TMI Tax Updates - e-Newsletter
September 9, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
Income Tax
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TDS u/s 194I premium paid for acquiring lease - payment for acquiring leasehold land is a capital expenditure - not liable for TDS u/s 194I - AT
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TDS u/s 192 - TDS on LTA and Medical reimbursement - The AO does not dispute non-fulfillment of conditions for allowing exemption u/s. 10(5) of the Act or proviso (iv) to Sec.17(2) of the Act. - The liability of the person deducting tax at source cannot be greater than the liability of the person on whose behalf tax at source is deducted - AT
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Nature of Lease Rent Received - Income from business or house property or other sources - Lease agreements - furnishing of floors of the building given on rent - agreement to provide maintenance and up- keeping of building, floor, furniture & fixtures and other equipments installed in the said premises - Principle of res judicata - Taxable as income from house property - AT
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Computation of capital gain - Capital asset or agricultural land - tax authorities have pointed out that the assessees themselves has described the impugned land as “Stadium land“ in the conveyance deed and further in the Form 1B annexed to the conveyance deed, the impugned land was described as “Commercial land“ - decided against the assessee - AT
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Exemption u/s 10(23G) - whether Banking company to be considered as Infrastructure capital funds/company - It is not necessary that the ‘infrastructure capital company’ should be formed solely for the purpose of mobilizing resources for financing infrastructure facilities. If it includes one of the objects of the banking business, the same should be sufficient to entitle the assessee to claim exemption of its income u/s 10(23G). - AT
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TDS on demurrage reimbursed by the assessee to the foreign buyer to compensate the foreign buyer for paying demurrage to the ship owner - Income cannot be deemed to accrue or arise in India in hands of foreign buyer - not taxable in India and not liable to tax deduction at source - AT
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Indo-Italian DTAA. - TDS on payment made to non residents - Nature of payment - overseas commission or fee for technical services (FTS) - systematic research- Held as FTS - disallowance confirmed u/s 40(a)(ia) - AT
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Whether the loss/gain arising on fluctuation of exchange is allowable as deduction/additions in the year of fluctuation of exchange rate or whether the same could be allowed only in the year of repayment - claim allowed on accrual basis - AT
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Method of accounting - business of cold storage - without considering the aspect whether assessee has followed correct method of accounting in accordance with Section 145 of the Act or not but certainly the addition proposed by the A.O. is not sustainable in law and fact - AT
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Long Term Capital Gain u/s 45 - transfer u/s 2(47) - non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable - It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. - Capital gain is taxable in the hands of members - AT
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Deduction u/s 80IA - from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. - This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. - AT
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Admission of revised return - when the processing of a return does not amount to an assessment, CIT(A) cannot be said to have erred in admitting the revised return as a valid return and requiring the Assessing Officer to proceed on that basis- AT
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Expenditure on sale of JV business - Whether Expenses related to sale of the Parker Pen Division is related to business of the assessee company - Held no, disallowance confirmed - AT
Customs
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Import of goods (wine) - food safety - Labelling Requirement - Assessee would have to comply with a number of conditions like providing details to comply with the local laws, at the time of the re-packing and the re-labeling of the said goods, in the customs bonded area, and goods to be subjected to necessary tests to make sure that the goods in question are fit for human consumption, before release of goods - AT
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Import of goods - whether scrap or parts of machine - It was well settled law that the goods had to be assessed in the condition in which they were imported - Even if some of the rollers can be put to use after some re-conditioning - the said fact will not make the imported goods as rollers to be used as parts of the machine - AT
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Redemption fine – The redemption fine imposed by the Tribunal cannot be taken as truly binding precedents and the same may be taken at the most only as guidelines - If a restricted import takes place repeatedly the hands of the adjudicating authority cannot be tied by prescribing a lower limit than the statutory limits prescribed u/s 125 - AT
Corporate Law
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Calculation of Period of one month in Negotiable Instrument Act - Expressions such as ‘from such a day’ or ‘until such a day’ are equivocal, since they do not make it clear whether the inclusion or the exclusion of the day named may be intended - As a general rule, however, the effect of defining a period in such a manner was to exclude the first day and to include the last day. - SC
Indian Laws
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HUF - Partition - A person who asserts a particular property to be a joint family property, onus is on him to establish that fact and unless such person who asserts such fact discharges his onus cast upon him, such burden is not shifted to the other party who claims the said property as self acquired property. - HC
Service Tax
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Re-rubberising of old and used printing rollers - Business Auxiliary Service OR Management, Maintenance or Repair Service - No prima facie case on merits but a strong case on the ground of limitation - AT
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Service tax demand – applicant could not explain the reasons of parallel invoices - Any transaction by way of issue of parallel/duplicate invoice is never reflected in books of accounts. - stay granted partly - AT
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Construction of Residential Complex u/s 65(105)(zzzh) – Undivided Share of Land - at no stage the Board clarified that if land was sold first and then construction is undertaken, there was no service tax liability - prima facie case is against the assessee - AT
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Management, Maintenance or Repair Service – main issue arises as to whether the applicant was rendering the service of maintenance of the leased line - prima facie case is against the assessee. - AT
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Renting out of immovable property – co-owner of a particular building - different cheques are issued to all the individuals as they are co-owners - prima facie case is in favor of assessee - eligible for exemption upto 10 lakhs - stay granted. - AT
Central Excise
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Clandestine removal - demand based on confessional statement - In the absence of any corroborative evidence, as to there being clandestine manufacturing and clearance of P&P medicaments, for the foregoing reasons, the impugned orders in our view are not sustainable - AT
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CENVAT credit on GTA servuce - Input credit - place of removal - duty paid at specified rate - In this case, the “place of removal” would be the “place of removal” for the purpose of Rule 4 of Central Excise Rules, i.e. the places on removal from where the duty is liable to be paid, which in this case, is the factory gate of Sonadih factory, as the duty on clinker becomes payable at the time of removal from Sonadih factory. - Section 4(3)(c) would be of no relevance - AT
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The process of transferring/converting the bulk packs of soda ash in bags of 75/50 kg into smaller/retail packs of 500 gms/1 kg and affixing with the brand name of M/s. Tata Chemicals would result into “manufacture” within the meaning of Section 2(f) of Central Excise Act, 1944 and leviable to duty - AT
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Fair adjudication cannot be sacrificed at the cost of speedy disposal - order relating to the said demand on rejected and repaired goods and remand the matter to Commissioner for passing the fresh orders - AT
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Benefit of CENAVAT credit or returned goods - Defective Goods - it is not the case of the Revenue that Rule 16 was not applicable to a case where defective goods returned by the buyer were subjected to a process of remaking defect-free product - AT
VAT
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Notice for Re-assessment - The huge quantity of diesel purchased by the petitioner for running diesel generating sets should have been examined both for the purposes of its utilisation in manufacture and for ancillary purposes - reassessment held as valid - HC
Articles
Notifications
Circulars / Instructions / Orders
- VAT - Delhi - 14/2013-14 - dated
6-9-2013
Filing of Annexure 2C and Annexure 2D
- VAT - Delhi - F. No. 7(105)/Policy-I/VAT/2007/736-743 - dated
3-9-2013
Sh Ashok Kumar Yadav, value Added tax Officer, ward-64, in addition to the existing dealers, shall exercise jurisdiction for all purposes for the financial years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13, over 29 dealers as per Annexure attached.
- Companies Law - Draft Rules under Companies Act, 2013 - dated
9-9-2013
Chapter I - Draft Rules under Companies Act, 2013
News
Case Laws:
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Income Tax
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2013 (9) TMI 261
TDS u/s 194I premium paid for acquiring lease - nature of payment - TDS u/s 194I - default u/s 201 - Held that:- A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire 'G' Block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area - Following decision of Commissioner of Income-Tax Versus Khimline Pumps Ltd. [2002 (9) TMI 94 - BOMBAY High Court] - payment for acquiring leasehold land is a capital expenditure - not liable for TDS u/s 194I - Decided against Revenue.
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2013 (9) TMI 239
TDS u/s 192 - TDS on LTA and Medical reimbursement - Exemption u/s 10(5) - fulfillment of conditions of section 17(2) - - Held that:- exemption in respect of medical expenditure and leave travel is considered after collecting and verifying the details and evidence furnished by the employees. Policies and controls are in force to ensure that the requirements of rule 2B are fulfilled. The details filed before the TDS officer explains the policies adopted to fulfill the requirements of rule 2B and the process adopted in considering the exemption under section 10(5) and proviso to section 17(2). Honest and bona fide estimate of taxable salary is made in the process of deducting tax at source under section 192. Every effort is made by the assessee to comply with the requirements of section 192. The assessee is not benefited by allowing employees to claim exemption - The AO does not dispute non-fulfillment of conditions for allowing exemption u/s. 10(5) of the Act or proviso (iv) to Sec.17(2) of the Act. The liability of the person deducting tax at source cannot be greater than the liability of the person on whose behalf tax at source is deducted. The AO has ignored this aspect and has proceeded to pass the order u/s.201(1) and 201(1A) of the Act. His order was rightly held to be unsustainable by the CIT(A) - Following decision of Infosys BPO (2013 (9) TMI 205 - ITAT BANGALORE), Decided against Revenue. Salaries - TDS on Free meal coupons u/s 192 – taxability as perquisite within the rule 3(7) (iii) – deduction of tax at source - coupons were not utilized by employee for purchasing meals at an eating joints but were mis-used to purchase grocery items, cosmetics items, etc., from shops/super stores – Held that employer is not expected to presume misuse of coupons to warrant deduction of tax at source – further, conveyance allowance in respect of vehicles owned by employees cannot be treated as perquisite - expenditure incurred on disbursement of meal coupons by the employer to the employees did not attract the provisions of s. 192 - Decided against Revenue.
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2013 (9) TMI 238
Nature of Lease Rent Received - Income from business or house property or other sources - Lease agreements - furnishing of floors of the building given on rent - agreement to provide maintenance and up- keeping of building, floor, furniture & fixtures and other equipments installed in the said premises - Principle of res judicata - Held that:- it is well settled that the principle of resjudicata or estoppel, which applies to decision of civil courts, has no application to decisions of income-tax authorities so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to a subsequent assessment. - for A.Y. 2005-2006 A.O. has accepted claim of the assessee without examining the relevant records and without recording facts of the issue. The order of the A.O. for A.Y. 2005-2006 is not in accordance with law. Merely accepting assessee's clam without examining records and material, it cannot be said that the order of the A.O. to be followed in subsequent year. The principle of consistency suggests that if any authority after examining records and material and after recording facts come to conclusion or taken a particular view on the issue by a speaking order in accordance with law only such view is to be followed on account of principle of consistency. A blind order, not taking any view, not examining records and material, such order is not required to be followed on principle of consistency. If anything was going wrong in the past that wrong thing need not to be followed in subsequent year. The wrong thing has to be corrected on notice of the same - partner of the assessee firm clearly admitted that the property taken on lease for the purpose of giving rent to GAIL - Revenue authorities are correct in not following the order of the A.O. for A.Y. 2005-2006. Nature of income - intention of the assessee was to let out the property to earn the rent. The assessee has claimed that income is assessable under the head "income from business" but the assessee has failed to discharge the onus by furnishing evidence and material that the assessee was doing business. No systematic set up has been established for doing business activities. The assessee has failed to point out the volume, frequency, continuity and regularity of the transactions of purchase and sale in clause of goods - CIT(A) has rightly confirmed the action of the A.O in treating rental income assessable as income from house property and services receipts as income from other sources. Order of CIT (A) is confirmed on the issue. The AO is directed to give consequential effects and calculate total taxable income in accordance with law - Following decision of CIT vs. National Storage Pr. Ltd. [1967 (4) TMI 16 - SUPREME Court] - Decided against Assessee.
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2013 (9) TMI 237
Computation of capital gain - Capital asset or agricultural land - Sale of land - Difference between sale consideration shown in agreement to sell and conveyance deed - Held that:- certificates issued by village officer and the revenue authority - those authorities have issued the certificates on the basis of assertion made by the assessees herein, i.e., they did not make any reference to the revenue records or other records maintained by the Government. None of the assessees has declared any agricultural income even in the returns of income filed after the date of search. In the cash flow statements, meagre amount of agricultural income was shown by each of the assessees, but they could not give any credible evidence in support of the same. Even though these assessees have admitted that the possession of land was given in January 2006 itself, still they have shown agricultural income in the years relevant to the assessment years 2007-08 and 2008-09. These facts prove that the agricultural income shown in the cash flow statements do not have any basis. The assessees herein could not bring any credible evidence to prove existance of various trees on the land. Further, the assessees could not bring evidence to show that they carried out agricultural operations on maintenance of those trees, sale proceeds realised on sale of produce etc. The tax authorities have pointed out that the assessees themselves has described the impugned land as "Stadium land" in the conveyance deed and further in the Form 1B annexed to the conveyance deed, the impugned land was described as "Commercial land". - The land in question is not a agriculture land - Decided against the assessee. Taxability of capital gain - Year of transfer - section 2(47) - Held that:- the transfer has taken place only on 13/02/2008, thereby the capital gain arising therefrom is assessable in the assessment year 2008-09 Enhancement of sales consideration - Held that:- The intention of the owners with regard to the user and sale of land, singularly and cumulatively go to establish that the land in question was never held as an agricultural land wef 2001 and never sold as an agricultural land at the time of sale - The tax authorities have pointed out that the assessees themselves has described the impugned land as "Stadium land" in the conveyance deed and further in the Form 1B annexed to the conveyance deed, the impugned land was described as "Commercial land" - assessing officer did not make any enquiries with the buyers - Thus, the AO has reached his conclusions without conducting proper enquiries - Though the Ld CIT(A) has rejected the said story, but the fact remains that the decision was taken by both the tax authorities without examining buyers - issue relating to determination of actual sale consideration needs to be examined afresh at the end of the assessing officer - Decided in partly in favour of assessee
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2013 (9) TMI 236
Disallowance of Revenue expenditure - Business not set up - Transfer pricing - ALP - Reasons for decision - Held that:- it is obligatory, for the DRP on its part to ascribe cogent and germane reasons for arriving at a conclusion. The reasons are heart and soul of the matter and they facilitate appreciation when the order is called in question before a Superior forum or an appellate forum. Since the detailed findings supported by the reasons of the DRP are not before us it would not be appropriate to considers the grounds raised by the assessee before us and it is necessary to hold that the matter deserves to be remitted back to the DRP for proper adjudication on all the objections in the grounds raised by the assessee. Needless to say, that the DRP after affording reasonable opportunity of being heard to both the parties shall deliver a speaking order as per the requirements of law and procedure accepted by the Courts - Decided in favour of assessee.
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2013 (9) TMI 235
Claim of bad debts - Banking company - Restriction on Provision for bad debts - Rural branches versus non rural branches - Section u/s 36(i)(viia) – Held that:- Assessee has submitted working for claim u/s 36(i)(viia), to demonstrate that assessee had set off bad debts relating to non rural branches against the opening provision u/s 36(i)(viia). In the same statement, assessee had claimed bad debts relating to rural branches amounting to Rs. 10,38,51,000/-. Considering the entirety of facts, the claim of assessee needs to be examined afresh in the light of decision of Hon’ble Supreme Court in the case of Catholic Syrian Bank [2012 (2) TMI 262 - SUPREME COURT OF INDIA] - If on verification, the AO finds that no separate bad debts had been written off in respect of non rural branches, then the same is to be allowed after due verification – Decided in favor of Assessee. Exemption u/s 10(23G) - whether Banking company to be considered as Infrastructure capital funds/company - long term finance made available to infrastructure capital funds/company – Held that:- Assessee company had earned interest on long term loan given to Gujarat State Energy Generation Ltd. which is notified as engaged in the business of infrastructure development within the meaning of sec. 80(i)(a) sub-section (4) clause (iv) sub clause (a) of the Act vide CBDT’s notification dt. 29/06/2006 - Assessee had provided long term finance to an eligible undertaking – Reliance has been placed upon the judgment in the case of Jammu & Kashmir Bank [2008 (2) TMI 533 - ITAT AMRITSAR], wherein it has been held that assessee is a banking company. The essential feature of the business of a banking company is to mobilize resources from the public and lend it on interest to various sectors. The Revenue has not denied that assessee had indeed made investment in shares and providing long term finance to enterprises engaged in infrastructural facility. Therefore, all the conditions laid down for claiming exemption u/s 10(23G) are fulfilled by the assessee. It is not proper to take a narrow view of the issue when the assessee had in fact made investments in shares and financed the enterprises engaged in providing infrastructure facilities on long term basis. It is not necessary that the ‘infrastructure capital company’ should be formed solely for the purpose of mobilizing resources for financing infrastructure facilities. If it includes one of the objects of the banking business, the same should be sufficient to entitle the assessee to claim exemption of its income u/s 10(23G). The above view also finds support from the fact that subsequently this benefit of sec. 10(23G) has been extended to co-operative banks, though such banks have also not been set up for the purpose of mobilizing resources for financing the infrastructure facilities. Therefore, in the present case, the assessee falls in the category of ‘infrastructure capital company’ entitled to exemption u/s 10(23G). The view that banks are entitled to exemption of its income falling in the nature mentioned u/s 10(23G) is reinforced by the news item which appeared in The Economic Times dt. 19.01.2008 - Explanation 1A to sec. 10(23G) of the Act, defining infrastructure capital company does not exclude banking companies so long as banking company is a company and has made investment in providing long term finance to an enterprise wholly engaged in the infrastructure business and approved by the Central Government – Decided in favor of Assessee. Depreciation on Computers - LAN and WAN, a part of computer system in banks – Depreciation @ 60% or at normal rate of 20% only - Held that:- LAN and WAN, both formed integral part of computer system as computer could not be utilized without there devises for assessee’s business purposes and, therefore, assessee was entitled to depreciation @ 60% - Decided in favor of Assessee.
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2013 (9) TMI 234
Disallowance of travelling expenses - Held that:- It is seen that Assessing Officer had disallowed the expenses for the reason that the Assessee had not furnished the details. CIT(A) while deleting the addition has noted that the details were indeed furnished by Assessee before Assessing Officer. He further noted that the facts of the case in the year under appeal are identical to that of AY 1994-95 & 1995- 96 and following his own order for aforesaid years he deleted the addition. Before us, Revenue could not controvert the findings of CIT(A) by bringing any tangible material on record - Decided against Revenue. Disallowance of guest house expenses - Held that:- It is an undisputed fact that the expenses incurred by the Assessee are towards the guest house. Hon'ble Apex Court in the case of Britannia Ind. (2005 (10) TMI 30 - SUPREME Court) has concluded that expenses towards rents, repairs, maintenance and depreciation of premises/accommodation used for the purposes of guest house were to be disallowed u/s 37(4). Respectfully following the decision of Hon'ble Apex Court, we are of the view that the action of Assessing Officer in disallowing the expenses cannot be faulted - Decided in favour of Revenue. Disallowance of loss on trading - Held that:- It is seen that while deleting the addition, CIT(A) after considering the tax audit report has given a finding that the sale was not to a party which would attract the provisions of Section 40A(2)(a). He further noted that there is no material on record to prove that the sale was made at a price which was below the market rate. Before us, Revenue could not controvert the findings of CIT(A) by bringing any tangible material on record - Decided against Revenue. Disallowance on account of excess consumption of Hexene - Held that:- It is seen that while deleting the addition, CIT(A) has held that the facts in the present ground are identical to that AY 1995-96 and he relying on his orders for AY 1994-95 and 1995-96 deleted the addition. Before us, Assessee has submitted that it has maintained complete quantity records as per Central Excise laws and no defect has been found therein. Before us, Revenue could not controvert the findings of CIT(A) or the submissions made by Assessee by bringing any tangible material on record - Decided against Revenue. Disallowance on account of excess consumption of Catalyst - Held that:- It is seen that while deleting the addition, CIT(A) has held that the facts in the present ground are identical to that AY 1995-96 and he relying on his orders for AY 1994-95 and 1995-96 deleted the addition. Before us, Revenue could not controvert the findings of CIT(A) by bringing any tangible material on record - Decided against Revenue. Disallowance of depreciation - Held that:- It is seen that the Assessing Officer has treated the entire transaction to be a device used to reduce the incidence of tax. However, he has not brought any-thing of record with respect to the treatment given by the Assessee to the income received on the disputed lease transactions. We, therefore, feel that the issue needs to be examined in all respect in light of the decision of CIT Vs Gujarat Gas Ltd (2008 (9) TMI 126 - GUJARAT HIGH COURT) - Decided in favour of Revenue. Deduction u/s 80HHC - Inclusion of excise duty and sales tax as part of turnover - Lease rent, interest etc as part of business income - Held that:- From the assessment order it is seen that the Assessee had earned interest of Rs. 4,10,388/- from banks and Rs. 242000/- from Sangam Chemicals. It is submitted that the interest has been earned in the normal course of business and has also been taxed as business income. It is seen that while passing the order u/s 143(3) the Assessing Officer has made no adjustment to the interest income and considered it as income from business. The Ld. D.R. could not controvert the facts by bringing any contrary material on record. In the case of CIT Vs Shri Ram Honda Power Equip. & Ors (supra) while deciding the eligibility of deduction u/s 80HHC, it has been held that when interest income is treated as business income, the net interest is required to be reduced to work out the deduction u/s 80HHC - . As far as the inclusion of lease rent, interest etc is concerned we find that there is no finding by the Assessing Officer as to whether the same is business income or income from other sources. We, therefore, feel that this aspect needs to be examined by Assessing Officer in the light of the ratio of decision in the case ASG Capsules (2012 (2) TMI 101 - SUPREME COURT OF INDIA) and CIT vs Sri Ram Honda Power (2007 (1) TMI 86 - HIGH COURT, DELHI) - Decided in favour of Revenue. Rejection of books of accounts - Low yield and GP addition - Held that:- CIT(A) while deleting the addition has given a finding that AO was not justified in comparing the yield of AY 97-98 with the yield of AY 1995- 96 ignoring the fact that the yield of current year was better than that in the immediately preceding year. He has further held that the Assessee has maintained proper records of production and consumption in accordance with the excise regulations. He has further noted that during the search at Assessee's premises in 1999-2000 minor difference in stock was observed which was due to various explainable factors. He has further held that AO has not brought any material on record to dispute the correctness of books of accounts and further no evidence has been brought on record to substantiate the allegation of unrecorded sales. He thus by a well reasoned order deleted the addition. Before us, nothing has been brought on record by Revenue to controvert the findings of CIT(A) - Decided against Revenue.
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2013 (9) TMI 233
Disallowance u/s 14A of I.T.Act read with Rule 8D of IT Rules - Assessee invested in debts mutual funds. Assessee computed disallowance u/s 14A(2) at ₹ 25,78,156/- and disallowed same, while computing its total income - Held that:- AO merely observed that the administrative expenses disallowed by the assessee is very less but how they are less and how the other expenses incurred by the assessee related to dividend income has not been brought on record. AO has not pointed out expenses excluded by assessee for disallowance has proximate connection with dividend income - Assessing officer before rejecting disallowance computed by assessee must give a clear cut finding having regard to accounts of assessee how other expenditure claimed by assessee out of non exempt income related with exempt income. No discrepancy in claim of assessee was pointed out – Onus of proof lies on Assessing officer – Reliance has been placed upon various judgments s.a. DCIT Vs. Jindal Photo Ltd [2010 (12) TMI 521 - ITAT, New Delhi]; CIT Vs. Hero Cycles [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT], wherein it has been held that disallowance u/s 14A of Act requires a clear finding of incurring of expenditure and that no disallowance can be made on basis of presumptions – Decided in favor of Assessee. Payment of sales commission - payment to third parties - Genuineness - Disallowance u/s 37 - Requirement of TDS u/s 195 – Held that:- Reliance has been placed upon judgment in case of CIT Vs Chandulal Keshavlal and Co. [1960 (2) TMI 1 - SUPREME Court], wherein held that if expense incurred for fostering business of another only or for some improper or oblique purpose outside course of business then expense not deductible. In deciding whether a payment of money a deductible expenditure one has to take into consideration questions of commercial expediency and principles of ordinary commercial trading. If payment or expenditure incurred for purpose of trade of assessee it does not matter that payment may incur to benefit of a third party. Another test whether transaction properly entered into as a part of assessee's legitimate commercial undertaking in order to facilitate carrying on of its business; and it immaterial that a third party also benefits thereby. But in every case it a question of fact whether expenditure was expended wholly and exclusively for purpose of trade or business of assessee. In instant case, buyers had been introduced by said agents in past. Emails exhibit that agents were deeply involved with buyers vis-a-vis assessee in actual transportation of goods and securing payments to assessee, confirming vessel nomination, request to agents for opening of LC, amendment to the LC, advising changes in sale contract etc.– Thus, easily inferred that non-resident agents were actually rendering services as middlemen in terms of their respective agreements with assessee and, accordingly, commission was genuinely paid by assessee for those services only, i.e., wholly and exclusively for purpose of business of assessee – Decided in favor of Assessee. TDS on demurrage reimbursed by the assessee to the foreign buyer to compensate the foreign buyer for paying demurrage to the ship owner - Held that:- In case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to purchase of goods in India for purpose of export. Non-resident buyer got compensation towards demurrage incurred through operation which are confined to purchase of goods, i.e. in relation to ship which it had arrange for taking delivery of goods from assessee/seller from India - Income cannot be deemed to accrue or arise in India in hands of foreign buyer and therefore it cannot be taxable in India and not liable to tax deduction at source - No disallowance can be made u/s 40(a)(ia) – Decided in favor of Assessee. TDS on demurrage paid to ship owner - Held that:- In view of the circular the assessee was not obliged to deduct tax at source on the demurrage paid to the shipping owners during the year. Since the provision of TDS were not applicable, therefore no disallowance can be sustained u/s 40(a)(ia). - Decided in favor of assessee. Allowance of education and higher education cess as business expenditure – Held that:- Education cess and secondary higher education cess levied by assessee has been collected as part of income-tax and provisions of section 40(a)(ic) & (ii) are clearly applicable and assessee not entitled for deduction. Said payment not a fee but a tax – Decided against Assessee. Eligibility of deduction u/s 10B for 100% EOU - By Finance Act, 2000, definition of 'manufacture' which included 'processing' contained in section 10B of Act was deleted w.e.f. 01.04.2001 – Held that:- Reliance has been place upon judgment in case of Commissioner of Income-Tax Versus Tara Agencies[2007 (7) TMI 4 - SUPREME COURT OF INDIA], wherein it has been held that blending of tea does not amount to 'manufacture' or 'production' of an article, but only processing – In present case, assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division - Assessee's unit engaged in export of tea bags and tea packets was a 100% EOU – Reliance has also been placed upon judgment in case of Madhu Jayanti case[2012 (7) TMI 531 - ITAT KOLKATA ] – Exemption u/s 10B allowed. Whether assessee has set new units or has merely reconstructed business which was already in existence – Held that:- CIT(A) had referred to only a few correspondence exchanged with Panchayat to make a case that it was only some repairs or at best a renovation work undertaken at Amona, whereas several other pieces of correspondence were ignored by him which prove that appellant had factually undertaken a major dismantling and demolition of existing plant as well as erection and installation of new plant in its place there – Newspaper clipping clearly bring out fact that a complete destruction of old unit was done and altogether new plant was set-up at Amona, albeit, with aid of some old machinery and parts thereof – Further, for determination of eligibility of a particular unit u/s 10B, value of old plant and machinery installed in that very unit will be considered for determining threshold limit of 20% - Decided in favor of Assessee. Additional depreciation u/s 32(1)(iia) of Income Tax Act – Held that:- Assessee must be engaged in business of manufacture or production of any article or thing and new plant and machinery must be acquired and installed - Assessee has extracted iron ore and also processed it - Case of assessee duly covered by decision of Hon'ble Supreme Court in assessee's own case reported in [2004 (11) TMI 14 - SUPREME Court] – Allowed additional depreciation – Decided in favor of Assessee.
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2013 (9) TMI 232
Indo-Italian DTAA. - TDS on payment made to non residents - Nature of payment - overseas commission or fee for technical services (FTS) - Revenue contended that the payee in question had rendered technical services in the nature of 'systematic research' to the assessee and received fee in lieu thereof, which is liable to be taxed as per Article 13 – Held that:- In sub-section (1)(vii) of section 9, income by way of 'fee for technical services' is defined - Section 9(1)(i) is a general provision whereas, clause (vii) is in the nature of specific provision – Explanation introduced by Finance Act, 2010 makes it categoric that in cases covered by clause (vii) or for that section 9, sub-section (1)(vi) - (vii), it would not be necessary for the non-resident to have residence or place of business or business connection in India - In case of 'fee for technical services', the mandate of the legislative is that clause (vii) would have overriding effect by virtue of aforesaid explanation to section 9(1)(i). In present case, assessee has paid for 'systematic research' made by the overseas entity - In Explanation 2 of clause (vii) (supra) of section 9(1) with effect from 01.04.1977, fee for 'technical services' means any consideration paid for 'technical' or 'consultancy' services – It is held that word 'technical' services would imply an operation involving skilled precision which 'systematic research' also involves – Payment made to overseas entity amounts to fees for 'technical' services - Hence, assessee was liable to deduct TDS as per the provisions of the Act, failure of which would entail disallowance under section 40(a)(ia) of the Act – Decided in favor of Revenue.
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2013 (9) TMI 231
Transfer price - ALP - corporate additions - selection of Comparables for Transfer pricing transactions – Held that:- The company selected by TPO namely Semac – The details of the Semac ought to have been provided by the TPO for consideration of assessee, in order to include it as a valid comparable – Again, Comparable Kitco submitted by Assessee should not have been excluded as other comparables are included by TPO on same parameters - Natural justice i.e. justice, equity and fair play have not been complied with in selection of comparables, hence the issue of TP adjustments restored back to the file of TPO to address these issues and pass a speaking order in accordance – Decided in favor of Assessee. Whether the loss/gain arising on fluctuation of exchange is allowable as deduction/additions in the year of fluctuation of exchange rate or whether the same could be allowed only in the year of repayment – Consistency to be maintained in the form of book keeping - Held that:- assessee in respect of foreign exchange realization follows mercantile system of accounting and not cash system of accounting. The loss has been incurred for hedging of foreign currency fluctuation involved in sales invoices on the basis of forward contracts, which is a business decision to safeguard its interest. The loss has been incurred on the basis of scientific method in the ordinary course of business. The loss being based on a scientific method, on the basis of contractual liability with banks and on mercantile system has to be allowed to the assessee following Hon'ble Supreme Court judgment in the case of Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] - Allowability of the loss on actual payment in A.Y. 2009-10 has been made subject to the allowability of the loss for AY. 2008-09. This stand of the DRP itself negates the observations of assessing officer that it is a notional loss and establishes that it is a business loss incurred by the assessee on mercantile system which method is consistently followed by the assessee - Allowed the foreign exchange fluctuation loss to assessee in this year – Decided in favor of Assessee.
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2013 (9) TMI 230
Method of accounting - business of cold storage - Gross rent receipt or returned gross receipt - mercantile system of accounting - Held that:- Significantly, the provision of section 145(1) presupposes that there can be more than one method of accounting the income from which may be properly deducible. These provisions would make no sense if always there is one method of accounting the income from which alone may be properly deducible. In the case of on-going business, the profit or loss made by the businessman from that business, as aptly described in the case of Sunil Siddharthbhai v. CIT [1985 (9) TMI 7 - SUPREME Court] remains in the "Womb of future". The measurement of periodic income is, to that extent, a matter of estimation on the basis of certain acceptable principle of accounting. For this reason, on the same facts and circumstances, the computation of business income may differ depending upon the method of accounting employed - assessee after having made entries in the books of account consistent with the method of accounting followed by him cannot be permitted to seek assessment of his income for income-tax purposes on a different basis on the ground that another basis may also be permissible under the method of accounting followed by the assessee or has been upheld in certain judgments of a High Court or Supreme Court. To this extent, the entries made in his books of account are as much binding as the method of accounting itself. It is only when the entries made in the books of account are erroneous or contrary to the correct legal position, the same are not conclusive or decisive of the matter, as held by the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971 (8) TMI 10 - SUPREME Court] and several other judgments. This position is also in built in the provisions of section 145(1) itself that where the method of accounting is followed is such that income cannot be properly deduced there from, the Assessing Officer may compute income upon such basis and in such manner as the Assessing Officer may determine. It cannot be said that the A.O. was not satisfied about the correctness of completeness of the accounts of the assessee. Because the assessee has disclosed gross receipt Rs.93,32,817/- whereas according to the A.O. gross receipt was Rs.87,61,916/-. The finding of the A.O. is contrary to the provision of Section 145 of the Act. Even otherwise also if the A.O. found that the method of accounting followed by the assessee accounting the hire chargers at the time of delivery of potatoes to farmers, he is empowered to correct the method of accounting in accordance with Section 145 of the Act. Cash or mercantile and accordingly consequential effects are required to be given in the year under consideration as well as in subsequent years. A.O. has completely failed in this regard. Therefore, making addition merely on the basis of the proposed method by the A.O. and followed by the assessee is not sustainable. - without considering the aspect whether assessee has followed correct method of accounting in accordance with Section 145 of the Act or not but certainly the addition proposed by the A.O. is not sustainable in law and fact. - Decided against the revenue. Increase in expenses - A.O. During the assessment proceedings the A.O. noticed that during the year there is tremendous increase made in expenses in comparison to gross receipt mainly on loading and unloading, diesel and fuel, labour and paltai, machine repair and maintenance, electric repair and maintenance and generator repair. - Held that:- CIT(A) after detailed examination of each of the expenses some of the expenses has been disallowed to the extent of 10% and some of them are taken up to 10% as per the above table. The revenue has failed to point out any contrary material to the finding of the CIT(A) - decided against the revenue. Estimation of expenses on sale of potato - The CIT(A) noticed that A.O. has only brought out one evidence which supports his case that the assessee was selling potatoes by observing that draft received by the assessee on sale of potatoes are in the name of the assessee's company and same was deposited in its Bank account. - CIT(A) deleted the additions - Held that:- .O. has failed to put on record complete facts after necessary examination of relevant parties and their books of account that in fact assessee has sold the potatoes. In absence of such enquiry the practice of assessee selling the farmers potatoes to secure their cold storage hire charges is a decision of businessman in accordance with commercial expediency for the purpose of business. - Decided against Revenue. Cash Credit - Additions u/s 68 - genuineness of purchase and sale of shares - held that:- The transactions carried out by the assessee have been explained through material on record and the assessee entered into the transactions of purchase and sale of shares genuinely. Sale consideration is received through broker who is also existing assessee with the Revenue Department. Therefore, there is no reason to treat the aforesaid transaction as non-genuine for the purpose of making addition. Since the source of the receipt of the amount in question is explained and the transaction entered into by the assessee with the broker clearly suggests a case of short-term capital gains, therefore, the ld. CIT(A) rightly directed the AO to compute the income as per return of income and for capital gains. - Decided in favor of assessee.
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2013 (9) TMI 229
Long Term Capital Gain u/s 45 - transfer u/s 2(47) - scope of the terms, accrual or arise - vacant land - Possession given by the society to the developer under joint development agreement (JDA) - Advance Received or Actual Sales – Held that:- As per Section 45 of IT Act, income-tax was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place - The year of transfer was the crucial year and not the time of the receipt - 'Accrue' means 'to arise or spring as a natural growth or result', to come by way of increase' - 'Arising' means 'coming into existence or notice or presenting itself' – both the words were used in contradistinction to the word 'receive' and indicate a right to receive - They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income, which was more or less inchoate and which was something less than a receipt - An unenforceable claim to receive an undetermined or undefined sum does not give rise to accrual. It was not only the money which has been received by the assessee which was required to be taxed but the consideration which had accrued to the assessee was also required to be taxed. Deemed transfer of property u/s 2(47) – Part performance - section 2(47)(v) r.w. section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property was not effective or complete under the general law – Held that:- Charging an item of income under the head 'Capital gains" require that there should be some profit, Such profit must be arising on account of transfer and there should be capital asset which has been transferred - There was no dispute that a capital asset was involved and there was some profit also – Capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer - relying upon Mysore Minerals Ltd. v. CIT [1999 (9) TMI 1 - SUPREME Court] it was not only the consideration received which was relevant but the consideration which had accrued was also relevant - irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer - It can be said that it had to be construed as 'possession' u/s 2(47). Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Non performance of the contract - Held that:- The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan / sanction and drawing grant of final license to develop where upon the construction can commence, whichever is later. Thus, this installment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans / designs drawing etc. leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and Administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per clause 4(i)(iv) of JDA. - in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. Concept of real income - Taxability of pro-rata receipt - Receipt of consideration and registration of property relevant or not - the contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s 54 and 54EC. - Held that:- Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house - the assessee had transferred the plot – thus it cannot be said that deduction u/s 54F and 54 was same - no ground had been raised for deduction u/s 54F. - in some genuine cases the difficulties may arise but it was for the Parliament or the Government to provide remedy in such cases and judicial forums cannot do anything. Ownership of the plot - society or members - When the plots remain unallotted and obviously legal ownership and beneficial ownership belonged to the society - Held that:- the Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. - Decided against the assessee.
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2013 (9) TMI 228
Deduction u/s 80IA - Nature of the business - developer versus Work contract - ownership - Held that:- The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. Following the decision in The Deputy CIT, Hyderabad Versus M/s. Koya & Company Constructions Pvt. Ltd. [2012 (5) TMI 158 - ITAT HYDERABAD ] and M/s. Sushee Hitech Constructions P. Ltd. (Now known as Sushee Infra P. Ltd.) Versus Income-tax Officer, Ward 3(2), Hyderabad [2013 (6) TMI 599 - ITAT HYDERABAD] - Decided against Revenue.
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2013 (9) TMI 227
Short term capital loss or speculation loss - whether CIT(A) erred in treating the transactions made by the assessee as short term capital loss and not speculation loss - Intention of assessee - Held that:- It is a well settled position that the assessee may acquire shares as stock in trade of its business or may acquire shares as investment or the very same assessee may acquire certain shares as stock in trade and other shares as an investor also. In our considered opinion, whether the shares in question was stock in trade of the assessee or capital investment depends upon the intention with which the shares were acquired by the assessee. If the intention of the assessee at the time of acquiring of the shares was to earn profit by selling the same again then the same constitutes stock in trade in the hands of the assessee giving rise to business income or business loss or when the shares were acquired with the intention to enjoy the fruits of such acquisition then the same constitutes capital asset in the hands of the assessee giving rise to capital gain or capital loss. The real intention of the assessee is to be gathered by taking complete fact and circumstances into consideration. There may be several factors like the manner of presentation of the same in the books of account, volume of transactions, period of holding, frequency of transactions, employment of borrowed funds for acquiring shares, nature of shares acquired etc. which taken together show the intention of the assessee for acquiring the shares. It is also an established position that the presence or absence of a single factor is not conclusive to determine the actual nature of the acquisition and a proper evaluation of all the factors taken together only show the actual intention of the assessee - assessee could not acquire sufficient number of shares and therefore the assessee sold the shares in question. However, no material was produced before us or before any lower authorities to support the above contention - CIT(A) has also brought no material on record to show what was the actual intention of the assessee in acquiring the shares in question whether the same was acquired as stock in trade or the same was acquired as capital asset to enjoy the fruits of the same - it shall be fair and in the interest of justice to restore this issue to the file of the AO for adjudication afresh after proper verification in the light of the discussions made herein above after allowing reasonable opportunity of hearing to the assessee - Decided in favour of Revenue.
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2013 (9) TMI 226
Admission of revised return - Wrong contract receipt - Held that:- The Assessing Officer has disregarded this revised return on the sole ground that after processing of return u/s 143(1)(a) of the Act, revision made as such cannot be taken as valid. Admittedly, when the processing of a return does not amount to an assessment as has also been held by the Hon'ble Apex Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (2007 (5) TMI 197 - SUPREME Court), the Ld. CIT(A) on the peculiar facts and circumstances of the case, cannot be said to have erred in admitting the revised return as a valid return and requiring the Assessing Officer to proceed on that basis - Decided against Revenue. Rejection of books of accounts - Estimation of income - Works contract - Held that:- The Assessing Officer is not found to have made any adverse comment nor recorded any finding on such verification aspect but made casual remarks only that the consumption of materials is not verifiable. In fact, in the appellant's case, all the quantitative details were duly appended with the audit report and were laid by the assessee alongwith return of income filed by it. Under these circumstances, the Assessing Officer could not have estimated income by applying a higher gross profit rate on this count even after the accounts stood rejected for some technical reasons. - Decided against the revenue. The appellant, therefore, has contested that the true profits can be deduced from the rejected accounts as well. We, therefore, having regard to the judgment rendered by the jurisdictional High Court in the case Kanhaiaya Lal Jangid v. Asstt. CIT (2007 (1) TMI 496 - HIGH COURT OF RAJASTHAN) and considering the over all conspectus as well as circumstances and peculiar facts of this case and also the earlier in issued judgments, find no rational in such estimation in the impugned year. We, therefore, consider it reasonable to estimate the profit for the peculiar year under consideration by making a disallowance of expenses of Rs. 10 lacs and modify the trading addition sustained by the Ld. CIT(A) - Decided partly in favor of assessee.
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2013 (9) TMI 225
Expenditure on sale of JV business - Whether Expenses related to sale of the Parker Pen Division is related to business of the assessee company - Disallowance u/s 14A - international sale of parker pen business - Held that:- there is no evidence to show how this expenditure is relatable to the business interests of the assessee as admittedly being joint venture partner in LWIPL with 50% share holding along with its affiliates where the other 50% belonged to the Jain family wherein only Jain family was paid non-compete fee and the assessee being a partner in the joint venture was instead burdened with legal and travel costs which are in the business interests of the ultimate holding company i.e Gillette USA and not the assessee have not been addressed by him. - disallowance sustained by the AO is upheld - Decided against the asseessee. Expenditure in relation to income which does not form part of Total Income - Disallowance u/s 14A - AO was of the view that the assessee has moved away from its stated stand namely that its principle business was to establish Gillette business in India and the assessee has now contended that it was doing its own business and entering into joint ventures and promoting other companies which were in the same business as that of Gillette Group USA. - Held That:- matter remanded back fresh decision - the assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment - Following decision of Maxop Investment vs CIT [2011 (11) TMI 267 - Delhi High Court] - Decided in favor of assessee. Fluctuation in rate of exchange - Increased liability in respect of loans taken - in which year, loss incurred on “revenue account” should be deducted u/s 37(1) - Held that:- Assessing Officer has merely assumed that external commercial borrowing was utilized for loans and advances made by the assessee during this year because there was an increase in unsecured loans. In relation to the assessee’s claim of deduction on account of additional foreign exchange liability, we are not concerned with unsecured loans of the assessee but only with external commercial borrowing on which additional liability has been incurred. The contention of the assessee is that during this year there was no fresh borrowings and only repayment of brought forward ECB. In this view of the matter we see no force in the case made out by the Assessing Officer - no justification for the disallowance of Rs.36,36,030/- claimed by the assessee by way of additional liability incurred on account of fluctuation in foreign exchange rate - Following decision of CIT Versus M/s Woodward Governor India P. Ltd. & M/s Honda Siel Power Products Ltd. [2009 (4) TMI 4 - SUPREME COURT] - Decided in favour of assessee.
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Customs
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2013 (9) TMI 251
Import of goods (wine) - food safety - Labelling Requirement - Conditons Before Releasing the Goods - Assessee filed Bill of Entry was filed on 29-07-2011 - The Authorized Officer informed that the goods in question did not meet the labeling requirement under the Food Safety and Standards Act, 2006 and Rules, Regulations 2011 made thereunder and hence samples could not be drawn for further testing - The labeling requirements which were not met for each of the items – Held that:- The Food Safety Standards Regulations (Packaging and Labeling) Regulation 2011 notified on 01-08-2011 - But even prior to notification of the regulations administrative instructions were in force – Following M/S. AVENUE IMPEX Versus THE COMMISSIONER OF CUSTOMS [2014 (5) TMI 483 - MADRAS HIGH COURT]. One of the non-rectifiable defects was the requirement of labeling Best before date - This may not have applied for wines in view of the circular dated 20-05-11 - But even for applying the provisions of the circular dt 20-05-11, there was a need for a label showing alcoholic content which appears to have been not present - Labeling of ingredient list was also classified as a non-rectifiable defect. Assessee would have to comply with a number of conditions like providing details to comply with the local laws, at the time of the re-packing and the re-labeling of the said goods, in the customs bonded area, and goods to be subjected to necessary tests to make sure that the goods in question are fit for human consumption, before release of goods - The order of Commissioner (Appeal) was set aside - the matter was restored to the adjudicating authority - the time limit for re-export of goods was extended - Decided in favour of Assesse.
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2013 (9) TMI 250
Forged licences - the show cause notice and the earlier round of litigation that the entire case starts on the basis of clearance of consignments based on forged/tampered licence – Held that:- licences were not available for defence of the assessee or the person – the forged/tampered licences were not available even at the time of investigations and could not be produced before the Bench. Waiver of pre deposit of penalty u/s 112(a) - Stay petition - the assessee had made out a case for waiver of pre-deposit of the amounts involved – court allowed the waiver of pre deposit - decided in favour of assessee.
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2013 (9) TMI 249
Import of goods - whether scrap or parts of machine - Origin of the goods - assesse had issued invoices to various re-rolling units describing goods as re-rollable goods - Held that:- Revenue had not conducted any investigation to show that the purchaser of the goods in question had not used the said goods as re-rollable but had used the same as parts of steel sheet/plate bending machines - There was virtually no evidence on record to indicate that the goods in question stand utilised as parts of plate bending machines and not as scrap - the goods on examination were found to be used and old rollers appearing to be part of steel sheet/plate bending machines - As per test report the sample was a circular metallic piece made of steel having uneven flat surface on top and bottom – following the judgement of Patiala Castings P. Ltd. v. Union of India [ 2002 (5) TMI 72 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH]. The imported consignment consisted of old and used, rusted and waste & scrap - the consignment was of non-usable pipes mere fact that they can be used as pipes in some of the cases by itself will not lead to the conclusion that what had been imported was not scrap but pipes - it may be possible that one person considers the goods as scrap which may appear different or reusable to another. The observations of the Chartered Engineer were to the effect that such rollers after repairing/re-conditioning were capable of being used as rollers - It was well settled law that the goods had to be assessed in the condition in which they were imported - Even if some of the rollers can be put to use after some re-conditioning - the said fact will not make the imported goods as rollers to be used as parts of the machine – order set aside – Decided in favor of assesses.
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2013 (9) TMI 248
Redemption fine – Penalty - assesses imported used multi-functional copiers along with accessories and classified the same under 84433100 – Held that:- It cannot be said that the redemption fines had been imposed without any basis or without conducting any enquiry - Commissioner (Appeals) had taken all relevant facts into account and used his discretion to reduce the redemption fines and penalties - The quantum of redemption fines and penalties sustained by the Commissioner (Appeals) cannot be considered either to be excessive or on the lower side - The amounts of fines and penalties determined were reasonable - there was no justification to interfere with the orders of the Commissioner (Appeals). The redemption fine imposed by the Tribunal cannot be taken as truly binding precedents and the same may be taken at the most only as guidelines - If a restricted import takes place repeatedly the hands of the adjudicating authority cannot be tied by prescribing a lower limit than the statutory limits prescribed u/s125 - Such a prescription will lead to flooding of prohibited and restricted items into the market which cannot be permitted – the discretion can be exercised by the original authority or Commissioner (Appeals) or by the Tribunal arbitrarily or mechanically.
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2013 (9) TMI 247
Confiscation of goods - The expert opinion given by the assayer that the gold of purity 995 could not have been manufactured by any venture in India was irrelevant as the respondents were claiming that the gold was only part of what was imported - Held that:- It was incumbent on the department to rely on evidence to show the illicit nature of the seized gold mound and pieces of gold - There was no such evidence adduced by the department - no verification had been conducted with the prospective dealers. No valid reasons had been adduced to doubt the correctness of the above findings especially when it had been held that Section 123 cannot be applied - The claim that the respondents marked the mound of gold with the words "CHI ESSAYEUR FONDEUR" as the mound was part of the imported gold had been rightly accepted by the Commissioner (Appeals) - the documents given in respect of substantial quantity of the seized gold produced by Keerthi Kumar Jain stands accepted by the department - the acceptance of the evidence by the Commissioner (Appeals) in respect of the balance quantity of gold calls for no interference – Decided against revenue
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Corporate Laws
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2013 (9) TMI 246
Calculation of Period of one month in Negotiable Instrument Act - Exclusion of first day - Whether for calculating the period of one month which was prescribed under Section 142(b), the period had to be reckoned by excluding the date on which the cause of action arose - Held that:- While computing the period of one month as provided under Section 142(b) of the N.I. Act, the first day on which the cause of action had arisen had to be excluded - It was not possible to hold that the word ‘of’ occurring in Section 138(c) and 142(b) of the N.I. Act was to be interpreted differently as against the word ‘from’ occurring in Section 138(a) of the N.I. Act; and that for the purposes of Section 142(b), which prescribes that the complaint was to be filed within 30 days of the date on which the cause of action arises, the starting day on which the cause of action arises should be included for computing the period of 30 days. Days included or excluded — When a period of time running from a given day or even to another day or event was prescribed by law or fixed as contract, and the question arises whether the computation was to be made inclusively or exclusively of the first-mentioned or of the lastmentioned day, regard must be had to the context and to the purposes for which the computation had to be made - Where there was room for doubt, the enactment or instrument ought to be so construed as to effectuate and not to defeat the intention of Parliament or of the parties, as the case may be - Expressions such as ‘from such a day’ or ‘until such a day’ are equivocal, since they do not make it clear whether the inclusion or the exclusion of the day named may be intended - As a general rule, however, the effect of defining a period in such a manner was to exclude the first day and to include the last day. Saketh India Ltd. & Ors. v. India Securities Ltd. [1999 (3) TMI 591 - SUPREME COURT] lays down the correct proposition of law - the purpose of calculating the period of one month, which was prescribed u/s 142(b) of the N.I. Act, the period had to be reckoned by excluding the date on which the cause of action arose - SIL Import USA does not lay down the correct law - Needless to say that any decision of this Court which takes a view contrary to the view taken in Saketh by this Court, do not lay down the correct law on the question involved in this reference.
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Service Tax
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2013 (9) TMI 260
Freight Forwarding Agency - Business Auxiliary Services - The appellant was a freight forwarding agency engaged in the business of booking cargo space on shipping lines for consideration and thereafter allotting the same to exporters also for consideration - Revenue was of the view that the Assesse was rendering business auxiliary services by promoting the service of cargo space provided by the shipping line - Held that:-Following Leaap International Pvt. Ltd. vs. CST [2013 (5) TMI 112 - MADRAS HIGH COURT] - When the question whether Assessee's services were classifiable under Business Auxiliary Service had to be adjudicated upon by the Tribunal, there cannot be a full waiver - The Tribunal prima facie was of the view that the appellant rendered services to the shipping lines and was liable to pay service tax under the category of business auxiliary services. The appeal was partly allowed – Pre-deposit was ordered to be paid - there shall be interim stay against recovery of tax, interest and penalty levied by the orders of the adjudicating authority – Partial Stay Granted.
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2013 (9) TMI 258
Re-rubberising of old and used printing rollers - Business Auxiliary Service OR Management, Maintenance or Repair Service - Exemption under Notification No.14/2004-ST - Revenue was of the view that the activity fell within the ambit of the definition of management, maintenance or repair service as defined w.e.f. 16/06/2005 - Held that:- The definition of management, maintenance or repair service as amended w.e.f. 16/06/2005 brought within its purview the activity of re-rubberisation of old rollers also - The rigour of the law was inescapable - The law had to be given full effect to - During the period of dispute, on the above activity, service tax was liable to be paid under the above head by the appellant - the appellant had specifically informed the Superintendent of Service Tax that they had obtained registration under BAS in respect of re-rubberisation of old rollers and that they were claiming the benefit of Notification No.14/2004-ST. The letter was received by the Superintendent as evidenced by his acknowledgment with seal. It appears, the material facts were disclosed to the Department by the appellant insofar as their activity was concerned as also insofar as their bona fide belief regarding tax liability was concerned - the appellant seems to have a case on limitation. Waiver of pre-deposit – Bar of Limitation – Financial Hardship - No prima facie case on merits but a strong case on the ground of limitation, we are inclined to direct predeposit of the service tax demanded for the normal period - Though there was a plea of financial hardships in the present application, it had not been substantiated - the appellant was directed to predeposit an amount of Rs.6 lakhs - upon such submission there will be waiver and stay in respect of the penalties imposed on the appellant and the balance amount of service tax and education cess and interest – Conditional Stay granted.
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2013 (9) TMI 257
Service tax demand – applicant provided services under security agencies and cleaning services – Held that:- Applicant had provided unaccounted services and issued parallel/duplicate invoices - amount of demand reduced by giving benefit to the applicant on cleaning service - service provided in Jammu & Kashmir, on traded goods, reimbursement of expenses and also on the maintenance and management service - service provided in special economic zones - court find that applicant had maintained the parallel invoices - applicant could not explain the reasons of parallel invoices - Any transaction by way of issue of parallel/duplicate invoice is never reflected in books of accounts. Pre-deposit of tax – court ordered to submit one- fourth of the duty amount – rest is waived till th final disposal – application decided conditionally in the favour of the applicant.
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2013 (9) TMI 256
Service tax demand - Management, Maintenance and Repairs of Road services were provide by the appellant – Held that:- Under Section 97 exemption has been provided with retrospective amendment made in the law - hence the demand is not sustainable – order was set aside – appeal decided in the favour of assessee.
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2013 (9) TMI 255
Construction of Residential Complex u/s 65(105)(zzzh) – Undivided Share of Land - waiver of Pre-deposit - The appellant was engaged in the business of developing properties and constructing residential complex - During the period 2006-07 to 2008-09, they did not pay service tax on consideration received for such activity - Whether there was service tax liability in cases where undivided share of land was first sold were registered and thereafter construction was done - Held that:- Prima facie the Commissioner had given appropriate abatement - The matter of double counting of same consideration was to be seen at the time of final hearing - Relying upon LCS City Makers Pvt. Ltd. Vs CST Chennai 2012 (6) TMI 363 - CESTAT, CHENNAI - There was some merit in the argument regarding land development - There was no merit in the argument regarding time bar because at no stage the Board clarified that if land was sold first and then construction is undertaken, there was no service tax liability - The appellant was directed to make a pre-deposit of 40 lakhs - Upon such deposit, the pre-deposit of balance of dues to be waived and stayed till pendency of appeal – Conditional Stay Granted.
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2013 (9) TMI 254
Management, Maintenance or Repair Service – main issue arises as to whether the applicant was rendering the service of maintenance of the leased line – Held that:- court found that on a perusal of the work order the charges in respect of "maintenance of leased line would be liable to be paid – either it is intra - city or intercity- It is also noted that maintenance charges will be paid to the applicant with effect from the month of commissioning in the slab – under the work order the applicant would provide technical-skilled persons for resolving the issues of circuit leased lines - there is also factual dispute on this issue in respect of its coverage under facilitation service or maintenance of the leased line. Waiver of pre deposit - applicant failed to make out a prima facie case for waiver of pre deposit of entire amount of tax and penalty- thus the applicant is directed to deposit the sum for pre deposit – on such submission stay would be allowed - application decided with conditions in the favour of the applicant.
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2013 (9) TMI 253
Renting out of immovable property – appellants contended that they are co-owner of a particular building and have rented out the premises to a person who issues different cheques to all the individuals as they are co-owners - Held that:- benefit of SSI exemption Notification grants the benefit of exemption of service tax per year, provided that the assessee has not crossed the threshold limit - if the cheques for rent are received individually by them. Waiver of pre deposit – requirement of pre deposit waived – appeal allowed in the favour of assessee.
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Central Excise
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2013 (9) TMI 245
Clandestine removal - demand based on confessional statement - M/s Centurian Laboratories (hereinafter referred to as M/s CL) are having factory at Vadodara and are engaged in manufacture of P&P medicines falling under Central Excise Chapter Heading No.30 of first schedule of Central Excise Tariff Act, 1985 and are registered with the authorities – Held that:- There is nothing on record as to unrecorded purchases or consumption of various other raw material in the manufacture of Frit, there is also nothing on record to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials - There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of Revenue. Held that:- In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises, demand of duty along with penalty and interest is not sustainable - appellant has not made any clandestine manufacture, which he has removed clandestinely and on which the duty was payable – Relying upon the judgment of Tejal Dyestuff Industries [2008 (7) TMI 412 - HIGH COURT OF GUJARAT AT AHMEDABAD], wherein it is held that recording of confessional statements would not be an end to the investigation and Revenue officers should be careful to ensure that they are not tricked out of regular and detailed investigation by making strategical confession which are retracted by an affidavit soon after they are made and which affidavit are again strategically held from the Revenue officers so that they become complacent and do not carry out fuller investigation, thinking that the confessional statements are made and not retracted was already done. - In the absence of any corroborative evidence, as to there being clandestine manufacturing and clearance of P&P medicaments, for the foregoing reasons, the impugned orders in our view are not sustainable – Decided in favor of Assessee.
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2013 (9) TMI 244
Stay Application - Classification - Isolator metallic under heading 85.35 or 85.38 of the Schedule to the Central Excise Tariff Act, 1985 - Isolator is consisting of (1) Rotating hamper assembly (2) Fixed contact assembly (3) Support Insulators (4) Isolator base (5) Operating mechanism and (6) Interlocks – Held that:- Prior to the period under this dispute and later to the period under dispute, the appellant was classifying the product heading 85.35 cannot be a basis for deciding the dispute having regard to the fact especially in view of the fact that the Counsel had not demonstrated that rates of duty for the two headings were different as is the situation for the period under dispute - Revenue not choosing to contest a matter which was of no consequence in terms of revenue collection cannot be a basis for deciding the matter at hand - Appellant's factory is closed down from the year 2002 - Applicant is a Joint Venture company and their subsidiary M/s. S&S Power Switchgear Equipment Ltd. is still working - Applicant failed to make out a prima facie case for unconditional stay – Applicant is directed to deposit a sum of Rs.1,00,00,000/- (Rupees One crore only) – Decided against the Assessee.
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2013 (9) TMI 243
CENVAT credit on GTA servuce - Input credit - place of removal - clearance of clinker - duty paid at specified rate U/s 3(2) on value fixed of the Central Excise Act and not on ad-veloram rate - Held that:- Prima facie the definition of “place of removal” in Section 4(3)(c) would be of no relevance - The duty on the goods - clinker was at specific rate - the “place of removal” would be the “place of removal” for the purpose of Rule 4 of Central Excise Rules, i.e. the places on removal from where the duty was liable to be paid, which in the case, was the factory gate as the duty on clinker becomes payable at the time of removal. In this case, the “place of removal” would be the “place of removal” for the purpose of Rule 4 of Central Excise Rules, i.e. the places on removal from where the duty is liable to be paid, which in this case, is the factory gate of Sonadih factory, as the duty on clinker becomes payable at the time of removal from Sonadih factory. Prima facie case is against the assessee - directed to make pre-deposit of entire demand of cenvat credit - stay granted in respect of interest and penalty.
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2013 (9) TMI 242
Packing of Goods From Regular to Small Packages - Whether the packing of soda ash from regular marketable packages into smaller packs was a manufacture or not - Held that:- The soda ash in bags of 50/75 kgs. were mainly meant for industrial consumers to whom the appellants had sold from their Registered premises at Rishra by raising dealer’s excise invoices and passed on the element of excise duty paid by the manufacturer M/s. Tata Chemicals Ltd. - the customers were eligible to avail Modvat credit/Cenvat credit on the duty paid on soda ash - It was admitted by the Appellants that the soda ash were repacked into smaller packs of 500 gm/1 kg to cater the needs of the small household customer i.e. retail consumers at the behest of M/s. Tata Chemicals - Obviously, these customers were not interested in availing Modvat/Cenvat credit on the amount of duty paid on the soda ash. Therefore, the activity of re-packing from bags of 75/50 kgs., even if these were termed as “standard packs”, cannot lose the characteristic of “bulk packs”, since these were meant for Industrial consumers, whereas smaller packs of 500 gm/1 kg made out of such bulk packs, were to meet the requirement of retail customers and hence safely be concluded as “retail pack”. The process of transferring/converting the bulk packs of soda ash in bags of 75/50 kg into smaller/retail packs of 500 gms/1 kg and affixing with the brand name of M/s. Tata Chemicals would result into “manufacture” within the meaning of Section 2(f) of Central Excise Act, 1944 and leviable to duty - The Adjudicating Authority had rightly confirmed the demand invoking the extended period - Also since, there was an element of suppression and non-disclosure of the activity of re-packing from bulk pack to smaller packs and selling the same affixing brand name of M/s. Tata Chemicals Ltd. from their unregistered premises, without payment of duty and without disclosing their said activity to the department, the penalties imposed on both the appellants were also justified - Decided against the assessee.
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2013 (9) TMI 241
Benefit of Notification No. 5/98 – Clearance of Goods - The dispute relates to Clearance of Poly Carbonate Bottles falling under Chapter Heading No. 3923.90 of Central Excise Tariff - Revenue was of the view that the appellant was not entitled to exemption as they availed Modvat credit on duty paid on the inputs used in the manufacture of other products - Whether the clearance of Poly carbonate containers as reflected in the statutory documents in March, 1998, were infact cleared in June, 1998, by which time they attracted duty of excise - Held that:- The appellants could not have anticipated that the exemption was going to be withdrawn with effect from 2-6-1998 - The records were being maintained in the normal course of business and the said entry in March, 1998 appears before the admitted clearance of 2855 pieces, supports their stand that the said 80,000 pieces were actually manufactured and cleared in the month of March 1998 itself - The appellants have taken a strong stand that the entry showing manufacture of 80,000 pieces in RG 1 register was prior to the entry of 2855 containers. Merely because the said letter and the inward register was not available in the office of the Assistant Commissioner in the year 2008 by itself cannot cast doubt on the letter - The inability of the department to trace its own inward register cannot result in an adverse inference against the appellants - the Revenue’s stand that the letter was not locatable in the year 2008, cannot be appreciated - Apart from the visual examination of the said RT 12 return by the adjudicating authority himself, entertaining doubt about two handwritings on two different pages, there was no further evidence to support the said doubt entertained by the authority - The appellants had submitted the said report along with their reply filed in the year 2000, at which point of time the genuineness of the same was neither verified nor questioned by the authorities - The reasons for rejecting the RT 12 return by the adjudicating authority were not legal and valid reason. Non-denial of cross-examination amounts to violation of principles of natural justice or not depends upon the facts and circumstances of each case - If the reliance is placed solely on the statements of the appellants which stand rebutted by the assessee by production of documentary evidence, it becomes necessary to test the veracity of such statements by the tool of cross-examination - No prejudice would have been caused to the Revenue if the deponents of the statement would have been offered for the cross-examination except that the same would have marginally delayed the proceedings - Fair adjudication cannot be sacrificed at the cost of speedy disposal - order relating to the said demand on rejected and repaired goods and remand the matter to Commissioner for passing the fresh orders.
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2013 (9) TMI 240
Benefit of CENAVAT credit or returned goods - Defective Goods - Rule 16 - Revenue was of the view that there was no evidence to prove that the goods received under Rule 16 had been cleared subsequently under appropriate document and on payment of appropriate duty - Held that:- The rejected goods after receipt in the unit have been accounted and stock accounts and credit had been availed by them under Rule 16(1) of CER, 2002 - the rejected/returned goods had been duly accounted for in the registers and credit had been correctly availed – The goods and raw material account, had been subsequently issued for production in the normal course and the final products emerged had been accounted for in the daily production register. Forgings had been cleared on payment of duty by the assessee to their buyers, that the latter found the same to be defective and returned the same under proper duty-paying documents to the assessee and that the goods were subjected to some process - if correlation was established between the defective forgings and the defect-free forgings, the assessee was entitled to the credit in question - This correlation was established at the original level and the same was not cogently challenged by the Revenue before the Commissioner (Appeals) - In any case, it is not the case of the Revenue that Rule 16 was not applicable to a case where defective goods returned by the buyer were subjected to a process of remaking defect-free product - The original authority took an eminently correct view after verification of records including Annexure-10 discussing the facts of the case in the light of Rule 16 as correctly understood by that authority - Order set aside - Decided in favour of Assessee.
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CST, VAT & Sales Tax
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2013 (9) TMI 259
Notice for Re-assessment - Notices u/s 21 (2) of the U.P. Trade Tax Act for reassessment of the completed assessments - Held that:- The assessing authority in all the four relevant assessment orders, did not apply his mind, considered and discussed the bulk purchases of diesel and its co-relation with the consumption in manufacture, sale and turnover of paper - It may not have been necessary to consider the unit-wise consumption per tonne of manufacture of paper but it was necessary for the assessing authority to consider as to how much quantity of purchase of diesel was utilised for manufacture of paper and the quantities which had no co-relation with such manufacturer and was used for allied purposes, before accepting the disclosed turnover – M/s Palco Lining Co. v. State of UP [ 1983 (9) TMI 261 - ALLAHABAD HIGH COURT] - Section 21 (1) does not permit reassessment of turnover, which after due consideration had been subjected to assessment for tax - where an opinion had been formed in the assessment order, that the turnover of sale was exempted from sales tax, the assessing authority should not issue notice under Section 21 for re-assessment. The huge quantity of diesel purchased by the assesse for running diesel generating sets should have been examined both for the purposes of its utilisation in manufacture and for ancillary purposes - There was no such error in law, in recording the reasons to believe, that the failure of the assessing authority to consider the utilisation of the diesel oil as fuel purchased by the petitioner was not sufficient material, even if it was disclosed by the assessee for the purposes of the assessment. Reassessment of Escaped Turnover - The assessing authority may also not be allowed to have a second thought about the applicability or effect of the survey - where primary facts necessary for assessment or fully and truly disclosed to the Income Tax Officer at the stage of original assessment proceedings, he was not entitled on a change of opinion to commence proceedings - but where the assessing authority did not apply its mind at all and completely omitted consideration of the purchase of raw material in bulk quantity, even if it was in relation to both manufacture and ancillary activities, the reason to believe for reassessment may not be doubted - Commissioner of Income Tax v. Bhanji Lavji [1971 (1) TMI 6 - SUPREME Court ] - There had to be application of mind by the assessing authority and the consideration of the material having co-relation with manufacture, turnover or sale, before it can be said that there is any change of opinion or re-assessment on the turnover, which had already been assessed. The huge quantity of diesel purchased by the petitioner for running diesel generating sets should have been examined both for the purposes of its utilisation in manufacture and for ancillary purposes. - Decided against the assessee.
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Indian Laws
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2013 (9) TMI 252
HUF - Partition - Nature of property - Onus to prove - Held that:- Proof of the existence of a joint family does not lead to the presumption that the properties held by any member of the family is joint. Burden is on the person who ascertain that any item of the property was joint to establish the fact. There is no presumption that any property whether moveable or immoveable held by the member of a joint Hindu family is joint family property. If such person proves that there was sufficient joint family nucleus from and out of which the said property could have been acquired, burden shifts to the member of family making a claim that it was his personal property and was acquired without any assistance with joint family property. If it is proved or is admitted that family possesses sufficient nucleus with the aid of which the member might have made that acquisition, it arises presumption that it is joint family property. Such presumption is however presumption of fact and rebuttable. Whether a person is governed by school of Hindu law under Dayabhaga or Mitakshra, a joint Hindu family, normally joint in food, worship and estate and property of such joint family may consist of ancestral, joint acquisition and self acquired but thrown into a common stock. If one or more more of the family start a business or acquire property without the aid of joint family property, such business or acquisition would be his or their acquisition. It can be however thrown into a common stock or blend with the joint family property in which case the said property becomes the estate of the joint family. If if it not done, the said property would be his or their self acquisition and succession of such property will not be governed by the law of joint family but only by the law of inheritance rights inter se between the members who have acquired such property and would be subject to the terms of the agreement whereunder it was acquired. There is distinction between the joint family property and property acquired by the joint efforts. Court has to see whether it is a jointly acquired property or not. There is no presumption that business carried out by a member of the joint family with the stranger is joint family business. It is a matter for evidence. In case of immoveable property standing in the name of the individual member, there would be presumption that the same belongs to joint family provided it is proved that the joint family had sufficient nucleus at the time of its acquisition but no such presumption can be applied to business. There is no presumption under Hindu law that a business standing in the name of any member of joint family is a joint family business even if that member is a manager of the joint family. Unless it is shown that the business in the hands of the coparcener grew up with the assistance of the joint family property or joint family funds or that the earnings of the business were blended with the joint family estate, the business remains free and separate. Such question is a question of fact. A person who asserts a particular property to be a joint family property, onus is on him to establish that fact and unless such person who asserts such fact discharges his onus cast upon him, such burden is not shifted to the other party who claims the said property as self acquired property. Plaintiff is unable to establish any rights in respect of any of the properties to the plaint as the properties of Hindu undivided family. Plaintiff is unable to show any nucleus by demonstrating before this Court even prima facie, that the income generated by his father prior to 1969 was used by father in starting the partnership business in the name of M/s Kanayalal Rameshkumar in 1969 and thereafter by defendant No.1 and others by use of such income generated out of such firm in other businesses started by defendants. In my prima facie view, the plaintiff has failed to discharge such initial burden on the plaintiff to prove that all such businesses and properties of Hindu undivided family businesses and properties. The defendant no. 1, 2, 4, 5, 7 and 8 state that in so far as properties and businesses which are standing in the name of the plaintiff, his wife and his son are concerned or firms and companies in which those defendants are not partners/shareholders, all such properties and businesses are the properties of the plaintiff, his wife and his son and are not Hindu undivided family properties and/or businesses. All these defendants have also made statement that they do not make claim in respect of any of those properties and/or businesses. Statements made by the contesting defendants are accepted - Decided against Appellant.
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