TMI Tax Updates - e-Newsletter
August 2, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Valuation u/s. 50C - Assessee should have objected to the valuation being adopted u/s. 50C(2). Having not done, it is not possible to substitute any value other than the SRO value under Section 50C - AT
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Income Tax:
Unexplained cash deposits - husband and wife are having joint bank a/c - any amount deposited by her husband which he would have earned from a separate business, it cannot be added to the hands of the assessee. - AT
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Service Tax:
Delay in payment of service tax - Since the service tax along with interest has been paid voluntarily by the appellant, we choose to set aside the penalties imposed by the revisionary authority - AT
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Service Tax:
Valuation - inclusion of value towards reimbursement of expenses - The facts in respect of these two appellants do not come within the mischief of provisions of Section 73(4) of the Finance Act, 1994. - demand set aside - AT
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Service Tax:
Cenvat Credit - eligible input services - input services were used for creating immovable property - benefit of canvat credit allowed - credit taken on debit notes are also allowed as valid duty paying documents. - Credit taken twice is required to be reversed. - AT
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Central Excise:
Classification of flavored milk packed in small pouches instead of bottles called as MILMA SIP - On completion of manufacture, the product is in liquid form, but to preserve without decaying, the same is frozen by keeping it in freezers for about 2 days. The item is kept in shops also, in freezers. The product is actually a solidified liquid and while using it has to be in a liquid form to sip - classifiable under heading 2105 - AT
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Central Excise:
Demand of interest on reversal of Canvet Credit - only when a debit occurs to such CENVAT account by way of utilization, would the exchequer be adversely affected, since otherwise the assessee would have to pay from account current or cash instead of adjusting from CENVAT account. - Demand of interest set aside - AT
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Central Excise:
Maintainability of revenue appeal - Authorization dated 25.10.2007 has been signed by only one Commissioner of the Committee - Revenue appeal dismissed. - AT
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VAT:
Validity of seeking Furnishing of security for an amount of ₹ 70 lakhs as a condition for registration - Section 17(2) of the KVAT Act - Matter restored before the authority to decide the issue afresh. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (8) TMI 23
Deduction u/s 10A - Held that:- The issue in dispute is squarely covered by the decision of the coordinate bench in the case of M/s Patni Telecom P. Ltd. (2008 (1) TMI 452 - ITAT HYDERABAD-A ) wherein it was held that “the deduction of expenses incurred in foreign exchange both from the amount of total turnover and also from the export turnover for the purpose of computation of the amount of deduction u/s 10A”. The Special Bench of the Chennai Tribunal in the case of ITO Vs Saksoft Ltd (2009 (3) TMI 243 - ITAT MADRAS-D ) held that “expenses excluded from export turnover should also be excluded from the total turnover”. - Decided against revenue.
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2016 (8) TMI 22
Additions made on the basis of seized material - Held that:- Additions can be made to the income of the assessee, while passing the 153 orders if reliance is placed on incriminating seized material. In the case before us, nothing is on record to prove that additions made by the AO had the backing of the seized material. Therefore, in our opinion the order of the FAA does not suffer from any legal infirmity. Confirming her order, we decide the effective Ground of appeal against the AO. Commissioner of Income-Tax-II, Thane Versus Continental Warehousing Corporation (Nhava Sheva) Ltd., All Cargo Global Logistics Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2016 (8) TMI 21
Valuation u/s. 50C - Held that:- AO is correct in invoking the provisions of Section 50C. Assessee either should have objected to the valuation before the SRO or should have objected the valuation before the AO who in turn could have referred it to the Valuation Officer. Since neither of the actions was undertaken by assessee, the provisions of Section 50C are to be applied as such. Eventhough the amount of difference is small; there is no option to the appellate authorities not to ignore the provisions of the Statute. Assessee should have objected to the valuation being adopted u/s. 50C(2). Having not done, it is not possible to substitute any value other than the SRO value under Section 50C. I find no merit in assessee’s contentions. Accordingly, the ground is rejected. Disallowance of expenditure on construction of partition walls and toilets - Held that:- As far as development agreement is concerned, it is true that assessee was to get constructed first floor admeasuring 9,000 Sq. Ft., without any internal partition walls. Assessee along with her husband has sold 6,185 Sq. Ft., in the first floor along with undivided share of land and the sale documents do indicate that there were partition walls and toilets. Obviously, these could have been incurred by assessee. Even though, no details could be furnished to the satisfaction of AO/CIT(A), the fact cannot be denied that assessee had to incur some expenditure on the partition walls and the toilets, being provided on the sold property. Considering the above, I am of the view that an amount of ₹ 3 Lakhs can be allowed to assessee towards possible expenditure on development of the property. Accordingly, the grounds are partially allowed. AO is directed to re-work out the capital gains accordingly. Addition of entire rental income in the hands of assessee - Held that:- This issue requires examination by the AO. First of all, it has to be seen whether assessee and her son owns only 50% of the share of the property? If so, whether assessee’s husband also owns any property as the submissions made before the AO vide letter dt. 11-12-2015 do indicate that Shri K. Pratap Reddy owns 1/4th share only. It is also stated that the same was accepted in an assessment u/s. 143(3) dt. 31-12-2009. Thus, the submissions by assessee indicates that Shri K. Pratap Reddy holds 1/4th share while assessee owns 1/4th share and her two sons owns the balance share at 1/4th each. Consequently, there are four persons in whose hands the income should have been offered. No details of the complete ownership and offering of incomes were placed on record. AO himself considers only 1/4th share of assessee and another 1/4th share of one son in assessee’s hand. Whether the other son is a major or a minor and incomes are offered separately could not be verified. Thus we direct the AO to examine the ownership of the property and assess only that part of the rental income which is to be assessed in assessee’s hands. AO is also directed to give credit accordingly in the respective hands.
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2016 (8) TMI 20
Disallowance of product development expenditure - revenue OR capital expenditure - Held that:- The product development expenditure is to be considered as capital expenditure and the assessee is entitled for depreciation at 15% on its capital asset as held for the assessment year 2006-07. Disallowance u/s.14A r.w.Rule 8D(2)(iii) - Held that:- As per sec.14A r.w. Rule 8D(2)(iii) is applicable and the assessee is not able to show as to how, it is not applicable to the assessee’s case. Hence, we are of the opinion that the CIT(Appeals) has taken a correct view and we confirm the order of the CIT(Appeals).
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2016 (8) TMI 19
Date of indexed cost of acquisition of the property devolved on the assessee on the date of death of the assessee’s father or the date on which the assessee’s father had become owner of the property - Held that:- When computing the capital gain arising on transfer of capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee becomes the owner of the capital asset. In view of the above, we are of the opinion that the cost of indexation to be computed from the year in which the assessee’s father had become owner of the property. Accordingly, capital gain is to be computed. This ground is allowed. Capital gain bonds under sec.54EC - Held that:- In any event, from a reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. See CIT v. Jaichander [2014 (11) TMI 54 - MADRAS HIGH COURT]
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2016 (8) TMI 18
Unexplained cash deposits - Held that:- There is a case where husband and wife are having joint bank a/c, bank statement and accounts were produced before us and even the bank statement regarding the relevant transactions were also brought in before us which are already on record. The assessee’s husband has categorically stated through affidavit and confirmation letter filed before the CIT (A) that he is earning income from rice business and that he is having a joint a/c with his wife the assessee here in SBI A/c No.30588257363 with the SBI Kukatapally Temple Branch. We have noticed that the Bank a/c indicates that the deposits are by Sri K. Basavaiah also and payments are for Rice purchase. This indicates that the entire cash deposit of ₹ 48,07,730 relates to his rice business. The learned CIT (A) has correctly ordered the concerned AO within whose jurisdiction the husband of the assessee is assessed to verify the sanctity of the claim in the rice business. Having said so, just because the assessee is a joint holder of that account, any amount deposited by her husband which he would have earned from a separate business, it cannot be added to the hands of the assessee. Therefore, we do not find any reason to interfere with the order of the learned CIT (A) on the relief granted to the assessee by the CIT (A). The grounds are rejected. Disallowance of HRA - Held that:- AO has noticed from the return of income of the assessee’s husband has claimed deduction u/s 80GG. However, during the course of the appellate proceedings, the assessee submitted that her husband filed his revised return of income withdrawing the claim u/s 80GG. A copy of the revised return was also filed before the first appellate authority. The learned CIT (A) ordered to verify the genuineness of the assessee’s claim and allow the claim of HRA after verifying the facts. With regard to this issue, our considered view is that whosoever paid the rent can claim the deduction and as directed by the first appellate authority, it is for the AO to verify the facts whether the assessee will get the claim or not. On this issue we do not see any reason to modify the direction of the CIT (A). The ground is accordingly rejected.
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Corporate Laws
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2016 (8) TMI 1
Winding up petition - Held that:- The defense raised by the Respondent Company is neither in good faith nor bonafide. As stated earlier, as far as the debt of the Respondent Company in relation to the Term Loan of ₹ 35 Crores is concerned, there is absolute no dispute and in fact none has been canvassed before me by Mr. Cama. In this view of the fact, on this count alone, and considering the fact that substantial amounts are due and payable by the Respondent Company to the Petitioner in relation to this Term Loan, the Petitioner would be entitled to an order of admission of the Company Petition. Even in relation to the Term Loan of ₹ 20 Crores disbursed to Borrower No.2 (and for which the Respondent Company stood as a Guarantor), find that even if one gives credit of ₹ 9 Crores entirely to the Respondent Company in relation to the said loan, substantial amounts would still be outstanding and payable by the Respondent Company to the Petitioner. In this view of the matter, find no substance in the contention of Mr. Cama that there is a serious dispute with reference to the claim made in the Petition. For all the aforesaid reasons, find that the substantial sum is undisputedly due and payable by the Respondent Company to the Petitioner which would warrant admission of the Company Petition. In this view of the matter, the following order is passed:- (i) The Company Petition is admitted and made returnable on 16th August, 2016. (ii) The learned counsel appearing on behalf of the Respondent Company waives service of the Company Petition under rule 28 of the Company (Court) Rules, 1959. (iii) The Company Petition shall be advertised in two local newspapers viz. (i) Free Press Journal (in English) and (ii) Navshakti (in Marathi) as also in (iii) Maharashtra Government Gazette. Any delay in publication of the advertisement in the Maharashtra Government Gazette and any resultant inadequacy of notice shall not invalidate such advertisement or notice and shall not constitute non-compliance with this direction or with the Companies (Court) Rules, 1959. (iv) The Petitioner shall, on or before 8st July, 2016 deposit a sum of ₹ 10,000/- towards publication charges with the Prothonotary and Senior Master, under intimation to the Company Registrar, failing which the Company Petition shall stand dismissed for non-prosecution without further reference to the Court. After the advertisements are issued, the balance, if any, shall be refunded to the Petitioner. It is clarified that the proceedings filed by the Petitioner against the Respondent Company in the DRT for recovery of its dues, shall be decided by the DRT on its own merits and without being influenced by any observations made in this order.
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Service Tax
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2016 (8) TMI 17
Demand of service tax on renting and construction - The petitioner is the Tamil Nadu slum Clearance Board which is a statutory body established under the provisions of the Tamil Nadu Slum Areas (Improvement & Clearance) Act, 1971, an Act to provide for improvement and clearance of slums in the state of Tamil Nadu. - Held that:- .In my view, repeatedly issuing demands to the petitioner and enforcing the same would only result in the multiplicity of the proceedings which should be avoided. More particularly, when the petitioner Board has challenged the constitutional validity of the very charging provisions and the earlier demands issued from the year 2012 are also under challenge. Hence, the third respondent is directed to issue the demands for the subsequent period, but such demands shall not be enforced till the vires of the statute which is put to challenge in W.P.No.35067 & 35068/2015 and W.P.No.4253/2016 are heard and decided by this Court. The reason for permitting the third respondent to continue to issue demands is that in the event, the petitioner is unsuccessful in the other writ petitions, then at that point of time, the petitioner may raise a plea that the demand is barred by limitation.
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2016 (8) TMI 16
Rent a cab scheme - whertehr the terms `rent’ and `hire’ are interchangeable - Held that:- this issue is now covered by the decision of this court in the case of Commissioner of Service Tax v. Vijay Travels [2015 (1) TMI 809 - GUJARAT HIGH COURT] - the appeal deserves to be dismissed - Decided in favor of revenue.
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2016 (8) TMI 15
Delay in payment of service tax - Levy of penalty - held that:- we find that the original authority found the case fit for grant of benefit of Section 80 to the appellant and once the benefit has been given under Section 80, it was not open to the revisionary authority to revise such decision of the original authority. Since the service tax along with interest has been paid voluntarily by the appellant, we choose to set aside the penalties imposed by the revisionary authority under Section 76, 77 and 78 by denying the benefit of Section 80 of the Act which benefit has been given to the assessee on valid ground by the original authority. Decided in favor of assessee.
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2016 (8) TMI 14
Valuation - inclusion of value towards reimbursement of expenses - extended period of limitation - whether certain elements like freight charges and other expenses reimbursed by the principal to the appellants are to be included in the value of taxable service of C & F or not? - Held that:- We have found enough truth and justification in the pleadings of the appellants that the demands under consideration are time barred, when the subject show-cause notices were issued after the expiry of one year from the relevant date. Consequently, the lower authorities orders in these two appeal cases are held to be non-sustainable and the subject demands are held as time barred on the face of the provisions of Section 73 of the Finance Act, 1994. In other words, the show-cause notices issued to these appellants do not fulfil the criteria provided in Section 73(4) of the Finance Act, 1994. The facts in respect of these two appellants do not come within the mischief of provisions of Section 73(4) of the Finance Act, 1994. When we have held above that subject demands are time barred, we are not further discussing the issue of liability of service tax on the amounts categorised as reimbursable expenses by the appellants and whether these reimbursable expenses have to be treated as part of value of taxable service of C & F Agency service. Demand set aside - Decided in favor of assessee.
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2016 (8) TMI 13
Cenvat Credit - eligible input services - input services were used for creating immovable property - Held that:- benefit of canvat credit allowed - credit taken on debit notes are also allowed as valid duty paying documents. - Credit taken twice is required to be reversed. - Decided partly in favor of assessee.
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Central Excise
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2016 (8) TMI 12
Claim of rebate on export of cigarettes - Held that:- the rebate in case of export of goods secured under area based exemption notification was denied by amending Notification No. 19/2004- CE, for the first time, vide Notification No. 37/2007-CE (NT) dated 17th September 2007. This amendment was prospective. However there was no corresponding amendment in Notification No. 41/1994-CE (NT) dated 12th September 1994 in terms of which the rebate was being claimed by the Petitioner. The Gujarat High Court has in the above decision held that the above amendment to Notification No. 19/2004-CE (NT) to be only prospective. As a result the exports already made prior to 17th September 2007 could not be denied rebate. Even on this basis the rejection of the Petitioner's refund application does not appear to be justified. Rebate allowed - Decided in favor of assessee.
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2016 (8) TMI 11
Offences punishable under Sections 9 and 9AA of Central Excise Act - an application under Section 311 Cr.P.C was filed by the petitioner seeking recalling of the witnesses. The same was dismissed - Though the complainant/petitioner pressed an application for withdrawal of show cause notice to Joint Commissioner, Excise but did not bother to examine the witnesses. The petitioner was more concerned about the waiver of the cost imposed and exemption of the Joint Commissioner from personal appearance. - Held that:- no time frame for conclusion of the trial can be fixed however the same does not take away the power of the Trial Court to close the evidence if the facts and circumstances of the case warrant. The decision in P. Ramachandra Rao (supra) and Abdul Rehman Antulay Vs. R.S. Nayak AIR 1992 SC 1701 preserve the right of an accused for a speedy trial. Thus if despite repeated opportunities witnesses are not brought by the prosecution or defense and the Trial Court closes its evidence, it commits no illegality. During the course of arguments this Court raised a query to the learned counsel for the petitioner as to whether he was in a position to produce all its witnesses expeditiously on one or two dates, when the learned counsel for petitioner was clueless as it was not even known as to how many witnesses are now available for examination. Considering the conduct of the complainant during trial, I find no infirmity in the impugned order dismissing the application of the petitioner under Section 311 Cr.P.C. Petition dismissed - Decided against the petitioner.
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2016 (8) TMI 10
Valuation - appellants carrying out job work on the goods received from the principal manufacturer and after carrying out the carban lining the same were returned to the principal manufacturer. - tribunal has granted stay - demand for the subsequent period raised on the similar issue - Held that:- The show cause notices, dated 05.06.2015 and 26.10.2015, issued by the first respondent shall be kept in abeyance, till the disposal of the Appeals filed by the petitioner as against order in original, dated 28.05.2014. For the subsequent periods, it is open to the first respondent to raise demand, however, the first respondent is precluded from enforcing the same against the petitioner. - Interim relief granted to the petitioner.
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2016 (8) TMI 9
Classification of flavored milk packed in small pouches instead of bottles called as MILMA SIP - classifiable under Chapter 04.04.90 CET carrying Nil rate of duty or heading 21.05 CET (i.e. Ice Cream and other edible ice whether or not containing cocoa) - Held that:- the product is removed in solid form, in container called insulated boxes . On completion of manufacture, the product is in liquid form, but to preserve without decaying, the same is frozen by keeping it in freezers for about 2 days. The item is kept in shops also, in freezers. The product is actually a solidified liquid and while using it has to be in a liquid form to sip. - There is no nfirmity in the Order-in-Appeal classifying the product MILMA SIP as classifiable under heading 2105 as the said product contains about 75% water, cane sugar, sweetening agents, colours etc. - Decided against the assessee.
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2016 (8) TMI 8
CENVAT credit - eligible input services - services received at the division / other office - input service distributor (ISD) - Held that:- there is no scope to have two views regarding the status of ILTD, Guntur, which is factually an integral part of ITC Ltd. In other words, ILTD, Guntur which is an input service distributor registered as such with the service tax wing of the Revenue in Guntur is nothing but ITC Ltd, who is the appellant only, for the purpose of enforcing laws of Central Excise and Service Tax. There have all the proofs been available on record giving clear conclusion that ILTD, Guntur is a part of ITC Ltd., who is the appellant claiming CENVAT Credit for the input services utilised directly or indirectly for the manufacture of the final product of the appellant, when the final product is an excisable commodity and on which the appellant is paying Central Excise duty. In the certificate of registration dated 8.2.2006 issued by the Superintendent of Central Excise, Guntur, it is clearly mentioned that credit of input services is distributed or intended to be distributed to their manufacturing factories of ITC Ltd. at Bangalore (Karnataka), Saharanpur (Uttaranchal), Munger (Bihar). Consequently, Revenue s argument that input service distributor s operations are within the mischief of Rule 7(b) of CENVAT Credit Rules is without any foundation and is hereby rejected. Credit allowed - Decided in favor of assesseee.
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2016 (8) TMI 7
Cenvat credit - various input services - Held that:- all the services for which credit have been claimed under Rule 2(l) of the Cenvat Credit Rules, 2004 already stand allowed in various decisions. Hence, these issues are no longer res-integra. - Decided in favor of assessee.
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2016 (8) TMI 6
Claim of interest on reversal of Canvet Credit - credit availed on the Volvo Tippers procured from Volvo - Held that:- he mere taking of non-entitled credit by way of a book entry will in no way cause financial adversity to the exchequer, unless such ineligible credit comes to be utilized. We therefore find that by stretch of imagination can the act of taking ineligible credit, however reversing the entire wrongly taken credit without utilization, be considered as creating a right for the government for forbearance or detention of money, or for that matter, loss suffered because the government had not that use. When credit has been solely taken but not utilized, the effect thereof is as if credit was never taken, since book entry availment of CENVAT account cannot be ever treated as a debit entry. We therefore conclude that only when a debit occurs to such CENVAT account by way of utilization, would the exchequer be adversely affected, since otherwise the assessee would have to pay from account current or cash instead of adjusting from CENVAT account. By implication, in such a scenario, when there is no adverse deprivation to the exchequer, there cannot be a claim of interest that can be latched on to the assessee. Levy of penalty - Held that:- The proposal in the show cause notice for imposition of penalty should have been accepted and confirmed in toto or not at all. The adjudicating authority cannot travel beyond the SCN. This being the case, and especially taking note of the adjudicating authority's own findings that there is no suppression, fraud etc., the said proposal in the notice for imposition of penalty under Rule 15 read with S 11 AC ibid will necessarily have to be dropped. In consequence the penalty of ₹ 60 lakhs imposed by adjudicating authority as aforesaid under Rule 15 of the Rules will require to be set aside, which we hereby do. Decided in favor of assessee.
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2016 (8) TMI 5
Maintainability of revenue appeal - Held that:- it is clear that the direction to any Central Excise Officer Authorized by the Committee of Commissioners will, as per Section 35B(2), be necessarily have to be issued by way of an authorization by both the Commissioners constituting the said Committee. This has certainly has not been done. We find that the impugned Authorization dated 25.10.2007 has been signed by only one Commissioner of the Committee. We are afraid that the submission by the AR that the note sheet from the file from which the said authorization was issued was signed by both Commissioners, will not help his case since a note sheet is only an internal file document and certainly not the legally prescribed document envisaged under Section 35B (2) of the Act. - Revenue appeal dismissed.
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2016 (8) TMI 4
Duty liability - job worker is liable to discharge the liability or the principal - related parties - dummy job workers - Held that:- the respondents cannot escape from their liability of payment of Central Excise duty in this case, especially when for the purpose of Central Excise, there is a clear-cut finding that respondents and their job worker viz., M/s. Ashok Bagi and Associates are one and the same having common interest. When the respondents have structure and stratagem in order to evade payment of duty of Central Excise it becomes necessary to go beyond such a structure and stratagem and lift the veil of structure in order to see what are the clear-cut facts; consequently the respondents cannot be allowed to escape, when they have not paid the dues of Central Excise. However, teir plea of giving benefit of Notification No.8/2003 C.E. dated 1.3.2003 deserves acceptance and the liability of payment of duty for the subject goods has to be computed after granting the benefit of Notification No.8/2003-C.E. - Decided partly in favor of assessee.
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CST, VAT & Sales Tax
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2016 (8) TMI 3
Escaped turnover of purchases and sales - validity of tribunal order - Held that:- The order of the Tribunal is totally silent on the basis of which this was arrived at. - The principles applicable to an assessment taken to the best of judgment are no longer res integra. - Following the decision in the case of State of Kerala v. C. Velukutty [1965 (12) TMI 32 - SUPREME Court], mater remanded back - Decided in favor of assessee.
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2016 (8) TMI 2
Validity of seeking Furnishing of security for an amount of ₹ 70 lakhs as a condition for registration - Section 17(2) of the KVAT Act - Held that:- there cannot be any dispute regarding the power of the officer in calling upon a dealer to furnish security not exceeding ˝ of the tax payable on the turnover of the dealer for the year as estimated by the Registering Authority. In cases where a new dealer seeks for registration, the Registering Authority is under obligation to estimate regarding the turnover of the dealer which apparently has to be based on certain factual material to be produced by the dealer. In fact it seems from Ext.P3 that, in the absence of any such material, the officer had proceeded to make the estimate on the basis of the turnover of M/s.Khushi International, the other firm. Primarily I do not find any error in the view taken by the Registering Authority, though it might be contended that the amount claimed is exorbitant. However, since the petitioner had relied upon Ext.P7 the return filed by M/s.Khushi International, the tax liability can be easily found out from the said document itself and the Registering Authority has to consider the same before taking a final decision in the matter. I am of the view that Ext.P7 may have relevance while conducting an enquiry in terms of Section 17 (2) of the Act. For that purpose, it will be appropriate for the Registering Authority to consider Ext.P7 as well before arriving at a finding regarding calling upon the petitioner to remit ₹ 70 lakhs. Matter restored before the authority to decide the issue afresh.
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