TMI Tax Updates - e-Newsletter
September 25, 2014
Case Laws in this Newsletter:
Income Tax
Central Excise
CST, VAT & Sales Tax
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (9) TMI 707
Interpretation of section 80-IB(10)(d) - Effect of amendment w.e.f. 01.04.2005 - Whether section 80-IB(10)(d) which was brought into force w.e.f. 1st April, 2005 would apply to projects that were approved by the local authority prior to it being brought on the statute book – Held that:- Requiring the Assessee to comply with the condition set out in clause (d) of sub-section (10) of section 80-IB merely because he has offered his profits to tax in A.Y. 2005-06 or thereafter, even though his housing project was approved before 31st March 2005, would be requiring the Assessee to virtually do a humanly impossible task – This could never have been the intention of the Legislature - clause (d) of sub-section (10) of section 80-IB cannot have any application to housing projects that are approved before 31st March, 2005 - clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the clause operates only prospectively i.e. for housing projects approved after 1st April, 2005 - section 80-IB(10)(d) is prospective in nature and can have no application to a housing project that is approved before 31st March, 2005 - clause (d) of section 80-IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/construction of the same, and has nothing to do with the profits derived therefrom - relying upon MANAN CORPORATION Versus ASSTT COMMISSIONER OF INCOME TAX [2012 (9) TMI 700 - Gujarat High Court] – Decided against revenue.
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2014 (9) TMI 706
Commission paid to non-resident for procuring export orders – Technical service or not u/s 9(i)(vii) - Whether the Tribunal was right in holding that the commission paid to M/s. Agenta World Trading and Consulting Establishment for procuring export orders, is not fee for technical services u/s 9(i)(vii) – Held that:- Commission paid for arranging of export sales and recovery of payments cannot be regarded as consultancy service rendered by the non-resident - The non-resident had not rendered any consultation or advice to the respondent-assessee - The non-resident no doubt had acquired skill and expertise in the field of marketing and sale of automobile products, the Tribunal and the CIT(A) had noticed that the non-resident did not act as a consultant, who advised or rendered any counseling services - The skill, business acumen and knowledge acquired by the non-resident were for his own benefit and use - The non-resident procured orders on the basis of the said knowledge, information and expertise to secure ‘their’ commission - There was no element of consultation or advise rendered by the non-resident to the respondent-assessee. The technical services consists of services of technical nature, when special skills or knowledge relating to technical field are required for their provision, managerial services are rendered for performing management functions and consultancy services relate to provision of advice by someone having special qualification that allow him to do so – these requisites and required necessities are not satisfied - Indeed, technical, managerial and consultancy services may overlap and it would not be proper to view them in water tight compartments – Decided against revenue.
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2014 (9) TMI 705
Deletion of penalty u/s 271(1)(c) – Concealment of income – Held that:- The AO was required to verify the books of accounts as is done in scrutiny cases - the order of the Tribunal is valid as it has been rightly held by them that the order passed by the AO is an ex parte order - CIT (A) has referred that the first service of notice by affixture cannot be held to be valid, but, he has not quashed the assessment on this ground - the details which have been provided clearly revealed that the source of the advance made by the assessee to its sister concerns is advance received against sale of land and thus investment made by the assessee with its sister concerns stands explained - No contrary evidence has been produced by the revenue to suggest that what has been held by CIT (A) is contrary to the facts – Decided against revenue
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2014 (9) TMI 704
Unexplained cash credits u/s 68 - Whether the Tribunal was right in deleting the addition u/s 68 by applying correct principles – Held that:- There is a big divergence on the aspect of PAN details, income tax returns, etc. as recorded and as per the findings recorded by CIT(A) and the Tribunal – relying upon Govindarajulu Mudaliar (A.) versus CIT [1958 (9) TMI 3 - SUPREME Court] - there were ample authorities for the proposition that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during an accounting year, the AO is entitled to draw inference that the receipts are of an assessable nature - Proof or evidence to show the circulation in money was clearly rejected in view of the statutory provision of Section 68 of the Act and on the question of doctrine of “source of source” or “origin of origin” - The onus to prove the three factum is on the assessee as the facts are within the assessee’s knowledge - Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up - These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive - Companies are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the companies - It is the persons behind the company who take the decisions, controls and manage them - The apparent, patent, and conspicuous facts were ignored by the first appellate authority and the Tribunal - section 68 of the Act was rightly invoked and is applicable – Decided in favour of revenue.
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2014 (9) TMI 703
Non-speaking order by Tribunal or not - Unexplained cash credits u/s 68 – Held that:- Section 68 empowers the AO to treat the income credited in the books of accounts of the assessee for any previous year if there is no plausible explanation by the assessee about the nature and source of such income or if the explanation given is not satisfactory - Once it is explained, it is for the AO to consider the same and form an opinion about the genuineness of the whole transactions - Such an opinion must be based on cogent evidence i.e. material produced by the assessee - insofar as the identity is concerned, the assessee could not produce the PAN Number of both the parties - The purpose for which the loans were taken, have not been spelt out by the assessee in his affidavit or otherwise - The Paying back of the so called loans by way of an Account payee cheque is not conclusive, more so, if the aspects narrated above, are considered cumulatively - The facts have to be seen in the context of Section 68 of the Act - Suffice to state, the identity of the parties have not been proved, their creditworthiness not established and genuineness of transactions not demonstrated - CIT(A) and the Tribunal have committed an error in not properly approaching the issue which fell for their consideration out of the findings rendered by the AO - they have committed substantial error of law in interfering with the order of the AO without any proper basis – thus, the order of the Tribunal is set aside and the matter is remitted back to the AO – Decided in favour of revenue.
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2014 (9) TMI 702
Interest on debentures - Whether the Tribunal is right in holding that interest on debentures will not form part of chargeable interest under the Interest Tax Act – Held that:- Following the decision in Commissioner of Income-Tax V. Sahara India Savings and Investment Corporation Ltd. [2009 (11) TMI 25 - SUPREME COURT OF INDIA] - the interest-tax is meant to be levied only on interest accruing on loans and advances but the Legislature has extended the meaning of the word "interest" to two other items, namely, commitment charges and discount on promissory notes and bills of exchange - interest on loans and advances will not cover u/s 2(7) interest on bonds and debentures bought by an assessee as and by way of "investment" - Even the exclusionary part of section 2(7) excludes only discount on treasury bills as well as interest under section 42(1B) of the Reserve Bank of India Act, 1934 – Decided against revenue. Addition of notional interest - Whether the Tribunal is right in holding that addition of notional interest are to be reckoned with for the purpose of calculating the chargeable interest under the Interest Tax Act – Held that:- CIT(A) has given a clear finding that notional interest can never be considered as part of chargeable interest - the notional interest brought to tax under Interest Tax Act has never been considered as part of interest accrued or arisen in the books of account, namely, profit and loss account and therefore, the question of adding notional interest was declined - The Tribunal has not gone into the issue at all – CIT(A) was correct in deleting the addition of notional interest - Revenue has not shown any provision whereby, notional interest can be included for the purpose of tax – Decided against revenue.
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2014 (9) TMI 701
Entitlement of deduction u/s 80HHC on export of zinc oxide - Whether there was any material before the Tribunal to hold that the assessee was entitled to deduction u/s 80HHC of the Income Tax Act, 1961, in respect of export of zinc oxide – Held that:- The export was made to a Hong Kong party whose name and details stand mentioned - The export proceeds were specified in U.S. Dollars - The Bank Realisation Certificate was filed and upon receipt converted into Indian Rupees - The paper-book has not been filed by the Revenue and no comment could be made on the contents of the documents and what was stated and apparent from them - the Tribunal has not considered their contention that Zinc Oxide is a mineral and therefore in terms of Sub-Section (2) to Section 80HHC of the Act, the export proceeds were not eligible – thus, the matter is to be remitted back to the Tribunal for consideration of the issue that whether the exported goods were a “mineral” and therefore, not eligible for deduction in view of Section 80HHC (2)(b)(ii) of the Act – Decided in favour of revenue.
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2014 (9) TMI 700
Leviability of penalty u/s 271(1)(c) - Concealment of income warranting levy of penalty or not – Held that:- Following the decision in Commissioner of Income Tax Versus M/s.Gem Granites [2013 (11) TMI 1375 - MADRAS HIGH COURT] - some details were furnished in the form of explanation by the legal representatives of the deceased assessee, but it has been found that except adverting to the letter of the legal heirs of N.R. Palanivel, there is no discussion whatsoever as to the nature of explanation offered by the assessee and his legal heirs - All the Authorities have cursorily dismissed the explanation - It is not as if the explanation was submitted without details - some records were filed along with letter dated 13.1.2009 - the assessee had given some explanation which would fall within the parameters of Explanation B to Section 271(1)(c) of the Income Tax Act. If the Authorities have considered these issues in detail, probably, there would have been no case for the assessee - reasonable explanation was offered by the assessee as to the fixed deposit prior to 31.3.2001 and the renewal of the fixed deposit with interest - He claimed it primarily as family income out of partition and agricultural income. The explanation made on the basis of Explanation B to Section 271(1)(c) of the Income Tax Act to some extent has been satisfied by the assessee and the legal heirs of the assessee - The details given by the legal representatives of the assessee along with the annexures have to be considered by the Authority before ever it proceeds to invoke Section 271(1)(c) - If the Authority still finds that the Explanation is not justified or reasonable, they are entitled to take a different view on the penalty proceedings - But when the assessee has given some reasonable explanation, it is incumbent on the part of the Authority to consider the same on its own merits before proceeding further - This exercise has not been done and the matter is to be remitted back to the AO for consideration of the explanation – Decided in favour of assessee.
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Central Excise
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2014 (9) TMI 717
Reversal of CENVAT Credit - Whether the removal of moulds and dies under Rule 57S(8) of the Rules without reversal of credit would be a violation as alleged by the Department - Held that:- Moulds and dies were supplied by the assessee to the job worker and the job worker used their own raw materials along with the moulds and dies supplied by the assessee in the manufacturing of parts according to the design and specification of the assessee. After the parts are so manufactured, central excise duty is paid on the value of raw material, the amortised value of moulds and dies and the job charges and thereafter, the goods are cleared to the assessee for use in the manufacture of washing machines. It is another matter that the assessee claims credit on the duty paid component of the manufactured parts supplied by the job worker. Ultimately, on the clearance of washing machine, duty is paid including all these values. Removal of moulds and dies without payment of duty is in relation to only moulds and dies and not with respect of any other capital goods. It does not impose any condition that the raw materials also should be supplied by the assessee along with the moulds and dies. So long as the permission is granted by the Commissioner for removal of moulds and dies without payment of duty to the job worker, the question of deeming it as an improper clearance does not arise. Decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in [1994 (7) TMI 157 - CEGAT, NEW DELHI] as had been already extracted supra, the emphasis laid by the Supreme Court is that the Explanation appended to notification on the expression 'job worker' is in relation to the said notification and not otherwise. It, therefore, means, that the term 'job worker' in respect of one notification and the term 'job worker' in relation to Rule 57S(8) should be understood in the context of the provisions of the Modvat Rules. The provisions of Rule 57S(8) clearly mandates that consequent on the permission of the competent authority, moulds and dies should be removed, without payment of duty, to 'job worker'. If such condition has been complied with by the assessee, the Department cannot import any other meaning to disentitle the assessee of the benefit that flow out of Rule 57S(8) of the Rules. When the Department having accepted the decision in the case of Monica Electronics vs Cce reported in [2000 (4) TMI 84 - CEGAT, NEW DELHI] without demur, in the present case, on the same set facts, they are not entitled to agitate the same issue with regard to the assessee's claim of removal of moulds and dies without payment of duty following the procedure prescribed under Rule 57S(8) of the Rules. as the issue on double Modvat benefit is concerned, the Revenue has not raised the issue before the first Appellate Authority or before the Tribunal - Decided against Revenue.
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2014 (9) TMI 716
Cenvat credit – 100% EOU - furnace oil used in production of steam/power supplied to EOU - whether a number of different plants manufacturing different excisable goods in the same premises would constitute one factory and the separate registration would not mean that they are different factories – Held that:- definition of factory under Section 2(e) of the Central Excise Act, 1944 and Inputs under Rule 2(k), factory includes more than one premises - To be eligible for CENVAT Credit, an assessee has to use the input in the manufacture of dutiable goods in his factory. If the factory includes more than one unit and if the assessee uses this input in the manufacturing of excisable goods in both the units, he would be entitled to CENVAT Credit. The term "within the factory of production" used in Rule 2(k) cannot be confined to a single unit - If the assessee owns more than one unit, all the units if they are situated at a place would constitute "a factory". The electricity or steam generated within the factory of production means within the factory premises which may include more than one unit. If such electricity or steam generated within the factory of production is utilized by the assessee in more than one unit and if those units are manufacturing excisable goods, then, the assessee would be entitled to the benefit of CENVAT credit to the entire extent of utilization of such electricity or steam in all the units of its factory premises. Therefore, whatever goes into generation of electricity or steam which is placed within the factory which may consists of more than one unit would be an input for the purposes of obtaining credit on the duty payable thereon - Decided against Revenue.
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2014 (9) TMI 715
Extension of stay order granted - Held that:- amendment, which came into effect from 10.5.13, by virtue of Section 98 of Finance Act, 2013 is only an extension of proviso 1 and 2 of sub-section (2A) of Section 35C. All that the 3rd proviso states is that where such appeal is not disposed of within the period specified in the first proviso, the Appellate Tribunal may, on an application made in this behalf by a party and on being satisfied that the delay in disposing of the appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit, not exceeding one hundred and eighty-five days, and it further states that if the appeal is not disposed of within the total period of three hundred and sixty-five days from the date of order referred to in the first proviso, the stay order referred to in the 1st proviso, viz., the order of stay shall, on the expiry of the said period, be vacated. Tribunal has considered the application filed by the respondent/assessee and has given a reason for grant of extension of interim order by holding that the Tribunal is granting the extension of interim order only on the ground that the Tribunal is unable to dispose of the appeal in time due to huge pendency of appeals before the Tribunal. When the appellate authority itself clearly concedes the fact that the delay is not on account of the respondent/assessee, the Tribunal has rightly relied upon the decision of the Supreme Court in Kumar Cotton Mills case (supra) and we find no reason to differ with the said stand taken by the Tribunal in granting extension of the interim order by relying on the said judgment. - No substantial question of law arises - Decided against Revenue.
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2014 (9) TMI 714
Levy of interest and penalty - Compounded levy scheme u/s 3A - payment of duty on the basis of Annual Capacity of Production (ACP) - Notification No. 48/97 CE(NT) dated 1.8.97 - Revenue Officials authority to levy penalty under the repealed provision - Held that:- Held that:- Amendment of notifications issued under Section 37 of Central Excise Act and validation of certain actions taken:- (1) The notifications of the Government of India, in the Ministry of Finance (Department of Revenue), numbers G.S.R.448 (E) dated the 1st August, 1997 G.S.R. 503 (E) dated the 30th August, 1997 and G.S.R.130(E) dated 10th March 1998, issued under Section 37 of the Central Excise Act, shall stand amended and shall be deemed to have been amended retrospectively in the manner as specified against each of them in column (3) of the Fourth Schedule, on and from the corresponding date mentioned in column (4) of that Schedule and accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or any authority, any action taken or anything done or purported to have been taken or done under the said notifications, shall be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done as if, the notifications as amended by this sub-section had been in force at all material times. For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force. Therefore, the contentions raised by the appellant is not sustainable and the case law referred by the appellant has been considered by the Division Bench. As far as the penalty is concerned, the Commissioner (appeals) has reduced the penalty and the Tribunal was right in upholding the order of the Commissioner (Appeals).
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2014 (9) TMI 713
Waiver of pre-deposit - Whether the Hon'ble CESTAT erred in granting waiver of pre-deposit of assessed demand in favour of the respondents during pendency of the appeal thereby extending the period of stay beyond 365 days ignoring the recent amendment to section 35-C of the Central Excise Act, 1944, made through enactment of Finance Bill, 2013 - Held that:- Tribunal has noted that a waiver of pre-deposit and unconditional stay on the realisation of the adjudicated liability was granted by the Tribunal since a prima facie case was found in favour of the assessee. The Tribunal has also observed that the appeal has not been disposed of only on account of the pendency of several older appeals and not on account of any delay on the part of the assessee - ends of justice would be met if the Tribunal is requested to dispose of the appeal expeditiously and preferably within a period of six months - waiver of pre-deposit will continue to remain valid for a period of six months - Following decision of Commissioner, Central Excise, Kanpur Vs. M/s J.P. Transformers [2013 (10) TMI 1194 - ALLAHABAD HIGH COURT] - Appeal disposed of.
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2014 (9) TMI 712
Concealment of facts - Customs & Central Excise Settlement Commission sent back the matter to Central Excise Officer - non-cooperation - Held that:- The relief to be granted by the Settlement Commission is in the form of immunity from prosecution. That, however, is a reward for the assessee being truthful. The relevant procedure mandates that it is only when the disclosure is complete and truthful in all respects, without any reservation, that the Settlement Commission can be expected to grant relief. If it finds that any information or fact that has bearing upon the assessment has been withheld from it, it can simply refrain from proceeding further, and drop the proceedings at that. In the instant case, the report submitted by the Commission as well as the facts referred to in para-4 of its order, the 2nd respondent has enlisted about 10 aspects, as regards which, information was withheld from it. On general conduct also, the Commission took note of the evidence and opined that the writ petitioner is not extending cooperation, meaning thereby that it has not placed the full and true facts before it. It must be said to the credit of the Commission that it had a clear comprehension of the contours of adjudication and took note of the relevant precedents on the subject. The contention of the petitioner that the settlement was not proceeded just by making an observation that the cooperation is not being extended; is not correct. - Substantial portion of the impugned order demonstrated the aspects on which the cooperation was not forthcoming. Further, it is not as if that the impugned order has taken away any accrued rights of the petitioner. Even at this stage, it can pursue the remedies that are provided for under law. The net result is that it cannot avail the benefits of immunity from prosecution - Decided against Assessee.
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2014 (9) TMI 711
Waiver of pre deposit - Cenvat credit - Cenvat credit which was available in the books of account of EOU was transferred into the books of account of DTA unit - Held that:- Prima facie, we are of the view that the applicant has made out a strong case for waiver of pre-deposit based on precedent decisions of the Tribunal as cited above. So pre-deposit of dues arising from the impugned order is waived for admission of appeal and there shall be no collection of such dues during the pendency of the appeal - Stay granted.
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2014 (9) TMI 710
Waiver of pre-deposit of duty - demand was raised on the scrap generated during the process - Held that:- There is no dispute that the process undertaken by the applicant would not amount to “manufacture”. It is also seen that in this context ld. consultant drew the attention of the Bench to Notification No. 59/95-C.E., dated 18-5-1995 wherein waste, scrap arising out during the process of manufacture of excisable goods would be exempted from payment of duty. However, this notification is in different context in so far as in the present case, the process would not amount to “manufacture”. We find that prima facie the decision of the original authority is more appropriate in the present case and therefore applicant made out prima facie case for waiver of entire amount of duty along with interest and penalty. Accordingly, we grant waiver of pre-deposit of entire amount of duty along with interest and penalty and stay its recovery during pendency of the appeal - Stay granted.
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2014 (9) TMI 709
Waiver of pre-deposit of duty - Valuation - inclusion of cost of such design work, free issue materials, as well as the establishment cost of the foreign representative rendering the services at the manufacturer’s site in the assessable value - Held that:- because of supply of drawing and design, and free issue materials along with other services, the assessable value cannot be determined under Section 4(1)(a) of the Central Excise Act, 1944. The assessable value was determined under Section 4(1)(b) read with Rule 6 of the Central Excise Valuation Rules, 2000. Prima facie, we do not find any infirmity in the Order of the ld. Adjudicating Authority, in computing the assessable value by including the free issue materials, drawing/design charges and other services and in confirming the duty on the differential value. Thus, the Applicant failed to make out a prima facie case for total waiver of pre-deposit of the dues adjudged. Consequently, we direct the Applicant to deposit 50% of the duty involved within a period of eight weeks from today and on deposit of the said amount, the balance dues adjudged would stand waived and its recovery stayed during the pendency of the Appeal - Partial stay granted.
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2014 (9) TMI 708
Clandestine removal of goods - Imposition of penalty - Held that:- Revenue’s sole reliance is on the commercial invoices raised by M/s. Dolsun Containers, without their being any other evidence to reflect upon unaccounted manufacture and clandestine clearance of the goods. The respondents have explained the reason for raising of such commercial invoices, which relates to previous clearances made under the cover of statutory Central Excise invoices. It is well settled that clandestine removal has to be proved by production of sufficient, positive and tangible evidence. There is virtually no evidence on record. As such, I am of the view that Commissioner (Appeals) has rightly accepted the stand of the respondents and has rightly dropped the demand. no reason to interfere in the impugned order of Commissioner (Appeals) - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (9) TMI 720
Maintainability of appeal - Alternative remedy - Challenge to revision petition - Held that:- In respect of notice issued to the petitioner, they sent reply on 27.03.2014 praying for three weeks time to submit their further reply and prayed for keeping the matter in abeyance and accordingly, it was considered and the petitioner was granted time upto 09.04.2014 and on that date, a representative of the petitioner appeared on 09.04.2014 and submitted a reply on 09.04.2014 and taking into consideration of the same, the impugned order came to be passed. Since the petitioner is having effective alternative remedy in the form of appeal before the above said Authority, this Court is of the view that these writ petitions cannot be entertained and therefore, the writ petitions are dismissed at the admission stage itself. However, this Court taking into consideration of the fact that the petitioner in these writ petitions are diligently prosecuting the writ petitions and that they should be given time to file appeal before the Appellate Authority, the petitioner in these writ petitions are granted time of two weeks from the date of receipt of a copy of this order to file appeals before the Appellate Authority - Decided against assessee.
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2014 (9) TMI 719
Restoration of the appeal - benefit under Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 - Held that:- Tribunal had initially thought it appropriate to direct the authorities to furnish a copy of the Verification Report as may be seen by its order dated 17.08.2010. However, this aspect appears to have completely escaped its attention when it proceeded to make ex-parte final order adverse to the appellant which proceeded on the assumption that the latter could not afford any explanation to the adverse report. In the first instance, such report was never made available to the appellant. In these circumstances, this Court is of the opinion that the impugned orders cannot be sustained - Matter remanded back - Decided partly in favour of assessee.
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2014 (9) TMI 718
Withdrawal of application - Whether, in the facts and under the circumstances of the case, the Gujarat Value Added Tax Tribunal was right in law and on facts in deciding the appeal on merits when the Deputy Commissioner (Appeals) had not decided the appeal on merits but dismissing it only for nonpayment of pre-deposit - Held that:- Appellant-Dealer, seeks permission to withdraw the present Tax Appeal with a liberty to approach the learned Tribunal by way of Rectification Application and to point out before the learned Tribunal that there was sufficient material / evidence on record to show that there was actual movement of goods on which Input Tax Credit was sought - when such an application is submitted pointing out the mistakes, if any, out of the material / evidence which are already on record with the Paper Book, same be considered by the learned Tribunal in accordance with law and on merits, as we have expressed no opinion on merits of the matter - withdraw of application allowed.
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