TMI Tax Updates - e-Newsletter
September 18, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
MAT - Depreciation - As per sub-section 2 of Section 115JB, the appellant can adopt the method and rate for calculating the depreciation, this shall be same as have been adopted for the purpose of preparing such account including P&L Account and laid before the company at its annual general meeting in accordance with the provisions of Section 210 of the Companies Act, 1956 - AT
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Income Tax:
MAT - Addition of Book Profits u/s 115JB – Dividend Stripping u/s 94(7) - The Explanation (f) of Section 115JB was clearly applicable in case of the appellant - AT
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Income Tax:
Violation of provisions of section 40A(3) r.w.r 8DD - Payment in cash - producers of fish or fish products has been specifically defined would include besides the fisherman any headman of fishermen, who sorts the catch of fish brought by fishermen from the sea, at the sea-shore itself and then sells the fish or fish products to traders, exporters, etc - AT
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Income Tax:
Interest earned on the parking of share capital - Interest cannot be taxed as income from other sources in the hands of the assessee and therefore, the subsequent disallowance of expenses claimed at 10% to earn that income has been infused in the total project cost cannot be disallowed insofar as the whole of the income has been capitalized - AT
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Income Tax:
Speculative loss - Setting off the Brought Forward Losses – Proportionate Expenses - The department cannot take different stand on the year under consideration as principle of consistency has to be followed - AT
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Income Tax:
MAT - The principle of apportionment as provided u/s 14A cannot be applied while computing the book profit u/s 115JB - However, the Assessing Officer had power and jurisdiction to make the adjustment as provided under Explanation 1 - AT
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Income Tax:
Penalty u/s 271(1)(c) - It was only when the A.O. asked the assessee to produce all the 45 parties before him, the assessee not finding it feasible and being unable to comply, made a bonafide surrender of the total amount qua them. - No penalty - AT
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Income Tax:
Addition of Opening Excess Cash - There is no absolute rule that the opening balance of a year only has to be taken as a gospel truth even when it is due to mistaken accountancy - AT
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Income Tax:
Determination of Capital Gains - Under section 48, only sums specified for being adjusted against the consideration accruing or arising on the transfer of a capital asset in computing the capital gains are, (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of improvement thereto - AT
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Income Tax:
Exemption u/s 10(15)(iv)(f) - interest income - It was catastrophic to withdraw the exemption already granted u/s.10(15)(iv)(f) - Due to the withdrawal of the exemption the impugned order u/s. 195(2), now under dispute was passed directing to deduct withholding tax @ 20% - decided in favor of assessee - AT
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Income Tax:
TDS on Dealer Incentive and Service Coupons - disallowance under Section 40 (a)(ia) r.w.s. 194 H and 194C - matter of incentives allowed by the assessee to its dealers needs to be restored to the file of the AO for reconsideration with regard to the provisions of section 194C - AT
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Income Tax:
Deemed dividend - Advance Received Against Sale of Property u/s 2(22)(e) - n the respective balance sheet of the company amount had not been shown separately as advance against the land and properties and the same have been shown under the head “Other Advances” - additions confirmed - AT
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Income Tax:
Addition of Income Interest Accrued - if the assessee followed mercantile system of accounting it is to be seen as to when the right to receive, accrued. The income is assessable in the year in which the right to receive accrued - AT
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Income Tax:
Capital Loss on Sale of R&D Assets - section 35 was part of head Income from business, profession or vocation - section 43 was part of same heading - provisions of head Capital Gains cannot be imported here to allow assessee one more deduction. - AT
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Income Tax:
Obsolete Stores/Stock - the assessee was following mercantile system of accounting and hence, scrap value had to be considered in the present year itself and it could not be deferred till the actual sale of scrap - the scrap value of stock had to be considered as opening stock in the year of sale. - AT
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Income Tax:
Depreciation on Assets – whether lessor was entitled to depreciation on assets leased by it in finance lease - Held No - lease agreement under consideration was that of finance lease and not operating lease - AT
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Income Tax:
AO held that the services agreement between the assessee and its holding company has been entered into with the clear intention of reducing the tax liability of the assessee and increasing the non-taxable profits of SSL - allocation of support services expenses on the basis of turnover was justified - AT
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Customs:
Classification of Goods - High Density Polyethylene was classified under Heading 39.01 and the said classification was not disputed - Every new discovery or new argumentative novelty cannot undo or compel re-consideration of a binding precedent - AT
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Customs:
Shortage found in re-warehousing of the imported goods - Contention of the Department that supplier has been obliging in sending Brass Scrap in the guise of Brass Dross to various importers cannot be taken as decisive factor to penalise the appellants in the absence of their involvement or connivance with Exporters in importing such wrong goods. - AT
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Customs:
Illegal import of goods – misdeclaration of value - import of aluminium scrap – the department cannot adopt any procedure which LME itself does not recognize. - AT
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Customs:
Refund claim – Interest on delayed refund -There was a delay of more than three months in payment of refund to the assesse and department was liable to pay interest on such delayed payment of refund - AT
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Corporate Law:
Whether there should be an interim injunction restraining the Defendant Hindustan Unilever Limited from publishing and/or telecasting the advertisements launched by it for its product Pepsodent Germicheck Superior Power toothpaste in the print and electronic media - Held no - HC
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Service Tax:
Extended period of limitation - if the appellant started paying a tax under the category of mining services w.e.f. 1.6.2007, how the said action of the assessee would reflect upon their malafide or any suppression or mis-statement of facts with an intent to evade payment of tax, during the relevant period under the category of ‘Technical Testing and Analysis’ - demand set aside - AT
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Service Tax:
Eligibility for CENVAT credit – Renting of Car Parking Space - credit allowed - AT
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Service Tax:
Eligibility for CENVAT credit – appellant has not shown as to how the membership of India International Centre, New Delhi has the nexus with the manufacturing business and as such the services tax paid on the membership fee of this club is not cenvatable - credit denied - AT
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Service Tax:
CENVAT credit - Input Service Distributors (ISD) - Credit of Service Tax paid on input services used in manufacture of Crude Oil and Natural gas at Mumbai Offshore was not admissible to Uran Plant - AT
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Service Tax:
Business Auxiliary Service or Not - multi-modal transporter - assessee paid service tax under the head of BSS and While rendering such service, they charged to their clients under various headings for which they were not paying any service tax - stay granted partly - AT
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Central Excise:
Valuation - reduction of discount which was not shown in the invoices - cash discount - Only on the ground that the procedure was strictly not followed it will not be appropriate to disallow the quantity and turnover discount which the party was otherwise entitled as per law - AT
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Central Excise:
Rule 25 of the Central Excise Rules, 2002 regarding confiscation of raw material/semi-finished goods - Rule 25, under which the semi-finished processed goods has been confiscated is applicable only to finished excisable goods - AT
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Central Excise:
Compounded levy scheme - manufacture of pan masala / pan masala containing tobacco commonly known as gutkha - Interpretation of Statute - Whether or not Notification No. 42/2008-C.E. superseded the Notification No. 38/2007-C.E. by implication or both the Not ifications were simultaneously operating during the period - differential duty demand confirmed - penalty set aside - AT
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Central Excise:
Classification - manufacturing - motor spirit or Organic Composite Solvent - the chemical analysis report does not establish that the disputed goods fulfil the requirement of definition of ‘motor spirit’ in the Chapter Heading 27 - AT
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Central Excise:
SSI Exemption Notification - The demand had to be treated as time-barred inasmuch as the assessee had filed the declaration claiming the benefit of the Notification and mentioning the use of brand trade name Zoloto-M - AT
Articles
Notifications
Circulars / Instructions / Orders
News
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Net Direct Tax Collections for 2013-14, up to 17th September 2013 Shows A Growth of 12.5% and Stood At Rs. 2,38,325 Crore as against Rs. 2,11,641 Crore in the Same Period Last Year
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An Agreement and Agreed Note Signed Between India and Latvia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (DTAA)
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Chief Commissioners of Central Excise and Customs Directed to take stock of all Pending Registration Applications for Service Tax and Ensure their Clearance by 23rd September, 2013
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Safe Harbour Rules Finalized after Considering Comments of Various Stake Holders ; Rules to be Applicable for 5 Assessment Years Beginning from Assessment Year 2013-14
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RBI Reference Rate for US $ and Euro
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Enabling Urban Microfinance
(Keynote Address by Dr Deepali Pant Joshi, Executive Director, Reserve Bank of India at the Conference on The Challenges of Enabling Urban Finance organised by Minorities Development Department, Government of Maharashtra and MAVIM the State Womens’ Development Corporation on September 16, 2013 at Mumbai)
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Speech of the Union Finance Minister at the International conference on ‘Governance and Development: Views From G20 Countries’ Organised by Icrier
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The Institute of Company Secretaries of India Enters into a Tripartite Memorandum of Understanding with Assocham and the Govt. of W. Bengal
Case Laws:
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Income Tax
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2013 (9) TMI 535
Disallowance of Commission - Held that:- similar commission was allowed by the A.O. in A.Y. 02-03, total turn over had gone up during the year - The Board had increased the salary on the basis of extensive knowledge, business skill, managerial experience and capability increasing in net profit and commercial expediency - The Revenue had not brought any material on record which contradicts the factual finding of the year under consideration to A.Y. 03-04 – Decided in favour of Assessee. Disallowance of Deduction u/s 80IA - Held that:- The market value for electricity would be one at which it was supplied by GEB to other assessees inclusive of duty - Therefore, the rates taken by the assessee for the purpose of supplying electricity from CPP unit to general unit is upheld. The assessee succeeds on this point - Following ACIT vs. Jindal Steel & Power Ltd.[2007 (6) TMI 308 - ITAT DELHI ] - the market rate postulated by section 80IA (viii) shall be the price at which the assesses purchases electricity from the Electricity Board - the market value postulated by the provisions of section 80IA shall be the price at which the assessee purchases electricity from Electricity Board and not the one which is fixed by the legislative mandate – Decided in favour of Assessee. Adjustments u/s 145A - Addition on Account of Modvat Credit in Opening Stock and Closing Stock – Held that:- Section 145A has been amended and as per Section all the taxes or cess whatever name it was called is to be added in the valuation of the closing stock in preparing the accounts of the appellant – Following COMMISSIONER OF INCOME TAX Versus MAHAVIR ALLUMINIMUM LTD. [2007 (11) TMI 41 - HIGH COURT, DELHI] - The A.O. only added excise duty / modvat credit in purchase, sale and closing stock but had not allowed any adjustment in opening stock – decided in favour of Assessee. Addition of Book Profits u/s 115JB – Dividend Stripping u/s 94(7) – Held that:- As per Section 94(7), any loss on security or unit was to be ignored for the purposes of the computing his income chargeable to tax where the transactions made within a period of 3 months prior to the recorded date and sales these securities within 3 months or within 9 months after such date. Ld. A.O. had given details of security purchased and sold in the assessment order, which were made within 3 months before the recorded date - The Explanation (f) of Section 115JB was clearly applicable in case of the appellant - The amount or amounts of expenditure relatable to any income to which [Section 10 (other than the provisions contained in Clause (38) thereof) or Section 11 or Section 12 applied] is to be increased by him – Decided against Assessee. Notional Disallowance u/s 14A – Interest Expenses u/s 115JB - The matter had been already allowed by the CIT(A), particularly, on the calculation of interest which had been accepted by the ld. Counsel in his argument. Therefore, the issue was restored back to the A.O. to re-calculate the disallowance as per the submission made by the appellant - The appellant had borrowed funds which were interest bearing - Therefore it can be said that if there were surplus funds then the appellant could have reduced its interest burden and by not doing so it was very clear that the interest bearing funds were in fact utilized for the purpose investment and therefore the disallowance of interest for earning of dividend income u/s.14A is in order. Disallowance of Depreciation - Held that:- The appellant had changed the method of depreciation in A.Y. 02-03, which had been accepted by the department - Now he had changed the method of depreciation from SLM to WDV method on Vareli as well as Jolva power plant - As per sub-section 2 of Section 115JB, the appellant can adopt the method and rate for calculating the depreciation, this shall be same as have been adopted for the purpose of preparing such account including P&L Account and laid before the company at its annual general meeting in accordance with the provisions of Section 210 of the Companies Act, 1956, which was conducted on 28.09.2004 by the Management - on adjustment u/s. 115JB, it was held that the A.O. doesn't have any power to make adjustment except provided in Section 115JB itself - Thus, we direct the A.O. to calculate thebook profit u/s. 115JB on the basis of depreciation WDV method.
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2013 (9) TMI 534
Violation of provisions of section 40A(3) of the Income Tax Act read with Rule 8DD - Payment in cash - Assessee is a 100% Exporter of fish and fish products which are allowed to be purchased in cash as per the provisions of Rule 6DD – Held that:- Assessee is covered by sub-clause (3) of Rule 6DD when fish or fish products can be purchased in cash and the payment can be made to the cultivators, grower or producers of such articles produced or products when the producers of fish or fish products has been specifically defined would include besides the fisherman any headman of fishermen, who sorts the catch of fish brought by fishermen from the sea, at the sea-shore itself and then sells the fish or fish products to traders, exporters, etc – As per genuineness and the business practices insofar as the assessee being an exporter of such magnitude would have received all payments by way of export in bank which he would have withdrawn from the bank for incurring such expenditure - Intention of the legislation to allow benefit to such exporter keeping in mind the cash is incurred for procuring fish and fish products was delicate and risk involved therein was to be allowed – Decided in favor of Assessee. Restricting the seeds purchase in cash to10% being the wild seeds – Held that:- Business conducted by the assessee is of such magnitude that it was nobody's case that wild seeds has to sprout in accordance with the arithmetical projection - Other purchases being the fish and fish products insofar as he explained that the value of the hatchery seeds which is higher and the wild seed may or may not grow was nobody's case which was again at the mercy of the nature when the seller of the prawn seeds also raises his hand for not hatching into prawns of desired quality. Therefore, keeping in view the magnitude of the export made by the assessee that 10% sustenance on account of seed purchase is fit for deletion. Disallowance u/s 40A(3) of the Income Tax Act – Held that:- Various facts leading to this part sustenance of the disallowance not maintainable insofar as payment for diesel, labour and places where banking facilities are not available are allowed under the provisions of Rule 6DD - There is no violation of Rule 46A insofar as the learned CIT(A) had on the basis of finding tried to assign a percentage for sustaining the disallowance which is not in accordance with the provisions of the I.T.Act for disallowance u/s.40A(3) - Directed the Assessing Officer to delete the addition so made and partly sustained by the learned CIT(A) on the issues as mentioned.
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2013 (9) TMI 533
Interest earned on the parking of share capital to be chargeable under the head ‘Income from other sources’ or to be capitalized – Interest payable on borrowing of such money to be disallowed u/s 14A of the Income Tax Act – Held that:- Interest cannot be taxed as income from other sources in the hands of the assessee and therefore, the subsequent disallowance of expenses claimed at 10% to earn that income has been infused in the total project cost cannot be disallowed insofar as the whole of the income has been capitalized was rightly considered for revision by the assessee before the Assessing Officer – Decided in favor of Assessee. Meaning to the insertion of the proviso to Section 36(1)(iii) - Held that:- Interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession was being allowed as deduction u/.s.36(1)(iii) of the Act as revenue expenditure was amended w.e.f. 1.4.2004 when the amount of interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession whether capitalized in the books of account or not for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction, holds true for the income insofar as once having identified that the income from interest is from the Banks where the share capital was parked was to not earn interest to be balanced interest on capital borrowed.
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2013 (9) TMI 532
Speculative loss - Setting off the Brought Forward Losses – Proportionate Expenses - Whether the CIT(A) was erred in not setting off the brought forward losses on shares as per last assessment order against current year profit from share activities and in not considering the proportionate expenses out of the expenses capitalized – Whether or not the activity of the assessee regarding sale and purchase of shares was similar to the activity carried on by it in respect of sale and purchase of shares with regard to assessment year 2007-08 - Held that:- There being lack of clarity on facts, it would be just and proper to restore the issue to the file of AO to bring all the facts on record and give a specific finding that where or not assessee's activity of sale and purchase of shares during the year remains same as it was in respect of assessment year 2007-08 and after determining this fact the AO will determine that whether such activity is speculative in nature - If such activity is speculative in nature then set off of earlier determined speculative loss is to be granted to the assessee - With these observations the issue was restored to the file of AO. According to the provisions of the Act brought forward speculative loss can be adjusted against speculative profit only - The AO in the computation of income had not determined the profit arising out of activity of sale and purchase of shares as speculative profit - the reason given by AO for disallowance of the claim of the assessee was absence of details regarding eligible losses. In the light of the material palced, The relevant observation of AO on the issue in respect of assessment years 2004-05 and 2005-06 from respective assessment orders have already been reproduced - The department cannot take different stand on the year under consideration as principle of consistency has to be followed - However, for verification of the quantum claimed by the assessee the issue was restored to the file of AO - After verifying the quantum the AO will allow the claim of the assessee according to the stand taken by revenue in respect of A.Ys 2004-05 and 2005-06 – Decided in favour of Assessee.
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2013 (9) TMI 531
Disallowance u/s 14A - Whether CIT(A) erred in deleting the disallowance made by the AO u/s 14A of the IT Act, 1961 without appreciating the fact that the assessee failed to prove that all the expenses debited to Profit & Loss Account were incurred for earning other than the income exempt from tax - Held that:- The Tribunal had not gone into merits of the case and remitted the issue to the record of the Assessing Officer because Rule 8D was not applicable as held by the Hon’ble jurisdictional High Court in the case of Godrej & Boyce Ltd v ACIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. Because the most of the investments were already made in the earlier years; however, for the Assessment Years 2002-03 to 2004-05, the issue of disallowance u/s 14A was pending before the Assessing Officer as it was remanded by the Tribunal - Therefore, to this extent, the issue for the year under consideration was remitted to the record of the Assessing Officer to work out the availability of assessee’s own funds, even if it is put into the common pool as held by the Hon’ble jurisdictional High Court in the case of Commissioner of Income-tax v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY ]. During the year under consideration, half of the total investments of Rs.23.81 crores made by the assessee from the total sales of investment; therefore, issue of disallowance u/s 14A on account of interest expenditure had to be decided after taking into consideration the available funds from sale of investments and other own funds - As we have already made it clear that upto the Assessment Year 2001-02, the issue had been allowed by the Tribunal and therefore, no disallowance can be made for the investments made upto Assessment Year 2001-02. Disallowance of Interest Expenses - Whether CIT(A) erred in deleting the disallowance out of interest expenses in respect of interest free advances to subsidy company without appreciating that the issue of business expediency was not proved by the assessee - Held that:- The assessee made interest free advance to its subsidiary company which was incorporated for doing life insurance business - The assessee’s group was carrying general insurance business and the main activity of the assessee was that of financing - The Hon’ble Supreme Court in the case of S.A.Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT ] - wherein interest bearing funds were lent to the sister concern without interest, the A.O. needed to examine the purpose of loan - If the loan was advanced for commercial expediency and not utilized by the Directors of the sister concern for their personal benefit, then the deduction of interest had to be allowed - the learned CIT(A) had rightly relied on this judgement in deleting this addition. Addition to the Book Profits computed u/s 115JB being the Expenses Disallowed u/s 14A – Held that:- The principle of apportionment as provided u/s 14A cannot be applied while computing the book profit u/s 115JB - However, the Assessing Officer had power and jurisdiction to make the adjustment as provided under Explanation 1 - Accordingly, in our view the amount of expenditure which is directly relatable to the income, which was exempted u/s 10, 11 and 12 shall be adjusted for the purpose of computing the book profit - Hence, this issue was required to be examined and considered afresh for making the adjustment only to the extent of actual expenditure incurred in respect of the earning of income claimed as exempt.
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2013 (9) TMI 530
Penalty u/s 271(1)(c) - Held that:- The revenue has to prove that the assessee has either concealed particulars of his income or has furnished inaccurate particulars of his income -There is no finding by the A.O. that the surrendered cash creditors are bogus - the penalty cannot sustained - under section 271(1)(c) penalty can be levied only if either the act of "concealment of particulars of income" or "furnishing of inaccurate particulars of income" is found to have been committed by the assessee – Following Dilip N. Shroff vs JCIT & Another [2007 (5) TMI 198 - SUPREME Court] and CIT vs Reliance Petroproducts Pvt. Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] The assessee has claimed to have loans from 45 parties. Out of them the assessee had produced duly attested and properly sworn-in affidavits of 23 parties, wherein, they not only have confirmed the factum of their deposit but have also explained the source(s) thereof. It was only when the A.O. asked the assessee to produce all the 45 parties before him, the assessee not finding it feasible and being unable to comply, made a bonafide surrender of the total amount qua them. By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income – Decided in favour of Assessee.
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2013 (9) TMI 529
Addition of Opening Excess Cash - Held that:- If there is some recording mistakes and if this fact is found to be correct, the same has to be considered and adjusted - There is no absolute rule that the opening balance of a year only has to be taken as a gospel truth even when it is due to mistaken accountancy - the issue has not been properly dealt with by the authorities below - Therefore, we restore this issue to the file of the Assessing Officer with a direction that he shall properly consider the above reply of the assessee and after giving plausible reasoning decide this issue afresh - He will not summarily reject the same. In case the contention of the assessee is found to be correct, the same has to be considered in correct perspective - Needless to mention, that he will give opportunity of being heard to the assessee - Hence this ground is allowed for statistical purposes –Decided in favour of Assessee. Treatment of Transactions - Actual Expenses OR Speculative Transaction - Held that:- There is enough proof qua the possession of biscuits - As to who brought these biscuits and what was the mode of travel is not of much relevance for this matter. The bill proves purchase of the biscuits. The non-recording of this purchase in the books on the date of survey also stands explained - The assessee has explained, through his elder brother [the manager] from the time of survey, the procurement of these ten biscuits. He has also given the source of purchase of these ten biscuits. He has also given the source of the purchase amount. Transactions Recorded in the 'Order Book' – Held that: -The A.O. has not properly dealt with these issues – all the issues were restored to the file of the A.O. for de novo consideration - This issue is the subject-matter of all the remaining grounds of assessee's appeal and the sole ground of revenue's appeal - Neither the A.O. nor the ld. CIT(A) had articulated the issues and have not given their clear-cut finding - The issues have been so jumbled and mixed up that it is impossible to cull out clearly full and final facts of the case.
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2013 (9) TMI 528
Disallowance of deduction u/s 80IB(10) of the Income Tax Act - Non-furnishing of completion certificate of the Housing Project – Held that:- There was no requirement for furnishing a completion certificate from the municipal authority. In that view of the matter, the claim of deduction u/s 80IB(10) cannot be denied for not submitting the completion certificate from the local authority. Similarly, it is not a requirement under the Statute that the undertaking must be owner of the land for claiming deduction u/s 80IB(10). However, it is a fact that the Assessing Officer has rejected the claim of deduction u/s 80IB(10) by alleging that the assessee has not furnished any information or evidence with regard to the housing project and whether the conditions for claiming deduction u/s 80IB(10) have been fulfilled. The Assessing Officer had further alleged that the assessee had not submitted and not obtained auditor's certificate in Form No. 10CCB - Remitted the matter back to the file of the Assessing Officer who shall consider the claim of deduction u/s 80IB(10) afresh after affording a reasonable opportunity of being heard to the assessee. It is open for the assessee to produce all the information and evidence in support of its claim of deduction u/s 80IB(10). The Assessing Officer shall consider all the information and evidences that may be produced by the assessee and decide the issue. Determination of the income from house property by applying the rate of 7% on the investment of the assessee subject to cost inflation index – Held that:- The Tribunal in its order dated 23rd October, 2009 for the previous assessment years, directed the Assessing Officer to recompute the income from house property by following the return on investment method, applying the rate of 7% on the assessee's investment in the property as enhanced by applying the cost inflation index applied for the respective years to arrive at the ALV for the relevant assessment year. The facts being identical, since the CIT(A) has followed the direction of the Income-tax Appellate Tribunal while directing the Assessing Officer to recompute the income from house property - The order of the CIT(A) on this issue is sustained. Disallowance of 10% expenditure claimed by assessee – Held that:- When the assessee has not submitted the details called for by the Assessing Officer, he was left with no option but to disallow part of the expenses on ad-hoc basis - Considering the totality of the facts and circumstances, disallowance of 5% of the expenditure under both the heads i.e. under head construction expenses and administrative expenses, would serve the purpose – Decided against the assessee.
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2013 (9) TMI 527
Determination of Capital Gains - Determination of Fair Market Value - Deduction from FMV - cost of improvement - Held that:- The number of lifts is only toward adequate 'lift capacity', which would rather depend on the number of people residing in the building who would be ordinarily requiring that facility and, besides, the number of lifts would also stand to be determined by the carrying capacity of the lifts themselves. The same (number of lifts), thus, would not assume any significance of its own, and the increase, if any, in valuation of the house property on account of a higher number of such units would be marginal, and not in any case in linear proportion to the number of lifts. - no infirmity in the valuation adopted by the A.O. - Decided against the assessee. Deductibility of the sum of Rs. 35 lakhs claimed from the sale consideration of Rs. 175 lakhs of the residential flat under reference in computing the capital gains arising on its transfer during the year - Basis of deduction being that the same represents a condition precedent subject to which only the said property stands bequeathed to, among others, is of assessee - Held that:- the assessee has not been able to show of the impugned sum as representing a condition precedent, with the succession of rights being given effect to without the said payment having been made, with even the transfer deed not recognizing the interest of any party other than the legatees in the subject property. - Decided against the assessee. Under section 48, only sums specified for being adjusted against the consideration accruing or arising on the transfer of a capital asset in computing the capital gains are, (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of improvement thereto - Assessee's case as not maintainable both in law as well as on facts – Decided against the Assessee.
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2013 (9) TMI 526
Exemption u/s 10(15)(iv)(f) - interest income - Withdrawal of exemption by Central Government - Utilization of ECB - foreign currency loans - Interest income being exempt in the hands of non-resident investors - Withholding tax u/s 195 - Held That:- by imposing a condition by Dy. Director (ECB) during the progress of the scheme was like changing the rules of the game in mid-way and the change of the rule was in respect of a game already played to alter its outcome. A retrospective or ex post facto change in such a manner is an arbitrary approach having no legal sanctity. Decision in the case of Reliance Industries Ltd V/s Dy. Director of Income Tax (IT) [2005 (2) TMI 445 - ITAT BOMBAY-I] Disallowance of Interest u/s 10(15)(iv)(f) - It was catastrophic to withdraw the exemption already granted u/s.10(15)(iv)(f) - Due to the withdrawal of the exemption the impugned order u/s.195 (2), now under dispute was passed directing to deduct withholding tax @ 20% - Held that:- conditions of the scheme, evidences of utility of the funds and the legal matrix of the case, the withdrawal of exemption was unwarranted - the appellant company was not liable to deduct withholding tax in respect of the interest payment. So the basic question was that once because of the letter or notification the provisions of the statute have been negated or diminished by an executive order then what was the course left to a tax payer - Naturally the answer was that a tax payer had no option but to knock the door of the judiciary - In a plethora of decisions it was unequivocally held that the full effect of the provision had to be given in preference to supporting legislature such as rules, notifications, approvals etc. The Tribunal does have the power to deal with the validity of such rules or notification and by applying the doctrine of “reading down” can strike down such rules if held to be in contradiction with the provisions of the statute itself - the rules were made only for the purpose of carrying out the provisions of the Act which cannot be taken away or whittle down the effect conferred by the statute - ITAT had both the power and duty to deal with such rules or notification and decide whether the same were in agreement with the main provisions of the statute - The provision of the statute provides in an unambiguous terms to grant exemption in respect of interest payable to an international investor who has lent money to industrial undertaking in India under a loan agreement as approved by the Central Government - The Government of India had properly regarded the need for industrial development only thereafter issued the notification and floated this scheme of ECB. Relying upon Radhasoami Satsang V/s CIT [1991 (11) TMI 2 - SUPREME Court] - Strictly speaking, res judicata does not apply to income-tax proceedings - Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years had been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year - in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. Decided in favor of assessee.
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2013 (9) TMI 525
Transfer pricing adjustments - ALP - addition made for guarantee amounting to Rs. 29.18 lakhs - addition made towards notional interest amounting to Rs. 5.64 Crores on loan to subsidiaries - Held that:- following the decision in Four Soft Limited [2011 (9) TMI 634 - ITAT, Mumbai] matter remanded back to AO. TDS on Dealer Incentive and Service Coupons - disallowance under Section 40 (a)(ia) r.w.s. 194 H and 194C - Held that:- as sale took place between the assessee and the dealers, provisions of section 194 H would not be applicable in the case under consideration. - Decision in Jai Drinks (2011 (1) TMI 1035 - Delhi High Court) followed - transaction between the assessee and the dealers were on principal to principal basis. In other words there are certain terma and conditions in the agreement that are clearly indicative of the fact that the transactions were between principal and principal and that even in the matter of sales that were effected by the dealer it did not act as an agent of the assessee company. AO has categorically stated that plan of incentives was not filed before him. In the paper book we do not find any documents related with the incentive scheme. We are of the opinion that matter of incentives allowed by the assessee to its dealers needs to be restored to the file of the AO. He is directed to decide the issue afresh with regard to the provisions of section 194C of the Act. Assessee is directed to furnish the AO details like plan adopted by it, method of calculating the incentives, incentives actually allowed etc. to the AO. - partly decided in favor of assessee. Depreciation of Rs.13,09,000, on intangible assets - evidence regarding use of technical know how - Held that:- The assessee had acquired technology for defence vehicles from one company of Israel. The assessee had acquired IPR of the said technology. We are of the opinion that existence of an agreement is not sufficient to claim depreciation. Neither before the Assessing Officer nor before us the assessee had shown as to how the technical know how was used passively during the year under consideration. - Decided against the assessee. Provisions for medical benefits as prior period expenses - Held that:- this is merely a provision and an unascertained liability - The claims also do not relate to the year under consideration. Further we also find that there are no specific approved funds for the provisions. The claim is also against the matching principle. The important fact also to be noted is that this amount has neither been paid to the employees during the year nor it has been deposited in a separate fund. In line with the foregoing, the disallowance is upheld - Decided against the assessee.
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2013 (9) TMI 524
Disallowance u/s 40A(3) - payment in cash for purchase of land - Held that:- Contention of the assessee was that, firstly, these payments were made by cheques by its sister concern M/s. Zoom Developers and secondly the assessee has not debited these expenditure in the profit and loss account, therefore, no disallowance u/s 40A(3) can be made. - no disallowance - Decided in favor of assessee Additions towards spped money / bribe - Through the letter, the Parker & Parker Associates had asked for payment of professional fee amounting to Rs.3 crore by 03.07.2006 through demand draft. The content of the letter has been interpreted by the AO as illegal payment made through them for bribing the .government officials in order to pursue their proposal for permission of purchase of lands. - Held that:- It is clear from the detailed findings recorded by the ld.CIT(A) that out of the total payment only a sum of Rs. 7 lakhs has been paid as speed money relevant to assessment year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in the assessment year 2008-09, he upheld the addition to this extent by observing that merely because the assessee has not debited this expenditure in the profit and loss account, no disallowance should be made. However, such disallowance should be made only in the year in which assessee claimed such payment as expenditure in its profit and loss account and not in the years under consideration, wherein undisputedly no claim of any of such expenditure is made by the assessee as per the audited profit and loss account and balance sheet placed before the lower authorities, which also find placed in the paper book. We direct accordingly. Undisclosed investment in land - addition u/s 69 - Held that:- , it is clear that the ld. CIT(A) ahs not deleted the addition by controverting the finding recorded by the Assessing Officer with respect to the applicability of provisions of Section 69 under which investment from undisclosed sources is added. The CIT(A) has simply deleted the addition by relying on the addition confirmed by him u/s 40A(3). We set-aside the order of CIT(A) on this ground and in the interest of justice, matter is restored back to the file of the Assessing Officer for deciding afresh after giving due opportunity to the assessee. Deemed dividend - Advance Received Against Sale of Property u/s 2(22)(e) – Held that:- Genuineness of the agreement so entered by the assessee with the respective company was found to be after thought - As per agreement, the assessee was to receive the balance amount at the time of handing over the possession of the constructed area, however, till date neither possession has been handed over nor balance payment was received by the assessee. In the respective balance sheet of the company amount had not been shown separately as advance against the land and properties and the same have been shown under the head “Other Advances” - Thus, even if the agreements were found to be genuine, the same have not been acted upon - The detailed findings recorded by the ld.CIT(A) to the effect that even in the audited balance sheet, the assessee had not shown the payments as advance against land and property, but was simply shown as other advances - The detailed finding recorded by the ld.CIT(A) had not been controverted by brining any positive material on record - Additions u/s 2(22)(e) confirmed - Decided against the assessee.
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2013 (9) TMI 523
Addition of Income Interest Accrued - Whether or not the assessee had a right to receive interest - Held that:- No income by way of interest on security deposit with MPEB, as accrued to the assessee in all the assessment years under consideration - Relying upon CIT vs. A. Gajapathy Naidu [1964 (4) TMI 6 - SUPREME Court] - the profit was to be included and could not be related back to earlier year during which the assessee actually supplied - It was also held that if the assessee followed mercantile system of accounting it is to be seen as to when the right to receive, accrued. The income is assessable in the year in which the right to receive accrued. - Decided in favor of assessee.
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2013 (9) TMI 522
Revenue or Capital Expenditure - principles to decided the nature of expenses - acquisition of a unit - Held that:- Expenditure incurred by appellant for successful or aborted acquisitions was capital in nature - While holding acquisition expenditure as capital expenditure we have considered type, nature and character of advantage as well as aim, intended object, effect of expenditure in larger context of necessity and expediency - Source /manner of payment or quantum of expenditure were not at all conclusive factors for deciding issue under consideration - issue has been decided after taking in to consideration basic facts i.e. where expenditure was for running business or not - expenditure was spent for purpose of bringing into existence a new asset /obtaining a new advantage. Expenses in Connection with Development of Engine - Held that:- Claim of assessee that expenditure should be allowed u/s.35 also cannot be accepted - Expenditure incurred by assessee was not for scientific research, it was for transfer Technical know-how CIT V. SWARAJ ENGINES LTD.[2008 (5) TMI 257 - SUPREME COURT] - appellant had acquired Technical know how from Austrian Company - Technical Know-how had been defined as knowledge which would enable a company receiving such know-how to do project - If we take note of definition of Technical know-how it becomes clear that expenditure incurred by assessee had rightly been considered as Technical know-how by AO - As per agreement IPR were to remain with appellant and final product was to be exclusive property of assessee. - Depreciation was rightly allowed - not eligible for benefit u/s 35. Development Expenses - Compact Project for Tractors - Premium Payable on Foreign Currency Convertible Bonds (FCCB) - Reversal of Premium payable on FCCBs - Held that:- CIT V. ITC Hotels Ltd.[2009 (11) TMI 582 - Karnataka High Court] and CIT v. Secure Meters Ltd.[2008 -TMI - 32081 - HIGH COURT RAJASTHAN ] even if debenture were to be converted into share at a later date, expenditure incurred on such convertible debenture had to be treated as a revenue expenditure - expenses incurred in connection with issue of FCCB were revenue in nature - No one was entitled to double deduction, so no one should suffer double taxation - AO should tax it only in one assessment year and appellant should make claim for said amount for one assessment year only. Unutilsed CENVAT Credit on Raw Material u/s 145A - Held that:- AO had deliberated upon various issues with regard to Modvat credit - But, it appeared that he had not considered data available during appellate proceedings - Even if he had considered said data, he had not mentioned anything about it in assessment order - for arriving at a logical conclusion figures furnished by assessee had to be considered and commented upon - in interest of justice we remit back issue to AO - He was directed to give proper effect to stocks, purchases and sales to arrive at a definite conclusion. Octroi Incentive - Not Taxable Being Capital Receipt - Held that:- It was a known fact that Octroi was charge collected by local bodies on commodities or things entering local limits -It was collected on capital goods as well as on raw material - Sahney Steel And Press Works Limited And Others V. CIT[1997 (9) TMI 3 - SUPREME Court] - subsidy received by appellant to extent of purchase of raw material was concerned it cannot be held a capital receipt - question of Octroi received for capital/revenue items was neither raised before tribunal nor was it adjudicated upon - It was sufficient to say that sales tax subsidy cannot be compared with Octroi scheme in question. Disallowance U/s. 40A(9) 14A - Payments to Clubs - Held that:- Following Raasi Cement Ltd. V. CIT[2004 (12) TMI 55 - ANDHRA PRADESH High Court] AO disallowed claim of assessee in view of provisions of section 40A(9) - provisions of section 40A(9) were very clear in providing that any payment or contribution made by an employer on behalf of employees to any fund, trust, society, association or person etc. would not be an allowable expense except payment made for expenses provided for u/s 36(1)(iv) and (v) - In earlier years matter was remanded back to AO - it was not decided in favour of appellant - issue in question in issue should be remitted back to AO as it was referred in earlier years - AO was directed to recompute disallowance considering materials submitted. Adjustment u/s 92CA(3) to Arm s Length Price of international transaction - Held that:- It was not responsibility of appellant to make payments to US company - As per agreement, appellant had to be reimbursed for payments made by it on behalf of AE - assessee was responsible only for insurance of products in course of transit, which became a liability of AE after it reached destination - No evidence in shape of expenditure had been divided to TPO or in DRP proceedings as to documentations kept. Disallowance of Capital Loss on Sale of R D Assets - Held that:- There was a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in absence of clear statutory indication to contrary, statute should not be read so as to permit an assessee two deductions - section 35 was part of head Income from business,profession or vocation - section 43 was part of same heading - provisions of head Capital Gains cannot be imported here to allow assessee one more deduction. Consideration Received on sale of LCV business in form of non-compete covenant treated as business income Held that:- Amount received by appellant was of a revenue nature - Guffic Chem (P) Ltd. Mandalay Investment P. Ltd v. CIT[2011 (3) TMI 6 - Supreme Court] - as per amended provisions whenever any fee or compensation is received by an assessee for not indulging in business activities, that were being undertaken by him before entering into such agreement, provisions of section 28(va) come into play. Disallowance u/s40a(ia) - Held that:- Provisions of tax deducted at source were not applicable - GE India Technology Centre Private Ltd. V. CIT Anr. [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - AO had not examined issue about year-end payments - there was a difference between payments that were made during year and payments made at end of year - in 2nd category of payments tax had been detected in subsequent year when Bills were booked - amendment made to Sec.40(a)(ia) by finance act,2008, with retrospective effect from 1.4.2005. Disallowance of Weighted Deduction u/s 35(2AB) Held that:- Deduction u/s 35(2AB) for Kandivili should be allowed by AO as and when approval from DSIR was received and produced by appellant - appellant was entitled to claim weighted deduction,as far as Nasik unit was concerned - while deciding issue related with benevolent provisions like 35 (2AB) a liberal and practical approach should be followed, so that it fulfils objects with which said section was introduced. Disallowance of Deduction u/s 801C Short Credit of TDS - Held that:- AO had not quantified losses suffered by new unit nor had passed a speaking order in this regard - Assessing officer is directed to quantify loss for year under consideration and to give a clear finding - Credit for TDS should be given for year under consideration, even if same was filed before finalisation of assessment proceedings.
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2013 (9) TMI 521
Disallowance of Interest:- Held that:- There was no nexus between the interest bearing funds taken by assessee and the debit balances in the name of two accounts which can be considered as diversion of funds - The debit balances with the two concerns were running accounts in the course of purchase and sale of shares and were business transactions - Since there was no diversion of borrowed funds for non business purposes – Following S A Builders and other Vs CIT [2006 (12) TMI 82 - SUPREME COURT] - the funds advanced were for business purposes - there was no need for disallowance of any interest - It was also seen that AO in the assessment order compared the debit balance which does not pertain to the year under assessment - his comparison on facts was also not correct as he had taken the debit balances of later year for disallowing the interest this year – Decided against Revenue. Disallowance of Finance Brokerage and Consulting Charges - Held that:- The borrowed funds were utilized for the purpose of business and interest was allowable as deduction allowed the brokerage and commission charges - the CIT (A) was correct in allowing the brokerage and consulting charges claimed by assessee for obtaining various loans – Decided against Revenue. Disallowance of Sub-Brokerage – Held that:- During the course of assessment proceedings the appellant had furnished information of Shri Madhusudan Kela, though those were not treated sufficient by the AO to consider genuineness of the person as well as the payment of sub-brokerage - Assessee had not filed any confirmation either during the special audit or before AO, in view of the factual findings given by the CIT (A), we have no other option than to accept his findings in the absence of any contrary evidence placed by the Revenue - The Revenue had also not raised any ground with reference to admission of any additional evidence which indicate that the factual aspect that assessee filed confirmation letters before AO in the course of the assessment proceedings were to be accepted - It was also seen that the learned CIT (A) directed to verify the receipt of payments given to Shri Madhusudan Kela and after examination directed AO to allow the claim - We do not see any reason to interfere with the findings of the CIT (A) on this issue - It was for AO to examine the factual aspects and allowed the claim as the matter was restored to him by the CIT (A) – Decided against Revenue. Deletion of Service Charges – Held that:- The service charges were debited to cost of shares, a copy of investment in shares account has also filed - It was claimed that the service charges was not shown in Profit & Loss A/c and in any other head - the claim appeared to be in order - Assessee filed copy of shares purchase account of Polaris Software shares and claimed that there is no double claim – Decided against Revenue. Disallowance of Finance Charges - Held that:- The issue require fresh examination by AO keeping in view the above observations - The issue in the ground was therefore, restored to the file of AO to examine the nature of funds obtained by assessee and its utilization afresh without getting carried away by the observations in earlier years - It was also submission that in the trading account no interest was charged or paid on the debit/credit balance with the clients - Therefore, this aspect also had to be considered by AO while considering the allowance of interest claimed by assessee - The matter is accordingly restored to the file of AO for fresh examination and decision. Three accounts which were maintained by assessee’s sister concerns were for the purpose of business and interest was allowed in assessment year 2000-01 on examination by the CIT (A) factually, the order of which was confirmed in that year - Since the facts in this year were at variance more so with reference to financial charges paid to Bank which was one of the major component and also brokerage paid for arranging inter corporate deposits aspect of which were neither discussed nor verified – Decided in favour of Assessee. Disallowance of Depreciation - BSE Membership card - intangible asset - section 32(1)(ii) - Held that: - Following Technoshares & Stocks Ltd. and Others [2010 (9) TMI 6 - SUPREME COURT OF INDIA] - On the analysis of the Rules of BSE, it was clear that the right of membership (including right of nomination) gets vested in the Exchange on the demise/ default committed by the member; that, on such forfeiture and vesting in the Exchange the same gets disposed of by inviting offers and the consideration received thereof is used to liquidate the dues owed by the former/ defaulting member to the Exchange, Clearing House, etc. - the right of membership (including the right of nomination) vests in the Exchange only when a member commits default - Otherwise, he continued to participate in the trading session on the floor of the Exchange; that he continued to deal with other members of the Exchange and even had the right to nominate subject to compliance of the Rules - Moreover, by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" was declared to be an intangible asset - Therefore, the right of membership, which included right of nomination, was a "licence" or "akin to a licence" which was one of the items which falls in Section 32(1)(ii) of the 1961 Act - The right to participate in the market had an economic and money value - It was an expense incurred by the assessee which satisfied the test of being a "licence" or "any other business or commercial right of similar nature" in terms of Section 32(1)(ii) - the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under Section 32(1)(ii) of the 1961 Act. Disallowance of 20% Admissible Depreciation – Disallowance on Various Expenditure - Held that:- The issue of depreciation was allowed in favour of assessee in assessment year 2000-01 and the Revenue had not contested the same as can be seen from the issues raised in other appeals - there was no need for disallowing 20% of the depreciation as was done by the CIT (A) – the cars were reflected in assessee’s balance sheet and were used for assessee’s business, assessee was entitled for depreciation as claimed - There was no need for disallowing 20% of the claim. Unexplained Cash Credit – Held that:- we are unable to understand how this entry will become unexplained cash credit - As far as the transactions to Shri I.R. Khandwala were concerned, money was ultimately received and paid and there was evidence on record that said transaction was a bonafide transaction - If we were to consider Shri I.R. Khandwala had not advanced money directly and the journal entry was passed without any basis, the actual credit was from Khandwala Securities Ltd in earlier year which was also not disputed by AO -Looking at either way, there was no basis for making addition under section 68 as unexplained income of assessee - Therefore, we have no hesitation in deleting the said addition made by AO and confirmed by the CIT (A). Penalty u/s 271(1)(c) – The CIT (A) order per se cannot be faulted - as seen from the appeal for the assessment year in quantum, the issue of BSE Membership and interest claim of borrowed funds were restored to the file of AO for fresh consideration - Therefore, to that extent levy or deletion of penalty on the issue does not arise at this point of time as the issues were already restored to the file of AO for fresh adjudication.
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2013 (9) TMI 520
Depreciation on Assets – whether lessor was entitled to depreciation on assets leased by it in finance lease - Held that:- Following M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2012 (12) TMI 416 - ITAT MUMBAI] - Finance lease was for a fixed period & non-cancellable - Lessee used the asset for its entire economic life & all risks and rewards incidental to ownership were transferred to the lessee even though title may or may not be eventually transferred to him - There was a fixed obligation on the lessee for payment of lease money - the assessee’s lease agreement had all the characteristics of a finance lease - Further, RBI Circular No.FSCBC 18/24-01- 001/93-94 dated 14.02.1994 states that equipment leasing activity should be treated by banks “on par with loans and advances” - lease agreement under consideration was that of finance lease and not operating lease – Decided against Assessee. Disallowance of Expenses – Financial Charges Allowable u/s 36(1)(iii) or Not – Held that:- Following United Phosphorus Ltd. Versus Joint Commissioner Of Income tax. [2001 (5) TMI 134 - ITAT AHMEDABAD-A] - Interest paid on funds borrowed for business purpose, including for the purpose of setting of anew unit of the existing running business was allowable u/s 36(1)(iii) of the Act - While examining the applicability of this tribunal decision, we have noted above that interest expenditure will be allowable if it was found that borrowed fund were used for the purpose of setting up of a new unit of the existing running business - borrowed funds were not used for setting up of a new unit of an existing running business but it was setting up of a new unit for production of an altogether new product i.e. power whereas the existing business of the assessee was production of lignite - Since this aspect was not fulfilled in the present case, even interest expenditure was not allowable in the present case u/s 36(1)(iii) because in the present case, the product to be manufactured by the new unit was an altogether new product – Decided against Assessee. Disallowance as per Explanation u/s 37(1) - salary to staff against the guidelines of Gujarat Govt- Whether the expenditure incurred by the assessee was for any purpose which was an offence and/ or which was prohibited by law and if it was not so, the provisions of explanation to Section 37(1) was not attracted - Held that:- If the expenditure is incurred in violation of the guidelines of Government of Gujarat and against Article 192 of the assessee corporation then the remedy lies somewhere else and action can be taken as per law against the person responsible for such violation but this cannot be the basis for making disallowance of expenses without proving that it was not for the purpose of assessee’s business - This was not the claim of the revenue that this expenditure was not for the purpose of business and therefore, the disallowance was deleted – Decided in favour of Assessee. Disallowance of Obsolete Stores/Stock – Held that:- Writing off of the value of closing stock should be allowed to the extent it brings the value of closing stock at level with cost or market price whichever was lower - The market price of obsolete items of stock will be definitely very low than its cost. At the same time, it is not acceptable that the value of such obsolete items will be ‘nil’ - Now, the question was what can be the scrap value of such obsolete items. Ld. CIT(A) has considered the same @ 25% of the cost - the same was reasonable - the assessee was following mercantile system of accounting and hence, scrap value had to be considered in the present year itself and it could not be deferred till the actual sale of scrap - the scrap value of stock had to be considered as opening stock in the year of sale. Deletion of Disallowance of Expenses – the fact had to be brought out on record as to whether the expenses in question have crystelised during this year and if the assessee is able to do so, no disallowance should be made - The A.O. should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee – Decided in favour of Revenue. Deletion of Addition of Bonus and Royalty – Held that:- Following Kedarnath Jute Manufacturing Co. Ltd Vs CIT [1971 (8) TMI 10 - SUPREME Court] - If liability was crystallized during the year, the same was allowable even if not claimed in the books of accounts - The fact that the liability or expenses were covered U/s. 43B, the disallowances also cannot be upheld since the liability had been filed before filing of return of income within the prescribed period - the expenses cannot be held even U/s. 43B of the Act and the addition/ made therefore cannot be sustained and accordingly deleted - as per the provisions of Section 43B, deduction had to be allowed with regard to these expenses because the payment was made before the due date of filing of return of income – Decided against Revenue.
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2013 (9) TMI 519
Allowability of Service Charges - AO held that the services agreement between the assessee and its holding company has been entered into with the clear intention of reducing the tax liability of the assessee and increasing the non-taxable profits of SSL. - Held that:- The assessee had placed each and every head of expenditure and this Expenditure has been bifurcated under the three heads- STP unit entitled to deduction under section 10A, non STP not entitled to deduction u/s.10A and support services - the basis of allocation amongst the three heads is actual expenses, number of employees and ratio of fixed assets, floor area and turnover ratio - Thus, on the basis of above five criteria, expenditure has been allocated to the three heads - The issue regarding the allocation of expenses in respect of service charges arose in the case of SSL - In that case, the Assessing Officer was of the view that allocation of expenses for Non-section 10A unit (not eligible for exemption) was excessive as exempted unit was much more expenditure oriented - allocation of support services expenses on the basis of turnover was justified. - Decided in favor of assessee. Allowability of Deputation Charges - Reimbursement of Various Expenses – Held that:- The terms of the Agreement between the Assessee and SSL by which SSL agreed to render some common services in the areas of Finance, Accounts, Taxation, Legal, Administration, HRD, education, Training, Research etc. Clause-3 of the said agreement which have been referred to in the earlier part of this order clearly shows that the expenses covered by that agreement cannot and do not relate to expenditure incurred on deputing employees to work on specific projects of the Assessee - Therefore the expenses on account of deputation charges as well as other expenses were not covered under the aforesaid agreement - The other reasons given by the AO for making the impugned disallowance cannot also be sustained. Royalty u/s. 91 (1)(vi) OR Not - Purchase of Software from Various Resident Entities - Held that:- Payment received by the assessee was towards the title and GSM system of which software was an inseparable parts incapable of independent use and it was a contract for supply of goods - Therefore, no part of the payment therefore can be classified as payment towards royalty - The consideration received by the Assessee for software was not royalty - The receipts would constitute business receipts in the hands of the Assessee - Admittedly the Assessee who was a non-resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment. Following Director of Income-tax Versus Ericsson A.B. & Ericsson Radio System A. B. & Metapath Software International Ltd. [2011 (12) TMI 91 - Delhi High Court] - The consideration received by the Assessee for software was not royalty - The receipts would constitute business receipts in the hands of the Assessee - Admittedly the Assessee who was a non-resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment.
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Customs
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2013 (9) TMI 548
Classification of Goods - Benefit of Notification NO. 21/2002 - The appellants imported 354.750 MT of High Density Polyethylene and classified the same under Customs Tariff sub-Heading 39012000 of the first schedule to the Customs Tariff Act, 1975 and claimed the benefit of concessional rate of duty under Notification NO. 21/2002 - Revenue Rejected the claim - Held that:- No technical literature or opinion had been produced either by the appellant or by the revenue in support of their case - The Revenue had not got even the test certificate from the government laboratory, which was essential in this case - In the absence of test conducted by the Government controlled laboratory, if the test report of the supplier was relied upon it had to be fully considered - The Revenue had not applied even after the trade parlance test. High Density Polyethylene was classified under Heading 39.01 and the said classification was not disputed - Therefore, the imported goods were indeed polymer of ethelene for the purposes of Heading 3910 - the goods had been described in the notification on the basis of tariff description Sl. No. 477 of the Notification borrowed the language of the tariff Heading 39.01 will get exemption under sl. no. 477 of the notification - Ambica Prasad V. State of U.P. [1980 (5) TMI 100 - SUPREME COURT] - Every new discovery or new argumentative novelty cannot undo or compel re-consideration of a binding precedent - submissions sparking with creative ingenuity and presented with high pressure advocacy cannot persuade us to reopen what was laid down for the guidance of the nation as a solemn proposition by the epic fundamental rights case – Order was not sustainable thus set aside – Decided in favour of Assessee.
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2013 (9) TMI 547
Shortage found in re-warehousing of the imported goods - Respondents are 100% EOU and having central excise registration for manufacture and also holing a Private Bonded Warehouse Licence under Section 58 of the Customs Act, 1962 - Imported goods have been re-warehoused at the Private Bonded Warehouse of the respondents and on physical verification of the said goods by the JRO, it was noticed that the goods were found short and accordingly re-warehousing certificate were submitted to ICD, Dashrath – Held that:- Imported goods were Brass Scrap as against declared item Brass Dross - Sufficient evidence was brought on record by the appellants to show that it was mistake on the part of the supplier in sending the wrong goods which would clearly show that there was no intention on the part of the appellants. Not only the suppliers have admitted their mistake, but also they compensated the appellants for discrepancies - Nothing incriminating evidence was found against the appellants to implicate their involvement in importing the goods other than declared - Contention of the Department that supplier has been obliging in sending Brass Scrap in the guise of Brass Dross to various importers cannot be taken as decisive factor to penalise the appellants in the absence of their involvement or connivance with Exporters in importing such wrong goods. Further, appellants have given sufficient evidences to show that the overseas supplier have loaded short quantity which also admitted by the overseas supplier. On basis of the same the quantity actual re-warehoused - There was no intention on the part of the appellants the overseas suppliers have admitted their mistake. No incriminating evidence was found against the appellants to implicate their involvement in importing the short quantity. Therefore, appellants cannot be penalised in absence of their involvement or connivance with exporters in importing such short quantity. Revenue authorities have not challenged the final assessment of bill of entry No.913. If that be so, the findings recorded by the first appellate authority and following the law as has been laid down by this Tribunal in the case of Jalanchand Mangilal vs Collector of Customs [1991 (7) TMI 229 - CEGAT, NEW DELHI] is correct, as the ratio of the decision squarely covers the issue in favour of the assessee
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2013 (9) TMI 546
Illegal import of goods – misdeclaration of value - import of aluminium scrap – Held that:- The valuation done in the order was not in accordance with the law and consequently the demand of differential duty and imposition of penalties cannot be sustained in law - no formal public study conducted indicating any co-relation between the prime metal price and the scrap price - the department cannot adopt any procedure which LME itself does not recognize. Violation of principles of natural justice - the department had denied the cross examination - When the appellants had raised serious doubts about the procedure adopted with respect to the examination - it was incumbent upon the adjudicating authority to clear and clarify the matter by allowing cross examination of the concerned witnesses - Thus there was a clear violation of the principles of natural justice - denial of cross examination of the officer who examined the pen drive has caused prejudice to the appellants - on this ground alone the order was not sustainable. Matter remanded back to the adjudicatory authority for fresh consideration - The appellant has to be given opportunity to cross examine – decided in favour of assessee
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2013 (9) TMI 545
Refund claim – Interest on delayed refund - Assesse had filed refund claim arising out of finalization of provisional assessment of Bills of Entry – the contention of the revenue that amount to be credited to the Consumer Welfare Fund on the ground of unjust enrichment – Held that:- There was a delay of more than three months in payment of refund to the assesse and department was liable to pay interest on such delayed payment of refund from the first day subsequent to three months of the finalizing of assessment - u/s 18(4) any refund amount due was not paid to the assesse within three months from the date of final assessment of Bill of Entry interest was liable to be paid. The date i.e. 24-1-2008 to 7-3-2008 becomes sacrosanct for determining the question of the applicability of interest on the amount of excess duty paid by the assesse - In view of legal position the assesse was entitled for refund of interest amount albeit after working out exact amount of interest liability by the adjudicating authority on the basis of evidence made available to him – relying upon AREVA T&D India Limited Versus Commissioner of Customs Chennai Airport and Air Cargo Complex/Assistant Commissioner of Customs (Refunds -Air) [2012 (10) TMI 919 - MADRAS HIGH COURT]. Unjust enrichment - The question of unjust enrichment also does not arise as there was an order of provisional assessment and findings were there being no unjust enrichment – the order was correct, legal and does not suffer from any infirmity – Decided against revenue.
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2013 (9) TMI 544
Payment of differential duty - issue involved in the case was regarding the demand of duty on the ground that crude oil was allowed to be cleared without payment of duty but actually the assessee had not been able to produce the correct reconciliation to show that they had cleared crude oil of interface - Held that:- The issue needed to be decided on the factual matrix by the adjudicating authority after considering all the evidences that may be produced by the appellant before him at the time of hearing in denovo proceedings – order set aside – matter remitted back to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice – decided in favour of assessee.
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Corporate Laws
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2013 (9) TMI 543
Interim Injunction - Whether there should be an interim injunction restraining the Defendant Hindustan Unilever Limited from publishing and/or telecasting the advertisements launched by it for its product Pepsodent Germicheck Superior Power toothpaste in the print and electronic media – Held that:- The Court was not persuaded to hold at this stage that the impugned TV advertisement or the impugned printed advertisement by HUL was disparaging of or denigrating the product Colgate Strong Teeth of the Plaintiffs - The Court was not satisfied that the Plaintiff had made out a prima facie case for the grant of an ad interim injunction as prayed for. The Court came to a prima facie conclusion on facts that the depiction of the use of the Plaintff’s product, liquid or soap, did not lead to removal of germs to the extent the competitor’s product did, and that this was disparaging of the Plaintiff’s products - the facts in the present case do not persuade the Court to come to a similar conclusion at this stage. As far as the MRTPC decision was concerned, it was pointed out that the injunction against the advertisement was only till such time an expert panel verified the veracity of the claims of Colgate - It iwa stated that at that stage Colgate Strong Teeth used to be an ordinary chalk based toothpaste without any anti-germ actives - When Pepsodent was launched as a superior product, Colgate introduced Triclosan with a 0.1% concentration thus giving the consumer a superior choice - Thereafter, Pepsodent increased the Triclosan concentration to 0.2% and added fluoride to the formation - Ultimately, the complaint before the MRTPC was withdrawn since the Plaintiffs themselves had added fluoride and 0.2% Triclosan to Colgate Strong Teeth. Advertisements that compared the product of a trader with the product of a market leader can offer the consumer better information about the product - They can also help to improve the overall quality of like products in the market and, in that process, the product of the market leader - Advertisements when viewed in a positive light can be seen as challenging the market leader to offer a better product at a competitive price - In the world of marketing, these were acknowledged business strategies adopted by traders having to compete in a market dominated by one or a few players - The market leader should view this as an opportunity to offer a superior product at a competitive price. The Plaintiffs surely do not suggest that preferences of male children of a certain school-going age group would significantly impact the Plaintiffs’ entire market share in toothpastes, a product which by its very nature commands loyalties and habit of use by the average consumer, spread across genders over a range of age groups - The choice of toothpaste, the use of which is perhaps the first activity of the day for many an average consumer, would depend on a variety of factors - Only evidence at a trial can possible demonstrate whether the impugned advertisements showing the Colgate child switching his preference to Pepsodent GSP had the potential of swinging loyalties of all or a part of a different consumer cohort to the competitor’s product - it was possible that “aggressive or catchy advertising may cause a partial or temporary damage to the plaintiff, but ultimately the consumer would be the final adjudicator to decide what is best for him or her.”
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Service Tax
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2013 (9) TMI 554
Technical Testing and Analysis Agency u/s 65(107) – Bar of Limitation – Waiver of Predeposit - Assessee was performing the services of well logging, perforation and other wireline services for M/s. ONGC, the appellant have provided services falling under category of ‘Technical Testing and Analysis Agency’ defined in Section 65(107) of the Finance Act, which are liable to duty to service tax – Held that:- When the assessee stopped payment of service tax under information to the Revenue, the Revenue never objected the same and allowed the appellant to do so - We really fail to understand that if the appellant started paying a tax under the category of mining services w.e.f. 1.6.2007, how the said action of the assessee would reflect upon their malafide or any suppression or mis-statement of facts with an intent to evade payment of tax, during the relevant period under the category of ‘Technical Testing and Analysis’ The appellant stopped paying service tax on the said services, though the value of the said services and the service tax payable on the same was being reflected by them in the returns required to be filed - all such returns were duly filed under the cover of a covering letter clarifying that they were not paying any service tax on the said services in terms of the advice obtained by M/s. ONGC and forwarded to them - the appellant also filed refund claim for the previous period when they had paid the service tax on the said services. As such, we are of the view that the appellant has a prima facie case on limitation - We accordingly dispense with the condition of pre-deposit of duty, interest and penalties and allow the stay petition unconditionally. - stay granted.
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2013 (9) TMI 553
Authorized Service Station - Business Auxiliary Service - Duty to be charged on what portion - Appellant were engaged in the business of providing services of Authorized Service Station for Maruti brand vehicles - The department was of the view that the appellant was liable to discharge Service Tax liability on the whole of the amount charged and not on the services portion alone - Whether spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax – Held that:- The matter was remanded back to the adjudicating authority for consideration afresh of the contention of the appellant that the cost of spare parts sold cannot be included in the value of the services rendered - The appellant was also directed to submit all documents and evidences in support of their claim that they have discharged Sales Tax/VAT on the spare parts sold during the course of rendering the service. The cost of spare parts sold during the rendering of service cannot form part of the transaction value - The Board's Circular dated 23.08.2007 also confirmed the above position - Appellant contended that the transactions which involved only sale of spare parts without rendering of the service - In those cases, the levy of Service Tax would not arise at all - In the bills raised, the appellant had clearly indicated the quantity and value of the goods sold and the Sales Tax/VAT liability discharged - They had also indicated the charges collected for the services rendered and the Service Tax liability - the appeal was allowed by way of remand.
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2013 (9) TMI 552
Cenvat Credit on Rent a Cab Operator Services - Respondent a manufacturer had been using the services of rent-a-cab operators for enabling their officers to visit their vendors and the purchasers as also for other business activities - For service tax paid by rent-a-cab operators, they had taken credit - Not verified any documents whether each of their trips of the officers of the Respondent company were actually in relation to manufacture – Held that:- Appeal is not supported by any evidence to disprove the claim of the assesse – As per the decision in the case of Hon’ble Kartanaka High Court in CCE Vs Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT], raising supporting evidence with the appeal is necessary – Decided against the Revenue.
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2013 (9) TMI 551
Eligibility for CENVAT credit – Penalty under Rule 15 - Whether the assesse would be eligible for Cenvat credit of service tax paid on services of renting of immovable property and services of club membership - Held that:- As such membership of the club would be covered by the definition of input services - This was an association of engineering products manufacturers and the association provides the market related information, information about new technology, etc., to its members which was essential to carry out business and such information was the basic need of an industry to stand in competition in the market. - . However, appellant has not shown as to how the membership of India International Centre, New Delhi has the nexus with the manufacturing business and as such the services tax paid on the membership fee of this club is not cenvatable. - Decided against the assessee. Renting of Car Parking Space - Held that:- The car parking space had been used for parking of the vehicles of the assesse-company and its officers and as such this service had nexus with the business of the assesse and had to be treated activity related to business – Repying upon - CCE, Nagpur Versus Ultratech Cement Ltd., [2010 (10) TMI 13 - BOMBAY HIGH COURT] - The service would have to be treated as an input service. Bar of Limitation - Held that:- Only normal limitation period would be available to the department for recovery of ineligible Cenvat credit - the assesse cannot be accused of suppression of the relevant information as it was not the allegation of the department that the appellant in terms of legal requirements were required to give invoice-wise and item-wise details of Cenvat credit which they had not given - Prolite Engg v. CCE[1990 (3) TMI 89 - HIGH COURT OF GUJARAT] – Order set aside. The matter remanded to the original adjudicating authority for re-quantification of the Cenvat credit demand - The penalty under Rule 15(1) would be only in proportion the Cenvat credit demand confirmed.
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2013 (9) TMI 550
Denial of CENVAT credit - credit distributed by the Input Service Distributors (ISD) - Held that:- Credit of Service Tax paid on input services used in manufacture of Crude Oil and Natural gas at Mumbai Offshore was not admissible to Uran Plant - credit was not admissible - Commissioner’s Order regarding confirmation of demand under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act was upheld - interest on the demand amount was also recoverable under Rule 14 of Cenvat Credit Rules read with Section 11AB of Central Excise Act - JAYPEE REWA CEMENT Versus COMMISSIONER OF CENTRAL EXCISE, M. P. [2001 (8) TMI 1332 - SUPREME COURT OF INDIA]. Penalty - Imposition of Penalty on Uran Plant - Rule 15 had been amended with effect from 27-2-2010 incorporating input services in Rule 15(1) and 15(2) of Cenvat Credit Rules, 2004 - Therefore, penalty under Rule 15(1) and 15(2) was not imposable - under Rule 15(4) penalty was imposable on output service provider - Penalty was imposable only under Rule 15(3) of Cenvat Credit Rules and maximum penalty under Rule 15(3) - As regards imposition of penalty on ISDs penalty was proposed under Rule 25/26 of Central Excise Rules but in the Order-in-Original penalty was imposed under Rule 15 of Cenvat Credit Rules - Penalty needed to be set aside on this ground alone - Penalty had been imposed under Rule 15(4) of the Cenvat Credit Rules - Rule 15(4) as it existed during the relevant period pertains to imposition of penalty on output service provider - Accordingly, penalties imposed on ISDs were set aside - Appeal Partly allowed.
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2013 (9) TMI 549
Business Auxiliary Service or Not - 'multi-modal transporter - The applicant paid service tax under the head of "Business Support Service" and While rendering such service, they charged to their clients under various headings for which they were not paying any service tax - During the relevant period transportation by sea was not taxable - It is far-fetched to tax such a substantial activity as part of the "Business Support Service" and the issue had been dealt with in stay orders already passed - Held that:- The main service namely ocean freight as "Business Support Service" had classified the service under "Business Auxiliary Service" - the order goes beyond the scope of the Show Cause Notices - during the relevant period, there was no entry in the Finance Act, 1994 for taxing transportation by sea - Rule 5 of the Service Tax (Determination of Value) Rules, which was initially proposed in the Show Cause Notices have been struck down. Whether the present case was on the same footing as that of M/s. Leaap International Pvt. Ltd. Vs Commissioner of Service Tax, Chennai [2013 (5) TMI 112 - MADRAS HIGH COURT - It was argued that the appellant was issuing the Bill of Lading as a multimodal transport operator and such aspect was not considered in the case of M/s Leaap International - When Bill of Lading was issued and the applicant was acting in a joint activity - they were entitled to their profit and such an activity cannot be considered as procurement of service for exporter/importer - Such submissions was not clearly coming in the reply to the Show Cause Notice and in the Order-in-Original and these facts needed to be decided at the time of hearing of the appeal. Waiver of Pre-deposit - At the prima facie stage 75 Lakhs were ordered to be submitted as Pre-deposit – upon such submission rest of the duty to be waived till the disposal – stay granted partly.
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Central Excise
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2013 (9) TMI 542
Valuation - reduction of discount from the value - Discounts not shown in the invoices - cash discount quarterly and annual trade discount depending upon the actual performance of their buyers - Held that:- Procedure has not been strictly followed but it was in the knowledge of the Department that quantity and turnover discount was being passed on by the assessee - Only on the ground that the procedure was strictly not followed it will not be appropriate to disallow the quantity and turnover discount which the party was otherwise entitled as per law – Decided in favor of Assessee Extended period of limitation – Held that:- Pattern of sale and allowing of discount to their customers was duly intimated by the appellants to the Department and it was in the knowledge of Department that quantity and turnover discount was being passed on by the assessee - Suppression of the facts cannot be alleged in this case and accordingly the extended period of limitation will not be applicable in the case – Decided in favor of Assessee.
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2013 (9) TMI 541
Cenvat Credit - Electrodes as welding electrodes – Held that:- Impugned electrodes can well be fitted into chapter sub-heading 8466 as parts suitable for use solely with the machines of heading no.8456 – Held that:- Ectrodes are not usual welding electrodes about which there is dispute whether CENVAT credit could be allowed or not - These electrodes form part of the machinery itself - CENVAT credit allowed on these items – Decided in favor of Assessee.
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2013 (9) TMI 540
Rule 25 of the Central Excise Rules, 2002 regarding confiscation of raw material/semi-finished goods - Held that:- There is no provision for confiscation of raw materials or semi-finished goods and Rule 173Q/Rule 25 provides for confiscation of finished goods only, the decision of relying upon the Tribunal in the case of Annapurna Impex Pvt. Ltd. [2009 (8) TMI 200 - PUNJAB & HARYANA HIGH COURT] - Rule 25, under which the semi-finished processed goods has been confiscated is applicable only to finished excisable goods – Decided in favor of appellant.
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2013 (9) TMI 539
Compounded levy scheme - manufacture of pan masala / pan masala containing tobacco commonly known as gutkha - Interpretation of Statute - Whether or not Notification No. 42/2008-C.E. superseded the Notification No. 38/2007-C.E. by implication or both the Not ifications were simultaneously operating during the period - Held that:-The assessee-appellant-respondent were liable to pay differential of excise duty based upon different rates in excise duty on account of enhancement of rate of excise duty. The first proviso to Clause 2 of procedure and conditions detailed in Notification No. 38/2007-C.E. provided that in case of revision in the rate of excise duty the same shall be recalculated on the basis of revised rates from the date of revision and the liability of duty leviable on the manufacturer of the specified goods from that date shall not be discharged unless differential duty is paid and in case the amount of duty so recalculated was less than the sum paid then the differential amount shall be refunded to the manufacturer - the excise duty rates had been enhanced vide Notification No. 42/2008-C.E. Two notifications were so inconsistent with or repugnant to each other that both cannot be stand together and such repugnancy arises from different criteria for charging excise duty - If both the Notifications were allowed to operate simultaneously this will obviously create an anomaly for the reason that it would discriminate between two sets of manufacturers of pan masala and gutkha, one who earlier to issue of the Notification No. 42/2008-C.E. were operating under Notification No. 38/2007-C.E. and others who were operating under normal scheme of payment of excise duty under Section 3 of the Excise Act. Assesses were operating under Notification No. 38/2007-C.E. issued under Rule 15 of Central Excise Rules, 2002 - The Notification provided for optional compounded levy scheme in respect of specified excisable goods i.e. pan masala and pan masala containing tobacco (gutkha) which provided prescribed rates of duty per pan masala/gutkha packing machine per month - Despite of issue of above referred Notification No. 29/2008-C.E. (N.T.) and Notification No. 52/2008-C.E., earlier Notification No. 38/2008-C.E. under which the assessees were operating, was not superseded or rescinded. However, on 16-7-2008 Notification No. 44/2008-C.E. was issued rescinding the Notification No. 38/2008-C.E. Penalty U/s 11AC – Interest - Penalty imposed on the appellant was not justified because the question of interpretation regarding applicability of Notification No. 38/2007-C.E. or Notification No. 42/2008-C.E. was involved and therefore, no intention to evade payment of excise duty can be inferred. - Penalty waived.
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2013 (9) TMI 538
Classification - manufacturing - motor spirit or Organic Composite Solvent - Chapter sub-heading No. 3814 00 10 or chapter sub-heading 2710 11 13 - Held that:- The onus of proving that the product in question falls within the definition of ‘motor spirit’ classifiable under aforesaid sub-heading is squarely on the Department - Chemical Examiner has given finding in respect of sample being composed of hydrocarbon oil and its flash point is below 25°C. The Chemical Examiner however declined to comment or certify whether or not the sample by itself or in admixture with any other substance was suitable for as fuel in spark ignition engine on the plea that it was not possible by the laboratory to determine octane number and give finding regarding suitability to be used as fuel in spark ignition engine. Thus it is clear that the chemical analysis report does not establish that the disputed goods fulfil the requirement of definition of ‘motor spirit’ in the Chapter Heading 27 - Following decision of Jagdamba Petroleum (P) Ltd. v. C.C.E. [2003 (10) TMI 123 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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2013 (9) TMI 537
SSI Exemption Notification - Revenue found that the party was using the brand name “ZOLOTO-m” on the Pipe Fittings manufactured by them under the SSI exemption notification in operation at the relevant time - Held that:- The respondent having been granted registration which had to be made effective from the date of application, the respondents were entitled to the benefit of the Notification - both the parties using the brand name “ZOLOTO-m” and “ZOLOTO” fall under the jurisdiction of same Central Excise Division, the department was fully aware about the use of brand name by both the parties and hence, there was no suppression of facts. Time-Barred Demand - Held that:- The demand had to be treated as time-barred inasmuch as the assessee had filed the declaration claiming the benefit of the Notification and mentioning the use of brand trade name Zoloto-M - The respondents have shown the fact of use of said brand name in their declaration as also the fact of availment of SSI exemption Notification - Having placed the entire facts before the Revenue, they cannot be held guilty of any suppression or mis-statement with intent to evade payment of duty - The appellate authority had rightly denied the extended period of limitation to the Revenue – Decided against the revenue.
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2013 (9) TMI 536
CENVAT credit - Burden to Prove - Angles, Channels, Plates, Sections, Beams, Flats, etc. - Revenue was of the view that the credit was wrongly taken as there was no evidence that the items had been used for manufacture of capital goods for use in the factory - Held that:- Held that:- Since the appellant had failed to discharge their onus the order was correct - By reading of the Explanation it was apparent that if the inputs have gone into manufacture of capital goods, then only they were eligible for Cenvat credit and such capital goods must be put to actual manufacture of final product - it was only within their knowledge as to how and in what manner these items were put in use - In the adjudication proceedings the appellant despite of the fact that they were given opportunity of hearing did not lead any evidence to indicate as to which items of structural steel plates, and in what quantity were used for fabrication of machinery - The Commissioner had no option but to hold that the appellant failed to discharge onus regarding use of items in question as inputs for manufacture of capital goods - Not only this admittedly the appellants in the ER-1 returns filed by them, did not declare the use of these items in manufacture of capital goods. The M.S. Angles, Channels, Plates, Sections, etc. were claimed to have been used for fabrication of various items of machinery for use in the factory, no evidence in support of this claim has been produced in spite of ample opportunities having been given to the appellants - neither the manufacture of any capital goods had been declared in ER-1 Returns nor any specific intimation had been given regarding use of the structural steel items in manufacture of capital goods - when the appellants had taken Cenvat credit in respect of items like M.S. Angles, Channels, Plates, Section etc. falling under Chapter 72 & 73 of Central Excise Tariff Act which were not covered under the definition of capital goods, Cenvat credit in respect of these items would be admissible as input only if there was evidence on record showing their use in the manufacture of capital goods for use in the factory the burden of producing evidence in this regard was on the appellant but the appellants had not discharged the burden of proof and that the Commissioner had rightly disallowed the Cenvat credit in respect of these items and there was no infirmity in the order - Decided against Assesses.
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