LATEST INCOME TAX, CENTRAL EXCISE COURT CASES (By.JAV & Associates, Chartered Accountants)
INCOME TAX - COURT CASES
FERROUS INFRASTRUCTURE PVT. LTD. & ANOTHER
V/s
DEPUTY COMMISSIONER OF INCOME TAX
DEPUTY COMMISSIONER OF INCOME TAX
(Delhi HC)
There are two points raised in the writ petition:
- The purported reasons for initiating reassessment proceedings had been recorded after the issuance of notice under Section 148 .
- The objections furnished by the petitioners to the Section 148 notice had not been disposed of by a separate speaking order prior to the reassessment order
COMMENTS:
In the above case, the Hon’ble Delhi High Court held that the reasons
have to be recorded prior to the issuance of notice under Section 148.
If they are not so recorded, then the notice under Section 148 and
proceedings pursuant thereto are without authority of law. In the
present case the reasons were recorded only after the notice under
Section 148 had been issued. Thus the notice under Section 148 would be
invalid and consequently all proceedings pursuant thereto would also be
vitiated. The Assessing Officer has to pass a speaking order disposing
of the objections “before proceeding with the assessment”. Since a
separate speaking order is not passed petitioner is liable to succeed.
[Decided in favour of assessee]
COMMISSIONER OF INCOME TAX
V/s
M. M. AQUA TECHNOLOGIES LTD
(Delhi HC)
The main issue that
arises here is: “Whether the funding of the interest amount by way of a
term loan amounts to actual payment as contemplated by Section 43B of
the Income-tax Act, 1961?”
COMMENTS:
In the above case, the Hon’ble Delhi High Court held that Explanation
3C to section 43B clearly states that deduction of any sum, being
interest payable under clause (d) of Section 43B of the Act shall be
allowed if such interest has been actually paid and any interest referred
to in that clause, which has been converted into a loan or borrowing,
shall not be deemed to have been actually paid. A similar matter was
decided by the Hon’ble Madras High Court in the case of Eicher Motors
Limited v. Commissioner of Income Tax to hold that in view of the
Explanation 3C appended to Section 43B with retrospective effect from
01.04.1989, conversion of interest amount into loan would not be deemed
to be regarded as actually paid amount within the meaning of Section 43B
of the Act. Thus, the assessee cannot claim deduction under Section 43B
of the Act. [Decided in favour of Revenue]
M/S. HOTEL ROOPA
V/s
COMMISSIONER OF INCOME TAX
(Karnataka HC)
The assessee is a partnership firm which is running boarding and lodging by name Hotel Roopa in Mangalore. Originally it consisted of four partners and on 06.10.2000, one more partner was inducted as a partner. On 20.10.2001, three partners retired from the partnership firm and the business was continued only with the remaining two partners. The assessee firm borrowed a sum of Rs. 75,00,000/- from the Bank for the purpose of settling the account to the retiring partners and the claim deducted of Rs. 5,04,803/- under Section 36(1)(iii) towards interest on the borrowal made to the Bank. The A.O. rejected the claim of the assessee on the ground that the borrowal has been made for the purpose of discharging the personal liability for the continuing partners of the firm and the payment made to the retiring partners has nothing to do with the business of the firm.
COMMENTS: In the above case, the Hon’ble Karnataka High Court held that the
outgoing partner or his estate is entitled at the option of himself or
his representatives to such share of the profits made since he ceased to
be a partner as may be attributable to the use of his share of the
property. The amount paid to the retiring partners is not a share of the
profit. Therefore, following the decision of the Hon’ble Supreme Court
in Madhav Prasad Jatia v. CIT U.P, the amount borrowed was not for the purpose of business. Hence the claim for deduction u/s 36(1)(iii) was not justified. [Decided against assessee]
THE
COMMISSIONER OF INCOME TAX, FARIDABAD
V/s
M/S CARRIER AIR CONDITIONING
AND REFRIGERATION (FORMERLY KNOWN AS AIRCON LIMITED)
(Punjab &
Haryana HC)
The assessee filed a return of income of 11,72,00,980/-. The revised return declared the same
income. The assessment was completed under section 143(3) at a total
income of Rs. 11,64,04,200/-. The assessee had debited an amount of Rs.
2,66,33,000/- on account of warranty expenses in the Profit and Loss
account. The assessee stated that the warranty costs were determined on
the basis of the past experience and are provided for in the year of
sale. This provision was increased from the previous year by an amount
of Rs. 60,25,000/-. The A.O. enquired why the warranty expenses to the
extent of Rs. 60,25,000/- should not be added back to the respondent’s
income.
COMMENTS: In the above case, the Hon’ble Punjab & Haryana High Court held
that the liability would be an accrued liability and would not convert
into a conditional one merely because the liability was to be discharged
at a future date. It was always open to the tax authorities concerned
to arrive at a proper estimate of the liability having regard to all the
circumstances of the case (As decided in Calcutta Co. Ltd. v. CIT by
the Hon’ble Supreme Court). Similar matter was decided by the Hon’ble
Supreme Court in Rotork Controls India P. Ltd. v. Commissioner of Income
Tax. Since the provision is based essentially on the respondent’s past
experience such a liability is to be treated in the present time and would not be contingent liability. [Decided in favour of assessee]
COMMISSIONER OF INCOME TAX
V/s
CO-OPERATIVE BANK OF RAJKOT LTD
(Gujarat HC)
The main question involved here is: “Whether on the facts and in the circumstances of the case, learned ITAT is justified in allowing Rs.68,25,000/- being amortization of premium paid on investments under "held to maturity category" holding that the same is revenue expenditure in nature?"
COMMENTS: In the above case, the Hon’ble Gujarat High Court held that an
identical question was answered in the case of Rajkot Dist. Coop. Bank
Ltd. and considering the paragraph (vii) of the CBDT Circular No.17 of
2008, assessee is entitled to the amortization of security premium. [Decided in favour of assessee]
PR COMMISSIONER OF INCOME TAX -3
V/s
FORTUNE TECHNOCOMPS (P) LTD
(DELHI HC)
The assessee used to deal with electronic articles. In the normal course of its business it used to procure unbranded electronic items and sell them. In the scrutiny assessment, the Assessing Officer added Rs. 3,62,49,274/- after rejecting the assessee's explanation with regard to the purchase made from nine named parties. It was held that these were bogus transactions and that the assessee could not report any satisfactory explanation. The AO was guided by the fact that the sellers/vendors of the items purchased by the assessee had not responded to notices under Section 131 and also relied upon the report of the Income Tax Inspector in that regard.
COMMENTS: In the above case, the Hon’ble Delhi Court held that the remand report obtained by the CIT(A) comprised Various materials including the PAN Number, TIN Number and assessment orders secured from the sales tax authorities. The genuineness of the underlined transactions claimed by the assessee, therefore, on having purchased goods from its vendors, could not be doubted. Thus, the disallowance on the part of the A.O. was wrongly made. [Decided against Revenue]
NAVIN KUMAR AGARWAL
V/s
COMMISSIONER OF INCOME TAX
(Calcutta HC)
A search u/s 132 of the Act was conducted on 8th December, 1999. The
restraint order imposed on 8th December, 1999 was vacated on 31st
January, 2000. The search party drew the panchnama dated 31st January,
2000 stating that the search commenced at 15:20 hours and was closed at
15:30 hours. The assessee claimed that the search was concluded on 8th
December, 1999 and that the search dated 31st January, 2000 was only for
the purpose of revocation of the restraint order dated 8th December,
1999 passed under Section 132 (3) of the Income-tax Act. The assessee
contended that the period of limitation has to be reckoned from the
search dated 8th December, 1999 and the period of limitation expired on
31st December, 2001, whereas the assessment order was passed on 31st
January, 2002 which is out of the prescribed period of limitation.
COMMENTS:
In the above case, the Hon’ble Calcutta High Court held that the search
ends and the period of limitation begins only on the drawing up of the
formal panchnama to record the ending of the search. The argument by the
assessee that the search is concluded on the date of the search itself
if nothing is seized thereafter is not acceptable. [Decided against
assessee]
CENTRAL EXCISE - COURT CASES
DELHI TRANSPORT CORPORATION
V/s
COMMISSIONER SERVICE TAX
(Delhi HC)
The assessee had entered into contracts with seven agencies
(contractors/advertisers) to provide taxable service by providing space
to such parties for display of advertisements on its buses, bus queue
shelters, time keeping booths and other properties. In the contract it
was provided that the responsibility to pay advertisement tax or any
other taxes imposed by any authority will be of the Advertisers.
Two
advertisers however failed to abide by the legal obligations as per the
contractual terms and did not deposit the service tax in spite of
contractual obligation. As a result, the assessee also did not pay the
service tax on the services rendered. SCNs were issued to the assessee
wherein interest and tax along with several penalties u/s 76, 77 and 78
were imposed.
COMMENTS: In
the above case, the Hon’ble Delhi High Court held it is clear that the
liability was avoided but not with intent to defraud or on account of
collusion or wilful misstatement or suppression of facts. It was also
held that since the services provided were taxable, the appellant was
liable to discharge the service tax liability. However there is no
malafide intent to suppress value of taxable services. Hence as per
provisions of section 80, penalty u/s 78 cannot be levied. [Decided
partly in favour of assessee]
COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, AURANGABAD
V/s
ENDURANCE TECHNOLOGY PVT LTD
(Bombay HC)
The main question that arises is whether the assessee is entitled to
avail the Cenvat credit on "management, maintenance or repair services"
provided on services provided to Windmills installed and situated away
from factory and factory premises which is used for generation of
electricity for manufacture of final product.
COMMENTS:
In the above case, the Hon’ble Bombay High Court held that management,
maintenance and repair of windmills installed by the respondents is
input service as defined by Rule 2(l). Rule 3 and 4 provide that any
input or capital goods received in the factory or any input service
received by manufacture of final product would be susceptible to CENVAT
credit. The rule does not say that input service received by a
manufacturer must be received at the factory premises. Following the
decision of Hon’ble Bombay High Court in the case of CCE V/s Ultratech
Cement Ltd (2010). Thus, the services used by the assessee were in
relation to manufacture of the final product and Cenvat credit could not
be denied. [Decided against Revenue]
SUN-AREA REAL ESTATE PVT LTD
V/s
COMMISSIONER OF SERVICE TAX, MUMBAI-I
(CESTAT Mumbai)
The appellant against export of service, received payment for the
services in Indian rupees from Deutsche Bank and FIRCs issued by the
bank has been produced before the lower authorities, whether in respect
of such remittance refund is admissible under Export of Service Rules,
2005. The second issue is whether the security services and air travel
services used by the appellant is an input service for providing output
service which were exported. The learned Commissioner (Appeals) held
that since the appellant has not received the service charges from
overseas entity in convertible foreign exchange whereas the payment was
received in Indian rupees, the condition of Rule 3(2) of Export of
Service Rules, 2005 was not complied with and accordingly the services
will not be treated as export of services. Therefore, the appellant is
not entitled for the refund.
In
the above case, the Hon’ble CESTAT Mumbai held that FIRCs were issued
and there is a specific certification that the payment has not been
received in non-convertible rupees. In other words it means that the
payment is in convertible foreign exchange. - out of the total payment
to be made by the insurance broker in India to the foreign insurer was
reduced to the extent of his brokerage
and remaining amount was remitted to foreign insurer in the foreign
exchange - when a foreign bank is maintaining Indian rupees in their
account obviously, such Indian rupees was obtained in lieu of foreign
exchange. Issue of admissibility as input service credit in respect of
security services was not raised in the show cause notice. Therefore,
denial of refund of Rs.7,747/- and Rs.1,051/- respectively is not
correct. - impugned order deserves to be modified inasmuch as the
impugned order in respect of Rs.1,64,081/- is upheld and the order
rejecting refund of an amount of Rs.10,98,077/- is set aside. [Decided
in favour of assessee]
SHRI NEERAJ SHARMA, CENCEPT ENGINEERS
V/s
COMMISSIONER OF CENTRAL EXCISE, MEERUT-I
(CESTAT New Delhi)
The appellant has contended that "vaastu advice does not fall in the
category of consulting engineer service as that is mythological in
nature and that vaastu concept is only a belief in Hinduism and some
people who have allegiance to the astrology like advice with regard to
vaastu" and that preparation of blue print is no where relating to
consultation as blue print of house is work of tracer and not of an
engineer. Preparation of project report, typing and binding also does
not fall in the consulting engineer. The Dept. argued that vaastu advice
falls under Consulting Engineer Service as it is related to
engineering.
COMMENTS:
In the above case, the Hon’ble CESTAT Mumbai held that it is nowhere
brought out in the order in appeal or in the order in original that Shri
Neeraj Sharma is a professionally qualified engineer. Further it is
also not brought out as to in which discipline(s) of engineering the
service has been rendered. Thus the Revenue has not been able to
discharge its obligation/onus to show that the
appellant
was professionally qualified engineer and also rendered any advice in
relation to any particular branch of engineering. [Decided in favour of
assessee]
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, NAGPUR
V/s
NOBLE GRAINS INDIA PVT LTD
(CESTAT MUMBAI)
The respondents are manufacturers of soya extraction meal holding
Central Excise registration and are also having service tax
registration. The respondent filed refund claims of service tax as per
the conditions of Notification No. 41/2007-ST dated 06/10/2007. The
refund claims which had been preferred by the assessee is in respect of
the service tax paid by the respondent assessee to service providers
like CHA, Cargo Handling Services, Port services, etc. which are in
respect of export of goods. The said refund claims were rejected by the
adjudicating authority.
COMMENTS:
In the above case, the Hon’ble CESTAT Mumbai held that the jurisdiction
for claiming the refund of service tax paid on such services which are
in connection with the export of goods cannot be shifted to their Indore
Commissionerate as the registered office of the respondent-assessee
being at Indore cannot be a reason for shifting the jurisdiction to
Indore. Since, the respondent is a manufacturer-exporter; the refund
claims have been correctly filed. [Decided against Revenue]
CCE, BANGALORE
V/s
M/S. VETCARE ORGANICS PVT LTD
(Supreme Court)
The issue relates to using of the brand name 'VETCARE' by the
respondent which, otherwise stands registered in the name of M/s
Tetragon Chemie (P) Ltd., Bangalore. The respondent claims itself to be a
Small Scale Industrial Unit (SSI) and is manufacturing organic
chemicals, disinfectants and other products. It claimed the benefit of
Notification No. 175/86 dated 01.03.1986 and 1/93 dated 01.03.1993 as
amended from time to time which provides for exemption from payment of
excise duty to the SSI unit.
COMMENTS:
In the above case the Hon’ble Supreme Court held that even if the goods
are different, so long as brand name or trade name of some other
Company is used, benefit of Notification 1/93 dated 01.03.1993 as
amended would not be available. The assessee cannot plead innocence
merely on the fact that the permission to use the brand name was granted
by Tetragon. The permission does not make the respondent owner of the
brand name. It is irrelevant whether the brand name is used in relation
to the same goods. The act of the assessee is therefore covered by the
mischief of Explanation VIII to the Notification No. 175/86 dated
1.3.1986. Thus, the assessee was denied SSI Exemption. Following the
decision by Hon’ble Supreme Court in the case of Commissioner of Central
Excise, Chandigarh-I Vs. Mahaan Dairies (2004). [Decided in favour of
Revenue]
KALI AERATED WATER WORK, SALEM
V/s
COMMNR. OF CENTRAL EXCISE, MADURAI
(Supreme Court)
The appellant herein is a SSI Unit and is manufacturing Aerated Water under various brand names using the trade mark with the “Kalimark” / M/s.Kali Aerated Water Works”. It sought exemption from payment of duty in terms of Notification 1/93-CE dated 28.2.1993 (as amended vide Notification No.59/94-CE dated 1.3.1994). This exemption has however been denied by the Dept. on the fact that the brand name belongs to a third party.
COMMENTS:
It was found that the business was started by a HUF which fell apart at
some time and this was later converted to a family business. It was
very much contained in the mutual agreement at the time of falling apart
from the family business that the trade name 'Kalimark Aerated Water
Works' and trade mark mentioned in the said agreement would remain
vested in all the parties including the appellant and that the appellant
was also allowed to use the same. The agreement also provides that no
payment of royalty or any other remuneration has to be made to any third
party. The Hon’ble Supreme Court therefore held that the appellant had
been correctly using its own brand name. Following the decision of
Hon’ble Supreme Court in the case of CCE, Hyderabad IV vs. Stangen
Immuno Diagnostics (2015) [Decided in favour of assessee]
COMMISSIONER OF CENTRAL EXCISE
V/s
M/S. AMRITLAL CHEMAUX LTD.
(Supreme Court)
The assessee is involved in repacking and / or labeling of various dyes
& dye bases, napthols & fast bases, and chrome pigments. The
question is as to whether the process undertaken by the assessee in
these products amounted to manufacture or not.
COMMENTS:
In the above case the Hon’ble Supreme Court held that as far as the
process of label or relabeling of containers is concerned, it would
amount to manufacture only if the other condition, viz., repacking from
bulk to retail pack is also satisfied. Here, it is clear that there was
repacking and even relabeling but the repacking of bulk was not into
retail packing as the goods after repacking were supplied to industrial
consumers on wholesale basis. Thus, the condition for repacking from
bulk to retail pack for the purpose of fulfilling the conditions for
manufacture is not
satisfied. [Decided against Revenue]
satisfied. [Decided against Revenue]
M/S. JITENDRA SYNTHETICS
V/S
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS
(Gujarat HC)
The appellant was engaged in the business of manufacturing goods like
synthetic filament yarn which are excisable goods. The appellant brought
and installed in its factory capital goods in the nature of texturing
machine on which excise duties to the tune of Rs.4,52,500/- were paid,
and therefore, the appellant took credit of the above amount of duty
paid on the texturizing machine under Rule 57Q of the Central Excise
Rules, 1944 which allowed the credit of duties paid on capital goods
while paying duties on the final products in relation to manufacture of
which the capital goods were used. The above machine was purchased and
brought in the factory during financial year 1994-95 and this
transaction was also reflected in the appellant’s statutory records. A
SCN was issued denying the modvat credit of Rs.4,52,500/- with penalty
of an equal amount.
COMMENTS: In the above case, the Hon’ble Gujarat High Court if the provision for imposing penalty was not in existence in December, 1994 when the contravention took place, then, there was no question of imposition of any penalty on the basis of the subsequent rule which was not in existence at the relevant time. The Hon’ble Supreme Court in Commissioner of Central Excise, Mumbai-I v. Lal Mining Engg.Works, reported in [2007] has held in para-3 that the penalty cannot be invoked in a case which was before the Apex Court as the same would amount to giving retrospective operation thereto which is impermissible in law. [Decided in favour of assessee]
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