TMI Tax Updates - e-Newsletter
August 18, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Reopening of assessment - mere reliance on Audit report without forming his own opinion, reassessment proceedings initiated by the AO are not valid - HC
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Income Tax:
Reopening of assessment - Valuation of closing stock - there is no failure on the part of the assessee to disclose truly and fully all material facts - reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot be sustained - HC
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Income Tax:
Unexplained share capital/share application money - When the source of the impugned amount is itself bogus, the net result cannot be genuine unless and until, positive material is brought on record to contradict the finding of the Department - AT
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Income Tax:
Recognition of income - determination of value of WIP - Merely because assessee has offered the same to tax in A.Y. 2004-05 cannot be a ground to reduce the correct WIP from ₹ 4.94 crores to ₹ 3 crores for A.Y. 2001-02. - AT
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Income Tax:
Penalty u/s. 271C - assessee failed to deduct tax u/s 192 on the payments to doctors drawing fixed remuneration which are essentially in the nature of 'Salary'- reasonable cause for the assessee for short deduction of the tax within the meaning of Sec. 273B - AT
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Income Tax:
Deduction of interest - Whether CIT(A) has erred in allowing the deduction of interest as revenue expenditure even though the same was never claimed by the assessee in the return of income? - deduction allowed - AT
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Income Tax:
Deduction u/s 35D - the assessee had increased the share capital by way of private placement with its holding, hence, deduction u/s 35D not allowable to the assessee - AT
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Customs:
Claim of Drawback on re-export of duty-paid goods – considering application for drawback, documents filed in support of claim should be considered liberally and drawback cannot be denied on mere technicalities or by adopting narrow and pedantic approach, since duty drawback is incentive scheme - HC
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Customs:
Import of Printing Machine at concessional rate – Burden of proof was on appellant to establish that machine imported by it generates more than 35,000 composite impressions or copies per hour which appellant failed to do so - SC
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Service Tax:
Advance receive before levy of service tax i.e. 1/5/2006 - in the absence of any positive action of in suppressing the details from the department, demand cannot be raised invoking extended period of limitation - AT
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Service Tax:
Supply of manpower - factory along with the machinery of the appellant was to be given under leave and licence to one company - amounts received by the appellant as actual salaries cannot be considered as an amount received for rendering of manpower recruitment and supply agency services. - AT
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Service Tax:
Activity of collection of toll / fee - collection of tolls by the appellant is not considered as Business Auxiliary Service provided to NHAI - AT
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Service Tax:
Denial of refund claim - Unjust enrichment - If the revenue authorities were not inclined to accept the chartered accountant content certificate, they should have adduced some evidence that the incidence of duty has been passed on - AT
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Central Excise:
Valuation - best judgment assessment - related person - where arm's length sales are made at well below cost, CESTAT is not justified in adopting cost plus method - SC
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Central Excise:
Invocation of extended period of limitation - Valuation - assessees could not be faulted for action taken prior to issuance of clarificatory circular - SC
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VAT:
Legality of a demand of ₹ 1/- per bulk litre of industrial alcohol manufactured - so long as expenses are incurred by the State Government in ensuring that industrial alcohol is not used as potable alcohol, recovery thereof shall be permissible - SC
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VAT:
Levy of Administrative Fee at the rate of 50 paise per bulk litre - the subject Regulatory Fees intended to prevent the conversion of alcoholic liquor for industrial use to that for human consumption is legal, and need not be strictly quid pro quo as long as it is not excessive - SC
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VAT:
Legality of Andhra Pradesh Rectified Spirits Rules, 1971 - Rule 15 is stroked down dealing with the export of rectified spirit, finding that it imposes a tax, not a fee, on the Appellants and is outside the Respondent State’s legislative competence - SC
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VAT:
Exemption granted on Invalid F-Form – Invocation of revision jurisdiction – KGST - If there was error resulting in revenue losing tax, it would be prejudicial to interests of Revenue - revision upheld - HC
TMI Short Notes
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Income Tax:
Example:- Loan Taken on 01-05-2006 of ₹ 5,00,000. Construction ends on 07-09-2012. Rate of interest is 1%. Calculate interest for pre-acquisition period?
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Income Tax:
Example: 4) The details of House property are as follows:
Municipal value: 80,000, Fair rent: 78,000, Standard Rent: 85,000, Annual rent: 72,000, Property remains vacant for 3 months and loss due to vacancy: 18,000. What is the Gross Annual value?
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Income Tax:
Example: 3) The details of House property are as follows:
Municipal value: 60,000, Fair rent: 65,000, Standard Rent: 63,000, Annual rent: 72,000, Property remains vacant for 5 months and loss due to vacancy: 30,000. What is the Gross Annual value?
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Income Tax:
Example: 1)The details of House property are as follows:
Municipal value: 60,000, Fair rent: 68,000, Standard Rent: 62,000, Annual rent: 66,000, Unrealised Rent: 6,000. What is the Gross Annual value?
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Income Tax:
Example: 2) The details of House property are as follows:
Municipal value: 60,000, Fair rent: 68,000, Standard Rent: 62,000, Annual rent: 66,000, Unrealised Rent: 2,000. What is the Gross Annual value?
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Income Tax:
What does building or land appurtenant includes?
Articles
Notifications
Circulars / Instructions / Orders
News
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RBI Reference Rate for US $
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Fm: For Some Years, Banks Are Facing Challenging Time But No Cause Of Panic;
Case Laws:
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Income Tax
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2015 (8) TMI 573
‘Write off’ of bad debts - can Assessing officer verify the claim in exercise of powers as provided under provisions of Section 36(2) of the I.T.Act? - CIT(A) and ITAT held that claims on deduction on the ground of ‘write off’ of bad debts of assessee corporation, having become irrecoverable are covered by provisions of Sub-Section 36(1)(vii) and not under Sub- Section 36(1)(vii-a) of the I.T.Act,1961, we do not find any justification to reopen the issues - Held that:- In the instant case, Assessee Corporation being a Non-Banking Financial Company has been held to be entitled to have a policy of writing off of irrecoverable debts which were not subjected to scrutiny by Assessing officer when debtors in question stopped existing in books of account of Assessee Company. Assessing officer, infact, should not have isolated such claim of Assessee Corporation just by picking notes on accounts disclosure, and disallowed where as such notes were to be considered in the entirety alongwith financial statements, particularly when policy of Assessee Corporation also indicated that such a claim had been made in accordance with provisions of the I.T.Act. Further, I.T.Appellate Tribunal also noticed that no controverting material was brought on record by Revenue on this point, therefore, impugned order passed by learned CIT (A) deserved to be upheld also on that count. According to CIT(A) w.e.f. 1.4.1989, provisions of Section 36(1)(vii) with addition of explanation have undergone a change. Therefore, there was no requirement on the part of assessee to establish that any debt had become bad in the previous year. The only requirement on the part of assessee is to write off the bad debt as irrecoverable. As Assessee Corporation had never claimed any benefit under Section 36(1)(vii-a), the question of applicability of Section 36(2)(v) of the I.T. Act, 1961, would not arise. Thus, finding of Assessing officer was found to be erroneous. CIT(A) and I.T.A.T. are in agreement that such a claim of bad debt upon ‘write off’ is allowable under provisions of Section 36(1)(vii) and no part of this claim for deduction of bad debt, can be disallowed under Section 36(2). Writing off of bad debts by assessee unilaterally is sufficient ground for claim to be allowed irrespective of fact that Assessing officer harbours a belief that debt in question has not yet become a bad debt. Assessee Corporation’ MIDC’ is a public sector non-banking financial company. Therefore, it was entitled to have a policy of writing off of bad and irrecoverable debts which were not to be subjected to scrutiny by Assessing officer. When Datas in question in regard to irrecoverable loans stopped existing in books of accounts of assessee company. Assessing officer, should not have isolated such claims of assessee corporation just by picking notes on accounts disclosure and disallowed such claims. Moreover, assessee corporation also indicated that such a claim had been made in accordance with provisions of the I.T.Act. Further, there was no controverting material brought by Revenue on record on this point to deny the claims. We thus do not find any ground to differ from views taken by CIT(A) and I.T.A.T on the issue of ‘write off’ of bad debts in both the I.T. Appeals. With regard to standing guarantor in respect of loans given to debtor company namely Meghalaya Phytochemicals Ltd, CIT(A) and I.T.A.T have not returned any finding. Further this point has also not been raised in appeals. Thus, we express no opinion in respect thereof. - Decided against revenue.
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2015 (8) TMI 572
Investment allowance under section 32A in respect of plant and machinery installed from April 1, 1987, to March 31, 1988, in the assessment year 1989-90 - Tribunal allowed claim - Held that:- Reintroduction of the scheme of investment allowance under section 32A of the Act the intention of the Legislature was to grant the benefit thereunder in respect of plant and machinery installed after 1988 as also to plant and machinery installed during the period April 1, 1987, to March 31, 1988. However, with a view to take care of a situation whereby the cost of such machinery had been met with out of the amount released to the assessee from the Development Bank, an Explanation came to be introduced below sub-section (1) of the section which provides that for the purposes of investment allowance, "actual cost" shall mean the actual cost of the ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been met out of the amount released to the assessee from the Development Bank in accordance with the provisions of section 32AB(6) of the Act. Thus, to the extent of the benefit derived under section 32AB of the Act such amount stands reduced from the actual cost of the plant and machinery, and as such, the question of double deduction would not arise. As is apparent on a plain reading of sub-section (8B) of section 32A of the Act the provisions of that section have been made applicable to any new machinery or plant installed after March 31, 1987, but before April 1, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that he had, before June 12, 1986, entered into a contract for the purchase of such plant or machinery with the manufacturer or owner of, or a dealer in, such machinery or plant, or had, where such machinery or plant has been manufactured in an undertaking owned by the assessee, taken steps for the manufacture of such machinery or plant. Thus, the intention of the Legislature clearly was to give the benefit of investment allowance in respect of plant or machinery installed during the period March 31, 1987, to April 1, 1988. If the contention of the appellant- Revenue were to be accepted, the provisions of sub-section (8B) of section 32A would be rendered nugatory and the very purpose of introducing the sub-section would be frustrated. Moreover, having regard to the fact that an assessee cannot claim the benefit of both investment allowance and investment deposit account in the same assessment year, the question of double deduction would not arise. Thus, sub-section (8B) of section 32A of the Act clearly envisages allowance of investment allowance under section 32AB of the Act in respect of plant and machinery installed from April 1, 1987, to March 31, 1988, in the assessment year 1989-90 and, hence, no infirmity can be found in the order of the Tribunal in allowing investment allowance under section 32A of the Act in respect of plant and machinery installed from April 1, 1987, to March 31, 1988. - Decided in favour of the assessee.
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2015 (8) TMI 571
Reopening of assessment - reliance on Audit report - Held that:- In a case like this where even while sending the proposal to the higher authority to grant the approval for initiation of the reassessment proceedings, the Assessing Officer still maintain that audit objection raised by the audit party is not valid and/or correct. Therefore, as such it cannot be said that the Assessing Officer had independently formed an opinion and/or had reason to believe independently that the income chargeable to tax has escaped assessment. From the correspondence between the Assessing Officer and the higher authority it appears that though the Assessing Officer maintains that the audit objection raised by the audit party is not correct, however as the amount involved is very high as mentioned by the audit party and to safeguard the interest of the Revenue and the guidelines issued the reassessment proceedings have been initiated. Therefore, as such the formation of the opinion by the Assessing Officer that the income chargeable to tax has escaped assessment has been vitiated and therefore, the impugned reopening of the assessment cannot be sustained and the same deserves to be quashed and set aside. Now, so far as the submission of revenue that as now, the order of assessment/reassessment under section 143(3) r/w section 147 has been passed and therefore, the present petition may not be entertained is concerned, it is required to be noted that as such, the reassessment proceeding has been passed during the pendency of the present petition. Even otherwise, when the reopening of the assessment is found to be invalid and not justifiable and the same is solely based on the audit objection raised by the audit party, this is a fit case to exercise the powers under Article 226 of the Constitution of India. - Decided in favour of assessee.
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2015 (8) TMI 570
Reopening of assessment - Valuation of closing stock - Adjustment under section 145A - inclusion of duty of excise / cenvat credit - Held that:- A.O. made addition on account of adjustment under section 145A of the I.T. Act and the same came to be deleted by the learned CIT(A), thereafter it is not open for the A.O. to reopen the assessment on the same ground. Considering the aforesaid facts and circumstances of the case, it cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment and therefore, the income chargeable to tax has escaped due to the failure on the part of the assessee to disclose fully and truly all material facts. Under the circumstances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied Applying the decision of the Division Bench of this Court in the case of Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT), to the facts of the case on hand and as observed hereinabove, there does not appear to be any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the initiation of the impugned reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot be sustained and on that ground alone, the impugned reassessment proceedings deserve to be quashed and set aside. 6.00. In view of the above and for the reasons stated above, present petition succeeds. The impugned notice under section 148 of the Income Tax Act for A.Y. 2008-2009 is hereby quashed and set aside and the impugned reassessment proceedings of reopening assessment for the A.Y. 2008-2009 are hereby terminated on the aforesaid ground alone.- Decided in favour of assessee.
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2015 (8) TMI 569
Entitlement to deductions in respect of cash payments in excess of ₹ 20,000/- made to the vendors for land in view of Section 40A - Tribunal denied deductions - Held that:- Tribunal has not disbelieved the transactions or the genuineness thereof. Nor has it disbelieved the fact of payments having been made. More important, the reasons furnished by the appellant for having made the cash payments, which we have already adverted to, have not been disbelieved. In our view, assuming these reasons to be correct, they clearly make out a case of business expediency. In the circumstances, the order of the Tribunal in this regard is set aside. The payments cannot be disallowed under Section 40A(3) of the Act - Decided in favour of the assessee. Addition on account of the appellant not charging interest from his debtors - Held that:- It has not been denied that interest free funds were available. Nor has it been denied that interest free advances were made by the appellant. In fact, the latter has been accepted by the Assessing Officer. The contention that the appellant has not established that it was the interest free funds that were actually advanced as interest free advances is without substance. Money has no identity. So long it is established that the interest free advances are made by an assessee who has adequate free reserves, it is sufficient to establish that the amounts advanced interest free cannot be added to the assessee's income. It was not contended that the interest free advances exceeded the interest free funds available with the appellant. Nor was it established that a particular advance received was in turn advanced by the assessee interest free.- Decided in favour of the assessee.
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2015 (8) TMI 568
Violation of rule 46A of the Rules - CIT(A) allowed part claim of assessee of losses accepting additional evidence - Held that:- Once the document is admitted as additional evidence, for the first time at the stage of appeal, the Department is entitled to put forward its own contention or objection vis-a-vis the same. Here again, two aspects become relevant. If the additional evidence is in the form of any document, the Department shall be entitled to examine or to make its own scrutiny of the same. On the other hand, if the evidence is in the form of deposition of any witness, it shall be entitled to cross-examine him. The first is provided for under clause (a) and the second, under clause (b) of sub-rule (3). Independently, the Department can adduce its own oral or documentary evidence to contradict or rebut the additional evidence that was adduced by a party, for the first time, at the stage of appeal. The record in the instant case does not disclose that the Department has raised any objection whatever for the additional evidence that was produced by the respondent. On the other hand, arguments were advanced with reference to the additional evidence also and the Commissioner of Income- tax (Appeals) dealt with the same. In other words, the Commissioner of Income-tax (Appeals) took into account the additional evidence duly taking into account, the plea of the Department. At any rate, it was not even urged that the Commissioner of Income-tax (Appeals) did not take into account any objection, if any, raised by the Department, for the additional evidence. They wanted opportunity to be given before admitting the fresh evidence. This plea does not derive any support from rule 46A of the Rules. The opportunity to be given to the Department is only in the context of "taking into account the additional evidence" but not "admitting the additional evidence". At the cost of repetition, we observe that the admission of additional evidence is the prerogative of the Commissioner of Income-tax (Appeals) and that in turn is circumscribed by clauses (a) to (d) of rule 46A(1) of the Rules. Learned senior counsel is not able to point out as to which of the conditions have been violated in the process of adjudication by the Commissioner of Income-tax (Appeals). The Tribunal dealt with the contention in detail and did not find any merit in the plea of the appellant. - Decided against revenue.
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2015 (8) TMI 567
Taxability of receipt of enhanced compensation - Whether the entire amount of award received by the assessee, shown in his books of account as liability of the trust does not amount to income of the assessee liable to be taxed in his hands under the Income-tax Act? - liabilty to pay gift-tax to the assessment year 1984-85 relevant to the financial year 1983-84 on the amount of award finally received and accounted for in his books of account in the name of the trust 'The P. Sreeramulu Naidu Trust' created under a trust deed dated April 26, 1976, transferring the right to receive the compensation in favour of the said trust ? - Held that:- Any amount representing debt other than the one secured by mortgage or hypothecation need not be in actual or constructive possession of the claimant. In the ultimate analysis, it is a right to claim the amount. However, the right must be clear and a definite one. The remote possibility of receiving the amount such as the one in a suit for damages, cannot be treated as an actionable claim. Unlike the right to receive compensation under the relevant enactments, the Bombay High Court in Akber A. Dehgamwalla's case (1991 (4) TMI 37 - BOMBAY High Court) explained the distinction as under : "It is only the amount of compensation that is to be determined later on after taking into account various relevant aspects. In the case of damages for breach of contract, there is no vested right as such. Breach of contract gives merely a right to sue which right is certainly not an "asset" within the meaning of section 2(e) of the Act." The amount involved in this case is the one referable to the Act.If a mere right to receive the compensation that may be enhanced may tend to become the one, equivalent to damages. The reason is that one cannot take the enhancement of compensation for granted. Several factors surround it and it is only on a case being made out, that the court can enhance the compensation. Had the applicant gifted the mere right to receive a probable enhanced compensation, things would have been different altogether. By the time he created the trust deed, the compensation stood already enhanced in the year 1974. What was gifted to the trust was the compensation enhanced in the O. P. The only difference was that the amount so enhanced was subject to modification by the High Court. Therefore, being an actionable claim, it was capable of being gifted. Therefore, the view taken by the Assessing officer, the Commissioner and the Tribunal in the instant case that the right to receive enhanced compensation could not have been gifted, does not accord with law. We hold that the arrangement made under the gift deed was legal and valid and there is nothing unnatural about it. However, the undisputed facts disable the applicant from getting any relief. It has already been mentioned that the enhanced compensation of about ₹ 4,00,000 was received by the applicant between April 26, 1976, and April 25, 1977. Had he passed on that amount instantly to the trust, the amount would have become the corpus of the trust. Since the amount remained in the hands of the applicant, at least till April 4, 1983, i.e., for a period of 6 years, it partakes of the character of income and was rightly assessed to tax. It was only in the subsequent year, i.e., 1984-85, that he was levied gift-tax, accepting the contention of the transfer of the amount on April 4, 1983. - Decided against assessee.
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2015 (8) TMI 566
Additional depreciation claim - Held that:- We find clause (iia) of section 32(1) provides for further depreciation on any new machinery or plant which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing at the rate provided to be allowed as a deduction under clause (ii) of the said section. There is no dispute on facts regarding the assessee having acquired and installed the plant and machinery for the purpose of generation of power necessary for the production of the items it manufactures. The assessee having satisfied those conditions is entitled to claim the additional depreciation as provided by the said clause (iia) irrespective of its original claim for depreciation having been made under clause (i) of the said section. We do not find any relation of clause (iia) of the said section with the head of deduction claimed by the assessee in the matter of determining whether it is entitled to a claim for additional depreciation. Decided in favour of the assessee.
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2015 (8) TMI 565
Assessment u/s 153A - addition towards purchase of property made on the basis of slips recovered during the search - ITAT held that as far as the addition of ₹ 37,80,000 was concerned, since the Assessee had admitted to having paid for the property at ₹ 13,000 per sq.ft but not out of the books, it was "just and proper to restore the issue to the file of AO to afford an opportunity of hearing for the Assessee to explain the detail of the investment before the AO substantiating the fact that the Assessee had actually paid purchase consideration @ 13000 per sq ft for the property of 540 sq.ft - As regards the addition of ₹ 50 lakhs the ITAT found no perversity in the order of the CIT (A) to held that once the Assess had offered an explanation, the AO ought to have conducted an inquiry and undertaken verification of the properties - Held that:- Appellant was unable to point out why the direction of the ITAT remanding the matter of addition of ₹ 37,80,000 to the AO for affording an opportunity to the Assessee to explain the details should be interfered with. She urged that even in respect of the addition of ₹ 50 lakhs a similar direction ought to have been issued. The Court is unable to agree. The second addition of ₹ 50 lakhs stood on a different footing. As is evident from the concurrent orders of the CIT (A) and the ITAT, the said addition was indeed made by the AO purely on surmises without any inquiry whatsoever. The said addition was rightly directed to be deleted. - Decided against revenue.
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2015 (8) TMI 564
TDS liability u/s 194C - hiring of cabs for the purpose of carrying on its business by the assessee - Whether the Tribunal was correct in holding that the assessee is not bound to deduct TDS as the provisions of section 194C are not attracted as no agreement was entered into by the assessee with the other operators, when the assessee has admitted the applicability of section 194C and tax was deducted at source ? - Held that:- This court had an occasion to consider the said substantial question of law in the case of Smt. J. Rama v. CIT reported in [2012 (6) TMI 645 - Karnataka High Court] wherein held It is not in dispute that the turnover of the assessee exceeds the monetary limit specified under clause (a) or clause (b) of section 44AB. Therefore, the liability to deduct tax arises under the said proviso to the sub-contractor from whom the vehicles are hired and the said amount payable to the sub-contractor is in excess of ₹ 20,000. Therefore, the three authorities have concurrently held that the transaction in question is a transport contract. The liability to deduct out of the money paid to the sub-contractors does arise. Immediately, TDS is not deducted and the said amount is not paid to the authorities. Therefore, the claim for deduction under section 40(a)(ia) is not attracted and the authorities were justified in disallowing the said deduction and treating the said amount as the income of the assessee and claiming tax on that amount. The learned counsel for the assessee submits that it has been paid within the time prescribed before the due date for filing the return, which is permissible in law. Unfortunately, none of the authorities have gone into this question. Therefore, it is necessary to remit the matter back to the assessing authority to find out whether the payment of TDS paid by the assessee is within the time prescribed under the law. If it is within time, then the assessee is entitled to the relief. Accordingly,substantial questions of law are answered in favour of the Revenue. The matter is remitted back to the assessing authority to find out whether TDS payment is within time and the assessee is entitled for the benefit in accordance with law. - Decided against assessee.
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2015 (8) TMI 563
Validity of assessment order under section 143(3) - Tribunal held that the assessment order under section 143(3) received by the respondent-assessee on April 13, 2005, was barred by limitation and as such perverse - Held that:- We have before us the affidavit evidence to show that a representative of the assessee, on his own volition and without intimation to the Department, visited the office and found the assessment order ready to be served upon him. We also find from the oral evidence of the Commissioner of Income-tax, Departmental representative that all records were produced and the Department had not made any attempt to despatch the order for service on the assessee. In the facts as above, there is no indication that the Assessing Officer revisited the order after March 31, 2005. The probability of the order being made and ready to be collected by the representative of the assessee as on April 1, 2005, cannot also be ruled out. For the reasons aforesaid, we find the order of the Tribunal requires interference and the same is set aside with regard to the quashing of the assessment as barred by limitation and, consequently, the cross-objection of the assessee before it being allowed. The rest of the questions before the Tribunal must now be adjudicated by it. - Decided in favour of revenue.
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2015 (8) TMI 562
Addition of tax by way of additional tax under section 143(1)(a) - assessee challenged this additional addition of tax by saying that in a settlement scheme undertaken under the Kar Vivad Samadhan Scheme, 1998, additional tax could not be levied - whether "additional tax" imposed is a tax which can be added to the amount payable as tax under the Scheme in question or it is prohibited from adding the element of "additional tax" while assessment is being made under the Scheme in question - Held that:- Keeping in view the principle of law laid down in the case of Hindustan Electro Graphites Ltd. (2000 (3) TMI 2 - SUPREME Court ) wherein held that the levy of "additional tax" bears all the characteristics of a penalty. It is held that when "additional tax" has the imprint of penalty, the Revenue cannot say that levy of "additional tax" is automatic under section 143(1)(a) of the Income-tax Act. The Supreme Court says that if "additional tax" could be levied in the manner as claimed by the Revenue, it will amount to punishing the assessee for no fault of his and this cannot be the legislative intent. Finally, it is held by the Supreme Court in the aforesaid case that "additional tax" being in the nature of penalty, it cannot be levied in the manner done and has quashed similar action taken of adding "additional tax". We have no hesitation in allowing this appeal. The order impugned passed by the learned single Bench is quashed and it is held that the imposition of "additional tax" in the facts and circumstances of the case as done is not permissible. The "additional tax" levied under the Scheme be deleted and the matter is remanded back to the Assessing Officer for proceeding to assess the matter afresh after taking note of the principle of law laid down by the Supreme Court, as indicated hereinabove, and followed by us in the aforesaid order. - Decided in favour of assessee.
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2015 (8) TMI 561
Non furnishing of documents - request of the petitioner cannot be considered as scrutiny assessment has been completed in the assessee case under Section 144 and liability for payment of tax has been established on 31.03.2015 and demand notice has been served on 22.05.2015 - Held that:- The said reason assigned by the first respondent in the impugned order for non furnishing the copy of the documents as sought for by the petitioner, cannot be accepted by this Court for the reason that when the petitioner has sought for furnishing of certain documents from the first respondent, in all fairness, the first respondent could have furnished the same. Thus without expressing anything with regard to the merits of the case, hereby direct the first respondent to furnish all the documents sought for by the petitioner in his letter dated 05.06.2015, to the petitioner, within a period of one week from the date of receipt of a copy of this order. - Decided in favour of assessee.
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2015 (8) TMI 560
Eligibility for section 10A deduction - STPI unit is not a new undertaking but formed by splitting up of the existing unit and reconstruction of business already in existence - Held that:- This court had an occasion to consider the similar question in the case of CIT v. Wipro GE Medical System Ltd. reported in [2015 (8) TMI 548 - KARNATAKA HIGH COURT], and in the case of CIT v. Maxim India Integrated Circuit Design (P.) Ltd. reported in [2011 (7) TMI 518 - Karnataka High Court ] and CIT v. Expert Outsource (P.) Ltd. reported in (2011 (3) TMI 1428 - Karnataka High Court) to hold that benefit of Section 10A would also be available even when an existing unit gets converted into a STPI unit - Decided in favour of the assessee
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2015 (8) TMI 559
Demand ex facie - attachment orders - Although in demand said order the assessee has been asked to pay 50 per cent. of the demand, a mere look at the demand would show that the assessee was asked to deposit 100 per cent. of the demand - Held that:- On a reading of paragraph 10 of the assessment order it shows that a sum of ₹ 26,35,09,093 has been added to the income of the assessee on the ground as this income has been added is that the quantity of the pure gold as declared was mixed with alloy bringing down the proportion of the pure gold in the product from 24 carats to 22 carats. An excess quantity than what was declared was produced and sold in the market for the "added back" amount. This is not quite correct. According to the summary of stock which is annexed to the writ petition at page 177 thereof and is also part of the writ petitioner's audited accounts, the quantity of the gold of 24 carats which was said to have been converted into 22 carats upon addition of alloy was in fact of only 22 carats. It is nobody's case that that particular quantity of the gold was further converted into gold of lesser carat value. The addition made on the said basis is prima facie erroneous. Therefore, writ petitioner has a substantial case to be tried before the Commissioner (Appeals). The petitioner should be relieved of some of the rigours of this attachment by discharging the attachment with regard to the cash credit account of the petitioner with Allahabad Bank, Bowbazar Branch. See K. M. Adam v. ITO [1957 (10) TMI 32 - MADRAS HIGH COURT] which opines that a loan fund cannot said to be a debt of the bank to the customer nor could it be said to be money on account of the customer. Hence, it cannot be attached. - Decided in favour of assessee.
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2015 (8) TMI 558
Penalty under Section 271(1)(c) - unapproved expenditure - appellant filed a revised return showing the additional income after claiming the expenditure - Held that:- It is, no doubt, true that the appellant filed a revised return on 30.11.1995 as a sequel to the survey conducted in his premises. It is not a case where any search was conducted or any definite amount was unearthed in the course of the same. The figures pointed out against the appellant are on the basis of projections based upon the strength in the school and the fee payable by the students. No finding as such was recorded to the effect that the amount of ₹ 9,22,810/- was collected. Obviously with a view to purchase peace and to avoid a delicate situation before the competitors in the field, the appellant filed a revised return showing the income, after deducting the expenditure. That was accepted. Here itself, it needs to be mentioned that though the Department pointed out that even after the revised return was filed, a sum of ₹ 5,30,790/- was not included, ultimately, an order under Section 143(3) of the Act was passed accepting the facts and figures furnished by the appellant. This only indicates that the figures mentioned, on the basis of survey, were not accurate. The levy of penalty cannot be resorted to as a matter of course. An assessee can be made to suffer such far reaching consequences, if only facts of the case support, and it emerges that the assessee had a clear intention to suppress the income. We do not find such elements in the instant case. Penalty deleted - Decided in favour of assessee.
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2015 (8) TMI 557
Disallowance of software expenditure - revenue v/s capital expenditure - Held that:- In view of the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court), where the expenditure has been incurred for facilitating the business and which does not form part of profit making apparatus, then the software expenditure is to be allowed as revenue expenditure. The assessee was the acquisition of software programmes which in turn, were utilized to conduct day-to-day business activities more efficiently. Further, the expenditure incurred on upgradation of the system i.e. conversion from R3 software to MySAP license was required at regular intervals and such upgradation was to gain operational efficiency in the areas of the sales, distribution and production planning. Since the expenditure had been incurred to facilitate efficiency in the business resulting in more profitability, the said expenditure is to be allowed as revenue expenditure - Decided in favour of assessee. Disallowance of deduction claimed under section 35D - Held that:- Undisputedly the expenditure was incurred by the assessee for increasing share capital thus it is capital in nature. Thus, the same cannot be considered for computing deduction u/s 35D of the Act. See Brooke Bond India Ltd. Vs. CIT (1997 (2) TMI 11 - SUPREME Court) and Punjab State Industrial Development Corporation Ltd. Vs. CIT (1996 (12) TMI 6 - SUPREME Court ).- Decided against assessee Disallowance made out of various heads of expenditure - Held that:- The first expenditure considered by the Assessing Officer was the staff welfare expenses which included canteen expenses of ₹ 6,21,189/- and staff welfare expenses of ₹ 8,49,177/-. The said expenditures included expenses on lunch, tea, refreshments, picnic and gift coupons, etc. and out of the same, 5% was disallowed for personal/non business purpose. We find no merit in the said plea of the authorities below, where the expenditure has been incurred both on canteen and staff welfare expenses. Accordingly, we direct the Assessing Officer to delete the addition of ₹ 73,518/-. Expenditure was on account of entertainment expenditure on gifts and on general expenses AO had disallowed 5% of the said expenditure for non-business purpose and entertainment of personal guests. The assessee is a limited company and there is no merit in the said disallowance having been made without coming to the conclusion as to a particular expenditure being incurred for non-business purpose. We find no merit in the adhoc disallowance made at 5% under the said head; hence, we direct the Assessing Officer to delete addition Expenditure on lease rent on vehicles, on petrol vehicle maintenance and for vehicle taxes and registration. Out of these amounts, lump sum disallowance of ₹ 1,00,000/- was made being for personal in nature. The case of the assessee being a limited company, there is no warrant for any personal expenses and hence, expenditure of ₹ 1,00,000/- is directed to be allowed. Another set of expenses were the Guest house expenses- and telephone expenses following the earlier line of reasoning that in the case of a company, there is no merit in disallowance on account of personal use and hence, we direct the Assessing Officer to delete the addition.Similarly, ₹ 50,000/- was disallowed out of business promotion expenses which was not warranted in the absence of particular expenditure having been pointed out by the authorities below. No disallowance on account of personal usage can be made in the hands of the assessee. Rejection of claim of deduction of premium paid towards lease of land - Held that:- In the facts of the case before us also, the assessee had made lump sum payment to MIDC for the acquisition of leasehold rights in land and such payment made by the assessee was for holding the land for a period of 95 years and hence, was of enduring nature. Consequently, the said expenditure claimed by the assessee as revenue in nature is not allowable in the hands of the assessee as deduction. Disallowance of amortization of leasehold premium over the period of lease - depreciation on such leasehold rights - Held that:- Pune Bench of the Tribunal in M/s. Drilbits International P. Ltd. Vs. DCIT [2011 (8) TMI 1083 - ITAT PUNE] relating to assessment year 2006-07, vide order dated 23.08.2011 had considered the issue of allowability of depreciation on leasehold rights of land and had held that no such depreciation is allowable to the assessee on the premise that a person holding freehold land would not be allowed depreciation on such land and where the person holds leasehold rights in the land if depreciation is allowed, then it would place the person holding freehold land to be at dis-advantage and the same is not justifiable. The Tribunal also held that the leasehold rights in the land were not intangible assets. - Decided against assessee. Expenditure incurred towards interest subsidy on housing loans to the employees of the assessee - CIT(A) allowed as business expenditure under section 37(1) - Held that:- The assessee during the year under consideration had made provision for interest on housing loans to the employees totaling ₹ 25,90,959/-. The said expenditure was incurred on account of reimbursement of interest cost on housing loans obtained by the employees. Where the said benefit forms part of employee compensation package and is provided as per the Human Resource Policy adopted by the assessee company vis- -vis of its employees, then such expenditure incurred by the assessee is wholly and exclusively incurred for the purpose of carrying on the business. The expenditure of providing benefit to the employees had been considered by the assessee as part of the salary cost of the respective employee and the perquisites value of such benefit being allowed to the employees had been worked out as per Rule 3 of the Rules, the said expenditure is thus, recognized by the provisions of the Act as an allowable expenditure. Where the law itself envisages the provision of such benefit to the employees, which in turn, is considered by the assessee as part of its salary cost, the expenditure having been incurred wholly and exclusively for the purpose of carrying on the business, is duly allowable as business expenditure under section 37(1) of the Act. Upholding the order of CIT(A), we dismiss the ground of appeal No.1 raised by the Revenue - Decided in favour of assessee. Addition made on account of expenditure incurred on set up of SAP Implementation - CIT(A) delted addition - Held that:- the assessee had made investment in the ERP package and following the ratio laid down in CIT Vs. Bhor Industries (2003 (2) TMI 20 - BOMBAY High Court) we hold that the assessee is entitled to the claim of deduction under section 37(1) of the Act. The Assessing Officer while deciding the issue had allowed 1/3rd on cost as being relatable to the year and the balance sum of ₹ 29,33,577/- was disallowed. The assessee had only booked ₹ 1,30,271/- in Profit Loss Account as allowable expenditure but in the computation of income had claimed the entire expenditure of ₹ 46,89,760/- to be allowed under section 37(1) of the Act. In contrast to which the Assessing Officer had allowed 1/3rd of the total expenditure. In other words, the plea of the assessee that the expenditure incurred for the purpose of business of the assessee has been partly accepted by the Assessing Officer. However, balance of the expenditure has not been allowed in the hands of the assessee being deferred revenue expenses, which plea is not to be applied in view of the various decisions of in Kedarnath Jute Mfg. Co. Ltd. Vs. CIT (1971 (8) TMI 10 - SUPREME Court) Upholding the order of CIT(A), we dismiss the ground of appeal No.2 raised by the Revenue. Working of disallowance of notional interest on interest free loans advanced to the subsidiary companies - Held that:- The CIT(A) noted the explanation of the assessee that assessee had advanced the said loan of ₹ 3.32 crores on 30.03.2001 and no interest was received for two days during current financial year since 30.03.2001 was the Friday and the funds became available to the subsidiary company only on 02.04.2001 which was Monday. The assessee was charging interest on the said advance from the next financial year onwards. The CIT(A) in view of the facts and circumstances, held that no interest was chargeable in the year, since the funds became available to the subsidiary company only on 02.04.2001. We find merit in the claim of the assessee in this regard. Admittedly, the loan was given on 30.03.2001 by the assessee to its subsidiary company which was a Friday. The loan became available to the subsidiary company on 02.04.2001 i.e. on Monday after clearance from the Bank and interest on the said loan was charged from the next financial year. In the facts and circumstances of the case, we find no merit in the order of Assessing Officer in charging notional interest on the said advances made, which became available to the subsidiary company only from the next financial year. Upholding the order of CIT(A), we dismiss the ground of appeal No.3 raised by the Revenue Disallowance of provision for expenditure in respect of benefit under Bhavishya Kalyan Yojanano (BKY) as an employee welfare scheme - Held that:- On the perusal of the order of Tribunal in assessee s own case for the earlier years, it is apparent that the Tribunal has come to a finding that the liability of the assessee has not crystallized in the year under consideration, since the said liability would only arise on the happening of certain events which would happen in the future, hence the liability is a contingent liability. The issue of the liability having been worked out on the basis of AS-15 or scientific method is different aspect of the issue, but the first point to be considered is the nature of liability i.e. whether it had arisen in the year under consideration or it would arise on the happening of certain event in future. The finding of the Tribunal in the case of assessee was that the liability to pay under BKY Scheme or Mediclaim Insurance Scheme would only arise on the happening of certain events in future and consequently, the Tribunal came to a finding that the liability having not been crystallized during the year under consideration was a contingent liability and was not allowable in the hands of the assessee. We are in conformity with the finding of Tribunal in this regard and applying the same, we hold that assessee is not entitled to the claim of allowance of provision for expenditure under BKY Scheme of ₹ 54,16,204/- and also the provision made for expenditure in respect of Mediclaim Insurance Coverage Scheme amounting to ₹ 19,53,311/-. However, as held by the Tribunal, the assessee is entitled to claim of expenditure in respect of benefit payable to Ex-employees, who have retired fulfill the conditions of the Scheme.. Accordingly, we direct the Assessing Officer to determine the deduction on account of BKY Scheme and Medical Insurance Scheme, in view thereof, the grounds of appeal aised by the assessee are thus, partly allowed by way of remand. Exclusion of export turnover pertaining to the Software Technology Unit from the eligible export turnover for the purpose of computing the deduction under section 80HHE - Held that:- 80HHC cannot be denied simply because the income of the industrial undertaking is exempt under sec. 10A. But even if two reasonable constructions of the relevant provisions are possible, that construction which favours the assessee, must be adopted - CIT v. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court] .We direct the Assessing Officer to include the export turnover of the EOU unit while computing the deduction under section 80HHE of the Act. - Decided in favour of assessee.
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2015 (8) TMI 556
Unexplained share capital/share application money - Held that:- Factual finding recorded in the assessment order as well as impugned order and the assertion made by the ld. respective counsel are kept in juxtaposition and analysed, we find that the Tribunal has already deliberated upon various judicial pronouncements including the off-quoted decision from Hon'ble Apex Court in the case of Lovely Exports Ltd.; [2008 (1) TMI 575 - SUPREME COURT OF INDIA]. In the present appeal the fund was claimed to be received from Omex Management (P) Ltd. Itself. This report was never contradicted by the assessee by bringing any adverse material on record. Before us, the ld. Counsel for the assessee merely contended that the search operation in the case of Omex Management P. Ltd. was done on 16.9.2009 whereas the transaction in the case of the assessee was made in 2007. We are not convinced with this argument because the director of Omex Management P. Ltd. was never produced by the assessee in its support, evidencing that it was not an accommodation entry, more specifically, when the report/statement were duly forwarded to the assessee for its comments. The financial statement of Standard Dealers P. Ltd. was duly examined by the Assessing Officer, wherein total receipt during the period was of a meagre sum of ₹ 3,51,449/-, virtually no business was carried out by the company. The expenses booked by this company comprises of administrative expenses, resulting into, book profit of ₹ 25,311/- only. In view of these facts, how a figure of the disputed amount can be believed to be diverted to others. The assessee has claimed that M/s. Standard Dealers P. Ltd. contributed the capital at a premium of nine times of the face value of its shares. The human probability does not permit to believe the story. The assessee, at any stage right from the assessment itself, neither brought on record any positive material in its favour nor cross-examined the director of the company Omex Management P. Ltd. which was brought to the notice of the assessee and the report dated 10.12.2009 of DDIT(Inv.), Kolkata wherein it was tendered that they are providing accommodation entries. We further find that due enquiry has been made by the Assessing Officer before making the impugned addition. When the source of the impugned amount is itself bogus, the net result cannot be genuine unless and until, positive material is brought on record to contradict the finding of the Department. In view of these facts, we find no infirmity in the conclusion drawn by the ld. CIT(A). It is affirmed. - Decided against assessee.
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2015 (8) TMI 555
Method of accounting - recognition of income - determination of value of WIP - accounting for construction contracts (AS7) of the Institute of Chartered Accountant of India - CIT(A) directing to take WIP for A.Y. 2001-02 at ₹ 3 Crs and not ₹ 4.94 for Ghatprabha Project as adopted by the AO - carrying forward of losses as per the revised return Held that:- The bill raised by the assessee has been accepted by the department and for whatever reason an amount of ₹ 2.88 crores was not paid during F.Y. 2001-02 but the fact remains that there is no such dispute as claimed by the assessee. No documentary evidence/correspondence has been filed by the assessee during assessment proceedings or appeal proceedings or even before us to substantiate the contention that some dispute was going on between the assessee and department. It is also to be noted that the assessee has not incurred any further expenditure in subsequent years for receipt of the above amount. We do not find merit in the submission of the assessee that since he has offered the income in the A.Y. 2004-05 and since there is no loss to the revenue the order of the CIT(A) should be upheld. Here, in the instant case the question is not relating to loss to the Revenue. It relates to the taxability of the income in a particular year. In the instant case the assessee follows mercantile system of accounting, has debited all the expenditure to the profit and loss account during the impugned assessment year, has valued the WIP at a particular figure, got its accounts audited and filed the return of income belatedly. Having done so the question that arises is whether the assessee be allowed to value the WIP at a reduced figure merely on receipt basis. The answer in our opinion in the facts of the present case is negative, i.e. in favour of the Revenue and against the assessee. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned we find the same are not applicable to the facts of the present case. In the instant case the assessee initially raised the bill on the Government department which has not been disputed by the department. The assessee has categorically submitted before the CIT(A) that the departmental engineer endorsed on the bill that the measurements were checked on 31-03-2001. Even the assessee in the profit and loss account has also accounted for such WIP. Further, from the copy of the letter addressed by the Executive Engineer to the Addl.CIT there appears to be no dispute so far as the bill is concerned. Only there was a delay in release of the payment. Therefore, the decision of Hon’ble Patna High Court in Chanchani Brothers (Contractors) Pvt. Limited [1986 (2) TMI 26 - PATNA High Court ] is not applicable to the facts of the present case. Since the assessee is following mercantile system of accounting and since the assessee himself has shown in the belated original return of income the figure of WIP as per the bills raised by it on the Government department and since the assessee has not incurred any further expenditure on such amount received in subsequent year, therefore, the order of the CIT(A) reducing the WIP from ₹ 4.94 crores to ₹ 3 crores for A.Y. 2001-02 in our opinion cannot be accepted. Merely because assessee has offered the same to tax in A.Y. 2004-05 cannot be a ground to reduce the correct WIP from ₹ 4.94 crores to ₹ 3 crores. We accordingly set aside the order of the CIT(A) and the grounds raised by the revenue are allowed. - Decided in favour of revenue.
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2015 (8) TMI 554
Disallowance of interest availed by the assessee towards housing loan - Held that:- This Tribunal is of the considered opinion that that the assessee has diverted a sum of ₹ 70 lakhs borrowed for the purpose other than construction. Under section 24 of the Income-tax Act, the interest paid by the assessee on the loan borrowed has to be allowed only from the rental income. Since the loan borrowed was diverted for the purpose other than construction, this Tribunal is of the considered opinion that the Assessing Officer has rightly disallowed the claim of the assessee. In the absence of any material to indicate the nexus between the utilization of funds by RMKV & Sons for construction and repayment of donation by the assessee to various temples, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. If at all, there was any obligation for reimbursing the cost of construction as claimed by the assessee then definitely there should be a reference in the lease agreement dated 19.10.2007 between the assessee and RMKV & Sons. In the absence of any reference about the investment of funds by RMKV & Sons and the liability of the assessee to reimburse the same, this Tribunal is of the considered opinion that the claim of the assessee that the donation paid to the temples is only reimbursement of the expenditure is not justified. This Tribunal do not find any infirmity in the order of the CIT(A) on this issue and the same is confirmed. - decided against assessee. Addition towards unexplained investment in silver articles to the extent of 18.23 kgs. - Held that:- streedhan has to be estimated depending upon the social status of the respective family in the society. Similarly, depending upon the social status, it cannot be totally ruled out the possibility of receiving gold and silver ornaments as gift. Admittedly, the assessee was married for the last 25 years and there are many occasions for them to receive gift from the close relatives. Here again, expecting documentary evidence to establish the receipt of gift is impossible one. Therefore, everything has to be estimated depending upon the facts of each case by taking into account the social status of the family in the locality in which they are living. This Tribunal is of the considered opinion that the assessee might have received gift of 15 kgs of silver articles as streedhan property during her marriage. Similarly, for the last 25 years of married life they might have also received 10 kgs of silver articles as gift. In those circumstances, this Tribunal is of the considered opinion that that the balance remains to be explained is only 13.23 kgs of silver articles. It is made clear this estimation is made by taking into consideration the business of the assessee’s family and the social status maintained by them in the area in which they are living. Therefore, the balance silver article remains to be explained is only 13.23 kgs. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition only in respect of 13.23 kgs of silver articles. - Decided partly in favour of assessee. Addition towards jewellery purchases without invoices - CIT(A) deleted the addition - Held that:- It is not in dispute that the purchase of jewellery has a reference in the bank account maintained by the assessee with ICICI Bank and the payments were made through cheques. Therefore, it is obvious that the purchase of jewellery to the extent of ₹ 3,76,470/- was made through known sources of income the addition of ₹ 3,76,470/- has rightly been deleted by the CIT(A). This Tribunal do not find any infirmity in the order of the CIT(A). Accordingly the same is confirmed. Coming to the addition of unexplained investment in 2.38 carats of diamond claim of the assessee that 2.38 carats of diamond was inherited from her motherin- law, cannot be doubted since the status of the family in society would indicate that they are used to wear diamond jewellery. this Tribunal is of the considered opinion that it is not known how the assessee could establish by material evidence to indicate the inheritance of 2.38 carats of diamond from her mother-in-law. This Tribunal is of the considered opinion that in view of the smallness of the value, the CIT(A) has rightly deleted the addition. In fact, the Assessing Officer himself has made addition of ₹ 65,071/-. Therefore, this Tribunal do not find any infirmity in the order of the CIT(A) on this issue - Decided against revenue. Unexplained investment in gold jewellery to the extent of 407.3 gms and diamond jewellery to the extent of ₹ 1,38,800/- - Held that:- 240 gms of gold jewellery belongs to the assessee’s daughter might have been kept in the house of the assessee. Now the difference is 133.59 gms. The assessee claims that this is the difference between the gross and net weight. On a query from the Bench, the ld. Counsel explained that this difference is due to the weight of the stone embedded in the jewellery and impurities. This Tribunal is of the considered opinion that it is common practice in all jewellery shop that stones are valued at the gold rate and in addition to the rate which prevails for the gold. The assessee has also required to pay charges for wastage, making charges besides the applicable taxes. Therefore, this Tribunal is of the considered opinion that the difference between the gross and net weight of 133.59 gms cannot be allowed. Now, coming to the diamond jewellery, the dispute is only with regard to 9.93 carats of diamond jewellery. As rightly pointed out by the ld. Counsel, it is usual practice in custom to gift diamond ear stud and diamond ring to the bride and bridegroom apart from diamond necklace. Since the assessee was married 45 years back and now aged about 70 years, asking the assessee to produce material evidence may not be practically possible. Therefore, this Tribunal is of the considered opinion that by taking into consideration the customary practice which prevails in this part of the country and the social status of the assessee, and the nature of business engaged by the assessee, this Tribunal is of the considered opinion that the assessee would have earned the value of 9.93 carates of diamond jewellery. Therefore, no addition is called for with regard to the value of diamond jewellery of 9.93 carats. - Decided partly in favour of assessee. Unexplained investment to the extent of 600.2 gms of gold jewellery - Held that:- This Tribunal is of the considered opinion that while purchasing jewellery the assessee has to make payment on the gross weight and not on the net weight. The stones which form part of jewellery would be weighed alongwith the gold and the assessee has to necessarily pay the cost of the stone at gold rate. Therefore, there is no justifiable reason for excluding the difference between the gross and net weight of the jewellery found. Therefore, the claim of the assessee that 97.7 gms of jewellery being the difference between the gross and net weight has to be excluded cannot be accepted. In view of the above, the balance remains to be explained is 200.2 gms. Accordingly, the order of the lower authority is modified and the Assessing Officer is directed to add the value of 200.2 gms of gold jewellery as unexplained investment.- Decided partly in favour of assessee. Unexplained investment in the gold and diamond jewellery - Held that:- Making addition to the extent of 11.74 carats of diamond may not be correct. After estimating the gold jewellery to the extent of 1000 gms as streedhan, the balance remains is only 204 gms of jewellery. The assessee also claims the difference between the gross and net weight to the extent of 224.6 gms. As already observed, the assessee has to necessarily pay the price of the jewellery on the gross weight and not on the net weight, therefore, the difference between the gross weight and net weight cannot be allowed as deduction while computing the value. After giving deduction of 1000 gms instead of 800 gms as streedhan jewellery to the assessee’s wife, the balance remains to explain is only 204 gms of gold jewellery. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition to the extent of 204 gms of gold jewellery. - Decided partly in favour of assessee. Unexplained investment made in gold jewellery to the extent of 261.54 gms. - Held that:- This Tribunal is of the considered opinion that instead of 800 gms of jewellery found by the Assessing Officer as streedhan on the occasion of marriage, credit has to be given to the extent of 1000 gms. Therefore, the balance comes to only 61.54 gms of jewellery. As already observed in the case of other assessees, the difference between the gross and net weight cannot be taken into consideration since the assessee has to pay the price for the gross weight. In view of the above discussion, this Tribunal is of the considered opinion that 61.54 gms of gold jewellery remains to be unexplained. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition of 61.54 gs of gold jewellery as unexplained investment. Coming to the diamond jewellery, as rightly submitted by the ld. Counsel, it is common in this part of the country to give streedhan to the girl child during her marriage in the form of gold and diamond jewellery. Therefore, this Tribunal is of the considered opinion that the assessee’s wife might have received 38.01 carats of diamond jewellery during her marriage. Therefore, the CIT(A) ought to have deleted the addition of entire 38.01 carats of diamond jewellery. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition towards 38.01 carats of diamond jewellery.- Decided partly in favour of assessee. Unexplained investment in silver articles - Held that:- It is not in dispute that what was found during the course of search operation are mostly pooja articles like kuthuvilakku, panner fan, camphor stand, kukum bowk, sandal bowl and plates etc besides tumblers. By taking into consideration the status of the assessee’s family in the society and the nature of business, it is not uncommon to receive silver articles as gift on various occasions, family functions etc. It is also common in this part of the country to receive silver articles as gift during marriage time. Apart from that the assessee’s father-in-law being a resident in Dubai, the assessee might have received some gift as streedhan property. In those circumstances, this Tribunal is of the considered opinion that the assessee might have received 28.17 kgs of silver articles as gift during his marriage. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of 28.17 kgs of silver articles found during the search operation. - Decided in favour of assessee.
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2015 (8) TMI 553
Penalty u/s. 271C - assessee failed to deduct tax u/s 192 on the payments to doctors drawing fixed remuneration which are essentially in the nature of 'Salary'- CIT(A) deleted the penalty - Held that:- As per the explanation of the assessee, in our opinion the order of the Ld. CIT(A) has to be confirmed for the reason that admittedly it is not a case of non-deduction of the tax or after deducting or collecting the tax, not depositing the same with the Govt. As per the plea of the assessee, it is merely the process of interpretation which was adopted in respect of both the payments otherwise whatever tax was collected was paid to the Govt. account. See Hindustan Steel Limited Vs. State of Orissa (1969 (8) TMI 31 - SUPREME Court ) There was a reasonable cause for the assessee for short deduction of the tax within the meaning of Sec. 273B of the Act. We, accordingly, confirm the order of the Ld. CIT(A) and grounds taken by the Revenue are dismissed. - Decided in favour of assessee.
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2015 (8) TMI 552
Disallowance of 50% provision of warranty - CIT(A) deleted addition - Held that:- As find from the figures for nine years the provision was almost equal to the actual expenditure incurred in this regard. In most of the years, the provision made was less than the expenditure incurred. Only in two years, in the financial years 2002-03 and 2008-09, the provision marginally exceeded the actual expenditure incurred. From the above chart, it is evident that the provision made by the assessee was a fair and reasonable estimate of the post sales expenses to be incurred by the assessee in respect of goods supplied by it. Therefore, on these facts, the ratio of the above decisions Rotork Controls India P. Ltd. v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA ] and Vinitec Corporation Pvt. Ltd. [2005 (5) TMI 54 - DELHI High Court] and Ericssion Communications P. Ltd. [2009 (9) TMI 710 - Delhi High Court] would be squarely applicable. Respectfully following the same, we uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeals filed by the Revenue. - Decided against revenue.
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2015 (8) TMI 551
Deduction of interest - Whether CIT(A) has erred in allowing the deduction of interest as revenue expenditure even though the same was never claimed by the assessee in the return of income? - Held that:- It is not in dispute that the assessee paid instalment towards conversion charges of land and the asset was already in existence and the business of the assessee was running from the very same factory premises. Learned counsel of the assessee fairly accepted that the assessee neither made any claim in the original return nor filed any revised return and the interest was also not found placed in the profit and loss account but the assessee pressed his claim by way of letter filed before the Assessing Officer during the assessment proceedings. In view of the decision of the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006 (3) TMI 75 - SUPREME Court ] AO is not empowered to entertain any claim out of return of income which could not find place in the original return of income or otherwise than by revised return but in the same decision, the hon'ble apex court made it clear that this did not impinge on the power of the Tribunal. However, we are of the considered opinion that since the asset, i.e., factory premises was already in use of the assessee, therefore, the interest paid along with instalment towards conversion of charges of land cannot be treated as capital expenditure and the same cannot be held to be capital expenditure. Thus, we are of the opinion that the Commissioner of Income-tax (Appeals) was right in holding that the interest expenditure cannot be capitalised and the same was allowable as revenue expenditure. - Decided against revenue.
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2015 (8) TMI 550
Challenging the levy of surcharge u/s 113 - block assessment - Held that:- The Hon'ble Supreme Court in the case of Vatika Township Pvt. Ltd. (2014 (9) TMI 576 - SUPREME COURT) has held that the proviso appended to Section 113 by Finance Act, 2002 is to operate prospectively w.e.f. 1st June, 2002. As in this case the search was conducted on 16th of December, 1999; therefore, surcharge is not to be levied. We accordingly allow this Application of the Assessee. - Decided in favour of assessee.
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2015 (8) TMI 549
Disallowance u/s. 14A read with rule 8D - Held that:- In this case, the AO has straight away applied Rule 8D, which is not applicable for the year under consideration in the light of the decision given by Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT). Even in case Rule 8D is applicable still the same cannot be applied straight away ignoring the calculation given by the assessee. The disallowance under Rule 8D can be made if AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. Hence, in view of our above observation, this issue is restored back to the file of AO with a direction to give the assessee a reasonable opportunity to place on record all relevant facts including its accounts and examine the computation calculation made in this regard by the assessee regarding the suo-motu disallowance of ₹ 25,34,001/-. Disallowing claim u/s. 35D towards 1/5th of the share issue expense incurred on account of expansion of business - Held that:- Assessee has vehemently contended that the activities of the assessee company falls in the definition of industrial activity. However, he could not rebut the contention that as per the provisions of section 35D of the Act, the deduction is admissible in connection with the issue for public subscription of shares or debentures of a company. However, in the case in hand the assessee had increased the share capital by way of private placement with its holding company M/s. Aditya Birla Nuvo Ltd, hence, deduction under section 35D of the Act is not allowable to the assessee. This issue is accordingly decided against the assessee. Disallowance on account of leave salary - Held that:- Respectfully following subsequent decision of the Tribunal on this issue in the case of Essar Exploration & Production India Ltd.,(2012 (8) TMI 910 - ITAT MUMBAI), we restore this issue to the file of A.O with similar directions.
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Customs
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2015 (8) TMI 581
Drawback allowable on re-export of duty-paid goods – Barred by Time – Petitioner presented duty drawback claim application before fifth respondent belatedly which was not accepted by fifth respondent on ground that claims were time barred – Held that :- Rule 5 of Rules, 1995 mandates that exporter would be entitled to file claim for duty draw back within outer limit of six months by explaining delay – Reasons for delay was petitioners inability to collect documents at time and file same before authorities – Genuineness of claim made by petitioner was not doubted by authorities –Third respondent intimated fourth respondent that such refusal would be irregular and even if time barred applications were to be received they came to be dealt with in accordance with extant rules – In view of fact that first respondent amended Rule 5 of Rules, 1995 and extended period from 6 months to 9 months therefore was empowered to condone delay – It was held in COMMISSIONER OF CUSTOMS, MUMBAI vs. TERAI OVERSEAS LTD [2002 (10) TMI 109 - HIGH COURT AT CALCUTTA] that while considering application for drawback, documents filed in support of claim should be considered liberally and drawback cannot be denied on mere technicalities or by adopting narrow and pedantic approach, since duty drawback is incentive scheme – In view of said observation impugned order set aside – Matter remitted to first respondent to consider applications of petitioner – Decided in favour of Appellant.
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2015 (8) TMI 580
Validity/Tenability of conviction order – Plea of Guilt – Petitioner questions validity and tenability of judgment and order of conviction whereby she was convicted under Sections of NDPS Act, 1985 and was sentenced to undergo Rigorous imprisonment with fine – Trial Court accepted statement of petitioner as acceptance of guilt and held that no appeal could have been filed except for legality/severity of sentence – Held that:- Section 229 of CrCP provides that if accused pleads guilty, Judge shall record plea and may, in his discretion, convict him thereon – Trial Court misdirected himself in acting upon plea of guilt in serious case of NDPS Act – Trial Court ought to have appreciated that petitioner was daily wage coolie with two sons to fend for – Till time when application pleading guilty by petitioner was filed, she was not afforded benefit of interpretation of evidence in terms of Section 279 of CrCP – Under such eventuality it was highly improper for Trial Court to have accepted statement of petitioner as her acceptance of guilt – Rule is that when accused is on his trial on capital charge, it is not expedient that court should convict him even upon plea of guilty – Therefore Trial Court adopted erroneous approach in accepting plea of guilt of petitioner –Since statement of petitioner was actuated by misconception, it ought not to be treated as plea of guilt – matter remanded back to trial court for afresh consideration of evidences on record – Decided in favour of Petitioner.
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2015 (8) TMI 579
Import of Printing Machine at concessional rate – High Court refused to allow import of Web Printing Machine on concessional rate of custom duty – However Interim relief sought for release of machinery was allowed but petition was kept pending – Whether High Court was competent to decide matter – Held that:- interim prayer for release of machinery was allowed by High Court – No doubt, when High Court passed interim order in favour of appellant, High Court could have dispose of petition – It was at instance of appellant that issue was taken up for hearing. After inviting High Court to decide matter on merits and finding that decision has gone against appellant, contrary argument was nothing but desperate attempt to come out of situation which was appellant's own creation –Order of High Court clearly records that appellant had requested High Court to decide issue on basis of material on record. Ultimate conclusion drawn by High Court in regards to entitlement of appellant to claim exemption under Notification No. 114/80-CUS in this behalf was correct and plausible – Burden of proof was on appellant to establish that machine imported by it generates more than 35,000 composite impressions or copies per hour which appellant failed to do so – Appeal dismissed – Decided against Assesse.
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2015 (8) TMI 578
Determination of Value of goods - Tribunal vide impugned order reported in [2003 (4) TMI 197 - CEGAT, MUMBAI] set aside commissioner's order holding that failure by importer to produce manufacturer's invoices, value of goods to be determined by depreciating from original value - Supreme court held that as financial implication was merely sum of rupees five lakhs therefore on this ground alone, appeal dismissed.
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2015 (8) TMI 577
Duty demand - Confiscation of goods - Notification 85/2013 – High court by impugned order reported in [2014 (1) TMI 122 - MADRAS HIGH COURT], modified order of demand of duty and directed release of goods confiscated immediately - Supreme court dismissed revenues petition and condoned delay - Further that judgement of high court shall not be treated as precedent in any other case.
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2015 (8) TMI 576
Refund of Special Additional Duty (ADC/SAD) - Vide impugned order reported in [2015 (1) TMI 573 - KARNATAKA HIGH COURT], high court dismissed appeal of revenue filed against order of commissioner entitling respondent for refund of special additional duty - Aggrieved by said order of commissioner revenue is before Supreme court - Supreme court dismissed revenue's appeal after condoning the delay.
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Corporate Laws
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2015 (8) TMI 575
Failure to maintain minimum net worth – Deactivation of trading terminal – Refund of membership subscription fees – Held that:- Deactivating terminal does not ipso facto amount to cancellation of membership, so long as membership subsists, appellant was obliged to pay yearly membership subscription – Appellant was repeatedly informed prior and subsequent to making application for cancellation, that payment of annual subscription fees was mandatory – Yet payment was not paid – In these circumstances decision of respondent in refunding Base Minimum Capital amount after deducting annual subscription amount cannot be faulted – Inspite of approval granted by SEBI, appellant could not complete sale/transfer of membership and hence sought cancellation, thus appellant cannot blame respondent for charging enhanced membership fees – No merit in appeal and hereby dismissed – Decided against Appellant.
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2015 (8) TMI 574
Scheme of Amalgamation – Dispensing convening of meetings of equity shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Section 391(1) of Companies Act, 1956 – Held that:- board of directors of transferor and transferee companies in their separate meetings unanimously approved proposed Scheme of Amalgamation – Equity shareholders and unsecured creditor of transferor and transferee companies have given their consents/no objections in writing to proposed Scheme of Amalgamation and were found in order – Application stands allowed – Decided in favour of applicants
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Service Tax
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2015 (8) TMI 596
Services of transportation of passengers - Advance receive for journey before levy of service tax i.e. 1/5/2006 - Suppression of facts - Bonafide belief - Bar of limitation - Assessee contends that that they were under the bonafide impression that the service tax liability may not arise on an amount received as advance for the journeys to be conducted after 01/05/2006 - Held that:- It can be noticed from the letter received by the appellant from the office of the Assistant Commissioner, service tax specific details were called for and such details were given. In our view the appellant had volunteered the information as soon it was sought by the departmental authorities. In our view the details which were not sought could not have been supplied by the appellant Receipts of the payments prior to the date of journey recorded in accounts, as is the industry practice. If the authorities were claiming that the appellant has suppressed the details, they could have asked for the correct details from the appellants, which they did not do so. Further, we find that the post communication dated 06/08/2006, which is referred by the adjudicating authority, it was also in the knowledge of the department that a clarification has been issued, despite such clarification, there seems to be no follow up by the department like seeking for the details or demand of tax from the appellants, in the absence of any positive action of in suppressing the details from the department, we find that tax liability which is being worked out by invoking the extended period is not correct - demands raised on the appellant are blatantly hit by limitation and we set aside the impugned order on the question of limitation. Since we have set aside the demands, the question of interest and penalties does not arise and they are also set aside. - Decided in favour of assessee.
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2015 (8) TMI 595
Cenvat Credit - various input services - nexus with output - Refund claim of unutilized Cenvat credit - Rule 5 - Export of services - Held that:- service of renting Car parking space used for parking of the vehicles of the Officers/Employees of the assessees Company has nexus with the business of the assessee - Credit allowed. Hotel bills for stay of auditor when he visited Chennai for audit of the appellants Company - Held that:- Auditing is an essential activity for the Company. The definition of input services is so wide, and it does not restrict or confine the scope of the service mentioned in the inclusive part. - Credit allowed. Cleaning services - dry cleaning of carpet, cleaning of chairs and glass etc. - Held that:- cleaning services has nexus with business activity of manufacture when cleaning service are undertaken in the premises of the appellants Company. - Credit allowed. Renting of equipments for organizing events and Event Management Service - Held that:- In a catena of decisions it has been laid that any service in relation to the business of providing the output service would get covered. - credit allowed. Advertisement and Sponsorship Service - Department contends that the appellants being a software company engaged in export, these input services pertains to brand HCL which is widely known for hardware and therefore the appellants are not entitled to credit. - Held that:- appellant has nowhere stated in the reply that these input services were availed for promotion of hardware - the observation of the adjudicating authority is factually wrong - credit allowed. Out of pocket expenses - Held that:- The words out of pocket expenses is too wide and lacks definiteness as to the kind of service which would qualify to be an input service. - credit cannot be allowed without specification - credit denied. Visa and Immigration Services - pertaining to the spouse and daughter - Held that:- These services do not qualify to be input service to avail credit - credit denied. Rent-a-Cab Service - Held that:- According to appellants the service is used to pick up and drop the employees on daily basis so that they reach on time and these facilitate the output services. It has been settled in a series of judgments that Rent-a-cab service qualifies as input service for the relevant period. - credit allowed. Accommodations Services for stay of employees - Held that:- The services for accommodation of employees in different places of the country in order to make ready the software for export cannot rule out the possibility of use of such services for personal purpose. - Credit denied. Decided partly in favor of assessee.
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2015 (8) TMI 594
Demand of service tax - Mining and minerals services - Imposition of interest and penalty - Held that:- hiring of rigs to ONGC by making payment to foreign entities is liable to be tax from 16.5.2008 From the records we find that the appellant has discharged entire service tax liability which was charged by them to ONGC. When the appellant has already paid the amount collected by them from ONGC to the Government, the question of any recovery of amount does not arise. Levy of penalty - activities of the appellant in hiring the rigs from the foreign parties and enlisting the same to ONGC would not fall under the category of mining of mineral oil and gas service, is in itself enough to set aside the liability of interest and penalties imposed, in as much as that when there can be no service tax liability, the question of interest and penalty does not arise - Decided in favour of assessee.
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2015 (8) TMI 593
Supply of manpower - factory along with the machinery of the appellant was to be given under leave and licence to one company - Whether the amounts received by the appellant towards salary and other government dues are liable to service tax or otherwise under the category of manpower recruitment and supply agency service - Held that:- amounts received by the appellant in this case as actual salaries cannot be considered as an amount received for rendering of manpower recruitment and supply agency services. As the ratio which has been laid down by the Honourable High Court squarely covers the issue, the decision of the Tribunal in the case of Daurala Organics (2009 (3) TMI 99 - CESTAT NEW DELHI) will not carry the case of the revenue any further. - Relying on authoritative judicial pronouncements we hold that the impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (8) TMI 592
Business Auxiliary Service - collection of toll / fee - appellant were providing various services to National Highway Authorities of India - Held that:- Appellant herein is not promoting or marketing or selling goods produced by a client nor is he promoting or marketing services provided by the client, inasmuch that undisputedly NHAI is a statutory body which has been constituted by the National Highway Authorities of India Act, 1988; has been in force from 1988 and it gives the NHAI a statutory position - On perusal of the agreement with the appellant and NHAI, we find the said agreement does not indicate anywhere that the appellant is appointed as an agent/representative and the said agreement talks of collection of amounts as "fee" to be known as "toll". In view of this, we find that the appellant is not rendering any service which is incidental or auxiliary on behalf of NHAI - collection of tolls by the appellant is not considered as Business Auxiliary Service provided to NHAI - Decided in favour of assessee.
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2015 (8) TMI 591
Denial of refund claim - Unjust enrichment - respondent discharged the service tax liability under protest - Held that:- If the revenue authorities were not inclined to accept the chartered accountant content certificate, they should have adduced some evidence that the incidence of duty has been passed on nor any further clarification was sought from respondent or their CA. Feeble attempt is made in the grounds of appeal to state that it is not clear as what records were checked by the chartered accountant. In my view, a chartered accountant is an expert and as can be seen from the certificate, he has verified the records and then came to a conclusion that incidence of tax is not passed on. - On the issue of unjust enrichment, of the service tax paid on goods transport operator services for the period in question, this bench in the case of Pauls Engineering Industries Pvt. Ltd., (2008 (2) TMI 82 - CESTAT MUMBAI) has allowed the refund in view of retrospective amendment - There is no infirmity in the impugned order - Decided against Revenue.
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Central Excise
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2015 (8) TMI 586
Valuation - best judgment assessment - Arm length sales is below the cost of production - related person - interconnected undertaking - Held that:- According to the Department, if the sale price contained in another chart is compared with the cost of production, it is clear that even the sales made to arm's length purchasers is at prices ranging between ₹ 69,000/- and ₹ 85,000/- which is way below cost at ₹ 1,57,548/-. While agreeing with the CESTAT that none of the Central Excise (Valuation) Rules would be directly applicable as a result of which Rule 11 would have to be relied upon - which gives the authority the power to make a best judgment assessment - we find that on facts in the present case, the cost of manufacture plus 15 per cent principle would not be attracted for the simple reason that it is found that in point of fact, sales made to arm's length purchasers were way below cost - To apply the cost plus principle on facts where arm's length sales are made at well below cost is to choose a principle that would work arbitrarily as the endeavour of the assessing authority is to arrive at an arm's length wholesale cash price to value the aforesaid manufactured articles for purposes of levy of excise duty. - Impugned order is partly set aside - Decided partly in favour of assessee.
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2015 (8) TMI 585
Invocation of extended period of limitation - Valuation - Held that:- issue as to what factors should be taken into consideration for arriving at the cost of production was clarified by the Department in its Circular dated 30.10.1996 and on that basis in the case of Commissioner of Central Excise, Ahmedabad vs. Asarwa Mills [2015 (4) TMI 816 - SUPREME COURT], this Court took the view that the assessees could not be faulted with for taking into consideration some of those paras prior to the issuance of the said clarificatory circular. - Applying the principle extended period of limitation up to September, 1996 cannot be invoked. - Decided in favour of assessee.
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2015 (8) TMI 584
Duty demand u/s 11A - Invocation of extended period of limitation - Held that:- On going through the orders of the adjudicating authority which has been upheld by the Customs, Excise and Service Tax Appellate Tribunal [2004 (5) TMI 452 - CESTAT, MUMBAI] as well, we find that there was misstatement/suppression of facts and therefore, the Department was justified in invoking the extended period of limitation. - Decided against assessee.
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2015 (8) TMI 583
Denial of SSI exemption - Use of third party brand name - Held that:- appellant has been using brand name which is connected with some other persons and therefore, the appellant cannot be held entitled to exemption from excise duty as SSI unit. - Decided against assessee.
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2015 (8) TMI 582
Duty demand - Captive consumption - Exemption from duty - whether the inputs/parts which were used for manufacturing of Railway wagons are to be subjected to Excise duty - Held that:- these are intermediate products and captively used and would come within the definition of “manufacture”. However, before these goods could be exigible to the Excise duty, it was also incumbent upon the Department to prove that the said parts were marketable. - Department did not lead any evidence to demonstrate that these products are marketable - Impugned order is set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (8) TMI 590
Legality of Andhra Pradesh Rectified Spirits Rules, 1971 - Requirement of obtaining a licence and the payment of Excise duty and Pass fee for exporting rectified spirit to be legal - Power of State Government to impose duty on rectified spirit - Held that:- While State Governments are not competent to impose taxes/levies on industrial alcohol, fee charged for services rendered to prevent the diversion and conversion of industrial alcohol for human consumption is permissible and legal; such fee need not be charged strictly on quid pro quo basis and it will pass legal muster so long as it is not excessive. We therefore find that the 1971 Rules themselves are not illegal, but rather are well within the purview of the Constitutional powers of the State Government. - State Government has not undertaken any supervisory activity which would constitute a quid pro quo for the imposition of the “export permit fee” charged under Rule 15(3)(i). Any expenses incurred on such supervisory or administrative activity has perforce already been recovered or reimbursed from fees on account of storage or sale transactions on industrial alcohol. These dues paid by the Appellants are channelled towards preventing the illegal activities of unrelated third parties for which the Appellants are in no way responsible. It is evident that the intention behind this “fee” is to prevent manufacturers from exporting industrial alcohol to breweries of potable alcohol in other States that would fetch them a better price than producers of other products within their own State. Rule 15 is stroked down dealing with the export of rectified spirit, finding that it imposes a tax, not a fee, on the Appellants and is outside the Respondent State’s legislative competence. It has not been conclusively shown by the Respondent State that it has been constrained to monitor or superintend that industrial alcohol is not illegally diverted to other uses within the State. If industrial alcohol is exported outside the State as industrial alcohol, these impositions partake of a totally different character, transferring it into a tax - Decided partly in favour of assessee.
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2015 (8) TMI 589
Exemption granted on Invalid F-Form – Invocation of revision jurisdiction – In original assessment appellant was granted exemption on basis of F-forms issued by consignment agent of appellant – Further notice was issued against which court granted stay of all proceedings pursuant to notice – While so, Commissioner of Commercial Taxes issued notice to appellant under section 37 of Kerala General Sales Tax Act, 1963 proposing to set aside assessment order – Whether Commissioner was right in invoking powers conferred under section 37 of KGST – Held that:- Commissioner by impugned order found that assessment was completed granting exemption on portion of turnover based on F form – Subsequent information revealed that F form furnished was invalid – Granting of exemption on strength of invalid declaration was prejudicial to interests of Revenue –It was also found that there was no need for order which was sought to be revised to be found erroneous – It was not necessary at all for exercise of power under section 37 that Commissioner must find that order was both erroneous as also prejudicial to interest of Revenue, as that was not requirement of section 37 – If there was error resulting in revenue losing tax, it would be prejudicial to interests of Revenue – Law does not require that order was erroneous for invocation of power under section 37 – There was no period of limitation prescribed for exercising power under section 37 – In such circumstances, impugned order upheld – Appeal dismissed – Decided in favour of Revenue.
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2015 (8) TMI 588
Legality of a demand of ₹ 1/- per bulk litre of industrial alcohol manufactured - levy and collection of administrative/regulating service fee - Held that:- It was not incumbent for collections or contributions to be recovered from only those who were directly involved in the subject transactions, since the newly established administrative machinery was necessary for the smooth and legal conduct of the entire business pertaining to the securities market. - if administrative or service charges are sought to be recovered from the Respondent Distilleries to cover nefarious activities carried out by third parties such as smuggling and countryside brewing etc. which have no causal connection with the production of industrial alcohol, or for collection of excise duties from other industries carrying out distinctly different production or manufacture, the fee would metamorphose into a tax. We must hasten to explicate that the illegal or illicit diversion of industrial or ethyl alcohol is possible at the stage where it is rectified spirit or industrial alcohol, contrary to the argument of the Respondents. Therefore, so long as expenses are incurred by the State Government in ensuring that industrial alcohol is not used as potable alcohol, recovery thereof shall be permissible. SEBI Act postulated and permitted the charging of two types of fees – (i) under Section 11(2)(k) of the SEBI Act for carrying out the several and sundry purposes contained in Section 11, and (ii) for the registration of applicants under Section 12(2). It was also clarified by the Court that the said service or regulatory or administrative fee can be levied on all contributors, regardless of whether or not services were being directly rendered to them. This decision cannot be extrapolated to permit the State to make recoveries in the guise of administrative expenses of all the outgoings of its Excise Department even though they have no bearing or connection with the possible misuse and diversion of industrial alcohol to potable alcohol. If administrative or service charges are sought to be recovered from the Respondent Distilleries to cover nefarious activities carried out by third parties such as smuggling and countryside brewing etc. which have no causal connection with the production of industrial alcohol, or for collection of excise duties from other industries carrying out distinctly different production or manufacture, the fee would metamorphose into a tax. We must hasten to explicate that the illegal or illicit diversion of industrial or ethyl alcohol is possible at the stage where it is rectified spirit or industrial alcohol, contrary to the argument of the Respondents. Therefore, so long as expenses are incurred by the State Government in ensuring that industrial alcohol is not used as potable alcohol, recovery thereof shall be permissible. Respondent Distilleries did not express any discomfiture on collection of fee at the rate of 1/- per bulk litre either before this Court or any of the subordinate courts. In fact, there was a hiatus in the litigation even in the High Court where collections were made at the increased rate even though that was quashed by the High Court. We clarify that there was no justification for the Appellant State or its Excise Department to collect charges at the rate of 1/- after it had been quashed by the learned Single Judge. Keeping in perceptive the absence of diligence by the Respondent Distilleries from seeking timely variations or modification of Orders passed by the Court, we desist from directing that the collection of charges over and above 50 paise per bulk litre should be refunded. - Decided against Appellant.
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2015 (8) TMI 587
Levy of Administrative Fee at the rate of 50 paise per bulk litre - industrial alcohol obtained from a distillery. - Competency of State legislature - Held that:- Appellant contends that the abovementioned amendment cannot be given retrospective effect, and that the fees should be levied at the rate of 7 paise per litre, since this amount was found to be “reasonable and proper” in Vam Organics Chemicals Ltd [1997 (1) TMI 512 - SUPREME COURT OF INDIA] - No ground has been made out for the former contention - 7 paise was deemed to be reasonable on the facts of that case which does not in any way indicate that a larger amount would be excessive especially with the passage of time. We have discussed when administrative and service charges can be recovered along with the relevant case law in some detail in our judgment of even date in the Appeal titled as State of Tamil Nadu vs. Tvl. South Indian Sugar Mills [2015 (8) TMI 588 - SUPREME COURT], which should be adverted to in the interests of avoiding prolixity. We uphold the High Court’s finding that in light of Synthetics and Chemicals Limited [1989 (10) TMI 214 - SUPREME COURT OF INDIA] and Vam Organics Chemicals Ltd., the subject Regulatory Fees intended to prevent the conversion of alcoholic liquor for industrial use to that for human consumption is legal, and need not be strictly quid pro quo as long as it is not excessive - Decided against assessee.
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