TMI Tax Updates - e-Newsletter
August 14, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Entitlement exemption under Section 54G - on omission of Section 280ZA and its re-enactment with modification in Section 54G, Section 24 of the General Clauses Act would apply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of Section 54A. - SC
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Income Tax:
Reopening of assessment u/s 147 r.w.s. 148 - since the assessee's return was accepted under section 143(1) of the Income-tax Act, there was no question of "change of opinion" inasmuch as while accepting the return under the aforesaid provision no opinion was formed - reassessment proceedings sustained - SC
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Income Tax:
The Vice president (ITAT), who played a dominant role in decision making, entertained the representative of one party to the litigation privately without notice to the other side, and introduced a completely irrelevant concept of ‘political sensitivity’ in the process, which by itself vitiates the decision making- HC
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Income Tax:
Computation of capital gains - determination of cost of acquisition as on April 1, 1974 - Assessing Officer had no jurisdiction to place reliance on the valuation report obtained subsequently and that too when not obtained in exercise of powers u/s 55A - HC
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Income Tax:
Notwithstanding the fact that the opinion of the Institute of Chartered Accountants of India (ICAI) was expressed in the guidance note, which had not attained a mandatory status, would not, in our view, be a ground to discard the books of account of the assessee or method of accounting for lease followed by the assessee - HC
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Income Tax:
Disallowance the commission paid to the agents - claim cannot be allowed on a regular basis merely because it was allowed in one year or for several years. If a mistake has happened, it can always be corrected in a subsequent assessment - HC
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Income Tax:
Validity of reopening of assessment u/s 147 r.w.s. 148 - exemption under Section 10AA of the Act allowed by the Assessing Officers in the first year, which was allowed without any further discussion and/or without applying any mind - re-opening in the subsequent year allowed - HC
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Income Tax:
Disallowance of deferred revenue expenditure in the aggregate incurred towards the product development - AO is correct in disallowing only the expenditure not relatable to the relevant assessment year. - HC
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Income Tax:
Income arising out of interest - whether cannot be taken into account for the purpose of giving benefit under section 33AB as held by Tribunal? - When the assessee has paid interest of nearly ₹ 2.66 crores and has earned interest of nearly ₹ 1.88 crores, the effective debit on that side is less than ₹ 1 crore. - benefit of Section 33AB allowed - HC
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Income Tax:
Treating the income from house property as business income - the intention of the assessee is to exploit commercially by way of complex commercial activities generating the business income as part and parcel of the assessee’s business activity only - held as business income - AT
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Customs:
Import of Ultrasound Systems, probes, and their parts and components. – History of notification shows that when ultrasound equipment contained feature or mode of B scan, it was specifically so stated and exempted – Specific equipments mentioned alone were to be granted exemption - SC
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Customs:
Renewal of Customs Brokers License – Rejected – The conduct of appellant clearly amounts to suppression of material information required to be furnished by respondent at time of making declaration - HC
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Service Tax:
VCES - Authority having not yet issued the acknowledgement of discharge in such form and in such manner as may be prescribed does not mean that the petitioner has failed to discharge his liability - HC
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Service Tax:
Business Auxiliary service - services provided to bank as direct sales agents (DSA) by authorized car dealers - Even if some part of the commission was given by the bank to the customers directly on behalf of the appellant, service tax liable to be paid - AT
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Service Tax:
BAS - services provided to bank as direct sales agents (DSA) by authorized car dealers - Quantum of commission - Once the department produces a letter from the bank the onus shifts to the appellant to dis-prove the same - demand confirmed invoking extended period of limitation - AT
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Central Excise:
Valuation of goods - Captive consumption - same or such goods - Goods cannot be treated as same or would fall within the description “such goods” as sold to the other buyers in loose form when they are used captively by the appellant in the turnkey projects - SC
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Central Excise:
Valuation - inclusion of value of software into the value of hardware - value of the software cannot be included in the value of the OCB exchanges. - SC
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VAT:
Undervaluation of goods – validity of Seizure and auction – auction was totally arbitrary and unconscionable, liable to be struck down – Petitioner was deprived of his goods and was paid nothing –Therefore, State directed to pay to petitioner sum of ₹ 4,80,000 which was declared value of goods along with interest at 12 per cent after deducting amount of tax payable - HC
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VAT:
Tools-open jaw spanners – Entry 6(ix) of BST and Entry 14(iv)(ix) of CST – Each subitem in Entry No.(iv) was separately taxable commodity for purpose of sales tax and each of them forms separate species for each series of sales although they may all belong to genus, “iron and steel” – Object of Legislature was to tax sale of each commercial commodity and not sale of substance out of which it was made - HC
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VAT:
Rate of Tax (VAT) - KVAT - all margarine, except liquid margarine, were liable to attract higher rate of tax and there cannot be any distinction between "table margarine" and "industrial/ bakery margarine" - HC
TMI Short Notes
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Income Tax:
Mr. Ram annually earns ₹ 3,00,000 (after all deductions) and pays an annual rent of ₹ 1,50,000.
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Income Tax:
Deduction if donation deducted from Salary and donation receipt certificate is on the name of employer?
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Income Tax:
Documentation required for claiming deduction U/s. 80G?
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Income Tax:
Whether donations made to foreign trusts qualify for deduction under this section?
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Income Tax:
What are the specified diseases and ailments for the purpose of deduction under section 80DDB?
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Income Tax:
I have a handicapped dependent who is my cousin ( Daughter of my mother’s sister). She is completely dependent on me and every month I spend 10,000. She is suffering from 85 % Blindness and mental problem. Whether I can claim tax benefit under 80DD?
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Income Tax:
Mr. X is a pensioner and his pension is less than his son’s salary. His daughter is a disabled dependent with 85% disability. She is dependent on his brother (Mr. X’s son). Can his son get rebate under section 80DD? If Assessing Officer says that Mr. X is getting pension; so his son cannot claim deduction. Is it true?
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Income Tax:
What is considered as disability and Severe Disability?
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Income Tax:
Who can be your disabled dependent?
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Income Tax:
Can somebody having invested the amount from income exempt from tax or by taking loan, claim deduction u/s 80D?
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Income Tax:
If office deducts salary for medical insurance for employee and his family, whether the employee can claim deduction u/s 80D?
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Income Tax:
Part contribution ?
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Income Tax:
An individual assessee pays (through any mode other than cash) during the previous year medical insurance premium, out of his taxable income, as under:
a. 12,000/- to keep in force an insurance policy on his health and on the health of his wife and dependent children;
b. 17,000/- to keep in force an insurance policy on the health of his parents.
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Income Tax:
Mr A, new retail investor has invested in listed equity share/units of equity oriented fund of Rajiv Gandhi Equity Savings Scheme. Calculate the amount of deduction u/s 80CCG for the following years.
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Income Tax:
X deposit 1,10,000 in PPF & made a contribution of 410,000 to annuity policy of LIC (eligible for deduction u/s 80CCC).
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Income Tax:
X deposit 41,000 in PPF & made a contribution of 1,10,000 to annuity policy of LIC (eligible for deduction u/s 80CCC).
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Income Tax:
Suppose Mr. has paid premium of 25,000 for policy A taken on 30th June 2011 (sum assured 2,00,000) and 12,000 for policy B taken on 1st August 2013 (sum assured 1,00,000). Calculate the amount of deduction Mr. X can claim u/s 80C.
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Income Tax:
I and my wife both paid for education of our one child. My wife paid 70,000 and I paid 1,60,000 can we both claim deduction?
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Income Tax:
Can I claim deduction u/s 80C of Income tax Act, 1961 for my adopted child’s school fees?
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Income Tax:
What are the inclusions and exclusions in Tuition Fees?
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (8) TMI 482
Entitlement exemption under Section 54G - appellant claimed exemption on the entire capital gain earned from the sale proceeds of its erstwhile industrial undertaking situate in Thane in view of the advances so made being more than the capital gain made by it - Held that:- On a conjoint reading of the Budget Speech, notes on clauses and memorandum explaining the Finance Bill of 1987, it becomes clear that the idea of omitting Section 280ZA and introducing on the same date Section 54G was to do away with the tax credit certificate scheme together with the prior approval required by the Board and to substitute the repealed provision with the new scheme contained in Section 54G. It is true that Section 280Y(d) was only omitted by the Finance Act, 1990 and was not omitted together with Section 280ZA. However, we agree with learned counsel for the appellant that this would make no material difference inasmuch as Section 280Y(d) is a definition Section defining “urban area” for the purpose of Section 280ZA only and for no other purpose. It is clear that once Section 280ZA is omitted from the statute book, Section 280Y(d) having no independent existence would for all practical purposes also be “dead”. Quite apart from this, Section 54G(1) by its explanation introduces the very definition contained in Section 280Y(d) in the same terms. Obviously, both provisions are not expected to be applied simultaneously and it is clear that the explanation to Section 54G(1) repeals by implication Section 280Y(d). From a reading of the notes on clauses and the Memorandum of the Finance Bill, 1990, it is clear that Section 280Y(d) which was omitted with effect from 1.4.1990 was so omitted because it had become “redundant”. It was redundant because it had no independent existence, apart from providing a definition of “urban area” for the purpose of Section 280ZA which had been omitted with effect from the very date that Section 54G was inserted, namely, 1.4.1988. We are, therefore, of the view that the High Court in not referring to Section 24 of the General Clauses Act has fallen into error. On a reading of Section 24 it becomes difficult to accept Shri Arijit Prasad’s contention that Section 24 would only apply to notifications which themselves gave rights to persons like the appellant. Unlike Section 6 of the General Clauses Act, which saves certain rights, Section 24 merely continues notifications, orders, schemes, rules etc. that are made under a Central Act which is repealed and re-enacted with or without modification. The idea of Section 24 of the General Clauses Act is, as its marginal note shows, to continue uninterrupted subordinate legislation that may be made under a Central Act that is repealed and re-enacted with or without modification. It being clear in the present case that Section 280ZA which was repealed by omission and re-enacted with modification in section 54G, the notification declaring Thane to be an urban area dated 22.9.1967 would continue under and for the purposes of Section 54G. It is clear, therefore, that the impugned judgment in not referring to section 24 of the General Clauses Act at all has thus fallen into error. We are therefore of the view that on omission of Section 280ZA and its re-enactment with modification in Section 54G, Section 24 of the General Clauses Act would apply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of Section 54A. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to “purchase” new machinery or plant or “acquire” building or land. We find that the High Court has completely missed the window of three years given to the assessee to purchase or acquire machinery and building or land. This is why the expression used in 54G(2) is “which is not utilized by him for all or any of the purposes aforesaid….”. It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the Section is to “utilize” the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that the entire amount claimed in the assessment year in question has been so “utilized” for purchase and/or acquisition of new machinery or plant and land or building. Construction of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words “not utilized” in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be “utilized” by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets. We find therefore that on this ground also, the assessee is liable to succeed - Decided in favour of assessee.
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2015 (8) TMI 480
Reopening of assessment - Capital gains arising on the sale of the premises should not be taxed in the assessment year 1991-92 - HC allowed assessee appeal on validity of reopening notice - Held that:- After going through the detailed order passed by the High Court, we find that the main issue which is involved in this case is not at all addressed by the High Court. Since the assessee's return was accepted under section 143(1) of the Income-tax Act, there was no question of change of opinion inasmuch as while accepting the return under the aforesaid provision no opinion was formed and, therefore, on this basis, the notice issued was valid. As decided in Asst. CIT v. Rajesh Jhaveri Stock Brokers Private Ltd. [2007 (5) TMI 197 - SUPREME Court] So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) The offshoot of the aforesaid discussion is to hold that the judgment of the High Court is erroneous and warrants to be set aside. We allow this appeal setting aside the impugned judgment of the High Court. - Decided in favour of revenue.
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2015 (8) TMI 479
Reliability of report of the D. V. O. by the Assessing Officer for making the assessment in question which was called by the Assessing Officer pursuant to the order of commission issued under section 131(1)(d) - Apex Court dismissed the appeal against the decision of High Court [2004 (10) TMI 580 - MADHYA PRADESH HIGH COURT] wherein was held that: In any event, in view of the recent decision of the Supreme Court in somewhat similar cases, wherein it is ruled that no commission under section 131(1)(d) can be issued for calling the report of the D. V. O. by the Assessing Officer, the impugned orders of the Tribunal deciding the issue in favour of the assessee does not call for any interference. The appeal does not involve any substantial question of law and hence, it is dismissed in limine - Decided in favour of assessee.
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2015 (8) TMI 478
Additions on account of unexplained cash credit - The Commissioner of Income-tax (Appeals) on re-appraisal of the entire documentary evidence adduced by the said Vipin Kumar has come to the conclusion that even the documents showing the sale of jewellery were doubtful also confirmed by ITAT - The finding of the Tribunal being based on cogent material cannot be said to be perverse, as is sought to be pleaded by learned counsel for the petitioner as held by HC [2003 (9) TMI 41 - DELHI High Court] - Held that:- Tax effect is very nominal. Even otherwise, no question of law, much less a substantial question of law, arises from the impugned order whereby tribunal has sustained the additions - Decided against assessee.
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2015 (8) TMI 477
Penalty u/s 271(1)(c) - search under section 132 wherein the assessee made voluntary disclosure under section 132(4) disclosing a sum of ₹ 6 crores even though no incriminating document suggesting any such undisclosed income was found - ITAT deleted penalty levy - HC [2015 (5) TMI 317 - CALCUTTA HIGH COURT] held that as it is in that sense a voluntary disclosure which has been clarified by the assessee by stating in answer to question No. 23 that he had not given any statement under pressure and he did not want to rectify or modify the statement made by him. Thus the order of the Tribunal is unsustainable in law and, therefore, is set aside - Held that:- No legal and valid ground for interference. The special leave petition is dismissed. - Decided against assessee.
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2015 (8) TMI 476
Higher Depreciation on studio building - HC allowed assessee claim of depreciation holding that the assessee's studio would constitute plant in the hands of the assessee and consequently be entitled to depreciation at the rates applicable to plant and machinery - Held that:- Having regard to the fact that the tax effect is minimal, we refuse to interfere with these appeals. We, therefore, dismiss these appeals leaving the question of law open. - Decided against revenue.
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2015 (8) TMI 475
Recovery of tax - Scheme of demerger - objection of Income-tax Department that the Scheme in question is floated with the sole object of avoiding the tax liability such as Income-tax, Stamp Duty, VAT, etc. and that the sole object is only to avoid capital gains tax - HC [2012 (9) TMI 100 - Gujarat High Court] held it cannot be said that the Scheme has no purpose or object and that it is a mere device/subterfuge with the sole intention to evade taxes, particularly when even the incidence of tax purportedly sought to be evaded is not established on facts - sanction of the Scheme granted - Held that:- We are not inclined to entertain the special leave petitions. The special leave petitions are, accordingly, dismissed. We only state that the Income- tax Department is entitled to take out appropriate proceedings for recovery of any tax statutorily due from the transferor or transferee company or any other person who is liable for payment of such tax due.
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2015 (8) TMI 474
Claim of expenditure u/s 37 - Penalty imposed by the Reserve Bank of India for committing violation of provisions of the Reserve Bank of India Act, 1934, and the Banking Regulation Act, 1949 - claimed as business expenditure by the respondent-bank - Held that:- Having regard to the pettiness of this amount, we are not inclined to consider the issue on the merits. It is more so when learned counsel for the respondent has pointed out that against a similar kind of judgment passed in CIT v. Catholic Syrian Bank Ltd. the same was dismissed by this court. - Decision of HC in [2002 (11) TMI 17 - KERALA High Court] sustained - Leaving the question of law open, the appeals are dismissed.
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2015 (8) TMI 473
Constitution of a special bench of the Income Tax Appellate Tribunal outside Andhra Prades - President of the Income Tax Appellate Tribunal exercising his powers under Section 255(3) of the Income Tax Act, has constituted a special bench of three members to hear the appeal filed by the Petitioner - order passed by bench challenged - grievance of the Petitioner that he was kept in dark about the decision making process - Held that:- The president forwarded the letter of the Board to the Vice president for his comments. This was purely an internal movement of the file. It was not that the matter was judicially assigned to the Vice president and notified on his board. There was no indication for any litigant to know that the file was now before the Vice president. In spite of this position, the Special counsel who was to be engaged by the Revenue met the Vice president and explained him the need for a special bench. How the Special counsel knew that the file of the matter was before the Vice president, is a mystery. This was a private meeting and the Petitioner was not informed. The matter was seized before the regular bench and the revenue was a contesting party. The Petitioner was completely unaware that any such private meeting had taken place between the counsel and the Vice president. Permitting a party to the litigation to meet privately in absence of other side in respect of an ongoing litigation and then base an opinion on such meeting ,was most improper on the part of the Vice president. The Vice president did not even find it improper and he has proceeded to place the said private meeting on record as if nothing was wrong about the same. Not only holding such private meetings is opposed to judicial conduct, but not knowing that it is an improper judicial conduct, makes the matters worse. It is true that the final order of the president is not a judicial order. Nevertheless, even when a judicial body acts in administrative capacity, in midst of the litigation, which order will have effect on the ultimate outcome, the judicial body, must act with fairness, and not allow itself to be influenced. This is a fundamental principle. We will be failing in our duty if we do not uphold this most important principle. No attempts to influence a judicial body by non-judicial methods can be permitted and tolerated. If a litigant, be it the State, indulges in such acts, it shall not derive any benefit therefrom. Such tainted process must be obliterated and undertaken again. This course of action is necessary to retain the faith of litigants in the quality of justice rendered by the Tribunal. It is also necessary to send a strong signal to all the litigants, including the State, to make no attempts to influence a judicial body by non-judicial methods. What is further troubling is that is the introduction of 'political sensitivity'. In fact, the request letter of the Board does not specifically invoke this concept. It is the Vice president who has introduced this concept. This concept is then carried forward by the Regular Bench and during the arguments before us. We fail to understand how 'political sensitivity' is relevant in a tax litigation. Tax is levied and collected under the sovereign power of the State. The Revenue is entrusted with collecting the tax and employ all legitimate methods to bring the tax evaders to book. The Tribunal is established to adjudicate disputes arising from the application of the Act. In the scheme of the Act, political affiliation of an assessee is irrelevant. The Vice president thought the case was politically sensitive. This was after the private meeting with the representative of the Board. So are we to presume that politics was discussed in the meeting ? The Vice president has sown a seed of an irrelevant and potentially dangerous concept in the income tax litigation. The underlined theme of the letter was that the Chief Promoter of the Petitioner was a politician who abused his position, indulged in quid pro quo and what the Department unearthed was a huge financial fraud. Except employing the word 'complex', nothing was shown how it was complex. If the fraud was complex, the Board would seek and request for a more investigating machinery. What may appear complex for investigation, may not, at the end of investigation remain complex for a judicial body to decide and vice-versa. The Regular Bench also did not find that the appeal contained any complex questions of law to be decided by a special bench. The letter of the Board was specially directed against the Petitioner alone. The petitioner has levied a charge, which has gone unanswered, that similar allegations were made in the case of Ramojirao Group, but their matters were not referred to a special bench and only the Petitioner is singled out. Why the Board did not choose to invoke the judicial power of the Bench is not been informed to us in spite of our repeated queries. There is a clear methodology laid down under the Regulation 98(A) to make a reference by judicial order to the president. To sum up, the president was under obligation to give hearing to the parties. The Regular Bench had not unequivocally recommended constitution of the special bench and it had merely recommended that the matter be heard outside Andhra Pradesh. Since the Regular Bench had not recommended constitution of the special bench, no reason at all is found in the order of the president in constitution of the special bench. The president entertained a request in a matter which was seized by the Regular Bench, from a party to the litigation, passed an order without hearing the other side, without any reasons, and posted the entire matter before the special bench. This course of action was in breach of principles of natural justice and lacking in fairness. The Vice president, who played a dominant role in decision making, entertained the representative of one party to the litigation privately without notice to the other side, and introduced a completely irrelevant concept of ‘political sensitivity’ in the process, which by itself vitiates the decision making. Even otherwise, all the factors cumulatively, it has to be declared that the entire course of action adopted to constitute a special bench was opposed to the rule of law, fairness, transparency and cannot be sustained. We do so declare accordingly. W.P. allowed. The impugned order passed by the Respondent No.1 president constituting a special bench to hear the appeal of the Petitioner, is quashed and set aside
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2015 (8) TMI 472
Validity of reopening of assessment - Held that:- Observations in Bawa Abhai Singh Versus Deputy Commissioner of Income-Tax [2001 (3) TMI 14 - DELHI High Court] the expression 'information' in the context in which it appears in the pre-amended section 147(b) was held to be instruction or knowledge derived from an external source concerning facts or particulars, or as to the law relating to a matter having a bearing on the assessment have to be read in the light of the ratio decidendi as expounded by the Supreme Court in the case of Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ), the decisions of the Full Benches of the Delhi High Court in Kelvinator of India Ltd. (2002 (4) TMI 37 - DELHI High Court ) and Usha International (2012 (9) TMI 767 - DELHI HIGH COURT), which prohibit and bar "change of opinion" as a ground for reopening. It is noteworthy that the Full Bench of this court in Kelvinator of India Ltd. (supra) referred to the aforementioned extract from Bawa Abhai Singh (supra) but distinguished the quote, asserting that it was not an authority for the proposition that a mere change in the opinion would also confer jurisdiction upon the Assessing Officer to initiate proceeding under section 147 of the Act. The present case would fall in the category of "change of opinion" as the "reasons to believe" proceed on the premise that the opinion formed in the original assessment orders was wrong or erroneous. A wrong or erroneous opinion is not a good ground for reopening. This would be contrary to the jurisdictional requirements and the mandatory pre-conditions which should be satisfied. - Decided in favour of assessee. Computation of capital gains - determination of cost of acquisition as on April 1, 1974 - Held that:- The valuation report relied upon by the assessee referred to two instances in the form of agreements between the builder and the third parties in October and November, 1981, for purchase of commercial space in the commercial building for which construction was yet to begin. By 1981, requisite permissions, etc., were granted. It had taken almost 7-8 years for permissions/conversion. The said valuation proceeded backwards and computed or estimated the fair market value as on April 1, 1974, on plinth area method by discounting or reducing the per square feet price mentioned in the two agreements. Thus, the valuation report relied upon by the appellant-assessee proceeded on the assumption that as on April 1, 1974, there was an agreement with the builder for construction of a commercial building and necessary permission, conversion costs, etc., had been granted and paid. Further, the construction was to commence shortly. As per the agreement dated March 7, 1973, enclosed as annexure P-1, the property was to be vacated by the tenants at the cost of the owners. The fact that the property was occupied by the tenants as on April 1, 1974, would be a relevant factor which would depreciate the value. Thus, we agree with the Revenue that the valuation report relied upon by the assessee did not give fair and correct market value of the property as on April 1, 1974. The computation made by the valuer, relied upon by the assessee at ₹ 356.15 per square feet cannot be accepted as correct. Assessing Officer had no jurisdiction to place reliance on the valuation report obtained subsequently and that too when not obtained in exercise of powers under section 55A of the Act. - Decided against assessee.
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2015 (8) TMI 471
Disallowance of deduction of the "lease equalisation" charges from the lease rental income - Held that:- Even if at the relevant time, it was not mandatory to adopt the methodology prescribed by the guidance note or for that matter the accounting standard as it was not notified by the Central Government in the Official Gazette, in our opinion, it is not relevant for the reason that, as long as there was a disclosure of the accounting policy in the accounts, which had a backing of a professional body, such as the Institute of Chartered Accountants of India, it could not be discarded by the Assessing Officer. It is well settled that the word "may" normally indicate that the provision is not mandatory. It is also true that the word "may" can also be used in the sense "shall" or "must" by the Legislature. The intent of the Legislature, however, will have to be gathered from the scheme of the relevant provision, Chapter or the relevant statute and also judicial pronouncements dealing with the relevant provision. Having regard to the provisions contained in section 145 of the Act, we are of the opinion that the word "may" used in sub-section (2) thereof cannot be read as "shall". Merely because, the Central Government has not notified in the Official Gazette "accounting standards" to be followed by any class of assessees or in respect of any class of income, it cannot be stated that the "accounting standards" prescribed by the Institute of Chartered Accountants of India or the accounting standards reflected in the "guidance note" cannot be adopted as an accounting method by an assessee. Thus, this submission also deserves to be rejected. Notwithstanding the fact that the opinion of the Institute of Chartered Accountants of India was expressed in the guidance note, which had not attained a mandatory status, would not, in our view, be a ground to discard the books of account of the assessee or method of accounting for lease followed by the assessee and disallowing the assessee to deduct the lease equalisation charges from the lease rental income. - Decided in favour of the assessee
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2015 (8) TMI 470
Disallowance the commission paid to the agents - agents were appointed for selling Indian Made Foreign Liquor manufactured by it to the Kerala State Beverages Corporation, a wholly owned Kerala Government Company - Tribunal deleted disallowance - Held that:- Division Bench judgment of this Court reported in Commissioner of Income Tax v. Premier Breweries Ltd. [2005 (3) TMI 83 - KERALA High Court] wherein held that the Tribunal should allow the claim only on being satisfied about the genuineness of the claim and the purpose for which commission was paid. The contention of the Revenue is that liquor distribution in the State is the monopoly of the sole marketing agency, which is the KSBC, a wholly owned Kerala Government company. Accordingly, there is no scope for paying any commission for the sale of liquor to a Government company. We find force in this contention because, collection of commission or incentive if any by a Government company or its employees would amount to a corrupt practice. There is prohibition against advertisements of liquor for sales promotion. Therefore, it is essentially a matter of selection of manufacturers and brands which should not involve any payment of commission because the sole purchaser in Kerala happens to be a Government company. The Tribunal allowed the appeals following the orders of earlier years, which, though was challenged in this Court was not considered on merits for the reason that the department did not press the appeals. We do not think the claim can be allowed on a regular basis merely because it was allowed in one year or for several years. If a mistake has happened, it can always be corrected in a subsequent assessment. Therefore, we feel matters require critical examination by the assessing officer. The assessee should be given full opportunity to give the entire details of the expenditure claimed under commission payments or if marketing expenses incurred are claimed as commission, the details thereof. We, therefore, allow the appeals by setting aside the orders of the Tribunal and that of the 1st appellate authority and remand the matter to the assessing officer to decide the matter afresh after giving opportunity to the assessee - Decided in favour of revenue for statistical purposes.
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2015 (8) TMI 469
Validity of reopening of assessment - exemption claimed under Section 10AA - revision u/s 263, Held that:- Once having participated in the reassessment proceedings without challenging the notice under Section 148 of the Act and thereafter reassessment proceedings are dropped and thereafter a show-cause notice has been issued by the Commissioner taking the reassessment order [which is a one line order] under revision, in such facts and circumstances of the case, it is not open for the petitioner now to challenge the notice under Section 148 of the Act. As observed hereinabove, it is nothing but a malafide and an afterthought. Therefore, in the facts and circumstances of the case, petitioner now cannot be permitted to challenge the notice under Section 148 of the Act. As observed hereinabove, in the first year i.e. AY 2007-08, the Assessing Officer accepted the return accepting the exemption under Section 10AA of the Act claimed by the assessee and sent the intimation under Section 143(1) of the Act, without any discussion on the issue / exemption under Section 10AA of the Act claimed by the assessee. As the same was allowed in the first year which was without any discussion at all and it was an intimation under Section 143(3) of the Act, in the subsequent years the Assessing Officers have mechanically allowed the exemption under Section 10AA of the Act claimed by the assessee. That does not mean that the exemption under Section 10AA of the Act allowed by the Assessing Officers in the first year, which was allowed without any further discussion and/or without applying any mind, cannot be reopened. The same can always be permitted to be reopened, however subject to the conditions being fulfilled under Section 147 of the Act. Under the circumstances, on the aforesaid ground, the notice under Section 148 of the Act cannot be quashed and set aside. However, as observed hereinabove, as such it is not open for the petitioner now to challenge the notice under Section 148 of the Act in the facts and circumstances of the case narrated hereinabove. - Decided against assessee.
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2015 (8) TMI 468
Calculation of capital gain - addition made by the Assessing Officer on the basis of the 18% of the project cost - Commissioner after having noticed that the dispute was with regard to calculation of value of gross consideration received by the assessee held that advertisement cost, extra amounts paid to land lord and the assessee are not part of actual cost of construction, hence deleted the addition also confirmed by ITAT - Held that:- For the purposes of valuation of the lease of undivided 50% share in the land in favour of the third party (developer) has been arrived at Rupees Four Crore by calculating 50,000 sq.ft. as the super built up area i.e. 50% of the constructed super built area by adopting the rate of construction at ₹ 800/- per sq.ft. and accordingly, the total sum payable has been arrived at Rupees Four Crore and the consideration of ₹ 1,40,00,000/- paid to the land lord has also been included in the said valuation. In fact it requires to be noticed at this juncture itself that developer has provided certain extra amenities in respect of 18% of super built area to be delivered to the assessee for which the assessee has paid a sum of ₹ 90,55,695/- which also came to be allowed by the Assessing Officer. The cost of construction having been agreed upon between parties at ₹ 800/- per sq. ft. and same being the full value of consideration which was agreed to between the parties and which was not rejected by the Assessing Officer by assigning reasons, same ought to have been accepted. We are of the considered view that amount of ₹ 1,40,00,000/- paid to the land lord to be accepted as part of actual construction and as such we are of the view that the finding arrived at by the Appellate Commissioner at Paragraph 6 by holding payment of ₹ 1.40 crores made to owner and amount paid to assessee to vacate the premises had nothing to do with the construction and it is also held that same is in consonance with the Tripartiate Agreement entered into between the parties and in that view of the matter it is to be held that the Appellate Authorities were correct in holding that the addition of ₹ 56 lakh made by the Assessing Officer on the basis of project cost indicated by the developer is liable to be deleted. The Assessing Officer has not gone into the issue of valuation adopted by the assessee, about and with regard to its correctness, the CIT (appeals) has proceeded to delete the additions made by the Assessing Officer on the facts obtained which we find that there is no infirmity. Said reasoning is just and proper. - Decided in favour of the assessee
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2015 (8) TMI 467
Disallowance of deferred revenue expenditure in the aggregate incurred towards the product development - Held that:- On a plain reading of section 35 of the Act, we are unable to accept the plea of the learned counsel for the assessee that deferred revenue expenditure could be allowed by way of carry forward. There is no provision under the Income-tax Act which provides for such a method of claiming deferred research and development expenditure. Moreover, the Assessing Officer has allowed the expenses relatable to the year under consideration and disallowed only the expenditure not relatable to the relevant assessment year. It is also not the case of the assessee that the expenditure is relatable to the year under consideration. Therefore, in our firm view, the authorities below were justified in disallowing such a claim made by the assessee. Accordingly, the first question of law is answered against the assessee and in favour of the Revenue. Main plank of the argument of assessee is based on the decision of the Supreme Court in Madras Industrial Investment Corporation Ltd. v. CIT [1997 (4) TMI 5 - SUPREME Court]. However, we find that the said decision relates to the issue of discount on debentures and the said decision does not apply to the facts of the present case. - Decided against assessee.
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2015 (8) TMI 466
Entitlement for exemption under Section 10(23C) (vi) - Held that:- It is an undisputed fact that the petitioner – University has been established under the provisions of the Universities Act, 2009, and accordingly, the same was included in the Schedule of the Universities Act, 23009 by publication in the Gujarat Government Gazette on 11.04.2012. We have perused the provisions of the Universities Act, 2009 as well as the First Statutes of the petitionerUniversity. Several aspects have been pleaded by both the sides with regard to the eligibility of the petitioner – University for getting exemption under Section 10 (23C) (vi) of the Act. However, we would like to deal with the present case at this stage only on the ground that the Chief Commissioner of Income Tax had no occasion to deal with the case of the petitioner in absence of sufficient materials i.e. final balancesheet showing income and expenditure account upto 31.03.2014 though the order has been passed on 20.10.2014. Chief Commissioner of IncomeTax, before passing the impugned order dated 20.10.2014, ought to have perused the relevant materials with regard to the income and expenditure of the University and ought not to have decided the case on the reasons assigned in the impugned order having insufficient materials to come to the conclusion that the University is established for earning profit from imparting education to the students. The respondents authorities ought to have perused the powers of the State Government under the Private Universities Act, 2009 while dealing with the case of a University established under the said Act. The respondents authority ought to have considered the powers of the State Government provided under Section 43 of the Universities Act, 2009. Section 43 of the Universities Act, 2009 empowers the State Government to take action against the Universities in certain circumstances. Thus the impugned order requires to be quashed and set aside only on the ground referred hereinabove and accordingly, quashed and set aside. The matter is remanded to the Chief Commissioner of IncomeTax for a fresh consideration with regard to the application dated 21.11.2013 submitted by the petitioner – University for grant of certificate under Section 10(23C)(vi) of the Act, after giving an opportunity of hearing to the petitioner - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 465
Income arising out of interest - whether cannot be taken into account for the purpose of giving benefit under section 33AB as held by Tribunal? - Held that:- It is not in dispute that the surplus commercial funds available with the company were kept in short- term fixed deposits. The company has borrowed funds for the purpose of carrying on its business. The funds may not always be necessary or may not always be blocked. Therefore, the funds which were surplus at any point of time were fruitfully invested in short-term fixed deposits and the assessee thus earned interest which in a way has reduced its burden on account of interest as would appear from the two figures indicated above. It is, therefore, not possible to hold that the interest earned was not a business income. When the assessee has paid interest of nearly ₹ 2.66 crores and has earned interest of nearly ₹ 1.88 crores, the effective debit on that side is less than ₹ 1 crore. No reason why it can be said that the interest earned by the assessee should not be treated as the business income for the purpose of the benefit under section 33AB. Another reason why the views expressed by the Tribunal cannot be accepted is that the benefit under section 33AB can be obtained provided the assessee has made the deposits with the national bank. Such deposits are not interest-free deposits. Interest also accrues from such deposits. If the intention of the Legislature was that income arising out of interest is to be excluded then a specific provision in that regard would have been made in the section itself. - Decided in favour of the assessee.
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2015 (8) TMI 464
Maintainability of appeal against the order passed by the Tribunal under section 254(2) - Held that:- The Tribunal had passed an order dated June 30, 2010. The Tribunal corrected a mistake on account of not having noticed the judgment of the Supreme Court in CIT v. Amalgamations P. Ltd. [1997 (4) TMI 8 - SUPREME Court ]. The Tribunal expressly recorded that the applicability of the decision cannot be adjudicated under the provisions of section 254(2), as the same is covered under section 254(1) of the Act. The respondent agrees that as and when an order is ultimately passed under section 254(1) in accordance with the order dated June 30, 2010, under section 254(2), the same would be appealable under section 260A. The appellant, therefore, is not without a remedy in the event of the order under section 254(1) being adverse to it. This order in an application under section 254(2) is not appealable.
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2015 (8) TMI 463
Entitlement to deduction under section 54 - assessee had failed to construct her house within the stipulated period of three years - ITAT allowed claim - Held that:- In order to get the benefit of section 54 of the Act, it does not appear that in case of purchase of the property with sale proceeds it has to be reckoned within three years, in case of construction of new building utilising sale proceeds, the construction has to be completed within a period of three years of the sale. In this case, question of registration of document does not arise and it is a question of investment in construction of the new building. When it was found on fact that construction was completed within three years of sale of the property, the benefit would automatically follow. Decided in favour of assesse.
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2015 (8) TMI 462
Validity of proceedings under section 153C - Held that:- In the instant case, the seized documents allegedly belonging to the assessee were handed over to the Assessing Officer of such other person on 5.6.2009. Now, as per the proviso to section 153C of the Act, the date of search is to be substituted by the date of receiving books of account or documents or assets seized. Accordingly, the assessment can be reopened of the preceding six years than 5.6.2009. In this case, the previous year in which the documents are handed over is 1.4.2009 to 31.3.2010. The assessment year would be assessment year 2010-2011. Accordingly the AO has the jurisdiction to reopen the assessment for six assessment years preceding this assessment year. They are 2009-2010, 2008-09, 2007-08, 2006-07, 2005-06 & 2004-05. As assessee further submitted that the assessment for assessment year 2003-04 is barred by limitation so far as the present assessee is concerned, in our opinion, there is substance in the above submission of ld counsel for the assessee and, therefore, we hold that the assessment framed u/s. 144/153C of the Act dt.30.12.2010 for assessment year 2003-04 is clearly barred by limitation. See Vijay M. Vimawal v. Asstt. CIT [2009 (6) TMI 626 - ITAT AHMEDABAD-A ] The documents having been handed over to the AO of the assessee on 5.6.2009 relevant to assessment year being 2010-2011, the AO can reopen the assessment for six preceding assessment years i.e. assessment years 2004-05 to 2009-2010 and assessment for assessment year 2003-04 is barred by limitation - Decided in favour of assessee.
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2015 (8) TMI 461
Penalty imposed under section 271(E) - mode of repayment - loan was actually repaid through account payee cheques but due to a clerical mistake it was wrongly shown as cash payments in the audited books of account - CIT(A) deleted penalty - Held that:- Assessee's contention that repayments through cheques were wrongly mentioned as cash payments as a result of clerical mistake is believable because, as found by the learned Commissioner of Income-tax (Appeals), withdrawals made from State Bank of India account of M/s. Supriya School of Nursing through cheques were wrongly mentioned in the books of account as cash withdrawals. Therefore, on overall examination of facts and materials on record, it is very much evident that the repayment of loan by the assessee to Mr. S. S. Prasad and Smt. S. Vijay Kumari were through account payee cheques. Hence, there is no violation of provisions contained under section 269T of the Act thereby, attracting the penal provision of section 271E. In the aforesaid facts and circumstances, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) in deleting the penalty imposed under section 271E - Decided in favour of assessee.
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2015 (8) TMI 460
Treating the income from house property as business income - Held that:- Merely because income is attached to a property it cannot be a sole factor for assessing such income as income from house property and it has to be seen that whether it was the primary objective of the assessee to exploit the property in a simple manner or to exploit it commercially i.e. to exploit it by way of complex commercial activities to arrive at the generation of income that could be taxed under the head income from house property or as income from business. If it is found that main intention is to simply let out property or any part of it, resultant income must be assured assessed as income from house property but if main intention is found to be exploitation of property by way of commercial activities, then resultant income must be held as business income. Where assessee company has developed shopping malls/business centres on properties owned by it and let out same by providing host of services/facilities/amenities in the said mall/business centres, it can be said that basic intention of assessee was commercial exploitation of its properties by developing them as shopping malls/business centres, therefore, income derived therefrom is assessable as business income. In the instant case before us there is no dispute that as per memorandum of Association of the company it is the main object of the company to purchase and/or acquire property and to give on lease and/or on license basis along with complex commercial activities and that is how the company has declared its income from such property as their business income. Even the agreement executed with the lessee of the impugned property does not mention the word “tenant”, therefore there is no simple landlord and tenant relationship between the assessee company and the lessee. Since, there is no change of the party in the lease agreement i.e. M/s Shopper Stop Ltd. and since there is no fresh agreement also for the same even after acquiring the property, it is clear that the intention of the assessee has not gone for a change and it remains the earlier one only i.e. to exploit commercially by way of complex commercial activities generating the business income as part and parcel of the assessee’s business activity only. A perusal of the agreements entered by assessee would show that the activities involved in providing the various services/facilities/amenities meet all the aforesaid four requirements laid down by Hon’ble Supreme Court in the case of Karnani Properties Ltd. v. CIT, (1971 (8) TMI 18 - SUPREME Court) to qualify as business activities. Hence, we do not find any reason to deviate from the findings recorded by the CIT(A). Accordingly, we uphold the order of the CIT(A) and dismiss the appeals of the Revenue and allow the appeal of the assessee on the issue of treatment of income declared by assessee as income from business. - Decided in favour of assessee.
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2015 (8) TMI 459
Addition made on account of low Gross profit - Estimated GP rate to determine Net profit - rejection of books of accounts - Held that:- We find that the assessee AO found that the books of account were not reliable. It is a fact that payment of more than 3 Crores were made in cash that details of nature of purchases quantity of purchases or name of suppliers were not supplied before the AO or FAA mentioned in the ledger, that assessee could not produce any vouchers in support of the expenses he had claimed. It is not the case that the AO had made GP addition without any basis. He had actually compared the GP of the bamboo supplier who were from the same locality and had similar turn over. We find that in the earlier preceding year the assessee had shown GP of more than 9%. Thus, his approach is very logical. It is also a fact that the assessee had not produced the creditors and the cash book and the bank account details were not matching. Considering the non reliability of the books of account, expenses and purchases, we are of the opinion that the estimate the income of made by the AO and confirmed by the FAA was is reasonable and justifiable. With regard to the higher percentage of the GP, we are of the opinion that in the interest of justice it should be restricted to 6.5% in place of 7.37%. We find that the cases relied upon by the assessee are not applicable to the facts of the case, as the business of the assessee is different and the facts are not similar. In our opinion, same are of no help. - Decided partly in favour of assessee.
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2015 (8) TMI 458
Addition on account of deposits made in undisclosed bank account with Prime Coop. Bank Ltd. (PCBL) without allowing set off of loss made in purchase of sale of shares and future option - Held that:- Copy of the statement of account of bank in question was filed by the assessee before us which shows that deposit of ₹ 37.75 lakhs was not made in the said bank account at a time, but, the same amount represents the aggregate amount of deposit, which was made in the said bank account during previous year. A perusal of the bank account shows that there were regular withdrawals from the said bank account itself. No material has been brought on record by the revenue to show why the withdrawals made from the same bank account could not have been available with assessee for making subsequent deposits in the bank account. In above facts, in our considered view, adoption of entire aggregate deposits during the year of ₹ 37.75 lakhs as income, by ignoring the withdrawals, was not justified. We find that the peak deposits in the said bank was ₹ 12,31,169.88 on 17.1.2008. Further, the frequency of deposit and withdrawal indicates that the assessee was carrying on certain undisclosed deposits. Therefore, it would be reasonable to estimate the said business income, and also to treat the same as business income of the assessee. We, therefore, estimate the assessee’s profit from such business at the rate of 5% of ₹ 37.75 lakhs, which comes to ₹ 1,88,750/-. Therefore, in our considered opinion, it would be just and fair to treat ₹ 14,19,919.88 (Rs.12,31,169.88 plus ₹ 1,88,750/-) as income of the assessee in respect of the bank account in question. We, therefore, delete the addition to the extent of ₹ 23,55,080.12 (Rs.37,75,000/- minus ₹ 14,19,919.88) and confirm the addition to the extent of ₹ 14,19,919.88, accordingly - Decided partly in favour of assessee.
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2015 (8) TMI 457
Taxability of the income generated by fees for technical services (FTS) - applicant relies on DTAA between India and Belgium and also the DTAA between India and Portugal and, since the Portugal Treaty goes beyond the Treaty in between India and Belgium as per the protocol the applicant will be entitled to take the benefit of Portugal Treaty also - Held that:- We examined the application threadbare. The three questions which have been asked do not pertain to income on royalty or the income generated on account of the earned interest. There is no statement found in the whole application that the applicant does not have an income from royalty or from interest. In that view, Shri Piyush Kaushik made a categorical statement before us that he is not inviting any question on the income received by the applicant on royalty and interest income. On the other hand, he has made a categorical statement in writing that the applicant was convinced about the taxability of the royalty and interest income. In our opinion, therefore, this cannot be seen as a device to avoid the tax. In that view we would prefer to admit the application. We make it clear that the Department will be free to take such action as is permissible by law in respect of income on royalty and interest income aspect.
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2015 (8) TMI 456
Non informing about the application filed before AAR - First objection of revenue that after filing the application when the matter proceeded before the Assessing Officer on the basis of the return filed by the applicant for those proceedings the Assessing officer was not informed about the applicant having filed the present application before this Authority - Held that:- Admittedly, the applicant is a non-resident Indian (NRI). Considering that the applicant is not an Indian taxpayer the application is admitted.
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Customs
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2015 (8) TMI 490
Import of Ultrasound Systems, probes, and their parts and components. – Exemption on specific types – Commissioner apprehended that exemption under Notification of 2000 was restricted only to specific type of ultrasound system, namely, A scan and if it had additional feature, such as B scan and M scan, those were excluded by implication – Tribunal vide impugned order decided that systems having additional features would not be denied exemption – Held that:- if equipments can be used in multiple applications in addition to their use as Ophthalmic applications, benefit of exemption was not to be denied – History of notification shows that when ultrasound equipment contained feature or mode of B scan, it was specifically so stated and exempted – Specific equipments mentioned alone were to be granted exemption – If equipment was one specified under exemption notification, it may be used for multiple purposes, this was not same as stating that notification itself should be read so as to extend what was "specified equipment" therein – Thus, Tribunal judgments set aside and order of Commissioner upheld – matter remanded back to tribunal to decide two other aspects - Decided in favour of Revenue.
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2015 (8) TMI 489
Renewal of Customs Brokers License – Rejected – Misconduct and suppression of information – Respondents application for renewal of License was rejected by Appellant, on ground of information of misconduct received from various port of country, therefore, show cause notice was issued – Tribunal by impugned order reversed decision of Commissioner – Held that:- Commissioner denied renewal of licence primarily on ground that there was complaint of misconduct and also because respondent had suppressed material information required to be declared under Regulation – Conditions to be fulfilled by applicant for grant of licence were provided for in Regulation 5 – In said application, respondent had given declaration which explicitly make it clear that it was categorical statement made by respondent that there was no judicial/quasi judicial cases pending against it – Explanation provided by respondent does not deserves to be accepted – This clearly amounts to suppression of material information required to be furnished by respondent at time of making declaration – Appeal hereby allowed – Decided in favour of Revenue.
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2015 (8) TMI 488
Restoration of appeal - Doctrine of merger - Vide impugned order reported in [2013 (10) TMI 124 - GUJARAT HIGH COURT] Gujrat high court upheld tribunals decision, dismissing application submitted for restoration of appeal - Apex Court dismissed the appeal after condoning the delay.
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2015 (8) TMI 487
Demurrage Charges – Grievance of petitioner was that goods were unnecessarily incurring demurrage charges – Held that:- Commissioner directed to assess provisional redeemable value of goods and said assessed amount will be deposited by petitioner with Commissioner – Imported goods to be warehoused in private godown hired by petitioner – Goods will be stored in godown subject to re-inventory by Customs at time of storing and will be subject to Special Officer’s supervision and control – Application disposed of – Decided partly in favour of petitioner.
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2015 (8) TMI 486
Issuance of Detention certificates – Recovery of demurrage and rent - Petitioner contended that detention certificates were not issued qua five (5) bills of entries, imported by him – As detention certificates were not issued, demurrage and rent was incurred – Petitioner submits that charges incurred towards demurrage and rent have to be recovered from CONCOR – Held that:- respondent was directed to act in accordance with regulations i.e., Handling of Cargo in Customs Area Regulations, 2009 – Petition disposed of – Decided in favour of Petitioner.
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Corporate Laws
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2015 (8) TMI 485
Non-compliance of CIS regulation – Ex-parte order of termination was issued to protect rights of investors against Appellant’s activities considering it beyond ambit of CIS Regulations – Held that :-Respondent passed Impugned Order to protect interest of investors as per Sections 11(1), 11(4) and 11B read with Sections 11AA(1), 11AA(2) of SEBI Act, 1992 along with Regulation 65 of CIS Regulations of 1999 – Appellant who was directly and adversely affected by ex-parte interim impugned order had atleast legitimate expectation of getting opportunity of being heard before such directions were issued – Impugned Order was based more on speculative inferences rather than legal conclusions. Although, SEBI have power to pass ex-parte interim orders but it must do so only upon showing existence of circumstances which warrant such drastic measure – If Respondent, after conducting in-depth analysis of scheme comes to conclusion that schemes do not fall within ambit of CIS, Appellant would already have suffered irreparable loss due to its Members not being able to avail themselves of services offered by Appellant – Unless necessity or emergency of grave nature was shown by SEBI to take ex parte interim action in form of extreme directions there was no reason to halt business of Appellant especially in light when SEBI has not yet determined whether or not provisions of CIS were attracted to Appellant’s business – Impugned order cannot be sustained in eyes of law –Decided in favour of Appellant.
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2015 (8) TMI 484
Scheme of Amalgamation - Dispensing convening of meetings of equity and preference shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Sections 390 and 391 Companies Act, 1956 read with Rules 6 & 9 of the Companies (Court) Rules, 1959 – Held that:- board of directors of transferor companies no. 1 & 2 and transferee company in their separate meetings respectively unanimously approved proposed Scheme of Amalgamation – Equity shareholders and debenture holder of transferor company no. 1 & 2 and transferor company have given their consents/no objections in writing to proposed Scheme of Amalgamation and were found in order – Direction issued to Transferor company no.1 having 01 secured and 107 unsecured creditors, transferor company no.2 having 10 unsecured creditors and transferee company having 252 unsecured creditors, to hold their meeting to seek their approval to proposed Scheme of Amalgamation – Application stands allowed – Decided in favour of Applicants.
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Service Tax
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2015 (8) TMI 505
Non issuance of acknowledgement of discharge of service tax - Tax paid through VCES - Held that:- When the petitioner raises appropriate defences and files a reply to the show cause notice or if it is already filed during the course of his submissions which could be oral, he will be able to point out that he had availed of The Service Tax Voluntary Compliance Encouragement Scheme and complied with the same particularly of the requirement or procedure for making declaration of the payment of tax dues. The authority designated under the Scheme has acknowledged the declaration, that the petitioner has in terms of the declaration made the payment and furnished details to the Designated Authority under the Scheme along with a copy of the acknowledgement issued to him, but the Designated Authority has failed to issue an acknowledgement of the discharge of such dues and as is required. Authority having not yet issued the acknowledgement of discharge in such form and in such manner as may be prescribed does not mean that the petitioner has failed to discharge his liability and, therefore, the demand should not be sustained. If that certificate has not been issued and in terms of the paragraph, it would be open for the petitioner to urge that failure on the part of the authority to issue such a declaration should not visit him with any tax demand including of interest and penalty - no reason to keep the petition pending and entertained any further - Petition disposed of.
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2015 (8) TMI 504
Demand of service tax - appellant is engaged in providing security services and also other services like cleaning services, services to SEZ units and some non-taxable services - difference in gross value of taxable service as shown in ST-3 returns, as compared to turnover as per Books of Account. - held that:- Other than security services, the appellant also provided services like caretaking services, driving services, loading and unloading services, fire fighting services which are not covered in any category of taxable services. As per certificate of the C.a. produced by the appellant before the court below as well as this Tribunal, the total value of such services is ₹ 40,00,99,350/- for the disputed period. - no specific head of service category has been proposed in the show-cause notice nor confirmed in the impugned order - Thus, the show-cause notice as well as the impugned order are vague. As regards classification, it is settled law that classification of taxable service must be specified in the show-cause notice in order to fasten liability of Service Tax. - appellant is not liable to Service Tax in respect of the non-taxable services, the gross value of which totals ₹ 40,00,09,350/- and accordingly, the demand of ₹ 4,12,00,963/- is set aside. In respect of 'cleaning services', the same have been provided by the appellant to various organizations including Govt. Hospitals, Govt. Educational Institutions, Horticulture, Agriculture, Housing Societies etc. - appellant have paid Service Tax suo motu even before the issue of show-cause notice on the value of cleaning services provided to 'Private Hospitals, Private Educational Institutions, Charitable Hospital and Institutions considering the value of the same as inclusive of Service Tax amounting to ₹ 19,20,285/-. - demand of ₹ 2,94,55,469/- towards cleaning services is erroneous and is accordingly set aside. Even in the earlier period out of 7 SEZ units (under dispute) except Punj Lloyd and Glenmark Pharma, services have been provided to these SEZ units and based on the certificate from the Chartered accountant, exemption was allowed to the appellant. In the present case also, the certificate of chartered Accountant is available on record and the same was filed before the adjudicating authority also, which is evident from the impugned order. The certificate certifies that the security services valued at ₹ 31,97,986/- was provided to Punj Lloyd under the head, 'services provided to SEZ units during 2011-12. Thus, it is evident that the appellant have provided services to the SEZ units and accordingly the demand of ₹ 30,68,290/- attributable on this account is set aside. So far the issue of difference in value of services as per ST-3 returns and balance-sheet due to introduction in point of Taxation Rules, 2011 w.e.f. 1.4.2011, the liability to discharge Service Tax was shifted from the receipt basis to accrual basis. It is evident that the liability on accrual basis has been discharged, on the difference in the value of the services for the prior period also and therefore, the same were not included in the gross value, determined for ST-3 returns for 2011-12. So far the issue of 'reimbursement of expenses' which have been taxed, it is seen that the appellant have voluntarily deposited ₹ 31,37,207/- out of the total demand on this count as ₹ 34,64,339/- prior to issue of show-cause notice. This small difference of about 10% being ₹ 3,23,132/- remains, which is attributable to erroneous computation by Revenue by considering the gross value of service as exclusive of Service Tax instead of considering the same as inclusive of Service Tax. It is also taken notice that for earlier period, order dated 12.11.2012 in the appellant's own case, the adjudicating authority has accepted and correctly held that the value of service shall be considered as inclusive of Service Tax. - Decided in favour of assessee.
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2015 (8) TMI 503
Business Auxiliary service - services provided to bank as direct sales agents (DSA) by authorized car dealers - agreements to arrange loans - Quantum of commission - Imposition of penalty - Invocation of extended period of limitation - Suppression of facts - Held that:- Appellant were paying service tax on the commission received from other DSAs such as Kotak Mahindra Pvt. Ltd. and ICICI Bank - cross-examination of bank official is not necessary for such a simple factual matter. The bank has clearly indicated in their replies to the department the details of commission passed on by the bank. We find no reason to discard the information given by the bank. If appellant wanted to dispute the same, the appellant were free to get a clarification from the bank during last 7 years from 2006 when the Bank gave the details to the Department. But the appellant chose not to do so. Once the department produces a letter from the bank the onus shifts to the appellant to dis-prove the same. Therefore, we hold that the amount of commission paid by the bank for promotion of their financial products by the appellant to customers is subject to payment of Service Tax. Even if some part of the commission was given by the bank to the customers directly on behalf of the appellant, the fact remains that the bank has shown full amount of commission as paid to the appellant. Board Circular 87/05/2006-ST dt. 6.11.2006 supports this view while stating that if part of the dealer's commission is shared with the customers, that is an independent transaction between the dealer and the purchaser of the vehicle, and does not involve the service rendered by the dealer to the bank. Tax payable by the dealer would be the gross amount paid by the bank. - The banks were providing services under the category 'Banking and Other financial services' falling in clause (12) of Section 65. In relation to those services, the respondent- assessees were providing services for promotion or marketing of the banking and other financial services provided by the banks. The banks were, therefore, their clients being recipient of such services from the respondents. It has come in evidence that the respondents were required to obtain loan applications from their customers who desired to avail loans from the banks. The respondents had undertaken to process those applications and after scrutiny forward them to the bank. Admittedly, for such services, they were paid commission by the bank, which was reflected in their account. Once consideration accrued to them, as against the services provided by them to the bank, by way of commission, it was hardly of any consequence how a portion of that commission, which as per the particulars provided by the Bank was given as "pay out" to assessees in respect of which even the TDS was deducted, was spent by them. It is also seen that the service tax was being paid by the appellant on identical service provided to other financial institutions such as Kotak and ICICI. The Vice President of the appellant admitted that in the case of HDFC Bank they had raised debit notes for Service Tax but the bank did not pay them the tax. This is no excuse for not paying tax to the Government. Therefore extended time period is invokable because, the appellant knowingly did not pay the tax. Further, for not declaring the total commission received by them and the suppression of this fact also, the extended period of limitation would apply. Taxability of incentive / discount - Held that:- Only because some incentives/discounts are received by the appellant under various schemes of the manufacturer cannot lead to the conclusion that the incentive is received for promotion and marketing of goods. It is not material under what head the incentives are shown in the Ledgers, what is relevant is the nature of the transaction which is of sale. All manufacturers provide discount schemes to dealers. Such transactions cannot fall under the service category of Business Auxiliary Service when it is a normal market practice to offer discounts/institutions to the dealers. The issue is settled in the case of Sai Service Station (2013 (10) TMI 1155 - CESTAT MUMBAI) As regards the issue of tax on pre delivery inspections; there is no difference whether the services are provided by one dealer or another and therefore service tax cannot be levied in respect of inter dealer claims. Appeal of M/s. Jaybharat Automobiles Ltd. regarding duty demands except for demand of tax on inter dealer claim, is rejected. Interest under Section 75 and penalties under Sections 76 and 78 are ordered to be paid appropriately in accordance with the amount of demand confirmed by us. Penalty under Section 77 is upheld. - Decided partly in favour of Revenue.
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2015 (8) TMI 502
Waiver of pre deposit - Mandatory pre deposit - whether the petitioner would have to deposit the amount of 7.5% of the tax confirmed against him, as a condition for pursuing the appellate remedy before the Tribunal - Held that:- petitioner, in whose case also the lis commenced in 2013, would not be required to deposit the amount of 7.5%, as required pursuant to the 2014 amendment, and in that respect, he would have an efficacious alternate remedy before the Tribunal where he can file an appeal, together with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed against him by Ext. P6 order. At the time of filing the appeal, he will not be required to make any payment as a pre-condition for the hearing of the waiver application by the Tribunal. - petitioner is relegated to the alternate remedy available under the Finance Act, 1994, as amended, of approaching the Appellate Tribunal by way of an appeal against the order - Decided against Assessee.
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2015 (8) TMI 501
Maintainability of appeal - Monetary limit - Held that:- Division Bench of this Court in the case of Commissioner of Central Excise & Customs v. Stovec Industries Ltd., reported in [2013 (1) TMI 72 - GUJARAT HIGH COURT] held that in view of instruction dated 17-8-2011, tax appeal below ₹ 10 lakh is not maintainable and this instruction also applies to the pending appeal. Following the aforesaid decision of the Division Bench, we dismiss these tax appeals as not maintainable - Decided against Revenue.
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2015 (8) TMI 500
Appointment of Members of CESTAT - Appointment on reserved category - By notification/advertisement dated 17.8.2009, applications came to be invited for appointment to the post of Member (Technical), CESTAT - Supreme Court dismissed the appeal filed by the appellant against the decision of High Court [2014 (4) TMI 846 - BOMBAY HIGH COURT] wherein High Court There is no scope to assume that the Petitioner was mislead into believing that any posts had been reserved for the Members of Scheduled Caste/ Scheduled Tribes. In absence of any clear indication in the notification/advertisement, the Petitioner could never have insisted that one of the posts be treated as 'reserved post' and the candidature of the Petitioner be considered against the same. The Petitioner, in the present case did not choose to challenge the notification/advertisement dated 17.8.2009 on the ground that no vacancy was declared as 'reserved vacancy'. Instead the Petitioner applied for appointment in pursuance of the notification/advertisement dated 17.8.2009 without any demur - relief was rightly denied to the Petitioner.
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Central Excise
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2015 (8) TMI 495
Denial of refund claim - closure of the factory for 15 days or more is not in a particular calendar month and it is spilling over in two months - manufacture of “Gutkha” - production capacity based duty - Notification No. 30/2008-C.E. (N.T.), dated 1-7-2008 - Held that:- abatement is provided in case the factory did not produce the notified goods during any continuous period of 15 days or more, the duty calculated on a proportionate basis shall be abated in respect of such period. In the said Rule there is no mention that the period of 15 days or more should fall under a particular calendar month. Therefore, as per the plain reading of this Rule, the only requirement is that the period of 15 days or more should be a continuous period. The contention of the Revenue is contrary to the plain language of Rule 10 - No infirmity in the findings given by the Commissioner (Appeals). It was made absolutely in accordance with the provisions of Rule 10 and the same does not require any interference. Therefore, I am of the considered view that the impugned order is sustainable and the appeals filed by the Revenue are liable to be rejected - Decided against Revenue.
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2015 (8) TMI 494
Valuation of goods - Captive consumption - same or such goods - Commissioner (Appeals) has accepted the cost produced by the assessee but referred the wrong rule - tribunal reversed the decision of commissioner (appeals) - Held that:- Though in the Show Cause Notice the Assistant Commissioner had mentioned the applicability of Section 4(1)(a) of the Act, even he abandoned that course of action while passing the order. In the final order passed by him, he accepted that the case was covered by Section 4(1)(b) of the Act and therefore, applied the Valuation Rules, 1975. Further, as per him, it is the Rule 4 which was applicable. On the other hand, as per the Commissioner (Appeals), Rule 4 was not applicable and he invoked Rule 6 of the Valuation Rules, 1975. - It is not a case where Section 4(1)(a) of the Act is applicable. That is the common case of the parties. As per Section 4(1)(a) of the Act, normal prices of the goods, viz., the prices at which such goods are ordinarily sold by the Assessee to a buyer, is to be taken into consideration, subject, of course, to the condition that the buyer is not a related person and the price is the sole consideration for the sale. Rule 4 would be applicable only in those cases where value of “such goods” which are sold by the assessee for delivery at any other time nearest to the time of the removal of the goods under the assessment, appears to be reasonable to the concerned officer. Goods cannot be treated as same or would fall within the description “such goods” as sold to the other buyers in loose form when they are used captively by the appellant in the turnkey projects. We find that the only mistake which is committed by the Commissioner is to refer to Rule 6(b) inasmuch as in the present case, the goods are not consumed by the appellant/ assessee itself but used in the turnkey projects/contracts meant for the third party. Thus, it was Rule 7 which should have been referred to by the Commissioner (Appeals) as none of the preceding rules would apply. To put it otherwise, it is the case of ‘best judgment assessment’. However, we find that, that is the exercise otherwise undertaken by the Commissioner (Appeals) in accepting the costing of the goods which was placed by the assessee/appellant before the assessing officer and it was taken into consideration by the Commissioner (Appeals). - Impugned order is set aside - Decided in favour of assessee.
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2015 (8) TMI 493
Clandestine removal of goods - Shortage of goods - Held that:- Respondent had pointed out that this was due to accounting errors and there was no “shortage” in fact because of the reason that in respect of many inputs even stocks in excess was found. It was demonstrated before the authorities that though the shortage of the inputs was to the tune of ₹ 25.67 crores, at the same time many other inputs were in excess and those figures were to the tune of ₹ 27.59 crores during the same period. This fact alone demonstrates the bona fides of the respondent in claiming the Modvat credit on the basis of figures disclosed by them in respect of the inputs which were used while manufacturing the motor vehicles. A finding of fact is recorded that there was no clandestine of removal of any inputs. It is therefore, not a case for any interference. - Decided against Revenue.
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2015 (8) TMI 492
Valuation - inclusion of value of software into the value of hardware - Classification of goods - CD doc entry subscription - Classification under sub-heading 8517.00 or under Chapter sub-heading No. 8524.90 - Held that:- matter is squarely covered by the judgment of this Court in ‘Commissioner of Customs, Chennai v. Pentamedia Graphics Ltd.’ [2006 (5) TMI 90 - SUPREME COURT OF INDIA], in favour of the assessee - Decided against Revenue.
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2015 (8) TMI 491
Violation of Rule 3(1)(i), (ii), (iii) of Central Civil Services (Conduct) Rules, 1964 - violation of the principle of natural justice - Reinstatement of wages - Inspection of premises with search authorization - Held that:- Having regard to the charges framed against the officer, the punishment imposed is proportionate to the gravity of charges proved against him. Learned Additional Solicitor General appearing for the petitioner submits out that the matter should be sent back to the Disciplinary Authority to go into the aspect of proportionality. However, having regard to the fact that the litigations have been going on for the last eleven years, we are of the view that it is only in the interest of justice to give a quietus to the whole issue. - reinstatement without backwages and with a recorded censure would be the just and proper punishment. - Appeal disposed of.
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CST, VAT & Sales Tax
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2015 (8) TMI 499
Undervaluation of goods – Seizure – Petition was filed against seizure of undervalued goods, it was found that entire seized goods were auctioned and sold in public auction – Whether order of seizure was proper – Held that:- after perusal of records, manner in which goods were seized and sold were highly improper – power to seize was granted only when goods were without documents or were not supported by documents – In present case documents were there admittedly, documents were not forged but according to State, value of goods given in documents was incorrect – Officer did not at all consider fact that petitioner was manufacturer of goods and this was in sense case of stock transfer – Seizure of goods was penal action and normally seizure should only be done where goods were not accompanied by any document or documents on face of it were forged – Where only difference was with regard to value of goods, officer should not normally seize goods but should have directed driver not to sell them till verification of price was made – Therefore action of seizure was based on no evidence and was totally illegal. Auction of Seized goods – Whether seized goods were liable to be auctioned – Held that:- Rules of natural justice says that action which affects rights of any party cannot be taken unless notice has been issued to said party – Therefore, before selling goods, officer-in- charge of check-post must issue notice to consignor or consignee – Though Act and Rules do not provide for issuance of notice(s), but no penal action can be taken without notice to affected party – Rule 71(5) clearly lays down that auction has to be conducted by Superintendent with previous sanction of Commissioner – From records we could not find any material to indicate that sanction of Commissioner had been taken before putting goods to auction – Therefore, auction was conducted without any proper sanction. Calculation of Reserve price – Auction – Whether amount, at which authorities auction seized goods, was justifiable – Held that:- According to petitioner, value of goods was ₹ 4,80,000 whereas officer-in-charge assessed value at ₹ 11,52,000 – Formula that was used to discern reserve price was fixed by fixing three times rate of tax payable on price estimated by officer seizing goods plus five per cent. for overhead cost – Finally goods amounting to ₹ 11,52,000 as per officials were auctioned for paltry amount of ₹ 1,76,000 –Present auction, does not comply either with provisions of Act or Rules or even with any reasonable view which could be taken in such matter – Rate at which oil was auctioned indicates that officer was not aware of market value of oil – Therefore auction was totally arbitrary and unconscionable, liable to be struck down – Petitioner was deprived of his goods and was paid nothing –Therefore, State directed to pay to petitioner sum of ₹ 4,80,000 which was declared value of goods along with interest at 12 per cent after deducting amount of tax payable – Decided in favour of Petitioner.
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2015 (8) TMI 498
Tools-open jaw spanners – Interpretation of Entry – Entry 6(ix) of BST and Entry 14(iv)(ix) of CST – Whether interpretation of Entry 6(ix) of Bombay Sales Tax Act, 1959 and Entry No.14(iv)(ix) of Central Sales Tax Act, 1956, “tools – open jaw spanners” attract tax liability @ 4% or should be treated as Entry No.102 of BST, 1959 – Held that:- iron and steel were main descriptive part as per entry 14(iv)(ix) – Upon careful perusal of Entry in question, CST and BST has identical entry – Supreme Court in case of State of Tamil Nadu v/s Pyare Lal Malhotra [1976 (1) TMI 151 - SUPREME COURT OF INDIA], observed that there were no dispute that Entry No.(iv) in Section 14 of CST, as originally worded, was meant to enumerate separately taxable goods and not just to illustrate one taxable substance, i.e, “iron and steel” – Each subitem in Entry No.(iv) was separately taxable commodity for purpose of sales tax and each of them forms separate species for each series of sales although they may all belong to genus, “iron and steel” – Object of Legislature was to tax sale of each commercial commodity and not sale of substance out of which it was made – Therefore Tribunal did not commit any error – Decided in favour of Assessee.
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2015 (8) TMI 497
Whether industrial margarine was liable to attract only lesser rate of tax, as "edible oil" given under entry 38(19) (d) of KVAT Act, while relying upon decision of supreme court in Aluva Sugar Agency v. State of Kerala [2011 (9) TMI 11 - Supreme Court of India] by which decision of this court in SSD Oil Mills Company Ltd. v. State of Kerala [2010 (6) TMI 732 - KERALA HIGH COURT] was reversed – Held that:- Supreme Court observed that, expression used in Government Notification, using words "such as groundnut oil, gingelly oil and vanaspati" was only illustrative and not exhaustive –Main issue for adjudication in said appeal was whether "margarine" could be treated as "edible oil" and thus would fall under entry 17A of Second Schedule to KGST Act, to have concessional rate of tax. Bench observed that, one has to consider whether margarine can be considered as edible oil, pointing out that "edible oil" was one which could be used for human consumption; simultaneously making it clear that, it was not necessary that all edible things should be consumed in form in which they were available – Heading of entry 1516 reveals that, it could be animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, whether or not refined, but not further prepared – Process of "emulsification" was not at all mentioned with regard to entries. It was for this reason, that product like "margarine" were separately enlisted under Head 1517, showing it as edible mixture –All types of margarine, except liquid margarine, stand specifically included under HSN Code 1517.10 – By virtue of entry 64(8) of SRO No. 82/2006 and description of commodity with HSN Code 1517.10, all margarine, except liquid margarine, were liable to attract higher rate of tax and there cannot be any distinction between "table margarine" and "industrial/ bakery margarine" – Challenge raised by petitioners was not correct or sustainable – Decided against the assessee.
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Wealth tax
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2015 (8) TMI 483
Enhancement in value of net wealth - Denial of exemption claim - AO denied the exemption claimed on the ground that these are single immovable properties and do not quality as commercial establishment - CWT(A) allowed exemption claim - Held that:- in absence of any contrary material brought to our notice by the Ld. Departmental Representative against the order of the Tribunal [2015 (8) TMI 186 - ITAT PUNE], we find no infirmity in the order of the CWT(A) treating the 2 properties as commercial properties. The said properties in our opinion, are not assets as per the provisions of section 2(ea)(i)(5) of the W.T. Act. Accordingly, the order of the CWT(A) is upheld - Decided against Revenue.
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