.
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2014 (7) TMI 242
Commercial training and coaching services - providing computer training which is recognized by Maharashtra State Board of Vocational Examination - whether the appellants are providing commercial training or coaching services - Held that:- Appellants are providing training but are not issuing any certificate. The certificate is issued by Maharashtra State Board of Vocational Examination. As per the definition, the only exclusion is in respect of institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law. - ratio of the decision of the Hon'ble Delhi High Court in the case of Indian Institute of Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] is not applicable in the facts of the present case. - Decided against the assessee. Regarding penalty - appellants were under the bonafide belief that the institution is recognized by Maharashtra State Board of Vocational Examination - penalty waived - Decided in favor of assessee.
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2014 (7) TMI 241
Waiver of pre deposit - CENVAT Credit - input services - port services - Held that:- On the amount of ₹ 11.31 Crores confirmed by the adjudicating authority, appellant has relied upon the case laws mentioned in Para 2 above wherein Royalty charges, Renting of immovable property in Port area etc have been held to be not covered within the scope of 'port services' during the relevant period. Appellant has, prima facie , made out a case of complete waiver of demand with respect to the port services. deposits, already made by the appellant and appropriated by the adjudicating authority, are enough deposit to grant stay on recoveries of the remaining amounts. - Stay granted.
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2014 (7) TMI 240
Works contract service - valuation - divisible or indivisible contract - Service of Erection, Commissioning and Installation - Held that:- contract is not an indivisible ‘works contract’, as the same mentions the details of the price of the supply items and various services. The invoices have been issued by the appellant based on rate schedule in the contracts/works order and the invoices also mention separate price of the supply items and various services and as such from the invoices it is possible to determine the value of the Erection/installation and Commissioning service. The appellant's contention is that all the contracts are of this type only. From the contracts/work order and the respective invoices, it is possible to determine the value of taxable services, assessment of service tax should have been done on this basis, instead of treating the gross amount received minus value of the goods supply items (taken as ₹ 24.25 lakhs) as gross amount received for the services of Erection/installation and Commissioning services and calculating service taxes on this basis after giving 67% abatement - Matter remanded back for de-novo adjudication - Decided in favour of assessee.
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2014 (7) TMI 239
Waiver of pre deposit - civil and industrial construction and construction of residential complexes services - Held that:- From the findings of the Commissioner (Appeals), it appears that the appellant have discharged service tax liability on the mobilization advance and the dispute would be only as to whether, the service tax should have been paid as and when the mobilization advance was received or whether the same should have been paid when the advance was adjusted during the course of execution of the project. As such, the dispute would be only of the interest for the period of delay in discharge of tax liability. In view of this, the impugned order directing the appellant to deposit 50% of service tax demand of ₹ 42,26,430/- is too harsh. The impugned order, therefore, is set aside and the matter is remanded to the Commissioner (Appeals) for deciding the appeal on merits without insisting on pre-deposit - Decided in favour of assessee.
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2014 (7) TMI 238
Waiver of pre-deposit - demand is from South East Central Railway, Nagpur on the ground that the Indian Railways provided the taxable service - Held that:- demand is for the period 2005-06 to 2009-10. In view of the provisions of Section 99 of the Finance Act, 2013, the pre-deposit of the dues is waived and recovery thereof stayed for hearing the appeal - Stay granted. Impugned order is passed in 2012 i.e. prior to the introduction of Section 99 of the Finance Act, 2012. In view of this, the impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to decide the appeal afresh in view of the provisions of Section 99 of the Finance Act, 2013 after affording an opportunity of personal hearing to the appellant. - Decided in favour of assessee.
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2014 (7) TMI 237
Waiver of pre-deposit of Service Tax - Penalty u/s 76, 77 & 78 - Mining services - Held that:- appellant submits that for the period after 1/6/2007, they have discharged service tax on mining services. The amount now stated by the Ld. Special Counsel has not been mentioned anywhere in the impugned order. Therefore, at this stage it is difficult to ascertain the correct figure of liability and on account of service tax on Mining after 01/06/2007. This Tribunal before 01/06/2007, on similar circumstances, has allowed the stay application in other cases. In the result, the offer of ₹ 1.00 crore against the now calculated liability of ₹ 1.40 crores, by the Revenue, seems to be reasonable - stay granted partly.
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Central Excise
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2014 (7) TMI 234
Denial of CENVAT Credit - Cenvat credit was denied to the respondent by the original adjudicating authority on the ground that same has been availed on various items used for manufacturing the supporting structures, ladders, platform and fabrication of storage tanks and cannot be considered to be an eligible cenvatable items - Held that:- Show cause notice was issued to the appellants on 24.2.2012 for the period August, 2008 to April, 2009. During the relevant period, various decisions of the Tribunal were in favour of the assessee and the law was reversed only subsequently by the Larger Bench in the case of Vandana Global Ltd [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - Tribunal in a number of other appellants similar situate has taken a view that when decisions of the Higher appellate authorities, during the relevant period, were in favour of the assessee, no malafide can be attributed to the assessee so as to invoke the longer period of limitation. Apart from the fact that the credit was being availed by reflecting the same in their statutory records, in which case again no malafide can be attributed on the part of the respondents so as to justifiably invoke the longer period of limitation - demand is beyond the period of limitation - Decided against Revenue.
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2014 (7) TMI 233
Waiver of pre deposit - CENVAT Credit - capital goods - denial of credit on the ground that appellant were not owner of the goods - denial of credit on another ground that, goods after being installed had become fixed to earth structure which is not excisable and hence the Cenvat Credit of Central Excise duty involved these goods would not be available to the appellant. - Held that:- There is absolutely no requirement that the capital goods at the time of receipt must be owned by manufacturer or that the same would cease to be capital goods, if they are installed in the factory and become fixed to earth. The words used in Rule 2(a) are "used in the factory of manufacturer of the final product" not "used in the manufacture of final product". Therefore, once any item received in the factory is "capital goods" in terms of Rule 2(a) of the Cenvat Credit Rules, and is used in the factory, the manufacturer would be entitled to Cenvat Credit of excise duty paid in respect of the same. If the logic of the commissioner in the impugned order is accepted, no capital goods Cenvat Credit can be allowed in respect of any item of capital goods enumerated in Rule 2(a) of the Cenvat Credit Rules, as all the items - various items of machinery covered under Chapter 84, 85 & 90 of the Tariff, pipes & tubes, tanks, pollution control equipments refractories etc. have to be installed in the factory before being put to use and after installation, the same would become fixed to earth plant. - prima facie case is in favor of assessee - Stay granted.
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2014 (7) TMI 232
CENVAT Credit - cutting or slitting of steel sheet in coil - Revenue contends that activity of assessee does not amount to manufacture - whether such availment of credit, which already stand utilized by them for payment of duty on their final product is required to be denied to them - Difference of opinion - Matter referred to larger bench:- Whether Cenvat credit on inputs can be allowed to be availed and further passed on to the buyers despite activity of slitting and pickling on CR coils undertaken does not amount to manufacture as held by Member (Judicial). OR Whether once an activity of slitting and pickling of CR Coils does not amount to manufacture as held by Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association Vs. Union of India in [2003 (11) TMI 107 - HIGH COURT OF DELHI] and Circular No. 940/01/2011-CX dated 14.10.2011 and 911/01/2010 CX dated 14.01.2011 issued by Board, then Cenvat credit on inputs cannot be allowed and it also subsequently cannot be passed over to buyers as held by Member (Technical).
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2014 (7) TMI 231
Waiver of pre deposit - appellants, submits that in view of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the appellant need not deposit the amount, as ordered by the Tribunal, as protection is available to the appellant under the said provision. - duty of waste and scrap generated during the course of manufacture of wires and cables - Held that:- against the total outstanding dues of 5.90 Crore confirmed against all the applicants, a pre-deposit of ₹ 8,53,502/- would meet the ends of justice. As already mentioned above, the said amount of ₹ 8,53,502/- is around 1.44% of the total dues and 3.32% of the total duty confirmed, which in our opinion, would not result in any undue hardship to the Applicant, in the circumstances, when the total Revenue of the Applicant is ₹ 25175.10 Lakhs; Cash and Cash equivalents ₹ 1340.52 lakhs; and investments are ₹ 448.64lakhs for the financial year ending 31.03.2013. - stay granted partly.
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2014 (7) TMI 230
CENVAT Credit - Eligibility - Various input services - Held that:- Eligibility of telephone services - mobile as well as land line - Following decision of CCE vs. Excel Crop Care Ltd. reported in [2008 (7) TMI 160 - HIGH COURT GUJARAT] - decided in favour of assessee. As regards the Cenvat credit in respect of courier services used for dispatch of documents, this issue also stands decided in favour of the appellant by the judgment of Hon'ble Gujarat High Court in the case of Commissioner vs. Apar Industries Ltd. (2013 (2) TMI 276 - GUJARAT HIGH COURT) and also by the judgments of the Tribunal in the cases of Kodak India Pvt. Ltd. vs. CCE, Indore reported in [2012 (11) TMI 70 - CESTAT, NEW DELHI]. decided in favour of assessee. As regards the eligibility of Cenvat credit of the insurance services used for insurance of the plant and machinery against damage due to accident etc., we are of prima facie view that this service is an integral part of the business of manufacturing of final product, as no prudent manufacturer would start manufacturing operations without ensuring his plant and machinery and other costly assets and hence the ratio of the judgment of Hon'ble Bombay High Court in the case of Commissioner vs. Ultratech Cement Ltd. (2010 (10) TMI 13 - BOMBAY HIGH COURT ) would apply. The Commissioner's reasoning that amendment made to Rule 2 (l) w.e.f. 01/4/11 by which the expression "activities relating to business" had been deleted, is retrospective amendment, is totally wrong as an amendment which restricts the definition of input services and thereby restricting the availability of Cenvat credit to an assessee cannot be given retrospective amendment when there is no such intention expressed in the amending provision. We find that the Tribunal in the case of Federal Mogul Goetze (India) Ltd. vs. CCE, Chandigarh - II (2013 (12) TMI 787 - CESTAT NEW DELHI) had also expressed the view that insurance of plant and machinery against risks and hazards is eligible for Cenvat credit and is covered by the definition of input service. decided in favour of assessee.
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2014 (7) TMI 229
Valuation - Inclusion of pre-delivery inspection charges and after sales service charges reimbursed by the respondent to their dealers in the assessable value of the goods sold - Held that:- The question of includibility of any amount in the assessable value would arise if that amount is received by the assessee, either directly or indirectly, from the buyer (dealer) in relation to the sale of the goods. In other words, there has to be flow-back from the dealer to the assessee. In the present case, there is no evidence of any such flow-back. On the contrary, it is the assessee who is reimbursing the expenditure to the dealer. In the absence of any flow-back from the dealer to the respondent-assessee, the question of including PDI and after-sale service charges in the assessable value of the goods sold does not arise at all. Therefore, we do not find any infirmity in the orders passed by the lower authorities who have given a clear factual finding that there is no flow-back. - Decided against Revenue.
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2014 (7) TMI 228
Denial of Cenvat credit - capital goods or inputs - Classification of goods - Classification of under Chapter 8419 8910 or under Chapter 72 - Held that:- classification of the goods cannot be changed at the hands of the recipients of ‘inputs’ or ‘capital goods’. Hence, goods does not appear to be classifiable under Chapter 72 of the Tariff - adjudicating authority should have examined this certificate along with utilisation of the goods before adjudicating this matter. Hence, we feel it is appropriate to remand this matter to the original authority for reconsideration of the use of the goods. Accordingly, we set aside the impugned order and remand back the matter to the adjudicating authority to decide the matter afresh after considering the use of the ‘capital goods’ - Decided in favour of assessee.
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2014 (7) TMI 227
Waiver of pre-deposit - Manufacture - MS Pipes - cutting them into desired lengths as per specifications in Work Orders; welding flanges at both ends; in case of Tripod Sets, fitting flanges to the pipes and bends - Held that:- uniform principle is propounded that transformation of long/straight MS Pipes/Tubes, either by cutting them into smaller dimensions or conversion into different shapes/curves such as bends, elbows, ‘T’ pieces, ‘Y’ pieces, joints, blocks, caps, pipe fittings, flanges, unions or collars - does not amount to manufacture, warranting levy of excise duty, on treatment as manufacture - since the Petitioners seem to have made out a strong prima facie case, pre-deposit of the adjudicated liability would cause undue hardship to the Petitioners. For these reasons, we grant waiver of pre-deposit in full and stay all further proceedings for realization of the adjudicated liability, pending - Stay granted.
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2014 (7) TMI 226
Valuation - Freight and insurance charges - Held that:- Goods have been sold ex-factory. However, at the request of the customers, the goods were delivered at the customers premises for which recovery of freight and insurance charges have been made from the customers. In the Order-in-Original, the adjudicating authority has given a clear finding that there is no dispute about the place of removal which is the factory. If there is no dispute about the place of removal, the question of invoking Rule 5 of Central Excise Valuation Rules, 2000 would not arise at all. In view of the above factual position, we do not find any infirmity in the impugned order passed by the lower appellate authority - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (7) TMI 236
Denial of input tax credit - Assessee filed Nil returns - credit on the basis of revised return was also denied - Levy of interest and penalty - works contract - construction of buildings - So it is urged by the appellant/assessee that even long after the expiry of the period in which the revised return could have been filed, the fact remains that there is no response by filing any revised returns. - first appellate authority allowed relief to the assessee - Held that:- it is not in dispute that all the requirements were not fulfilled by the assessee for the period involved in the appeals - it is a case of the first appellate authority acting more loyal than the king, even though a claim had not been put forth by the assessee through the returns, the first appellate authority has ventured to allow the appeals and grant relief to the assessee, contrary to statutory provisions! Even in regard to this period of April 2006 to November 2006 is concerned, the factual position is not very different - The conduct of the assessee in filing nil returns for April 2006 to November 2006 can never be accepted as bona fide, as the assessee, prior to the filing of the return, had been made aware of the tax liability and virtually admitted the same and had paid some provisional amount. Therefore, there is absolutely no bona fides on the part of the assessee in continuing to file nil returns even for this period and claiming no tax liability. The revised returns were filed only after inspection, etc., and therefore, cannot be accepted as a voluntary return or bona fide return as the assessee has done it after a good deal of persuasion. Even when a revised return or a return subsequently has been made subsequent to passing of the best judgement order, while the original assessment can be withdrawn, best judgement assessment cannot be withdrawn, which, nevertheless does not absolve the assessee from being levied with penalties and interest. Insofar as the argument that the revised return having been filed within six months and taking cue from the provisions of section 38(3) of the Act, the revised return should be accepted and acted upon is concerned, we find this provision is not applicable to the present situation as it arises only in a situation where best judgment assessment is passed because of non-filing of the return as for the periods in question which we are discussing, the assessee had filed nil returns. In so far as the submission that in a best judgment assessment, where a return is not accepted and is based on the information as disclosed in the books of accounts, etc., the claim in the returns or nonclaiming in the returns cannot be of much significance, we find that claim for input-tax credit can only be in specified form and not in a generalised form and therefore, the arguments cannot succeed. We have discussed this aspect elaborately as above. Therefore, on comparison of provisions of section 38(3) of the Act, the benefit cannot be extended by overlooking the statutory requirements under section 10(4) of the Act read with sub-sections (1) and (4) of section 35 of the Act. An assessee pays penalty if it violates the statutory provision and likewise the Revenue also loses revenue unless it adheres to the requirements of the statutory provision. It is for this reason we are not impressed by the submission on behalf of the assessee that there was no need for taking a technical approach or hyper-technical approach and if the appellate authority had taken a pragmatic and plausible view, the revisional authority should not have disturbed the same or interfered with the same, is not accepted. Input credit disallowed - levy of interest and penalty confirmed.
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2014 (7) TMI 235
Taxability of Vaccum Cleaner @ 12% treating it as electrical goods - entry 81 of the notification - appellant has submitted that since vacuum cleaner is not specifically included within the entry 81, therefore, it should be deemed to be excluded - Held that:- none of electrical goods, instruments, apparatus, which is included in the said entry is specifically mentioned and if that interpretation is accepted, all electrical goods would have to be excluded because they are not specifically mentioned therein. That could not be the intention of the framers of the notification while exercising the powers under the subordinate legislation. If we also accept such an interpretation, in our opinion, entire entry 81 would be rendered otiose - decisions given by the High Court as also by all other authorities are correct decisions, recording cogent reasons, and, therefore, we are not inclined to interfere with the same - Decided against assessee.
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