.IT : Where assessee by mistake claimed interest received on Government of India Capital Index Bonds as interest received on tax free bonds, levy of penalty under section 271(1)(c) upon assessee was not justified
IT : Where assessee claimed premium received on redemption of debentures as income from capital gains, whereas Assessing Officer held that said premium was assessable to tax under head 'income from other sources' and also levied penalty under section 271(1)(c) upon assessee, since there was only a change of head of income, levy of penalty was not justified
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[2013] 33 taxmann.com 227 (Bombay)
HIGH COURT OF BOMBAY
Commissioner of Income-tax - I, Mumbai
v.
Bennett Coleman & Co. Ltd.*
J.P. DEVADHAR AND M.S. SANKLECHA, JJ.
IT APPEAL (LOD) NO. 2117 OF 2012
FEBRUARY 26, 2013
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Bona fide claim, disallowance of] - Assessment year 1999-2000 - Assessee claimed deduction of interest on tax free bonds - Assessing Officer asked assessee to give details of interest on tax free bonds - While preparing said details, assessee noticed that 6 per cent Government of India Capital Index Bonds purchased during year had been categorized as tax free bonds and, therefore, interest earned on such bonds had escaped tax - Thereupon Assessing Officer levied penalty under section 271(1)(c) upon assessee - Tribunal after recorded a finding of fact that there was an inadvertent mistake on part of assessee in claiming interest received on Government of India Capital Index Bonds as interest received on tax free bonds, deleted penalty levied upon assessee - Whether since it was not contended by revenue that above finding of fact by Tribunal was perverse, order of Tribunal deserved to be upheld - Held, yes [Para 2] [In favour of assessee]
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Bona fide claim, disallowance of] - Assessment year 1999-2000 - Assessee claimed premium received on redemption of debentures as income from capital gains - Assessing Officer held that said premium was assessable to tax under head 'income from other sources' - Thereupon he also levied penalty under section 271(1)(c) on assessee - Tribunal deleted penalty on plea that there was only a change of head of income by Assessing Officer and it was not case of department that assessee had concealed any particulars of income or furnished inaccurate particulars of income by stating incorrect facts - Whether Tribunal was justified in cancelling penalty levied upon assessee - Held, yes [Para 3] [In favour of assessee]
Suresh Kumar for the Appellant. Jas Sanghavi for the Respondent.
JUDGMENT
1. In this appeal by the revenue for the assessment year 1999-2000, following questions of law have been raised for our consideration :-
| (i) | Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in cancelling the penalty levied of Rs.26,25,000/- u/s.271(1)(c) in the light of decision of Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 in respect of addition of Rs.75,00,000/- on account of interest received on 6% Government of India Capital Index tax free bonds which was accepted by the assessee during the course of assessment proceedings vide reply dated 28/2/2002 and not offered voluntarily ? | |
| (ii) | Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in cancelling the penalty levied of Rs.35,64,000/- u/s.271(1)(c) in respect of addition made on account of treating premium received on redemption of debentures as income from other sources against claim of assessee as capital gain ? |
2. So far as question (i) is concerned, the respondent-assessee has claimed deduction of interest on tax free bonds of Rs.5,60,11,644/-. During the course of the assessment proceedings, the assessee was asked to give details of interest on tax free bonds. While preparing the said details, it was noticed that 6% Government of India Capital Index Bonds purchased during the year had inadvertently been categorized as tax free bonds and, therefore, interest of Rs.75,00,000/- earned on such bonds had also inadvertently escaped tax. The assessing officer levied penalty under Section 271(1)(c) of the Income Tax Act, 1961 (the Act). The CIT(A) upheld the order of the Assessing Officer. On further appeal, the Tribunal in the impugned order records a finding of fact that by inadvertent mistake interest @ 6% on the Government of India Capital Index Bonds was shown as tax free bonds. The Tribunal concluded that there was no desire on the part of the respondent-assessee to hide or conceal the income so as to avoid payment of tax on interest from the bonds. In that view of the matter, the Tribunal deleted the penalty imposed upon the respondent-assessee under Section 271(1)(c) of the Act. In view of the fact that the decision of the Tribunal is based on finding of fact that there was an inadvertent mistake on the part of the assessee in including the interest received of 6% on the Government of India Capital Index Bonds as interest received on tax free bonds. It is not contended by the Revenue that above finding of fact by the Tribunal is perverse. In these circumstances, we see no reason to entertain the proposed question (i).
3. So far as question (ii) is concerned, the respondent-assessee had claimed premium on redemption of debentures as income from capital gains. Whereas the assessing officer held that the redemption of debentures is revenue receipt assessable to tax under the head income from other sources. The CIT(A) confirmed the order of the assessing officer. The respondent-assessee did not file any further appeal on the quantum proceedings. Thereafter, the assessing officer levied penalty under Section 271(1)(c) of the Act on the respondent-assessee. The CIT(A) also confirmed the levy of penalty upon the respondent-assessee. On further appeal, the Tribunal held that there is no dispute with regard to the fact that the respondent-assessee had disclosed that the amount received as premium on redemption of debentures in its computation of income. Further, the Tribunal records that it is not the case of the department that the respondent-assessee had concealed any particulars of income or furnished inaccurate particulars of income by stating incorrect facts. The assessing officer considered the said premium received on redemption of debentures to be taxable under the head income from other sources while the respondent-assessee considered the same to be taxable under the head capital gains. In view of the fact that there is only a change of head of income and in the absence of any facts that the claim of the assessee was not bonafide, the Tribunal deleted the penalty imposed under Section 271(1)(c) of the Act. The revenue has not been able to point out that the finding of the Tribunal is perverse. In these circumstances, we see no reason to entertain the proposed question (ii).
4. Accordingly, the appeal is dismissed with no order as to costs.
ST : Utilising Cenvat credit in excess of limit fixed under rule 6 of CENVAT Credit Rules, 2004 would attract only interest liability; entire credit itself cannot be denied to assessee
ST : Break bulk fee and freight rebate are not, prima facie, liable to service tax under Custom House Agent's services and Business Auxiliary Services respectively
ST : Commission and incentive received from airlines for booking of cargo space is, prima facie, liable to service tax under Business Auxiliary services
ST : CCX fee received from foreign principal for purpose of delivering documents to customers in India, to collect and remit freight charges due to overseas company is liable to service tax under Business Auxiliary services
ST : Cenvat Credit cannot be denied for procedural violations
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[2013] 33 taxmann.com 337 (Mumbai - CESTAT)
CESTAT, MUMBAI BENCH
DHL Logistics (P.) Ltd.
v.
Commissioner of Central Excise, Thane - II*
P.R. CHANDRASEKHARAN, TECHNICAL MEMBER
AND ANIL CHOUDHARY, JUDICIAL MEMBER
AND ANIL CHOUDHARY, JUDICIAL MEMBER
ORDER NOS. S/259/2013/CSTB/C-I & A/324/2013/CSTB/C-I
APPLICATION NO. ST/STAY/2142 OF 2012
APPEAL NO. ST/623 OF 2012
APPLICATION NO. ST/STAY/2142 OF 2012
APPEAL NO. ST/623 OF 2012
FEBRUARY 6, 2013
I. Rule 6 of the Cenvat Credit Rules, 2004 - CENVAT Credit - Obligation of a manufacturer or producer of final products and a provider of output service - Period from April 2000 to March 2007 - Department denied credit on ground that assessee did not maintain separate accounts for input services used for taxable and exempted services and input service tax credit had been availed/utilised in excess of 20 per cent of credit taken in contravention of rule 6(3)(c) - HELD : Cap of 20 per cent was applicable on service tax payable and not on service tax credit actually availed - What was restricted was only utilisation of credit and not taking credit per se; credit taken could be carried forward - When cap was removed on 1-4-2008, assessee was eligible to utilise credit also - Further, utilising credit in excess of limit would attract only interest liability; entire service tax itself could not be denied to assessee - Hence, matter was remanded back to adjudicating authority to re-examine matter in light of CBEC circular dated 21-11-2008 [Para 5.1] [In favour of assessee]
II. Section 65(35), read with section 65(19) of the Finance Act, 1994 - Custom House Agent's Service - Department sought levy of service tax on break bulk fee and freight rebate under Custom House Agent's services and Business Auxiliary Services respectively - HELD : Said issue was considered in DHL Lemuir Logistics (P.) Ltd. v. CST [2012] 22 STT 100 (Mag.)/[2009] 22 STT 398 (Bang.-CESTAT), wherein it was held that activities relating to freight forwarding and charges collected such as charge collect fees, break bulk fees, profit share from margin, unallocated income, currency adjustment factor, air/sea freight rebate, air freight incentive, etc. could not be subject to service tax under category of Custom House Agent's services - Hence, matter was remanded back for re-examination by adjudicating authority in light of aforesaid judgment [Para 5.2] [In favour of assessee]
III. Section 65(19) of the Finance Act, 1994 - Business Auxiliary Services - Stay Order - Assessee received commission and incentive from airlines for booking of cargo space and collection of charges for cargo space under agency agreement - HELD : These services have been rendered by assessee to promote business of carriers (airlines) and, therefore, classification under 'Business Auxiliary Service' is prima facie sustainable - Pre-deposit was ordered and matter was remanded for adjudication afresh [Paras 5.3 and 6] [In favour of revenue]
IV. Section 65(19) of the Finance Act, 1994 - Business Auxiliary Services - Stay Order - Assessee charged CCX fee from foreign principal for purpose of delivering documents to customers in India, to collect freight charges due to overseas company and to remit amounts so collected to overseas company - HELD : Assessee's activities were clearly covered under 'Business Auxiliary Service' and, therefore, it was liable to discharge service tax liability on consideration received under said category - Pre-deposit was ordered and matter was remanded for adjudication afresh [Paras 5.4 and 6] [In favour of revenue]
V. Rule 3 of the Cenvat Credit Rules, 2004 - CENVAT Credit - General - Assessee argued that substantive benefit of Cenvat credit could not be denied for procedural violations - HELD : As regards this issue, it was to be examined whether lapses were procedural or not and whether it affected substantive benefit to assessee - Hence, matter was remanded back for adjudication afresh [Para 5.5] [Matter remanded]
Circulars and Notifications : Circular F. No. 137/72/2008/CX.4, dated 21-11-2008
CASES REFERRED TO
DHL Lemuir Logistics (P.) Ltd. v. CST [2012] 22 STT 100 (Mag.)/[2009] 22 STT 398 (Bang.-CESTAT) (para 3.2).
S. Thirumalai for the Appellant. K.L. Goyal for the Respondent.
ORDER
P.R. Chandrasekharan, Judicial Member - The appeal and stay application are directed against Order-in-Original No: 12/PKA/COMMR/Th-II/2012 dated 22/05/2012 passed by the Commissioner of Central Excise, Thane - II.
2. A service tax demand of Rs.6,68,65,392/- along with interest and penalties have been confirmed against the appellant in the impugned order. The break-up of the demands are as follows:
| S.No. | Nature of demand | Amount confirmed | Period of demand |
| 1. | Wrong CENVAT credit uitilisation under Rule 6 CENVAT Credit Rules, 2004 | Rs. 2,84,94,797/- | April 2006 to March 2007 |
| 2. | Service tax demand on break bulk fee | Rs. 1,60,38,452/- | April 2003 to March, 2007 |
| 3. | Freight rebate | Rs. 1,38,38,721 | July, 2003 to March, 2007 |
| 4. | Airline commission | Rs. 10,04,001/- | July, 2003 to March, 2007 |
| 5. | Airline Incentive | Rs. 23,02,462/- | July, 2003 to March, 2007 |
| 6. | CCX fee | Rs.38,48,221/- | July, 2003 to March, 2007 |
| 7. | Inadmissible CENVAT credit | Rs. 8,90,567/- |
2.1 As the regards the amount mentioned at serial No. 1, the grounds for denial of CENVAT credit is that the appellant did not maintain separate accounts for the input services used for taxable and exempted services and input service tax credit have been availed/utilised in excess of 20% of the credit taken in contravention of Rule 6(3)(c) of the CENVAT Credit Rules, 2004 and the demand under serial No. 7 has been made on the ground that the invoices bear a different name and address than that of the appellant. While the demand under SI. No. 2 has been confirmed under 'CHA Services', the demand under Sl. Nos. 3 to 6 have been confirmed under 'Business Auxiliary Service.'
3. The learned counsel for the appellant makes the following submissions:
3.1. As regards the CENVAT credit availed, the learned counsel submits that from the work orders available with them they can show that the credit has been availed only in respect of taxable services and not in respect of exempted services and, therefore, the provisions of Rule 6(3) will not come into operation. Secondly it is his contention that the 20% cap has to be computed on the total service tax payable during the period and not on 20% of the input services availed. He also submits that even if it is assumed that the utilization of the credit taken was wrong, it does not deny the admissibility of the credit which can be carried forward and w.e.f. 01/04/2008 the cap has been removed and the carried forward credit could have been utilised by the appellant. If there is any utilization before 01/04/2008, what can be demanded is only interest on the excess credit utilised and the entire credit cannot be denied. In this regard he relies on the clarification issued by the Central Board of Excise and Customs vide F.No . 137/72/2008/CX.4 dated 21/11/2008 where this issue has been clarified.
3.2. As regards the service tax demand on break bulk fee, it is his submission that the very same issue was considered by the Bangalore bench of the Tribunal in the appellant's own case in DHL Lemuir Logistics (P.) Ltd. v. CST [2012] 22 STT 100 (Mag.)/([2009] 22 STT 398 (Bang.-CESTAT)wherein it was held that activities relating to freight forwarding and the charges collected such as charge collect fees, break bulk fees, profit share from margin, unallocated income, currency adjustment factor, air/sea freight rebate, air freight incentive, etc. cannot be subject to service tax under the category of CHA service. The activity of freight forwarding is different and distinct from the activities of a CHA. In view of the above he submits that the demand of service tax on break bulk fee under the category of CHA service is not sustainable in law.
3.3 As regards the freight rebate on which service tax has been demanded under the category of 'Business Auxiliary service, he submits that this issue is also covered by the Tribunal decision in the assessee's own case cited supra and the freight rebate is a margin derived on principal-to-principal transaction basis. The freight forwarder purchases space in bulk from the carrier and sells the space to various consignors at a higher or lower rate. The difference between the buying rate and the selling rate is the margin and is referred to airfreight rebate. This rebate is not related to any service rendered but represents the profits from selling of cargo space. The department's argument is that as an IATA agent, the appellant is promoting the services of the carrier such as shipping lines or the airlines and the difference in the buying and selling rate is nothing but a consideration for the services rendered to the carrier. Inasmuch as there is a decision in favour of the appellant in the case cited supra, the demand is not sustainable.
3.4 As regards the airline commission, the commission is received from the airline for booking of cargo space and collection of charges for cargo space under the IATA agency agreement and the commission is received from the airline as a percentage of the freight amount charged. The appellant's contention is that they are not permoting or marketing the business of the appellants and, therefore, they do not come under the purview of the 'Business Auxiliary Service'.
3.5 Regarding the airline incentives, this incentive is given by the airline to the appellant for achieving agreed volume/target of cargo during a specific time and the incentive is given to promote the airline's business. The contention of the appellant is that the same cannot be considered as liable to service tax.
3.6 CCX fee: Service tax demand on this charge is made under the category of 'Business Auxiliary Service'. This fee is charged by the assessee from the foreign principal for the purpose of delivering the documents to the customers in India, to collect freight charges due to the overseas company and to remit the amounts so collected to the overseas company. The argument of the appellant is that these services are provided by freight forwarders and are not relatable to CHA operations and hence service tax demand is not sustainable.
3.7 As regards the demand towards inadmissible credit, these are only procedural violations and for the procedural violations the substantive benefit cannot be denied.
4. The learned Commissioner (AR) appeared for the Revenue and reiterates the findings of the adjudicating authority.
5. We have carefully considered the submissions made by both the sides.
5.1 As regards the denial of CENVAT credit to the extent of Rs. 2.85 crore, on the ground that the appellant did not maintain separate accounts towards utilization of credit in respect of both taxable and exempt services and also utilization of credit in excess of 20%, it is noted that the cap of 20% is applicable on the service tax payable and not on the service tax credit actually availed. What is restricted is only utilisation of the credit and not taking the credit per se; the credit taken could be carried forward. When the cap was removed on 01/04/2008, the appellant was eligible to utilise the credit also. In the present case what is involved is the utilisation of credit in excess of 20% of the tax payable during the impugned period which was permitted. Therefore, utilising the credit in excess of the limit would attract only interest liability. The entire service tax itself cannot be denied to the appellant. This position has been clarified by the CBEC vide a circular dated 21/11/2008 cited supra and the Ministry clarified as follows:
"Prior to 1.4.2008 [before the amendment in rule 6 (3)] the option available to the taxpayer, under rule 6(3), was that, he was allowed to utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. However, there was no restriction in taking CENVAT credit and also there was no provision about the periodic lapse of balance credit. This resulted in accumulation of credit in many cases.
W.e.f. 01.04.2008, under the amended rule 6(3), the following options are available to the taxpayers not maintaining separate accounts;"
| ** | ** | ** |
As stated earlier, many taxpayers had accumulated CENVAT credit balance as on 01.04.2008. The matter to be considered was whether this credit balance should be allowed to be utilized for payment of service tax after 01.04.2008.
As no lapsing provision was incorporated and that the existing Rule 6(3) of the CENVAT Credit Rules does not explicitly bar the utilization of the accumulated credit, the department should not deny the utilization of such accumulated CENVAT credit by the taxpayer after 01/04/2008. Further, it must be kept in mind that taking of credit and its utilization is a substantive right of a taxpayer under value added taxation scheme. Therefore, in the absence of a clear legal prohibition, this right cannot be denied."
In view of the above clarification given by the Board, recovery of the CENVAT credit wrongly taken cannot be sustained. What can be demanded is only interest on the wrongly availed credit from the date of utilisation of credit till 01/04/2008 when the assessee became entitled for the credit. Therefore, the adjudicating authority has to reexamine the matter in the light of the CBEC circular dated 21/11/2008.
5.2 Coming to the issue relating to break bulk fee and freight rebate, in view of the decision of this Tribunal in the appellant's own case cited supra, the matter needs re-examination by the adjudicating authority. If the facts are identical the benefit of the said decision cannot be denied by the adjudicating authority. Therefore, the matter needs to go back to the adjudicating authority to examine the issue in the light of the decision passed by this Tribunal in the appellant's own case.
5.3 As regards the demand on the airline commission and airline incentive received, the demand has been made under the category of 'Business Auxiliary Services. These services have been rendered by the appellant to promote the business of the carriers (airlines) and, therefore, the classification under 'Business Auxiliary Service' is prima facie sustainable and on the consideration received, the appellant is liable to discharge service tax liability.
5.4 With regard to the CCX fee, here also the demand has been made under 'Business Auxiliary Service' and the service has been rendered to the overseas companies by way of recovering amounts from the customers in India towards freight charges, to deliver documents such as delivery orders to the customers on behalf of the foreign principal and also to remit the amounts so collected to the overseas group company. These activities are clearly covered under 'Business Auxiliary Service' and, therefore, the appellant is liable to discharge service tax liability on the consideration received under the said category.
5.5 As regards the last issue regarding inadmissible credit, it should be examined whether the lapses are procedural or not and whether it affects the substantive benefit to the appellant.
6. In view of our above observation, the matter needs to go back to the adjudicating authority for reconsideration afresh in the light of the directions given above. However, since the appellant has been prima facie found liable to service tax in respect of airlines commission, airline incentive and CCX fee under the category of 'Business Auxiliary Service', we direct the appellant to make a pre-deposit of Rs. 71 lakhs within eight weeks towards service tax dues confirmed in this regard and report compliance before the adjudicating authority by 10/04/2013. On such compliance the adjudicating authority shall consider the matter afresh and pass a fresh order in accordance with law. Needless to say the appellant should be given a reasonable opportunity of being heard and for submitting all documentary evidence in support of their contention.
7. Thus the appeal is allowed by way of remand. Stay application is also disposed of.
2013-TIOL-465-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'D' AHMEDABAD
BENCH 'D' AHMEDABAD
ITA No.159/Ahd/2013
Assessment year 2009-10
Assessment year 2009-10
AHMEDABAD MANAGEMENT ASSOCIATION
C/o MUKESH M PATEL & CO,
3-4, VITHALBHAI BHAVAN,
NEAR S P COLONY RLY CROSSING, AHMEDABAD
PAN/GIR No: AAATA5881D
C/o MUKESH M PATEL & CO,
3-4, VITHALBHAI BHAVAN,
NEAR S P COLONY RLY CROSSING, AHMEDABAD
PAN/GIR No: AAATA5881D
Vs
JT DIT, (EXEMPTION), AHMEDABAD
D K Tyagi, JM And A K Garodia, AM
Dated: March 22, 2013
Appellant Rep by: Shri Mukesh M Patel, AR
Respondent Rep by: Shri T Shankar, Sr. DR
Respondent Rep by: Shri T Shankar, Sr. DR
Income Tax – Sections 2(15), 11 - Whether when an assessee is engaged in the activity of providing continuing education of diploma certificate programme, management development programme, public talk and seminars and workshop and conferences, it can be said as part of education which is included in Section 2(15) with the object of providing general public utility.
Assessee is a trust. During assessment, AO asked the assessee to file a note of activities of the trust and regarding the assessee's entitlement to exemption u/s 11 in view of the amended definition of Section 2(15). In reply, it was submitted that it had conducted various courses during the year and submitted a list of more than 800 programs conducted during the year and also submitted a detailed chart about expenses incurred in respect of each of suchprogramme, income earned there-from and resultant surplus or deficit. Thereafter AO had summarized such chart and bifurcated the same into 4 categories being (a) Continuing education Diploma & Certificate Programs, (b) Management Development Programs, (c) Public Talks & Seminars and (d) Workshops & Conferences. Out of the total receipt of Rs.411.91lacs, the receipt on account of first programme i.e. continuing education diploma & certificateprogramme, was to the extent of Rs.332.51 lacs and there was no receipt on account of public talk and seminars. Receipt on account of management development programme was of Rs.65.74 lacs and in respect of workshop and conferences Rs.13.66 lacs. The AO was of the opinion that on going through the nature of courses and duration, the resultant surplus for each activity, the activity of the assessee was not educational as defined by SC in the case of Sole Trustee, Loka Shikshana Trust Vs CIT (2002-TIOL-875-SC-IT-LB). By following thisjudgement of SC, it was held that the assessee's activities were not educational and since the receipts were more than Rs.10 lacs, the provisions of Section 2(15) were applicable and, therefore, the assessee was not entitled for exemption. AO refused to grant exemption to the assessee u/s 11 and assessed the income of the assessee at Rs.1,42,11,129/-. AO further made addition of Rs.26,38,500/- on account of voluntary contribution as corpus donation received by the assessee during the year on this basis and since the assessee was denied exemption, for corpus donation claim, the same was also to be added back. On appeal, CIT(A) had dismissed the assessee's contentions on the basis that the assessee had not appeared in spite of various opportunities and hence, held that the assessee had no evidence/submission to make with regard to the grounds of appeal raised. On this basis, CIT(A) had dismissed the appeal of the assessee.
Before Tribunal, AR had submitted that the object of the assessee society wa to make efforts towards the promotion and development of management in Gujarat, to promote education in practice of management and related subjects through meeting, discussion, lectures, research projects, seminars, conference, programmes of studies etc. It was submitted that it clearly showed that the entire activity of the assessee was only to promote education and therefore, the proviso to Section 2(15) was not applicable which was applicable only to those activities which were in relation to the object of general public utility and not the main three objects i.e. relief to poor, education and medical relief. It was also submitted that all through since the formation of the assessee in the year 1967, the assessee was granted exemption u/s 11. It was also submitted that when the facts were identical in the current year, AO was not justified in rejecting the claim of the assessee for exemption u/s 11. Regarding reliance placed by the AO on the judgement of SC rendered in the case of Sole Trustee, LokaShikshana Trust, it was submitted that this judgement was not applicable in the present case because it was explained by Gujarat HC in the case of Gujarat State Cooperative Union Vs CIT that the observation of the SC in the case of Sole Trustee, Loka Shikshana Trust were not intended to give a narrow or pedantic meaning to the word 'education'. It was also explained that Gujarat HC had observed that SC had indicated that the word 'education' was not used in a loose sense so as to include acquisition of every knowledge by way of traveling, being victim of swindlers and thieves etc. and it was intended to apply the word education to schools, colleges and similar institutions and excluding any other media for such acquisition of knowledge. On the other hand, DR had submitted that this matter should go back to the file of CIT(A) for afresh decision because due to non appearance of the assessee before him, no finding had been given by him and therefore, the matter should go back to his file.
Having heard the matter, Tribunal held that,
++ in the case of Sole Trustee, Loka Shikshana Trust, the observation of SC was that, the facts of that case were these that the assessee was engaged in publishing and selling activity of news papers and journals and it was the claim of the assessee that the assessee was educating the Kannad speaking people through news papers and journals. Under these facts, this observation was made by SC that the sense in which the word 'education' has been used in Section 2(15) is the systematic instructions, schooling and resulting given to the minds preparing for the work of life. It is also observed by SC that the word education has not been used in the wide and extended sense according to which every action of further knowledge constitute education. SC observed that according to this wide and extended sense, traveling is education, because as a result of traveling you acquire fresh knowledge but this is not the sense in which the word education is used in clause 15 of Section 2. It was also observed that the word education in that clause is referring to the process of training and developing the knowledge, skill, mind and character of students by normal schooling. While perusing this judgement of SC, HC in the case of Gujarat State Cooperative Ltd. has observed that the observation was not intended to keep out the meaning of the word 'education', persons other than young. Regarding the explanation of schooling, it was observed that this also means that schools instruct and educate.Therefore, the meaning of the word schooling, taken by Gujarat HC form the Oxford English dictionary Vol IX Page 217. Thereafter, it was observed by Gujarat HC that the observation of SC was not intended to give a narrow or pedantic sense to the word education. They had also observed that by giving further illustrations of a traveler gaining knowledge, being victim of swindler and thieves becoming wiser, visitor of night club adding to the knowledge of hidden mysteries of life, the SC had indicated that the word education is not used in a loose sense so as to include acquisition of such knowledge. In the present case, thus is not the objection of the revenue that the activity of the present assessee is like of an activity which are noted by Apex Court such as traveler gaining knowledge, victim of swindler and thieves becoming wiser and visitor of night club adding to the knowledge of hidden mysteries of life etc. It is also observed by Gujarat HC that the word school also means instruction or education. In the present case, this is not the case that by way of activity of the present assessee, the assessee is not engaged in the activity of instruction of education of the people/persons who are attending the programmes. In fact the assessee is granting diploma also and as has been noted by the A.O. himself in the assessment order, more than 80% of the receipts are on account of continuing education, diploma and certificate programmes. All the four activities noted by the A.O. on this page of the assessment order are not like those activities which were noted by SC to say that those activities cannot be covered by the term education in Section 2(15). In the light of the judgement of Gujarat High Court rendered in the case of Gujarat State Cooperative Union, where the Gujarat HC has explained the judgement of SC rendered in the case of Sole Trustee, Loka Shikshana Trust, we are of the considered opinion that in the facts of the present case, it cannot be said that the activities of the assessee is no in the field of education and, therefore, not eligible for exemption u/s 11;
++ we have found that the issue involved in the present case is squarely covered in favourof the assessee by the judgement of Gujarat High court cited by the A.R. having been rendered in the case of Gujarat State Cooperative union and the judgement of SC followed by the A.O. has been explained and considered by Gujarat High court in that case. Both thejudgements of Gujarat High Court cited by the D.R. are not rendering any help to the revenue in the present case and hence, by respectfully following the judgement of Gujarat high court in the case of Gujarat State Cooperative union, we decide the issue in dispute infavour of the assessee and we hold that the activities of the assessee are in the field of education and the assessee is eligible for exemption u/s 11(1) in the absence of any other objection of the A.O. in this regard. Regarding the addition made by the A.O. of Rs.26,38,500/- in respect of corpus donation, we would like to observe that this addition was made by the A.O. on this basis that allowance of exemption were denied and hence, corpus donation has to be added to the income of the assessee. Since, we have held that the assessee is eligible for exemption u/s 11, this addition also does not survive. In the result, appeal of the assessee is allowed.
Assessee's appeal allowed
Case followed:
Gujarat State Cooperative Union Vs CIT as reported in 195 ITR 279 (Guj.).
Cases distinguished:
CIT Vs Sorabji Nusserwanji Parekh as reported in 66 Taxman 411 (Guj.)
Saurashtra Education Foundation vs CIT as reported in 141 Taxman 26 (Guj.)
ORDER
A K Garodia:
This is assessee's appeal directed against the order of Ld. CIT(A) XXI, Ahmedabad dated 02.01.2013 for the assessment year 2009-10. The grounds raised by the assessee are as under:
"The appellant respectfully submits as under:1. That the learned CIT (Appeals) erred in law and on facts in dismissing the appeal of the appellant in an ex-parte manner, alleging that, "the appellant had been given opportunities on various dates but there has been no compliance at all."It is most respectfully submitted that this charge of the learned CIT (Appeals) against the appellant is clearly not justified, as duly highlighted in the letter dated 07/01/2013 addressed to him.2. That the learned CIT (Appeals) further erred in law and in facts in confirming the action of the learned A.O. in assessing the total income of the appellant at Rs.1,68,49,629 as against the returned income of Rs,62,523.3. That the learned CIT (Appeals) further erred in law and in facts in confirming the action of the learned A.O. in holding that the activities of the appellant were of a nature which could not be treated as a charitable purpose."
2. Brief facts of the case are that it is noted by the A.O. in the assessment order that the return of income declaring total income of R.62,523/- was filed by the assessee on 29.09.2009. In the course of scrutiny assessment proceeding, the A.O. asked the assessee to file a note of activities of the trust and regarding the assessee's entitlement to exemption u/s 11 of the Income tax Act, 1961 in view of the amended definition of Section 2(15). Reply was submitted by the assessee before the A.O. and the relevant portion has been reproduced by the A.O. in the assessment order. As per the reply, it was submitted by the assessee that the assessee has conducted various courses during the year under consideration and submitted a list of more than 800 programs conducted during the year and also submitted a detailed chart about expenses incurred in respect of each of such programme, income earned there-from and resultant surplus or deficit. This is also reproduced by the A.O. in the assessment order itself. Thereafter the A.O. has summarized such chart and bifurcated the same into 4 categories being (a) Continuing education Diploma & Certificate Programs, (b) Management Development Programs, (c) Public Talks & Seminars and (d) Workshops & Conferences. Out of the total receipt of the assessee of Rs.411.91 lacs, the receipt on account of first programme i.e. continuing education diploma & certificate programme, was to the extent of Rs.332.51 lacs and there was no receipt on account of public talk and seminars. Receipt on account of management development programme was of Rs.65.74 lacs and in respect of workshop and conferences Rs.13.66 lacs. The A.O. was of the opinion that on going through the nature of courses and duration, the resultant surplus for each activity, the activity of the assessee is not educational as defined by Hon'ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust Vs CIT as reported in 101 ITR 234 (S.C.) = (2002-TIOL-875-SC-IT-LB). By following this judgement of Hon'ble Apex Court, it was held by the A.O. that the assessee's activities are not educational and since the receipts are more than Rs.10 lacs, the provisions of Section 2(15) are applicable and, therefore, the assessee is not entitled for exemption. He refused to grant exemption to the assessee u/s 11 and assessed the income of the assessee at Rs.1,42,11,129/-. He further made addition of Rs.26,38,500/- on account of voluntary contribution as corpus donation received by the assessee during the year on this basis and since the assessee is denied exemption, for corpus donation claim, the same is also to be added back. Being aggrieved with the assessment order, the assessee carried the matter in appeal but the same was dismissed by Ld. CIT(A) on this basis that the assessee has not appeared in spite of various opportunities and hence, he held that the assessee has no evidence/submission to make with regard to the grounds of appeal raised. On this basis, he dismissed the appeal of the assessee and now, the assessee is in further appeal before us.
3. In the course of hearing before us, it was submitted by the Ld. A.R. that on pages 1-32 of the paper book is the copy of Memorandum and Rules & Regulations of the assessee society which was registered under the Societies Registration Ac 1860 and Bombay Public Trust Act 1950. He drawn our attention to clause (d) of the objects clause on page 3 of the paper book as per which one object of the assessee society is to make efforts towards the promotion and development of management in Gujarat, to promote education in practice of management and related subjects through meeting, discussion, lectures, research projects, seminars, conference, programmes of studies etc. He submitted that his goes to show that the entire activity of the assessee is only to promote education and therefore, the proviso to Section 2(15) is not applicable which is applicable only to those activities which are in relation to the object of general public utility and not the main three objects i.e. relief to poor, education and medical relief. He also submitted that all through since the formation of the assessee in the year 1967, the assessee was granted exemption u/s 11. He submitted that the copy of the assessment order in assessee's own case for various assessment years beginning from assessment years 1995-96 to 2008-09 are available on page 63-71 of the paper book. It was his submission that when the facts are identical in the current year, A.O. was not justified in rejecting the claim of the assessee for exemption u/s 11. Regarding reliance placed by the A.O. on the judgement of Hon'ble Apex Court rendered in the case of Sole Trustee, Loka Shikshana Trust (supra), it was submitted that this judgement is not applicable in the present case because it is explained by Hon'ble Gujarat High Court in the case of Gujarat State Cooperative Union Vs CIT as reported in 195 ITR 279 (Guj.) that the observation of the Hon'ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust (supra) were not intended to give a narrow or pedantic meaning to the word 'education'. It was also explained that Hon'ble Gujarat High Court has observed that Hon'ble Supreme Court has indicated that the word 'education' is not used in a loose sense so as to include acquisition of every knowledge by way of traveling, being victim of swindlers and thieves etc. and it is intended to apply the word education to schools, colleges and similar institutions and excluding any other media for such acquisition of knowledge. He also placed reliance on the tribunal decision rendered in the case of Sardar Patel Institute of Public Administration Vs JDIT (Exemption) in I.T.A.No. 2350/Ahd/2012 dated 04.01.2013 and he submitted a copy of this Tribunal decision. As against this, it was the first contention of the Ld. D.R. that this matter should go back to the file of Ld. CIT(A) for afresh decision because due to non appearance of the assessee before him, no finding has been given by him and therefore, the matter should go back to his file.
4. On merit, his submission was this that the issue in dispute in the present case is squarely covered against the assessee by the judgement of Hon'ble Apex Court rendered in the case of Sole Trustee, Loka Shikshana trust (supra). He also placed reliance on the judgement of Hon'ble Gujarat High Court rendered in the case of CIT Vs Sorabji Nusserwanji Parekh as reported in 66 Taxman 411 (Guj.) and Gujarat State Cooperative Union Vs CIT as reported in 195 ITR 279 (Guj.).
5. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgements cited by both the sides. Regarding the objection of the Ld. D.R. that the matter should go back to the file of Ld. CIT(A) for afresh decision because no decision has been given by him because of non appearance of the assessee before him, we are of the considered opinion that in the facts of the present case, the limited dispute is as to whether the activity of the assessee is in the field of education or not and the facts are not in dispute. Reliance has been placed by both the sides on several judgements of Hon'ble Apex Court as well as the jurisdictional High court and hence, we feel that sending the matter back to the file of Ld. CIT(A) will be a futile exercise and hence, we proceed to decide the appeal of the assessee on merit after considering the submissions of both sides.
6. We find that in the present case, the only dispute is that as to whether the activity of the assessee, which include continuing education of diploma certificate programme, management development programme, public talk and seminars and workshop and conferences can be said to be education which is included in Section 2(15) of the Income tax Act, 1961 or it can be covered in the 4th object of Section 2(15) i.e. the object of general public utility. In this regard, we find that the first judgement available is the judgement of Hon'ble Apex Court rendered in the case of Sole Trustee, Loka Shikshana Trust (supra). We also find that this judgement was explained by Hon'ble Gujarat high court in the case of Gujarat State Cooperative Union (supra). We also find that in the case of Sole Trustee, Loka Shikshana Trust (supra), the observation of Hon'ble Apex Court was this that the facts of that case were these that the assessee was engaged in publishing and selling activity of news papers and journals and it was the claim of the assessee that the assessee was educating the Kannad speaking people through news papers and journals. Under these facts, this observation was made by Hon'ble Apex Court that the sense in which the word 'education' has been used in Section 2(15) is the systematic instructions, schooling and resulting given to the minds preparing for the work of life. It is also observed by Hon'ble Apex Court that the word education has not been used in the wide and extended sense according to which every action of further knowledge constitute education. Hon'ble Apex Court observed that according to this wide and extended sense, traveling is education, because as a result of traveling you acquire fresh knowledge but this is not the sense in which the word education is used in clause 15 of Section 2. It was also observed that the word education in that clause is referring to the process of training and developing the knowledge, skill, mind and character of students by normal schooling. While perusing this judgement of Hon'ble Apex Court, Hon Gujarat High Court in the case of Gujarat State Cooperative Ltd. (supra) has observed that the observation was not intended to keep out the meaning of the word 'education', persons other than young. Regarding the explanation of schooling, it was observed that this also means that schools instruct and educate. Therefore, the meaning of the word schooling, taken by Hon'ble Gujarat High Court form the Oxford English dictionary Vol IX Page 217. Thereafter, it was observed by Hon'ble Gujarat High court that the observation of Hon'ble Apex Court was not intended to give a narrow or pedantic sense to the word education. They have also observed that by giving further illustrations of a traveler gaining knowledge, being victim of swindler and thieves becoming wiser, visitor of night club adding to the knowledge of hidden mysteries of life, the Hon'ble Supreme Court had indicated that the word education is not used in a loose sense so as to include acquisition of such knowledge. In the present case, thus is not the objection of the revenue that the activity of the present assessee is like of an activity which are noted by Hon'ble Apex Court such as traveler gaining knowledge, victim of swindler and thieves becoming wiser and visitor of night club adding to the knowledge of hidden mysteries of life etc. It is also observed by Hon'ble Gujarat High court that the word school also means instruction or education. In the present case, this is not the case that by way of activity of the present assessee, the assessee is not engaged in the activity of instruction of education of the people/persons who are attending the programmes. In fact the assessee is granting diploma also and as has been noted by the A.O. himself on page 11 of the assessment order, more than 80% of the receipts are on account of continuing education, diploma and certificate programmes. All the four activities noted by the A.O. on this page of the assessment order are not like those activities which were noted by Hon'ble Apex Court to say that those activities cannot be covered by the term education in Section 2(15). In the light of the judgement of Hon'ble Gujarat High Court rendered in he case of Gujarat State Cooperative Union (supra), where the Hon'ble Gujarat High Court has explained the judgement of Hon'ble Apex Court rendered in the case of Sole Trustee, Loka Shikshana Trust (supra), we are of the considered opinion that in the facts of the present case, it cannot be said that the activities of the assessee is no in the field of education and, therefore, not eligible for exemption u/s 11.
7. Now, we consider the applicability of the two judgements cited by Ld. D.R.:-
- The first judgement is the judgement of Hon'ble Gujarat High court rendered in the case of CIT Vs Sorabji Nusserwanji Parekh (supra). We find that in that case, this is the judgement of Hon'ble Gujarat High court that in the fact of that case, it can be said that the assessee was not an educational institution and thus, was not entitled to total exemption u/s 10(22) although its income would be exempt u/s 11(1) to the extent it would apply for its objects. There is a wide difference between the provision of Section 2(15) and 10(22) regarding the term education. In section 2(15), the term used is charitable purpose includes education whereas in Section 10(22), the term used is this that any income of a university or other educational institution listed/registered for education purpose and not for the purpose of profit. The facts of that case were that the society out of its income had given outright grant to some of the schools and under these facts, it was held by Hon'ble Gujarat High court that simply by giving grant to institution to enable them to pursue their educational activities without any control whatsoever on such students, an institution cannot be said to be educational institution. This goes to show that this judgement of Hon'ble Gujarat High Court is not applicable at all in the present case because the ratio laid down by Hon'ble Gujarat High court is this that in the facts of that case, the assessee was not considered as educational institution and it is not eligible for exemption u/s 10(22) although it was held that the income of the assessee would be exempt u/s 11(1) to the extent it was applied for its objects and, therefore, in the present case, this judgement is not of any help to the revenue because in the present case, the claim of the assessee is not this that the assessee is an educational institution and hence, eligible for exemption u/s 10(22) or 10(23)C. Because the claim of the assessee is regarding exemption u/s 11 and for this claim, it was held by Hon'ble Gujarat High court in that case also that the income would be exempt u/s 11(1) to the extent it would apply for its objects hence, in our considered opinion, this judgement is of no help to the revenue in the present case.- The 2nd judgement of Hon'ble Gujarat High Court on which reliance has been placed by Ld. D.R. is the judgement rendered in the case of Saurashtra Education Foundation vs CIT as reported in 141 Taxman 26 (Guj.). In that case, the assessee conducted various classes for students of class 10, 11 & 12th and for C.A. entrance examination. The assessee also held refresher courses for teachers teaching in various schools. The assessee also held lectures, meetings, exhibitions and relevant educational topics. In view of these activities, the assessee claimed exemption u/s 10(22) of the Income tax Act, 1961. The relevant para of this judgement of Hon'ble Gujarat High Court is para 8 which is reproduced below for the sake of ready reference:"It is significant to note that while a trust holding property for a charitable purpose of education as defined by section 2(75) may also be an educational institution existing solely for the purpose of education, the two institutions cannot be treated as belonging to the same class. An institution may be carrying on educational activities as are being carried on by the assessee herein without imparting formal education and without being affiliated to or accountable to any authority. Such a trust can certainly be considered as qualifying for exemption under section 11(1)(a) read with section 2(15), but the term 'the educational institution' contemplated by section 10(22) is a narrower concept. Though 'educational institution' and the educational activities are closely interconnected: in section 11(l)(a), read with section 2(15) it is the activities which are in focus, whereas in section 10(22) both the institution and the activities are in focus. An educational institution under section 10(22) is therefore, more than a body carrying on charitable activities in the field of education as contemplated by section 2(15 )."- From the above para of this judgement of Hon'ble Gujarat High Court, we find that it was held by Hon'ble Gujarat High court in that case that a trust who is carrying out educational activities without imparting formal education and was not affiliated to or accountable to any authority, can certainly be considered as qualifying for exemption u/s 11(1)(a) read with Section 2(15) but the term educational institution contemplated by Section 10(22) is a narrower concept. Thereafter, Hon'ble Gujarat High Court also considered the judgement of Hon'ble Apex Court rendered in the case of Sole Trustee, Loka Shikshna Trust (supra). Hon'ble Gujarat High Court has also considered its own earlier judgement rendered in the case of Gujarat State Cooperative Union (supra) and it was observed that in that case, the assessee was conducting employees' training and running four training centers which conduct special courses for employees and urban cooperative bank, district cooperative bank and also employers. The assessee also conducted cooperative education programmes, consumer education programmes, women cooperative education programmes, special training classes in the district under cooperative education and industrial projects and centers as mentioned in the list of its activities. It was further observed by Hon'ble Gujarat High Court that it was in the context of these activities, it was held in that case, that the assessee was existing for educational purpose. In our considered opinion, this judgement of Hon'ble Gujarat High Court cited by the Ld. D.R. is in fact supporting the case of he assessee and not the revenue. It was observed by Hon'ble Gujarat High court in that case that the as per the earlier judgement of the same court, it was held that education is not confined to teaching of young but the court did not draw away with the test of systematic instruction and training evolved by the Hon'ble Apex Court. In the present case also, the activity of the assessee fulfills the satisfaction of this test of systematic instruction and training evolved by Hon'ble Apex Court. It could not be established by the revenue that the programmes undertaken by the assessee were not involving systematic education or training and hence, we hold that in our considered opinion, this judgement of Hon'ble Gujarat High court is also not rendering any help to the revenue.
8. As per above discussion, we have found that the issue involved in the present case is squarely covered in favour of the assessee by the judgement of Hon'ble Gujarat High court cited by the Ld. A.R. having been rendered in the case of Gujarat State Cooperative union (supra) and the judgement of Hon'ble Apex Court followed by the A.O. has been explained and considered by Hon'ble Gujarat High court in that case. Both the judgements of Hon'ble Gujarat High Court cited by the Ld. D.R. are not rendering any help to the revenue in the present case and hence, by respectfully following the judgement of Hon'ble Gujarat high court in the case of Gujarat State Cooperative union (supra), we decide the issue in dispute in favour of the assessee and we hold that the activities of the assessee are in the field of education and the assessee is eligible for exemption u/s 11(1) in the absence of any other objection of the A.O. in this regard.
9. Regarding the addition made by the A.O. of Rs.26,38,500/- in respect of corpus donation, we would like to observe that this addition was made by the A.O. on this basis that allowance of exemption were denied and hence, corpus donation has to be added to the income of the assessee. Since, we have held that the assessee is eligible for exemption u/s 11, this addition also does not survive.
11. In the result, appeal of the assessee is allowed.
12. Order pronounced in the open court on the date mentioned hereinabove.
2013-TIOL-464-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'D' AHMEDABAD
BENCH 'D' AHMEDABAD
IT(SS)A No.298/Ahd/2012
Assessment Year: 2008-2009
Assessment Year: 2008-2009
ITA No.1323/Ahd/2012
Assessment Year: 2009-2010
Assessment Year: 2009-2010
CHIRAG HARMANBHAI PATEL (HUF)
3, JAPAN PARK SOCIETY
NEAR CHAITANY HARIVIHAR
BEHIND DENA PARIVAR
TOWN HALL ROAD, ANAND-388001
PAN NO:AACHC6712K
3, JAPAN PARK SOCIETY
NEAR CHAITANY HARIVIHAR
BEHIND DENA PARIVAR
TOWN HALL ROAD, ANAND-388001
PAN NO:AACHC6712K
Vs
DEPUTY COMMISSIONOER OF INCOME TAX
CIRCLE-1, BARODA
CIRCLE-1, BARODA
Mukul Kumar Shrawat, JM and A K Garodia, AM
Dated: April 26, 2013
Appellant Rep by: Shri Mukund Baxi, AR
Respondent Rep by: Shri T Sankar, Sr. DR
Respondent Rep by: Shri T Sankar, Sr. DR
Income Tax - Section 271(1)(c) - Whether penalty u/s 271(1)(c) is justified when regarding unsecured loan, the assessee has not even made an attempt to establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction and regarding unaccounted income the assessee has not declared the same for tax purpose.
The allegation of the A.O. in the penalty order was that the assessee was guilty of concealing the particulars of his income and also furnishing inaccurate particulars of his income. The CIT(A) confirmed the action of the A.O.
On Appeal before the Tribunal the AR submitted that the penalty order of both the appeals, it was observed by the A.O. that the assessee did not only conceal the particulars of its income but also furnished inaccurate particulars of such income, and therefore, the objection of the A.O. did not specify as to whether assessee has concealed the income or has furnished inaccurate particulars of income. The D.R. submitted that there cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and therefore, concealment of particulars of income and furnishing inaccurate particulars of income may at times overlap.
Having heard the parties, the Tribunal held that,
++ in the present case, the allegation of the A.O. in the penalty order is specific that assessee is guilty of concealing the particulars of his income and also furnishing inaccurate particulars of his income. Hence, as per the A.O., the assessee had committed both the defaults and such allegation of A.O. is specific and it cannot be said that the allegation of the A.O. is not specific;
++ regarding unsecured loan in both years, the assessee has not even made an attempt to fulfill the requirement of law by establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction. There is one more addition, i.e., regarding unaccounted income credited by the assessee and not declared the same for tax purpose and similarly the assessee had negative cash balance in A.Y 2008-09 shown under that head in Balance sheet without including the same in the income of the assessee. There is no explanation of the assessee as to how the penalty is not leviable;. Hence, Section 271(1)(c) is clearly applicable;
++ for the addition of Rs.458030 by invoking the provision of Section 41(1), we feel that in respect of this addition, the penalty is not justified because such liability is appearing in the balance sheet of the assessee and hence, it cannot be said that the liability has conclusively ceased to exist and hence although the addition is not in dispute but in these facts, it does not amount to concealment and hence, for this addition, penalty is not justified.
The allegation of the A.O. in the penalty order was that the assessee was guilty of concealing the particulars of his income and also furnishing inaccurate particulars of his income. The CIT(A) confirmed the action of the A.O.
On Appeal before the Tribunal the AR submitted that the penalty order of both the appeals, it was observed by the A.O. that the assessee did not only conceal the particulars of its income but also furnished inaccurate particulars of such income, and therefore, the objection of the A.O. did not specify as to whether assessee has concealed the income or has furnished inaccurate particulars of income. The D.R. submitted that there cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and therefore, concealment of particulars of income and furnishing inaccurate particulars of income may at times overlap.
Having heard the parties, the Tribunal held that,
++ in the present case, the allegation of the A.O. in the penalty order is specific that assessee is guilty of concealing the particulars of his income and also furnishing inaccurate particulars of his income. Hence, as per the A.O., the assessee had committed both the defaults and such allegation of A.O. is specific and it cannot be said that the allegation of the A.O. is not specific;
++ regarding unsecured loan in both years, the assessee has not even made an attempt to fulfill the requirement of law by establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction. There is one more addition, i.e., regarding unaccounted income credited by the assessee and not declared the same for tax purpose and similarly the assessee had negative cash balance in A.Y 2008-09 shown under that head in Balance sheet without including the same in the income of the assessee. There is no explanation of the assessee as to how the penalty is not leviable;. Hence, Section 271(1)(c) is clearly applicable;
++ for the addition of Rs.458030 by invoking the provision of Section 41(1), we feel that in respect of this addition, the penalty is not justified because such liability is appearing in the balance sheet of the assessee and hence, it cannot be said that the liability has conclusively ceased to exist and hence although the addition is not in dispute but in these facts, it does not amount to concealment and hence, for this addition, penalty is not justified.
Assessee's appeal partly allowed
Case followed:
K.M. Shah & Company Vs. CIT reported in (1999) 238 ITR 415.
K.M. Shah & Company Vs. CIT reported in (1999) 238 ITR 415.
ORDER
Per: A K Garodia:
Both the appeals are filed by the assessee and the same are directed against the combined order of learned CIT(A)-IV, Baroda, dated 30th March, 2012, for the assessment year 2008-09 and 2009-10.
2. In both the appeals, issue involved is regarding imposition of penalty under Section 271(1)(c) of the I.T. Act. Hence, both the appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
3. The grounds raised by the assessee for the assessment year 2008- 09 are as under:
1. The Ld. Commissioner of Income Tax (Appeals)-IV, Ahmedabad has erred in law and in facts in confirming the action of the Ld. A.O. in the levy of penalty u/s. 27(1)(c) in violation of law inasmuch as that the penalty levied is without specifying the charge of concealment of income or furnishing of inaccurate particulars. The penalty could not have been levied in such circumstances as held by the Hon'ble Gujarat High Court in the case of New Sorathia Engineering Co. Vs. CIT 282 ITR 642 and thus deserves to be quashed.2. Without prejudice to the above the Ld. Commissioner of Income Tax (Appeals)-IV, Ahmedabad has further erred in law and in facts in confirming the action of the Ld. A.O. in the levy of penalty u/s.27(1)(c) on the failure to:(a) Substantiate the credits in terms of Sec.68 of the I.T. Act amounting to Rs. 6,35,000/- is concealment of particulars of income and(b) Satisfactorily explain the source of investment of Rs.2,16,838/- is furnishing of inaccurate particulars of income.The penalty so confirmed on such additions is prayed to be cancelled".3. Your appellant craves liberty to add, alter, amend or substitute or withdraw any of the grounds of appeal hereinabove contained."
4. Similarly, the grounds raised by the assessee for the assessment year 2009-10 are also reproduced below:
"1. The Ld. Commissioner of Income Tax (Appeals)-IV, Ahmedabad has erred in law and in facts in confirming the action of the Ld. A.O. in the levy of penalty u/s. 27(1)(c) in violation of law inasmuch as that the penalty levied is without specifying the charge of concealment of income or furnishing of inaccurate particulars. The penalty could not have been levied in such circumstances as held by the Hon'ble Gujarat High Court in the case of New Sorathia Engineering Co. Vs. CIT 282 ITR 642 and thus deserves to be quashed.2. Without prejudice to the above the Ld. Commissioner of Income Tax (Appeals)-IV, Ahmedabad has further erred in law and in facts in confirming the action of the Ld. A.O. in the levy of penalty u/s.27(1)(c) on the failure to:(a) substantiate the credits in terms of Sec.68 of the I.T. Act amounting to Rs.7,01,000/- is concealment of particulars of income and(b) satisfactorily explain the source of investment of Rs.2,24,222/- is furnishing of inaccurate particulars of income.The penalty of Rs.2,00,000/- so confirmed on such additions is prayed to be cancelled".3. Your appellant craves liberty to add, alter, amend or substitute or withdraw any of the grounds of appeal hereinabove contained."
5. It was submitted by learned A.R. for the assessee that in paragraph no.9 and 10 of the penalty order of both the appeals, it is observed by the A.O. that the assessee did not only conceal the particulars of its income but also furnished inaccurate particulars of such income, and therefore, the objection of the A.O. did not specify as to whether assessee has concealed the income or has furnished inaccurate particulars of income, and therefore, the penalty order in both the years is bad in law as per the decision of Hon'ble Gujarat High Court rendered in the case of New Sorathia Engineer Co. Vs. CIT reported in (2006) 282 ITR 0642, and therefore, the same may be quashed in both the years.
6. In reply, learned D.R. for the revenue supported the order of authority below. It was submitted by learned D.R. that as per the judgment of Hon'ble Gujarat High Court rendered inK.M. Shah & Company Vs. CIT reported in (1999) 238 ITR 415, it was held by Hon'ble Gujarat High Court that there cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and therefore, concealment of particulars of income and furnishing inaccurate particulars of income may at times overlap. He further submitted that as per the judgment of Hon'ble Gujarat High Court when objection is about both the defaults, the penalty is justified and only when the A.O. is not specific as to whether the assessee is guilty of both defaults or any one particular default then only it can be said that the penalty order is defective.
7. Learned A.R. for the assessee has placed reliance on a tribunal decision in which the penalty proceedings were quashed by following the decision of Hon'ble Gujarat High Court rendered in the case of New Sorathia Engineer Co. Vs. CIT (supra) & CIT Vs. Manu Engineering Works reported in (1980) 122 ITR 306. He submitted the copy of five decisions passed by the tribunal in the paper book.
8. We have considered the rival submissions regarding the technical aspect and we find that in the present case, the allegation of the A.O. in the penalty order is specific that assessee is guilty of concealing the particulars of his income and also furnishing inaccurate particulars of his income. Hence, as per the A.O., the assessee had committed both the defaults and such allegation of A.O. is specific and it cannot be said that the allegation of the A.O. is not specific. Hence, in our considered view, we find that in the facts of the present case, this issue is covered in favour of the revenue and against the assessee by the judgment rendered in K.M. Shah (supra) and other two judgments of Hon'ble Gujarat High Court in case of New Sorathia Engineering Co. (supra) and Manu Engineering (supra) are not applicable in the present case. For the same reason, the Tribunal's decisions cited by the learned Counsel for the assessee and copy furnished in the paper book are also not applicable in the present case because the tribunal's decision has followed the judgment of Hon'ble Gujarat High Court rendered in the case of New Sorathia Engineer Co. (supra).
9. Now we should decide about the merit of the penalty in the present case. We find that the penalty has been levied in respect of unexplained cash credit from various persons. Learned A.R. for the assessee has placed reliance upon the tribunal's decision in the case of I.T.O. Vs. Chhail Behari reported in (2010)129 TTJ(Agra) 389. As against this, learned DR for the revenue has placed reliance upon the following judgments: (a) Snita Transport (P) Ltd., Tax Appeal No.474 of 2012 dated 11.12.2012 (copy filed), (b) CIT Vs. Becharbhai P. Parmar reported in 341 ITR 499 and (c) Charandas Haridas Vs. CIT reported in [1960] 39 ITR 202 (SC) (d) CIT Vs. Chandra Vilas Hotel reported in 291 ITR 202.
10. We have considered the rival submissions regarding merit of the penalty order and we find that it was held by the tribunal in the case of ITO Vs. Chhail Bihari (supra) that the difference between the two limbs of Section 271(1)(C) is not erased by the retrospective amendment. These two limbs are stated to be concealment of income and furnishing of inaccurate particulars of income. The tribunal in this case has simply followed the judgment of Hon'ble Gujarat High Court rendered in the case of New Sorathia Engineering Co. (supra). We have already discussed that the judgment of Hon'ble High Court in New Sorathia Engineering Co. (supra) is not applicable in this present case and therefore, the tribunal decision is also not applicable in the present case.
11. When we examine the assessment order, we find that it is noted by the A.O. in paragraph 4 of the assessment order that the assessee has shown unaccounted income of Rs.2,24,222/- in the profit & loss account. We further noted that the assessee had explained that he has reconciled the Auto Sweep Account in Kotak Mahindra Bank Ltd along with the bank statement and accordingly, excess credit appearing in the Auto Sweep Account with the Kotak Mahindra Bank Ltd., which represented the interest income credited by the bank in the past as well as for the year under consideration and therefore, the same is credited under the head "unaccounted income" because the assessee was not knowing as to which portion of this income is related to which year. In addition to this, there is one more addition in respect of unsecured loan received by the assessee from three persons in Assessment Year 2009-10 of Rs.7.01 lac. It is noted by the A.O. in the assessment order that the assessee was asked to establish the identity and creditworthiness of the three persons and genuineness of the transactions and despite several opportunities, the assessee has not furnished any material to substantiate his claim regarding the receipt of unsecured loan. Similarly, in Assessment Year 2008-09, it is noted by the A.O. that the assessee had received unsecured loan from four persons of Rs.6.35 lacs and despite several opportunities, the assessee had not furnished any material to substantiate his claim of the amount being received as loan in spite of this that the assessee was asked to establish the identity of the loan creditors and their creditworthiness and also genuineness of these transactions. In this year, the A.O. has made one more addition of Rs.2,16,838/- on account of negative cash balance. One more addition was made of Rs.4,58,030/- in respect of sundry creditors by invoking Section 41(1) of the I.T. Act, 1961.
12. In course of penalty proceedings, the assessee has raised objection on technical aspects as to whether the penalty proceedings is for the concealment of income or for furnishing of inaccurate particulars of income but no submission was made on the merit of the penalty. When we examine the fact of the present case, we find that regarding unsecured loan in both years, the assessee has not even made an attempt to fulfill the requirement of law by establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction. There is one more addition, i.e., regarding unaccounted income credited by the assessee and not declared the same for tax purpose and similarly the assessee had negative cash balance in Assessment Year 2008-09 shown under that head in Balance sheet without including the same in the income of the assessee. There is no explanation of the assessee as to how the penalty is not leviable and there is a clear cut case of concealment of income as well as furnishing of inaccurate particulars of income. As per explanation 1 to Section 271(1), if the explanation is given, which is not found to be false and some other conditions are fulfilled by the assessee, it can be said that 271(1)(c) is not applicable. In the present case even no explanation is given by the assessee. Hence, Section 271(1)(c) is clearly applicable.
13. However, for the addition of Rs.458030 made by the A.O. in A.Y. 2008-2009 by invoking the provision of Section 41(1) of the I.T. Act, we feel that in respect of this addition, the penalty is not justified because such liability is appearing in the balance sheet of the assessee and hence, it cannot be said that the liability has conclusively ceased to exist and hence although the addition is not in dispute but in these facts, it does not amount to concealment and hence, for this addition, penalty is not justified. We, therefore, delete the penalty in A.Y. 2008-09 in respect of this addition of Rs.4,58,030/- made by the A.O. by invoking the provision of Section 41(1) of the IT Act but the balance penalty in both years is upheld.
14. In the result, the appeal of the assessee for the A.Y. 2008-09 is partly allowed whereas appeal of the assessee for the A.Y.2009-10 is dismissed.
1. When there is a cloud in the documents produced, the Tribunal's right in refusing to accept the same – Needless to say any that any statement made must be supported by materials – Madras High Court
1) Facts
A car was purchased by the Respondent No. 1 from M/s. Afghan Motor Co., Sharjah (U.A.E) and imported into India by filing a Bill of Entry along with documents pertaining to the said car including a Purchase Receipt dated 12-11-1995 issued in his own name. On specific intelligence that the said car was imported using false documents and was being used by one Mr. Abdul Razak, the DRI, Calicut summoned him for further investigations. Mr. Razak in his statement dated 22-2-2000 made before DRI deposed that he had purchased the said vehicle through the Respondent No.1 for which a receipt dated 18-11-97 was issued in his favour. However, the said statement was retracted by Mr. Razak on the very next day, by issuing a letter wherein he stated that said car which was purchased by the Respondent No.1 by the said receipt dated 12-11-95 and that the Receipt dated 18-11-1997 was not connected with the original purchase of the said car made by the Respondent No.1. However, Mr. Razak vide his statement dated 8-6-2000 deposed that his earlier statement dated 22-2-2000 was correct and retracted statement given by him on 23-2-2000. On adjudication, the said car was held liable to confiscation and redemption fine as also penalty was imposed on the Respondent No. 1. The adjudication order was however set aside by the CESTAT against which the revenue was in appeal before the Hon'ble High Court.
2) Issue
When the statement of Abdul Razak given in response to the summons issued is admissible in evidence, has not the Tribunal committed an error of law in ignoring that statement, while deciding the issue in Question?
3) Held
(Commissioner of Customs (Imports), Custom House, Chennai-I v. (i)Shri Sainul Abideen Neelam P B No 28341, Abu Dhabi, UAE (ii) CESTAT, South Zonal Bench, Shashtri Bhavan Annexe 1st Floor, 26, Haddows Road, Chennai-6, 2013-TIOL-213-HC-MAD-CUS)
2. Petitioner (DRI) instead of supplying the copies of the documents to the Respondents and giving them an opportunity of fair trial and expediting the case - approached the HC seeking to invoke its inherent powers u/s. 482 of the CrPC to keep away the documents from the Respondents which are the very basis of the Complaint – filing of petition appears to be mala fide, hence dismissed: Delhi High Court
1) Facts
A prosecution under Section 132 and 135(1)(a) of the Customs Act, 1962 was launched by the Petitioner (DRI) against the Respondent before the Ld. Additional Chief Metropolitan Magistrate (A.C.M.M.) in connection with the evasion of the custom duty. When the case was fixed for recording the Petitioner's evidence, the Ld. A.C.M.M., at the request of the Respondent, directed the Petitioner vide its order dated 20-1-2010 to make available to the Respondents the copies of the documents which were the very basis of the said prosecution proceedings. Agreed by the said order dated 20-1-2010, the Petitioner sought to invoke the inherent powers of the Hon'ble High Court u/s. 482 of the Code of Criminal Procedure for setting aside of the said order dated 20-1-2010 passed by the A.C.M.M.
2) Issue
Whether the Petitioner instead of supplying the copies of documents to the Respondents and giving them an opportunity of fair trial ought to have approached this Court invoking its inherent powers u/s. 482 of the Code to keep away the documents from the Respondents which are the very basis of the complaint?
3) Held
In order to have a fair trial & to have its case expedited, the Petitioner (DRI) ought to have supplied the Respondents with the copies of the documents promptly so that the trial could have proceeded. The Petitioner was unable to make out a case for invoking the powers u/s. 482 of the Code. It was further held that the filing of the Petition appeared to be mala fide and the same was accordingly to be dismissed.(DRI v. Bhanu Chandra & ANR; 2013-TIOL-221-HC-DEL-CUS)
3. Central Excise – Valuation - Physical samples cleared free of cost are to be assessed based on MRP value less abatement – Physical samples manufactured on job work and cleared to principal manufacture are to be assessed based on the transaction value
1) Facts
The Appellants were manufacturing P&P medicaments for their own consumption as well as on job work basis. The Appellants were clearing the physician samples on free of cost on which they were discharging the duty liability on transaction value of identical goods. They were also clearing the physician samples to their principal manufactures and duty on the same was also being paid on the transaction value.
2) Issue
3) Held
4. Central Excise – Stay – Pre-deposit – Commissioner (Appeals) to show that he has at least prima facie considered the submissions of the parties.
1) Facts
The Petitioner had sold its finished products to M/s. Oil India Ltd and cleared the same at Nil rate of duty by claiming the benefit of exemption Notf No.6/2006 dtd 1.3.2006. However, a SCN was issued to it proposing to deny the said exemption claimed by the Petitioner and thereby demanding the Excise duty payable thereon. On adjudication of the said SCN, the said demand was confirmed against the Petitioner along with interest and equivalent penalty. Aggrieved by the said Adjudication Order, the Petitioner preferred an Appeal along with the Stay application before the Commissioner (Appeals). In the said Stay Application the Appellant had contended that the impugned clearances made by it were eligible for exemption from payment of Excise duty under Notf. No.21/02-CUS dtd 1.3.2002 and therefore it had a strong prima facie case for dispensing with pre-deposit of duty and penalty. The Commissioner (Appeals) disposed of the said Stay Application merely by stating that the Petitioner had not made out any prima facie case for waiver of the said pre-deposits and thereby directed the Petitioner to pre-deposit an amount equivalent to 50% of the duty and penalty. While passing the said stay order, the Commissioner did not express any view on the contentions raised by the Petitioner in support of its Stay Application. Aggrieved by the said Stay order passed by the Commissioner (Appeals) the Petitioner had approached the Hon'ble High Court.
2) Held
The Hon'ble High Court held that at the time of disposing the stay application, the Commissioner (Appeals) is not required to consider all the submissions made by the parties in depth. However, as Commissioner (Appeals) would be exercising a quasi-judicial function while directing the Petitioner to deposit or not deposit any amount for the purposes of entertaining the Petitioner's Appeal on merit, the same is required to be exercised by showing that he has at least prima facie considered the submissions of the parties before him. A strong prima facie case may at times constitute sufficient reason for dispensing with pre deposit of any amount for the purpose of entertaining the appeal on merits.(M/s A Plus Projects Technology Pvt. Ltd. v. Union of India & ANR, 2013-TIOL-10-HC-MUM-CX)
5. Refund – Not disputed that the Appellant had paid the amount during the course of investigation but there was no adjudication order and no confirmation of demandagainst the Appellant as on the date of hearing of the Appeal – In such circumstances, order rejecting refund as pre-mature was set aside and appeal allowed with consequential relief-refund to be granted within 30 days: CESTAT
1) Facts
Appellant had imported SAP software from SAP AG, a German corporation. During the course of investigation by the DRI, Bangalore, one of the officials of the appellant admitted the undervaluation of software. Pursuant to enquiry, the appellant paid the amount of duty and interest without prejudice to their contention in Dec, 2008. A SCN dated 31-8-2009 was issued to the Appellant and adjudication of the same was still pending. As adjudication was pending, the Appellant filed a refund claim of the amount deposited on 9-6-2009
2) Issue
Whether the claim of the Appellant could have been rejected on the premise that the same was pre-mature?
3) Held
It was not disputed that the appellant had paid the amount during the course of investigation and that there was no adjudication order and no confirmation of demand as on the date of the appeal against the appellant. The impugned order was set aside and the appeal was allowed with consequential relief. The adjudicating authority was directed to expedite the case and sanction the refund within 30 days of receipt of the order.(M/s. Raymond Ltd v. Commissioner of Customs (Airport), Mumbai, 203-TIOL-182-CESTAT-MUM)
A] Classification of Service
Air Travel Agent's Service
- The assessee, collected levies and charges imposed by authorities but did not pay any tax thereon. The Hon'ble Tribunal held that impugned charges and fees form part of gross amount of air tickets and there is no provision to exclude such charges from taxable value. Rule 5(1) of Valuation Rules, 2006 clearly states that any expenditure or cost incurred by service provider in providing taxable service to be treated as consideration for taxable service. It further held that service provider was required to make tax payment on taxable service provided on or after 1-5-2006, when it was made taxable. Since at time of journey, levy of Service tax was in force, tax was payable on tickets sold prior to impugned date.
British Airways PLC v. CST (2013) 29 STR 177 (Tri.-Del)
Business Auxiliary Services
- The assessee, engaged in providing renting of immovable property and export of customised software appointed Syntel Inc., USA as its agent for identifying customers overseas. The assessee paid commission to Syntel Inc., USA and discharged service tax liability under the category of "Business Auxiliary Services". As the assessee was unable to utilise the total credit, it filed refund claim of unutilised CENVAT credit under Rule 5 of CCR, 2004. The assessee's claim was rejected on the grounds that no proof was submitted proving the nexus of business auxiliary services to the output services. The Hon'ble Tribunal on perusal of the Business Associates Agreement between Syntel International Pvt. Ltd. and Syntel Inc., USA, held that the services were in the nature of sales promotion and thus covered under "business auxiliary services", a valid input service and hence eligible of refund. It further observed that the department had allowed subsequent refund claim and hence the above refund was also to be allowed.
Syntel International Pvt. Ltd. v. CCE, Pune [2013-TIOl-224-CESTAT-Mum]
Commercial Training and Coaching
- The Hon'ble Tribunal held that the explanation added w.e.f. 1-7-2010 in clause 65(105)(zzzh) of Finance Act, 1994 which sought to tax sale of under construction flats is not retrospective in nature.
CCE v. Amar Nath Aggarwal Builders P. Ltd. (2012) 28 STR 364 (Tri.-Del.)
- The assessee providing Commercial Training and Coaching services recovered the cost of books purchased from another company and supplied to the students in addition to the coaching fee. The Hon'ble Tribunal held that the cost of such books was excludible from the taxable value on the basis of Notification No. 12/2003-ST dated 20-6-2003 which seeks to exempt value of goods/material sold during the course of provision of taxable service. It also held that the exemption cannot be restricted only to 'standard textbooks' as was clarified by CBEC in Circular No. 59/8/2003 dated 20-6-2003 since the notification has not used expression "standard textbooks".
Chate Coaching Classes Pvt. Ltd. v. CCE (2013) 29 S.T.R. 138 (Tri.-Mum)
Cargo Handling Agency Services
- The Hon'ble Tribunal held that the income from sale of abandoned cargo (after meeting all expenses of sale, etc.) received by a container freight station would not be liable for service tax under the category of Cargo handling/ storage and warehousing services.
Maersk India Pvt. Ltd. v. CST (2013) 29 S.T.R. 170 (Tri-Mum)
- The Hon'ble High Court observed that 'Palletising' cargo i.e. packing of cargo on a wooden platform (pallet), which could be lifted and loaded to the container by using forklift, crane, etc., is classifiable as "cargo handling service" under Section 65(23) and not as "packaging service" under Section 65(76b) since 'packaging' covered under Section 65(76b) is basic packing of products either in the course of manufacturing or subsequent to manufacturing for marketing and 'packing' covered by the broad definition of "cargo handling service" is the group packing of cargo for easy handling. Since cargo, in the present case being export cargo, it would not be liable for service tax since export cargo handling is excluded u/s. 65(23)(b). It also observed that the conclusion was in line with the object and purpose of granting service tax exemption for handling of export cargo viz., the reduction of cost to exporters thereby making the Indian goods competitive in the international markets.
Beena Pradeep v. Government of India (2013) 29 STR 225 (Ker)
- In this case it was held that transportation of household articles is not to be equated with cargo or goods handling. Cargo itself suggests handling of cargo in bulk and goods suggest some goods/items in commercial quantity. The household items cannot be equated with bulk cargo or goods and thus could not be brought to tax under Cargo Handling Service.
In Re: Freight Systems (India) Private Limited (2012) 28 STR 521(Commr. Appl.)
- The Hon'ble Tribunal case held that loading, unloading, transportation and stacking of various iron and steel products within stockyard of M/s. SAIL cannot be held to be covered by the activity of Cargo Handling Service.
LA. Dhas v. CCE, Raipur (2012) 28 STR 630 (Tri.-Del.)
Clearing and Forwarding Services
- Where on facts, the High Court found that the assessee as per an agreement with the manufacturer/vendor purchased goods at a discount and sold them on his own account although at prices decided by the manufacturer/ vendor, the nature of activities performed by the assessee would not amount to providing 'clearing and forwarding services' to the manufacturer/vendor.
CCE&C v. Trade Tek Corporation (2013) 29 STR 23 (Guj.)
Construction of complex services
- The Hon'ble Tribunal held that construction of 15 independent residential units in a compound would not amount to construction of a residential complex i.e. construction of building / buildings with more than 12 residential units and hence no service tax would be payable on such construction services under the category of 'Construction of Complex Services'.
A. S. Sikarwar v. CCE (2012) 28 STR 479 (Tri.-Del)
- The assessee constructed residential complexes on their land and made agreements for sale of flats and received advance from prospective buyers. As per CBEC Circular, the builders provided no service to any prospective buyers. The activity was covered only after introduction of Explanation to Section 65 (105) (zzzh) of the Finance Act, 1994 i.e. with effect from 1-7-2010. The assessee contended that the said explanation was prospective and such activity was not chargeable to service tax prior to 1-7-2010 as depicted in the case of Skynet Builders Developers Colonizers & Ors. (2012) 27 STR 388 (Tri-Del.). The Revenue relying on the case ofG. S. Promoters v. UOI (2011) 21 STH 100 (P & H) contended that the activities as chargeable to service tax even prior to 1-7-2010 and considered the explanation to be clarificatory. The Hon'ble High Court observed that the G. S. Promoter's case dealt with the issue of constitutional validity of the Explanation inserted under Section 65(105)(zzzh) of the Finance Act, 1995 with effect from 1-7-2010 and the case did not examine whether the explanation could have retrospective effect. Accordingly, following the decision of Skynet Builders it dismissed the appeal of the Revenue.
C.C.E, Chandigarh v. Amar Nath Aggarwal Builders Pvt. Ltd. (2012) 28 STR 364 (Tri.-Del.)
Insurance Services
- The Hon'ble High Court held that:
Franchise Service/Intellectual Property Right Service
- The assessee transferred right to use Trade Mark to franchisees for use, against agreed royalty. The Hon'ble High Court upheld the Hon'ble Tribunal's decision that it is deemed sale liable to tax under Kerala Value Added Tax Act, 2003. It rejected assessee's plea that VAT on such transfer was illegal as they were paying Service Tax on royalty received and Service tax and VAT are mutually exclusive. It held that introduction of service tax on franchise agreement was inconsequential and legality of levy of service tax on royalty was not before the Court and had to be challenged in appropriate proceedings.
Malabar Gold Pvt. Ltd. v. CTO (2013) 29 STR 119 (Ker.)
Legal Consultancy Service
- The Hon'ble High Court, in this case granted interim injunction restraining Department from compelling Members of Revenue Bar Association from registering themselves with Service Tax Authorities under Legal Consultancy Service.
Revenue Bar Association v. UOI (2013) 29 STR 126 (Mad.)
Maintenance and Repair Services
- In terms of the amended Notification No. 24/2009-ST, dated 27th July, 2009 services provided by way of management, maintenance or repair of roads were exempt from the levy of service tax. The assessee contended that the word 'roads', appearing in the notification, would include runways at airports. The Hon'ble Bombay High Court on a prima facie basis held that 'runways' at airports are species of the genus 'road'. Therefore, for Service tax purposes, 'runways' should also normally receive the same treatment as 'roads'. Accordingly, services provided by way of management, maintenance or repair of 'runways' at the airport would also be entitled for exemption in terms of the Notification.
D. P. Jain & Co Infrastructure Pvt. Ltd. v. CCE&C, Nagpur [2012-TIOL-1030-HC-MUM-ST]
Mining Service
- The Hon'ble Tribunal held that the activity of benefication/washing of raw coal at washery was liable for service tax under the category of 'Mining services' introduced w.e.f 1.6.2007 and not under the category of 'Business Auxiliary Services' prior to 1-6-2007.
Spectrum Coal & Power Ltd. v. CCE (2012) 28 STR 510 (Tri.-Del.)
- The assessee entered into contracts with its customers for beneficiation/washing of raw coal at its washery (which included bringing the coal to its washery) and supply of washed coal to its customers. It charged his customers for washing and handling separately. The Revenue sought to tax the washing charges, under 'business auxiliary services' and handling charges under the category of 'cargo handling services'. On appeal, the Hon'ble Tribunal held –
Port Services
- The Hon'ble High Court held that the ship repairs undertaken by shipchandlers in port area under a licence from the port was liable for service tax under the category of 'Port Services'. The argument that the scope of 'port services' would only include those services which the port under a statutory obligation under Major Port Trusts Act, 1963 or other statute is entitled to perform itself or 'authorise' others to do, is incorrect. The 'authorisation' need not necessarily be in respect of only those functions which the Port itself was required to perform under the Act.
Kandla Shipchandlers and Ship Repairers Association v. UOI (2013) 29 STR 233 (Guj.) – Homa Engineering Works v. Commissioner (2007) 7 STR 546 (Tri.) overruled.
Storage and Warehousing service
- The assessee, owning an air cargo terminal, from airlines charged 'terminal charges' for providing the facility for x-raying, security check, completion of custom-formalities and short duration safe custody of goods and passenger baggage for transit to the plane within a cut-off period of 48 hours from the arrival of the cargo/baggage. The Hon'ble High Court held that:
- The assessee, under a contract with its client drew crude oil from subsea wells, processed it in a 'floating production unit' (FPU) and transported it to fleets. It engaged a foreign company for provision of operations personnel, maintenance, spare parts, supplies and all other resources necessary for operation at FPU. The department contended that the foreign company provided 'storage and warehousing' services to the appellant and hence the appellant was liable for service tax as a recipient of services. The Hon'ble Tribunal held that the foreign company cannot be treated as 'storage and warehouse keeper' providing storage services.
Aban Lloyd Chiles Offshore Ltd. v. CST (2012) 28 STR 622 (Tri.-Chennai)
- The assessee a container freight station retained auction proceeds of abandoned cargo by importers in lieu of storage and warehousing charges due from importers. It was held that the assessee was a custodian of goods and transfer of title of goods during auction was to be treated as sale. The auction proceeds received did not represent storage and warehousing charges and hence no service tax was payable.
In Re: Sical Distriparks Ltd. (2012) 28 STR 525 (Commr. Appl.)
Tour Operator's Service
- The assessee arranged 'package tours' in the State of Andhra Pradesh and charged abated rate of service tax on the net amount i.e. gross collection less the value of 'supplementary services' viz., train fare, Tirumala Tirupathi Devasthanam darshan ticket charges, Ramoji Film City entry fee, hill transportation charges and waterfleet charges contending that such charges could not be taxed since 'tour' means a 'journey' from one place to another and any consideration received for such journey is liable and not the above charges. It also contended that these are in the nature of 'reimbursements' not includable in taxable value. The Hon'ble Tribunal held that the phrase 'in relation to a tour' in the definition of taxable service in the context of 'tour operators' is wide enough to cover such 'supplementary services' and the amounts collected from tourists for supplementary services rendered by the appellant cannot be termed as 'reimbursements' as the amounts collected are towards the service provided by the assessee and not towards expenditure incurred on behalf of the client.
Andhra Pradesh Tourism Devl. Corpn. Ltd. v. CCE (2012) 28 STR 595 (Tri.-Bang.)
- The assessee provided the following services:– (i) Operating point to point buses under contract carriage permits for transport of passengers; (ii) Providing buses on lease to other companies; and (iii) Booking bus tickets for other tour operators. The Hon'ble Tribunal held that the service in Sr. Nos. (i) and (ii) were not taxable under the head 'Tour operator services' since the assessees were eligible for exemption under Notification No. 20/2009 which exempts the service provided by a tour operator having a contract carriage permit for inter-State or intra-state transportation of passengers, excluding tourism, conducted tours, charter or hire service. As regards service in Sr. No. (iii), it held that the same was taxable under 'Business auxiliary service' as they were in the nature of promoting the services of other operators.
Sharma Transports v. CST (2013) 29 STR 249 (Tri. -Bang.)
- The assessee in this case supplied ordinary buses (not tourist vehicles) on rent basis to other tour operators such as ITDC, etc., who were discharging service tax and also to other commercial or non-commercial concerns. The Hon'ble Tribunal held that as service tax has been paid by other tour operators, it could not be demanded second time on same activity however, buses provided to other commercial concerns/schools were liable to service tax. It was further held that persons neither holding tourist permit nor having tourist vehicles were not liable to pay service tax for period prior to 10-9-2004. It was also held that, since issue involved interpretation of law, neither extended period was invocable nor penalty was imposable.
Chaudhary Yatra Co. Pvt. Ltd. v. CCE, Nashik (2013) 29 STR 240 (Tri.-Mumbai)
- The assessee in this case provided tour operators services by using own vehicles and also of third parties. They contended that service provided by using third parties vehicles should be treated as Business Auxiliary Service and only amount of commission retained by them should be subjected to Service Tax. The Hon'ble Tribunal held that this contention of the assessee was not acceptable and the entire amount was liable to service tax.
Mangalore Tourist Service v. CCE, Mangalore (2013) 29 STR 244 (Tri.-Bang.)
Supply of Tangible Goods Service
- The Hon'ble Tribunal held that activity under Mining Service was restricted to actual extraction of oil or gas from beneath the earth. Supply of impugned rigs for post-extraction activity without transferring possession and effective control was liable to service tax under Supply of Tangible Goods Service. It further held that time prescribed under Section 11E of Central Excise Act, 1944 for refund of tax was applicable to tax collected as permitted by statute and not applicable to tax collected without authority.
In Re: Hardy Exploration & Production (I) Inc. (2012) 28 STR 513 (Commr. Appl.)
Works Contract Service
- The assessee had an on-going works contract as on 1-6-2007 (the date on which service tax on "Works contract services"were introduced) and had paid service tax on payments received prior to 1-6-2007 inter aliaunder the category of "Construction services". As per Rule 3(3) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 introduced w.e.f. 1-6-2007 an assessee could pay tax @ 2% on the gross contract value provided he opted for the composition scheme before service tax is paid in respect of the works contract. Since, the assessee had already paid tax and could not have opted for the composition scheme the Hon'ble Supreme Court held that the assessee would not be entitled to avail the benefits of the Composition Scheme. Further, it was also held that Circular No. 98/1/2008-S.T. dated 4.1.2008 interpreting Rule 3(3) are neither discriminatory in nature nor is it contrary to the Act or statutory rules.
Nagarjuna Construction Company Ltd. v. Government of India (2012) 28 STR 561 (S.C.)
- The assessee's contract with the Government of Andhra Pradesh was for - survey, design, engineering and construction of earth dams / barrages and canal system meant for irrigation including maintenance during warranty period and beautification of the sites, for a lump sum amount (billed based on running bills submitted) without separate charge for each activity. The Hon'ble Tribunal held that:
Hence the exclusion pertaining to 'site formation, clearance, excavation, etc.' services for irrigation was not applicable to the present case.
Ramky Infrastructure Ltd. v. CST (2013) 29 STR 33 (Tri.-Bang.)
B] Valuation
29 The assessee, a consulting engineer, charged his 'fee' and 'out-of-pocket expense' ("OPE") such as air travel, hotel stay, etc. separately and paid service tax only on his 'fee' and not on the OPE. The Revenue initiated proceeding for recovery of service tax on out-of-pocket expenses. Aggrieved, the assessee filed a writ petition before the Hon'ble High Court. The Hon'ble High Court considering provisions of sections 66 and 67 of the Act and the Valuation Rules held as follows:
• The relevant provisions for valuation of taxable service [i.e. Section 66 read with Section 67(1)(i) of the Act] envisage that the value of taxable service is nothing more or nothing less than the "consideration" paid as quid pro quo for the service.
• Rule 5(1) of the Valuation Rules which provides for including any expenditure or costs incurred by the service provider in the course of providing the taxable service in the value of the taxable service has gone beyond the charging sections (Section 66 r.w. Section 67) under the Act which is not permissible. Hence the said rule is unconstitutional.
Intercontinental Consultants & Technocrats Pvt. Ltd. v. UOI (2013) 29 STR 9 (Del.)
C] CENVAT
30 The Hon'ble Tribunal relying on judgment in case of Shree Rajasthan Syntex Ltd. v. CCE (2011) 24 STR 670 (Tri.-Del.) held that the assessee was entitled to utilise CENVAT Credit for payment of service tax on commission paid to an overseas agents under the reverse charge.
Indian Acrylic Ltd. v. CCE (2012) 28 STR 354 (Tri.-Del.)
31 The Hon'ble Tribunal held that the CENVAT Credit cannot be disallowed on the ground that the assessee did not maintain separate accounts of CENVAT Credit used for payment of excise duty on final product manufactured and service tax paid on output service since there is no such provision in CENVAT Credit Rules, 2004
Jyoti Structures Ltd. v. CCE (2012) 28 STR 380 (Tri.-Mumbai)
32 The Hon'ble Tribunal held that where goods are exported on FOB/CIF basis, CENVAT credit of service tax paid on outward transportation from factory to port of shipment is admissible.
Oriental Containers Ltd. v. CCE (2012) 28 STR 397 (Tri.-Mumbai)
33 The Hon'ble Tribunal held that the CENVAT Credit of service tax paid on GTA service used for transporting raw material from the place of supplier to job workers' premises without bringing them into the assessee's premises was allowable.
CCE v. KEC International Ltd. (2012) 28 STR 399 (Tri.-Del.)
34 The Hon'ble Tribunal held that:
• CENVAT Credit of service tax paid on insurance of vehicles registered in the name of director of company was to be allowed subject to verification that vehicle was figuring as asset in the balance sheet of the company and its expenditure were met by the company.
• CENVAT Credit of input services received in a factory can be taken on the basis of bill addressed to the headquarters (H.Q.) without the H.Q. obtaining registration as Input Service Distributor.
• CENVAT Credit of mobile services used by director would be allowable subject to reduction of CENVAT credit attributable to factory located in exempted area.
• Invoices raised in the 'brand name' or 'earlier name' of the company would be eligible documents for claiming CENVAT Credit in view of proviso to Rule 9(2) of CENVAT Credit Rules, 2004.
Valco Industries Ltd. v. CCE (2012) 28 STR 457 (Tri.-Del.)
35 The Hon'ble Tribunal relying on judgment of well known Polyesters Limited v. CCE (2012) 25 STR 411 (Tribunal)held that the assessee after obtaining service tax registration would be eligible to avail CENVAT Credit of input service tax paid prior to obtaining such registration. It further held that refund of such credit could also be claimed if it remains unutilised.
C. Metric Solution Pvt. Ltd. v. CCE (2012) 28 STR 460 (Tri.-Ahmd.)
36 The Hon'ble Tribunal held that the CENVAT Credit availed by an exporter on clearing, commission on export sales, material handling, terminal handling, bank commission and aviation charges would be allowable since these services are availed in the course of business of manufacturing.
JSW Steel Ltd. v. CCE (2012) 28 STR 557 (Tri.- Mumbai)
37 The Hon'ble Tribunal held that the CENVAT Credit availed on insurance of vehicles, finished goods in godown located inside and outside factory, finished goods in transit, cash in box/counters, cash in transit and personal insurance of cashier would be allowed since it is necessary to make the assessee risk free for carrying out its manufacturing operations and other activities related thereto.
DSCL Sugar v. CCE (2012) 28 STR 559 (Tri.-Del.)
38 The Hon'ble Tribunal relying on judgment of Spenta International Ltd. v. Commissioner (2007) 216 ELT 133 (Tri.-LB) held that eligibility of CENVAT Credit on capital goods is to be determined with reference to the taxability of the output service on the date of receipt of such capital goods. Thus, CENVAT Credit on capital goods received on 5-5-2005 for providing 'construction services', which subsequently became taxable w.e.f. 16-6-2005, cannot be allowed.
CCE v. Aneri Construction (2012) 28 STR 578 (Tri.-Ahmd.)
39 The assessee, a manufacturer of excisable goods, had short paid service tax under reverse charge on services received from overseas marketing agents prior to 18-4-2006 but took credit of the tax actually paid. The Hon'ble Tribunal held that:
• Prior to 18-4-2006, no service tax is payable by the service recipient for services received from abroad as the provisions of Rule 2(1)(d)(iv) were ultra vires the provisions of Finance Act, 1994, and hence the demand of the service tax short paid is not sustainable.
• As per Rule 9(1) of CENVAT Credit Rules, 2004, the criterion for availing CENVAT Credit is with reference to the date of the invoice (which must be after 10-9-2004) and not the date on which service is provided. Hence the department's contention for denying credit on the ground that the services pertained to a period prior to 10-9-2004 is not sustainable.
H.R. International v. CCE (2012) 28 STR 580 (Tri.-Del.)
40 The Hon'ble Tribunal in an earlier decision in the assessee's case reported in (2012) 28 STR 174 disallowed CENVAT credit on construction service and other services availed for construction of a mall whose units were subsequently rented out. On being pointed out that the order was based on wrong precedents (regarding inputs and capital goods) and did not consider a division bench precedent, the Hon'ble Tribunal rectified its earlier decision and allowed the credit.
Venus Investments v. CCE (2013) 29 STR 72 (Tri. – Ahmd.)
41 The Hon'ble Tribunal held that:
• CENVAT credit on outdoor catering service received by the appellant for providing food to their employees was admissible.
• CENVAT credit on cab service used for transportation of employees from home to factory and back home was admissible.
Paramount Communication Ltd. v. CCE (2013) 29 STR 146 (Tri.-Del.)
42 The assessee manufactured sponge iron (dutiable), during the course of which 'iron ore fines' were generated as a 'waste product' and cleared without payment of duty in terms of exemption Notification No. 4/2006. The assessee used input services for such manufacture on which it took credit. The Hon'ble Tribunal relying on Rallis India Ltd. (2009) 233 ELT 301 (Bom.) held that the assessee need not reverse any credit under Rule 6 (3) since the 'waste' cannot be considered as 'final products' exempt from duty.
CCE v. Devi Iron Power Ltd. (2013) 29 STR 172 (Tri.-Del.)
43 The assessee, manufacturer of transmission towers also provided erection, commissioning and installation, management, maintenance or repairs, testing, inspection of these towers services. For discharging Central Excise Duty and Service tax liability, the assessee utilised CENVAT Credit. The department denied utilisation of CENVAT Credit for payment of Central Excise Duty on the dutiable final product and output services on the grounds that the assessee did not maintain separate books of account for inputs and input services utilised in the manufacture of final products and used in providing output services. The Hon'ble Tribunal following the decision of Forbes Marshall Pvt. Ltd. v. CCE (2010) 258 ELT 71 (Tri.) held that there was no provision under CENVAT Credit Rules, 2004 for segregation of CENVAT Credit for payment of Central Excise Duty and Service tax liability.
Jyoti Structures Ltd. v. CCE (2012) 28 STR 380 (Tri.-Mumbai)
44 The assessee, a manufacturer of motor vehicles also rendered technical assistance, training with respect to supply, assembly, manufacture, testing and quality assurance of products and to use their trademark, to Skoda Auto A. S. The assessee paid service tax with interest during the pendency of SCN. In view of decision of Indian National Ship Owners Association v. UOI (2009) 13 STR 235 (Bom.), the assessee filed refund claim of interest for delayed payment of Service tax paid in pursuance of the SCN. Since the assessee took CENVAT credit of service tax paid, the refund claim was with respect to interest paid which was filed within 1 year from the date of the decision. The authorities rejected the refund claim on the grounds of limitation and that the order-in-original was not challenged. On appeal, the Hon'ble Tribunal observed that the assessee paid service tax with interest in the year 2006 which was appropriated by way of adjudication and the assessee took CENVAT Credit of Service tax paid and filed refund claim of interest paid. Though in view of the decision of Indian National Ship Owners Association service tax was not leviable, the assessee did not claim refund of service tax which implied that the assessee had admitted their service tax liability. Since the liability was admitted, it should be paid with interest as held by Hon'ble Supreme Court in case ofCCE v. SKF India Ltd. (2009) 239 ELT 385 (SC) and therefore rejected the appeal.
Skoda Auto India Pvt. Ltd. v. CCE (2012) 28 STR 391 (Tri.-Mumbai)
45 The Hon'ble Tribunal observed that the present case was of not following appropriate procedures and not a case of misutilisation of ineligible CENVAT credit. No CENVAT credit was distributed since the entire CENVAT credit was availed by only one office and the same could have been verified by the department. The premises, where equipments were installed, belonged to the assessee and also the capital goods were used for providing output services. Therefore, substantial benefit of CENVAT credit was not to be denied for procedural defects of minor nature. However, it further held that the procedures laid down under the Rules should not be circumvented quoting different decisions of the Hon'ble Tribunal and directed the assessee to make an earnest attempt to follow such procedures.
BSNL v. CCE (2012) 28 STR 624 (Tri-Chennai)
46 The Hon'ble Tribunal allowed the CENVAT credit by applying the principle of substance over form. It stated that "a 'bill' is that which gives right to an actionable claim". A party raising the bill communicates its intention to the recipient of such service, making him aware of his contractual obligation and value involved to provide such service. The assessee cannot be denied benefit of CENVAT credit in case of reimbursement of expenses as it is already included in the taxable value. It held that the department on its own can verify the claim and in the event of failure of such verification, the law will take its own recourse.
Shree Cement Ltd. v. CCE (2013) 29 STR 77 (Tri. – Del)
47 The assessee had availed CENVAT Credit on capital goods which while in use were destroyed by flood and thereby cleared as scrap on payment of duty on the amount realised [as per the provisions of Rule 3(5A) as it stood then], no demand could be raised either on the ground that the duty was payable on the insurance compensation received by treating it as the value of capital goods or on the basis of 'depreciation method' which was introduced only in 2011.
TotalOil India Pvt. Ltd. v. CCE (2013) 29 STR 334
48 The Hon'ble High Court in this case held that there was no bar on utilization of CENVAT credit for payment of service tax on Goods Transport Agency services by recipient of service tax. It is permissible under Rule 3(4)(e) of CENVAT Credit Rules, 2004 and Revenue's contention that tax liability had to be discharged in cash and assessee was only recipient of taxable service and not its provider, rejected in view of fiction created by Section 68(2).
CST v. Hero Honda Motors Ltd. (2013) 29 STR 358 (Del.)
49 The Hon'ble Tribunal allowed CENVAT credit of service tax paid on Manpower Recruitment or Supply service, Security Agency service, Chartered Accountants service, Advertisement, Housekeeping service, Annual Maintenance Contract service and Clearing & Forwarding service as the same were used in relation to the IT enabled output service.
C. Cubed Solutions Pvt. Ltd. v. CCE, Bengalurne (2013) 29 STR 385 (Tri.-Bang.)
50 The Hon'ble Tribunal held that Cell Site comprising Base Trans-receiver Station and other equipments housed in prefabricated building was immovable property and non-excisable and it was neither classifiable under Heading 85.25 nor capital goods under Rule 2(a) of CENVAT Credit Rules, 2004. Thus Credit could not be claimed on tower either as components, part or accessory of Cell Site as Capital Goods or as item used for providing output service. Towers are immovable structures and ipso facto non-marketable and non-excisable and cannot be considered as inputs. Officer chairs used by telecom service provider were classifiable under Chapter 94 which, is not specified in Rule 2(a) of CENVAT Credit Rules, 2004 and hence not a capital goods. Further, there was no evidence of their use for providing telecom service hence, they were also not inputs. It also held that though Printers used by the assessee were covered under the definition of Capital goods, credit was not admissible as no nexus is established with output service.
Bharti Airtel Ltd. v. CCE, Pune (2013) 29 STR 401 (Tri.-Mumbai)
51 The assessee allowed CENVAT credit of service tax paid on stock exchange service, employee insurance, food charges, subscription / books / periodicals and travelling expenses as services were utilised during course of business activity. It further observed that in Debit Note all the relevant information / details as mentioned in any invoice were available and hence credit was allowed on debit notes.
In re: DBS Cholamandalam Securities Ltd. (2012) 28 STR 529 (Commr. Appl.)
D] Penalty
52 The assessee on being pointed out by the department during the course of investigation paid service tax along with interest on GTA service and overseas commission. The Hon'ble Tribunal waived penalty under Section 78 of the Act as the assessee was entitled to take credit of the same and no extra benefit was earned on account of suppression.
India Trimmings Pvt. Ltd. v. CCE (2012) 28 STR 401 (Tri.-Chennai)
53 The Hon'ble Tribunal relying on judgment of Commissioner v. Motorworld (2012) 27 STR 225 (Ker.) deleted the penalty under Section 76 since the show cause notice was issued post amendment in Section 78 w.e.f. 10-5-2008 which provided for non-imposition of penalty under Section 76 if penalty under Section 78 is imposed.
Jivant Enterprise v. CST (2012) 28 STR 582 (Tri.-Ahmd.)
54 The assessee did not pay service tax and file returns on time but later on, on their own ascertainment paid service tax, filed the returns and informed the department. The Hon'ble Tribunal held that in such a case show cause notice was not required to be issued as per Section 73(3) and Board Circular No. 137/167/2006–CX–4 dated 3-10-2007 and accordingly, no penalty was imposable.
Gupta Coal Field & Washeries Ltd v. CST, (2013) 29 S.T.R. 166 (Tri.-Mum.)
55 The assessee inadvertently availed CENVAT credit of the value of invoice instead of the amount of service tax. On being pointed out, the assessee immediately reversed the inadmissible portion of the credit and also paid interest. The Hon'ble Tribunal observed that the show cause notice did not allege any mala fide intention on part of the assessee. Moreover, the assessee had shown its bona fide by reversing CENVAT credit on being pointed out and also paying interest on the same. Thus, it set aside the penalty.
Prayas Casting Ltd. v. CCE (2013) 29 STR 171 (Tri. -Ahmd.)
56 The assessee utilised CENVAT credit in excess of prescribed limit even though it had provided taxable and exempt services and did not disclose the same in its returns. The Hon'ble Tribunal held that the invocation of the extended period and imposition of penalty under Section 78 was justified observing that:
• When the return contains a declaration as to the self-assessment particulars stating that the assessee had paid service tax correctly in terms of provisions of the Act and Rules made thereunder such declaration becomes faulty if tax is held to be not so paid, in absence of bona fide statement either on the return or made through a letter accompanying the return.
• Failure to make disclosure in return or submitting entire fact by any letter accompanying the return appears to be a case of willful suppression.
• Suppression does not vanish by mere passage of time to issue show cause notice and contravention of law gets no immunity from penal consequences. Suppression corroborated by an untrue declaration in the return filed calls for levy of penalty
On appeal, the Hon'ble High Court agreed with the above observation of the Hon'ble Tribunal.
Vodafone Digilink Ltd. v. CCE (2013) 29 STR 229 (Raj.)
57 The assessee in this case claimed refund of the penalty paid. The Revenue sought to reject the same on the ground of unjust enrichment. The Hon'ble Tribunal held that the decision in United Spirits Ltd. (2009) 240 ELT 513 (Bom.) supports that principle of unjust enrichment is inapplicable to penalty and the burden of proving passing on of penalty was on department and not on assessee as in case of duty.
Shree Perfect Security Services (India) P. Ltd. v. CST Ahmedabad (2013) 29 STR 389 (Tri.-Ahmd,)
E] Others
Adjustment of service tax
58 The assessee had paid excess service tax in the month of October 2006 owing to payment of tax without receipt of monies, and only in June 2007 when the customer settled for a lesser sum, they suo motu took credit of the excess service tax and disclosed in the returns. The Hon'ble Tribunal allowed the excess adjustment although technically it was allowable only in the 'succeeding' month (i.e. November, 2006) and that too after intimation to the department (which was not done), which infractions were considered to be minor.
Siemens Ltd v. CCE (2013) 29 STR 168 (Tri.-Chennai)
59 The assessee, a recipient of GTA services, overpaid service tax on 31-3-2005 and 31-3-2006 and adjusted the excess service tax in April, 2006 and April, 2007. The Hon'ble Tribunal held that the excess tax paid was adjustable under Rule 6 (3).
Tamil Nadu Newsprint & Papers Ltd v. CCE (2013) 29 S.T.R.197.
Audit of Accounts
60 The Hon'ble High Court held that Rule 5A(2) of Service Tax Rules, 1994 does not empower CA's to audit accounts of any assessee and it is more so as it is framed under power from Section 94(2) of the Finance Act, 1994 which does not empower Central Government to frame rules for such audit. It only casts obligation on assessee to make records and documents as specified therein available to officer authorised by Commissioner, or audit party deputed by Commissioner or CAG.
SKP Securities Ltd. v. Deputy Director (RA-lDT) (2013) 29 STR 337 (Cal.)
Show Cause Notice
61 The show cause notice was issued and adjudicated in favour of the assessee on an issue, against which no appeal was filed by the revenue. On issue of second show cause notice, the Hon'ble Tribunal held that there is no scope for subsequently issuing a second show cause notice on the same issue.
Tamil Nadu Newsprint & Papers Ltd. v. CCE (2013) 29 S.T.R.197
62 The assessee did not challenge the wrong classification made by department. The department issued show cause notice demanding tax under wrong classification. The assessee contested such classification in the reply to the show cause notice. The Commissioner (Appeals) held in favour of assessee. On further appeal, the Hon'ble High Court dismissing the appeal held that only because the jurisdictional Assistant Commissioner classified and approved some goods under wrong heading without any challenge by the assessee, it would not mean that for future also, wrong classification shall continue in respect of such goods. It further noted that on the receipt of demand of duty videshow cause notice, the assessee challenged the erroneous classification. Therefore, it could not be said that the assessee had accepted the classification and that the approval attained finality.
CCE v. Simplex Casting Ltd. (2012) 285 ELT 365 (Tri.-Del)
Circulars
63 The Hon'ble High Court quashed the Circulars holding them contrary to the Finance Act, 1994 and the Point of Taxation Rules, 2011 and observed that in case a circular is contrary to the Act or the Rules, it has no existence in law.
Delhi Chartered Accountants Society v. UOI & Ors. [2013-TIOl-81-HC-DEL–ST]
Demand
64 The Hon'ble Tribunal relying on judgment of Union Metals Ltd. v. Commissioner (2006) 4 STR 491 (Tri.-LB) held that where the assessee had already paid the service tax amount collected from the customers to the revenue through CENVAT Credit, no service tax needs to be deposited once again in cash in case of proceedings u/s. 73A.
Sangam India Ltd. v. CCE (2012) 28 STR 627 (Tri.-Del.)
Delay in filing appeal
65 The Hon'ble High Court disposed of the case on the grounds of delay in filing appeal by the department. On further appeal, the Hon'ble Supreme Court held that in cases where huge stakes are involved, the Hon'ble High Court should examine and decide the case on merits and should not dispose of the same based on the mere grounds of delay in filing appeal by the department. In such a case, the Hon'ble High Court may impose costs on the department. Accordingly, it remitted the present matter to the Hon'ble High Court to decide the case de novo in accordance with the law.
CIT v. West Bengal Infrastructure Dev. Fin. Corpn. Ltd. (2012) 28 STR 665 (SC)
Import of Service
66 The Hon'ble Tribunal held that no service tax would be payable for services received from foreign service provider for the period prior to 18-4-2006 even if the service provider had a liaison office in India.
Mitsui & Co. Ltd. v. CST (2012) 28 STR 491 (Tri. -Kolkata)
Export of Service
67 The assessee were engaged in promoting, marketing and distributing (installation and warranty) of various medical equipments for M/s. Viasys International Corporation, Pennsylvania, USA. It discharged the service tax liability in respect of the installation and warranty services but did not pay service tax on advertising, promoting and marketing services under the category of "business auxiliary" as it was export of services.
The Hon'ble Tribunal held that the appellants satisfied the conditions laid down for export of services for the period 1st July, 2003 to 19th November, 2003 as service tax is a destination based tax and the service recipient being located outside India, no service tax was leviable. For the period 15th March, 2005 till 18th April 2006, the Export of Services Rules, 2005 inserted the conditions that (a) service should be delivered outside India and (b) there should be receipt in foreign exchange. The condition of delivery outside India was not satisfied as the services were rendered in India and thus consumed in India. For the period from 19th April, 2006 to 5th December, 2007, the condition in relation to export of services was amended stating that (a) the services should be provided from India and used outside India; and (b) there should be receipt in foreign exchange. During the said period also, the services were not used outside India as the sales took place in India and thus, the services were provided and consumed without reverting to foreign principals for consumption abroad meant to have exhausted in India and hence not exported. The Tribunal also observed that since the assessee discharged the liability on installation and warranty services, they were aware of the levy of service tax. Moreover, the relevant clause of the agreement also stipulated the condition of reimbursement of tax from the foreign principal. Hence, plea of limitation was also disallowed and pre deposit of ` 25 lakh was ordered.
Life Care Medical System v. CST [2011 TIOL 993 (Tri.-Mumbai)]
68 Western Union (WU) a company located abroad provided money transfer services to its clients abroad for remitting monies to intended recipients in India. WU appointed agents and sub-agents (assessees) in India, to give money to the intended recipients for a commission. The assessees also received reimbursement of expenses on advertisement and sales promotion activities. The Revenue sought to deny the export exemption under the "Export of Services Rules", 2005 ("Export Rules"), since the services were performed in India and hence were not delivered / used outside India. The Hon'ble Tribunal (by a 2:1 majority) allowed the export exemption and observed as follows:
• The term "export" has not been defined either in Article 286 (l)(b) or in any of the article of the Constitution of India. The meaning of the term "export", with regard to export of goods, is not applicable for determining what constitutes "export" of services. The Export Rules are not in conflict with Article 286(1)(b) of the Constitution of India. The Export Rules are in accordance with the Apex Court's ruling in the AIFTP case [(2007) 7 STR 625 (SC)] and Association of Leasing & Financial Services Companies case [(2010) 20 STR 417 (SC)] that service tax is a destination based consumption tax. There is nothing in the Export Rules contrary to the principle that a service not consumed in India is not be taxed in India. What constitutes export of service is to be determined strictly with reference to the provisions of the Export Rules.
• The service being provided by the agents and sub-agents was delivery of money to the intended beneficiaries of the customers of WU abroad and this service was "business auxiliary service", being provided to Western Union more particularly covered in clause (vi) of Section 65(19), 'provision of service on behalf of the client'.
• The consumer and service recipient of the service provided by the Agents and sub-agents of WU in India was the Western Union, located abroad who used their services for their money transfer business and not the persons receiving money in India. Since the service was provided in relation to business of Western Union located abroad, and the payment for the service had been received in India in convertible foreign currency, the same was to be treated as export of service. It is the person who requested for the service and is liable to make payment for the same who has to be treated a recipient of the service, not the person or persons affected by the performance of the service. Thus, when the person on whose instructions the services in question had been provided by the agents/sub-agents in India and who is liable to make payment for these services, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of service.
• Reimbursement of advertisement and sales promotion activities received from WU was not taxable as the same were for the services provided to WU, which were export of service.
M/s. Paul Merchants Ltd. v. CCE (2013) 29 STR 257 (Tri.-Del.)
Limitation
69 The Hon'ble Tribunal held that the extended period of limitation could not be invoked where there was ample correspondence with the department on the issue under consideration and several Tribunal decisions in favour of the assessee during the relevant period.
Universal Enterprises v. CCE (2012) 28 STR 466 (Tri.-Del.)
70 The Hon'ble Tribunal held that where it was found that there was continuous correspondence with the department on the issue and conflicting interpretation of statutory provisions and notifications, the extended period of limitation cannot be invoked.
Andhra Pradesh Tourism Devl. Corpn. Ltd. v. CCE (2012) 28 STR 595 (Tri.-Bang.)
71 The assessee engaged in providing vehicles on hire were not paying service tax and were not filing service tax returns. Therefore, the department issued a show cause notice (SCN) considering the said services to be "rent-a-cab services" for the period from February, 2004 to March 2005 demanding service tax with interest and penalty under sections 76, 77 and 78 of the Finance Act, 1994. Relying on the Hon'ble Apex Court's decision in case of Nizam Sugar Factory v. CCE, A.P. 2008 (9) STR 314 (SC), the assessee argued that the SCN was time barred since on the same grounds, the department had issued SCN previously for the period from 1-4-2002 to 31-12-2003. Therefore, the department was aware of the facts and accordingly, there cannot be any allegation with respect to suppression of facts from the department and thereby, invoking extended period of limitation was not justified.
The Hon'ble Tribunal held that though the assessee wilfully ignored the payment of service tax and submission of returns even after issuance of SCN for the previous period, the activities of the assessee were fully known to the department. The department could have further searched the premises of the assessee in such a case to obtain any requisite information. Accordingly, following the ratio laid down by the Hon'ble Apex Court in case of Nizam Sugar Factory v. CCE, A. P. (Supra), the demand was not sustainable on the grounds of limitation and therefore, the issue was not discussed with respect to its merits.
Bhawana Motors v. CCE, Jaipur – II (2012) 28 STR 268 (Tri.-Del.)
72 The assessee, a clearing and forwarding agent for M/s. Chambal Fertilisers & Chemicals Ltd. ('CFCL') also had separate contract with CFCL for giving their godown on rent for the goods for which they acted as clearing and forwarding agent. Service tax was demanded on godown rent under storage and warehousing services. According to the assessee, the godown rent was in the form of reimbursements and as per CBEC clarification, it was not leviable to service tax. Further, the nature of its services was "clearing and forwarding agent" as against "storage and warehousing services" and that the department issued SCN under the category of storage and warehousing services and the demand was confirmed under "clearing and forwarding agent" and therefore, the order travelled beyond the scope of SCN. The Revenue contended that the services of clearing and forwarding could not have been performed without storage space and the cost of storage space was integral part of value of services provided. Further, the separate contract for rent was for the purpose of reduction of tax incidence. Since the contract was hidden, there was suppression of facts and therefore, extended period was invoked. On appeal the Hon'ble Tribunal held that there was a legal infirmity that tax was demanded under a different category from the one mentioned in SCN. Viewing the case as one of tax planning rather than tax evasion, it held that the extended period of limitation was not justified.
Ashok Agarwal v. CCE, Jaipur – I (2012) 28 STR 362 (Tri.-Del.)
Levy of Service Tax
73 The Hon'ble Service Tribunal held that the supply of imported as well as indigenous designs and drawings which were assessed as goods liable to customs duty/excise duty, cannot be made liable to service tax.
Mitsui & Co. Ltd. v. CCST (2012) 28 STR 491 (Tri. -Kolkata)
74 The Delhi High Court considered the issue relating to validity of Rule 5(1) of the Service tax (Determination of Value) Rules, 2006 (Valuation Rules). In terms of this Rule, Service tax was levied on reimbursements. On appeal, the Hon'ble Tribunal held that in terms of Section 67 of the Service tax law, Service tax can be levied only on gross amount charged for services. Reimbursements are not part of gross amount charged for services and thus, Rule 5(1) of the Valuation Rules is ultra vires the Service tax law.
International Consultants and Technorats Pvt. Ltd v. UOI & ANR [2012-TIOL-966-HC-Del-ST]
75 The Hon'ble Tribunal observed that the charging provision levying Service tax on services received from outside India (i.e. the reverse charge mechanism) had come into force from 18 April 2006. It thus held that there was no mechanism to levy Service tax on a liaison and project office in India for services provided by the foreign service provider from outside India prior to 18 April 2006.
Mitsui & Co. Ltd. v. CCE&ST [2012-28-STR-491-Tri.-Kolkata]
Notification
76 The issue was whether details of input services required to be used in providing taxable services which would be exported, as required to be submitted under Notification No. 12/2005-ST dated 19 April 2005 (which provides for rebate of Service tax), is possible to be ascertained prior to the date of export of services. The Hon'ble High Court held that given the peculiar feature of service rendered by the assessee (which in the instant case was IT-enabled services such as customer-care services, back-office services, etc.), it was difficult to comply with the requirement of furnishing the aforesaid specified details prior to the date of export of service. Further, if such details were furnished to the authorities within a reasonable time, along with the necessary documentary evidence, the object and purpose of the requirement stands fulfilled. It also held that any condition imposed by a notification must be capable of being complied with, and if it is impossible of compliance, there is no purpose behind such condition. It further clarified that this decision was provided on facts of the case and the Court did not decide on the broader question as to whether the requirement of furnishing aforesaid specified details is merely procedural or substantive.
Wipro Ltd v. Union of India [2013-TIOL-119-HC-DEL-ST]
Payment of service tax under incorrect service category
77 The Hon'ble Tribunal held that payment of Service tax under an incorrect service category does not mean that Service tax liability has not been discharged. Further, in terms of the Finance Act, 1994, a person liable to pay Service tax includes his 'agent', and accordingly the assessee has effectively discharged its Service tax liability.
Katrina R Turcotte v. CST [2012-TIOL-1780-CESTAT-Mum]
Recovery during Stay
78 The Hon'ble Tribunal observed that interim stay was granted by the Hon'ble Tribunal vide its order dated 14th January 2013 and hence directed the department to refund the amount to the assessee and not to proceed with the recovery proceedings during the pendency of the stay application.
Atlas Documentary Facilitators Co. Ltd. v. CST, Mumbai [2013-TIOL-268-CESTAT-MUM]
79 The department, despite stay granted by Tribunal till disposal of appeal, acted in haste for recovering amount by coercive process. On appeal, the Hon'ble High Court held that, it was arbitrary action of authorities which would shake confidence of law abiding dealers and adversely affect development and industrial growth.
Hamdard (Wakf) Laboratories v. State of UP (2013) 29 STR 99 (All.)
Refund
80 The assessee had paid service tax along with interest on reverse charge basis on overseas payments made prior to 18-4-2006 (though not liable); took CENVAT Credit of the tax paid but claimed refund of the interest. The Hon'ble Tribunal rejected the refund claim relying on judgment of CCE v. SKF India Ltd. (2009) 239 ELT 385 (S.C.) on the ground that when the assessee had admitted the service tax liability by not claiming refund and taking credit of the same, interest on delayed payment is payable by the assessee and cannot be refunded.
Skoda Auto India Pvt. Ltd. v. CCE (2012) 28 STR 391 (Tri.-Mumbai)
81 The assessee, a merchant exporter, had applied for refund of service tax paid (as payer of freight) on GTA service used for export of food items under Notification No. 17/2009-ST, though service tax on such transportation was exempt vide Notification No. 33/2004-ST. The department denied refund on the ground that the services were exempt. On appeal the Hon'ble Tribunal held that there was no provision barring payment of service tax on an exempt service like Section 5A(1A) of Central Excise Act, 1944 which bars payment of excise duty on an exempt product. Hence the refund claim of the assessee cannot be denied.
Crown Products Pvt. Ltd. v. CCE (2012) 28 STR 406 (Tri.-Mumbai)
82 The Hon'ble Tribunal held that:
• Refund of service tax paid on input services used for export of goods was allowable on the basis of certified copies of invoices instead of original invoices, in view of Board's Circular No. 112/6/2009 – ST dated 12-3-2009.
• Refund of service tax paid on fumigation charges i.e. specialised cleaning charges incurred for containers carrying agricultural products for export was to be disallowed in absence of written agreement between the buyer and seller.
CCE v. Gokul Refoils & Solvents Ltd. (2012) 28 STR 488 (Tri. – Ahmd.)
83 The Hon'ble Tribunal held that
• For claiming refund of service tax paid on scientific testing services used in export of goods, there is no need to establish correlation between the samples tested and consignment exported under Notification No. 17/2009 dated 7-7-2009.
• For claiming refund of service tax paid on transportation service vide Notification No. 17/2009 dated 7-7-2009, it is sufficient that invoice issued by the exporter indicate that the goods were exported through the Inland Container Depot (ICD) concerned and it is not material that the receipt issued for the said service could not be correlated with the consignments exported.
Trident Ltd. vs. CCE (2012) 28 STR 505 (Tri.-Del.)
84 The Hon'ble Tribunal held that the refund of amount deposited during investigation as payment under protest – unjust enrichment not possible when demand dropped since it is refund of deposit towards duty and not refund of duty.
CCE v. Krypton Industries (2012) 28 STR 555 (Tri. -Kolkata)
85 The Hon'ble Tribunal held that:
• Even though the assessee was not eligible for refund of service tax paid on services used in relation to authorised operation in SEZ under Notification No.9/2009-ST, they were certainly eligible for refund under Section 11B of Central Excise Act, 1994 r.w.s. 83 of FA, 1994.
• Once Approval Committee gave nexus and justification, it was unwarranted for adjudicating and appellate authorities to go into the question and come to their own findings in matter.
• Though under Notification No. 9/2009-ST. in case of services wholly consumed within SEZ, there is no necessity to discharge Service Tax liability ab initio, it does not mean that, in case where Service Tax liability has been discharged, assessee is not eligible for refund of Service Tax paid under Section 11B of CEA, 1994 r.w.s. 83 of FA,1994.
86 In this case, the Revenue denied refund claim as time barred filed under Notification No. 5/2006-CE(NT) under Rule 5 of CENVAT Credit Rules, 2004. The Hon'ble Tribunal observed that dispute of eligibility of credit was settled in assessee's favour on 28-1-2009 and the claim was filed within one year from that date. Accordingly, it held that the assessee was entitled for refund from date of settlement of dispute and the claim was filed within the time prescribed.
India Trimmings Pvt. Ltd v. CCE&ST, Coimbatore (2013) 29 STR 383 (Tri.-Chennai)
87 The Hon'ble Tribunal in this case held as under:
• Even though the assessee was not eligible for refund of service tax paid on services used in relation to authorised operation in SEZ under Notification No. 9/2009-ST, they are certainly eligible for refund under section 11B of Central Excise Act, 1994 r.w.s. 83 of Finance Act, 1994.
• Once Approval Committee gave nexus and justification, it was unwarranted for adjudicating and appellate authorities to go into the question and come to their own findings in matter.
• Though under Notification No. 9/2009-ST. in case of services wholly consumed within SEZ, there was no necessity to discharge Service Tax liability ab initio, it does not mean that, in case where Service Tax liability has been discharged, assessee was not eligible for refund of Service Tax paid under Section 11B of Central Excise Act, 1994 r.w.s. 83 of Finance Act, 1994.
Tata Consultancy Services Ltd. v. CCE&ST (LTU) Mumbai (2013) 29 STR 393 (Tri.-Mumbai)
Others
88 The Hon'ble Tribunal held that the activities of the assessee, an electricity transmission company, like installation of electricity meters and testing the same were services relating to the transmission and distribution of electricity and hence exempt from service tax vide Notification No. 45/2010-ST dated 20-7-2010.
Paschimanchal Vidyut Vitran Nigam Ltd. v. CCE (2012) 28 STR 412 (Tri.-Del.)
89 In the instant case as per the terms of contract, the taxes and duties were to be borne by the respondent (viz. service provider) and accordingly, the assesssee (viz. service recipient), who was liable to deposit Service tax with the Government (under 'reverse charge mechanism'), deducted tax from the bills of the respondent thereby remitted the net amount to the service provider. The Hon'ble Supreme Court commented that liability to bear the tax can be decided based on contractual arrangement and accordingly, held that the assessee was well within his rights for deducting Service tax from the bills of the respondent given the contractual arrangement.
Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [2012-TIOL-37-SC-ST]
90 The service provider, had not disclosed statutory duties and levies at the time of the transaction or agreement. It however, claimed such taxes and levies from the consumer at a later stage during the course of continuing service. The Hon'ble Kerala High Court held that taxes and levies, which have not been specifically disclosed at the time of entering into transaction or agreement, cannot be subsequently recovered from the service receiver.
Max New York Life Insurance Co. Ltd. v. Insurance Ombudsman [2012-28-STR-453-Ker.]
S.271(1)(c) : Penalty – Concealment – Revised return – Income not fully declared in original return but in return filed pursuant to notice under section 148 – Liable for penalty in first assessment year instead of all assessment years. (S.148)
The assessee is a qualified anesthetist working in a private hospital. In response to notice under section 148 of the Income-tax Act, 1961, the assessee filed another return substantially enhancing his income and also claiming expenditure which had not been previously admitted. The Assessing Officer disallowed the claim and also initiated penalty under section 271(1)(c) of the Income-tax Act, 1961. The Commissioner (Appeals) granted part relief to the assessee and held that his claim of expenditure was liable to be accepted at 30 per cent of net receipt on estimation basis. On appeal, the Tribunal restricted the expenditure to 15 per cent. Since, penalty proceedings stood revived, the assessee submitted before the Assessing Officer that he had neither concealed his income nor furnished inaccurate particulars. The Assessing Officer held that the revised return submitted by the assessee was only after the initiation of the investigation and therefore he imposed penalty. The Commissioner (Appeals) confirmed this. On appeal, Held, that only when notice under section 148 was issued to the assessee, he chose to disclose the receipt and raise the claim of expenditure. Despite the fact that the assessment proceedings attained finality, this ipso facto did not absolve the assessee from the necessary conclusion from his conduct that he had nevertheless concealed the income which ultimately led to furnishing inaccurate particulars in the initial return. Therefore, the provisions of section 271(1)(c) were attracted in the act and conduct of the assessee. It is a settled law that the assessment proceedings and penalty proceedings are altogether different and any disallowance does not result in imposition of penalty. In penalty proceedings, the assessee's conduct during assessment always carries significance. Therefore, it could not be said that he was not guilty of concealment and furnishing of inaccurate particulars of income within the meaning of section 271(1)(c). Moreover, the assessee had been continuing with the practice of alleged concealment and furnishing inaccurate particulars in the assessment years 2000-01 to 2005-06. However, adopting the "doctrine of continuity" and concurrence, the penalty was liable to be confirmed only in the first assessment year i.e., assessment year 2000-01 instead of all the assessment years. (A. Ys. 2000-2001 to 2005-2006)Bapuji Cherukuri (Dr) v. Dy. CIT (2013) 21 ITR 714 (Chennai) (Trib.
S.139 : Return of income – E-return – Errors – Not ignorance of law but ignorance of usage of latest technology, direction to Assessing Officer to examine interest paid and if satisfied, positive interest to be added to taxable income. (S.143(1))
The assessees filed e-returns showing interest income earned as well as interest paid under the head "Income from other sources". The assessees did not realise that the server would not accept a negative figure and therefore the interest paid was rejected by the server while processing the returns. The Commissioner (Appeals) observed that it was an incorrect claim on account of the assessees failing to reflect the correct details in the returns, under the computerised processing programme. The Assessing Officer made adjustments for this incorrect claim for deduction and held that there was no mistake in the processing of returns and further concluded that no appeals would lie against such processing where adjustments had been correctly made during processing under section 143(1)(a)(ii) of the Income-tax Act, 1961. On appeal the Tribunal held that no one cared to educate the taxpayers about the nuances of preparing an e-return compared with filing details in the return forms. This had resulted in many clerical errors because of the ignorance of the taxpayers in acclimatising themselves with the latest technology. This was not ignorance of law but ignorance of the usage of the latest technology. Therefore, the Assessing Officer was to examine the assessees' claim of the interest paid and if satisfied with the claim, he was to deduct it from the positive interest figure to be added to the taxable income. (A.Y 2009-10)Sumanchandra G. Mehta v. ITO (2013) 22 ITR 270 (Mum.)(Trib.)Tarulata S. Mehta v. ITO (2013) 22 ITR 270 (Mum.)(Trib.)
S.80-IA : Industrial undertakings – Infrastructure development – Loss of eligible unit – Loss of eligible unit, even if set-off against non-eligible profits, has to be aggregated & carried forward for set-off against future eligible profits.
The assessee set up two windmills, the income from which was eligible for deduction u/s. 80IA. The assessee suffered a loss in the said wind mills and claimed a set-off of the same against its other income. The AO and the CIT(A) rejected the claim by relying on ACIT v. GoldMine Shares and Finance (P) Ltd. (2008) 113 ITD 209 (SB) (Ahd) where it was held that in view of s. 80-IA(5), the loss suffered by the eligible unit cannot be set off against the profits of other units / other business in the initial year of assessment or subsequent years of eligible years of assessments. The Tribunal had to consider the following legal issues: (i) what is the "initial assessment year"? (ii) whether the loss/ depreciation from the eligible unit is entitled to be set-off against the other income? (iii) whether the said loss/ depreciation of the eligible unit is, after set-off against the other income, still required to be notionally carried forward for set-off against the future profits of the eligible unit? HELD by the Tribunal:(i) The "initial assessment year" is the year in which the eligible unit commences operations. It is not the year in which the assessee chooses to claim deduction. The requirement of s. 80-IA(5) is that the loss and unabsorbed depreciation of the eligible unit should begin to be aggregated from the "initial assessment year" to the last allowable year. The aggregation has to continue for every year irrespective of whether s. 80-IA (1) deduction for that year is exigible or not;(ii) If the eligible unit has no profit, the loss & depreciation of the eligible unit is entitled to be set-off against the other income. However, despite such set-off, the loss and depreciation has to be aggregated and notionally carried forward for set-off against the future profits of the eligible unit. (A.Y. 2005-06 to 2008-09)Hercules Hoists Limited v. ACIT (Mum)(Trib.) www.itatonline.org
On 8 June 2013 21:09, Amit Jha <amitmohanjha83amit@gmail.com> wrote:
This is a perfect example of making additions or make disallowances just because last year's such type of trivial addition or disallowance not yet decided by the Supreme court. If this kind of trend continues, assesses will try to indulge in other acts to evade tax. Department should make such acts or laws or do such assessments where people would not try to evade tax but to avoid tax by using the expertise knowledge of CAs in proper Tax Planning. There is no harm in having an excellent and solid tax planning method than to enforcing the assesses in indulging unfair practice to avoid tax.. It will be huge burden on our exchequers then.
In this case there is no logic on the part of the assessing authority to not allow the set off of loss from the eligible business of the assessee. How can we deny the assessee to set off the loss from its windmill business to arrive at the net profit from the business or profession when sec 70(1) clearly says it. loss on account of windmill business, i.e., eligible business as per section 80-IA, is allowable for set off against income under other heads as here business profit through windmill power generation could be an ancillary business in addition to its other eligible business. In this particular case I don't find any logic on the part of the AO to take this issue to such a state. Its only wastage of time, energy and public money on such a frivolous argument base. As its rightly pointed out by Sri Ravi Mohan that we too take lessons from this case and avoid writing such type of objection when the issue is crystal clear. We should not encourage the trend that "Only for the sake of raising a multitude of objections, we have raise it". All our field staffs should believe in quality not quantity of objections and our hqrs people should also not create a hype and accolade persons who raise only a plethora of irrelevant or objections on frivolous ground which is apparent from the records that there is no objections, we stop this attitude sooner than later as our reputed organization always set an example to follow for others in the years to come. Thanks Pavan sir for bringing this issue here which turns out to be a great eye-opener for all of us. I hope all would follow the suggestions imparted by Sri Pavan sir and Sri Ravi sir which would definitely result in saving the precious time we require the most and our tireless efforts going waste. It may be a trivial issue but it consists of a great theme for all of us in practice.
In this case there is no logic on the part of the assessing authority to not allow the set off of loss from the eligible business of the assessee. How can we deny the assessee to set off the loss from its windmill business to arrive at the net profit from the business or profession when sec 70(1) clearly says it. loss on account of windmill business, i.e., eligible business as per section 80-IA, is allowable for set off against income under other heads as here business profit through windmill power generation could be an ancillary business in addition to its other eligible business. In this particular case I don't find any logic on the part of the AO to take this issue to such a state. Its only wastage of time, energy and public money on such a frivolous argument base. As its rightly pointed out by Sri Ravi Mohan that we too take lessons from this case and avoid writing such type of objection when the issue is crystal clear. We should not encourage the trend that "Only for the sake of raising a multitude of objections, we have raise it". All our field staffs should believe in quality not quantity of objections and our hqrs people should also not create a hype and accolade persons who raise only a plethora of irrelevant or objections on frivolous ground which is apparent from the records that there is no objections, we stop this attitude sooner than later as our reputed organization always set an example to follow for others in the years to come. Thanks Pavan sir for bringing this issue here which turns out to be a great eye-opener for all of us. I hope all would follow the suggestions imparted by Sri Pavan sir and Sri Ravi sir which would definitely result in saving the precious time we require the most and our tireless efforts going waste. It may be a trivial issue but it consists of a great theme for all of us in practice.
On Jun 1, 2013 11:27 PM, "Ravi Mohan" <ravibabusa321@gmail.com> wrote:
manpower,crucial time and lots of money going wastage by making
additions or disallowance on such things..by doing so they themselves
are complicating the matters.it is evident from the case itslf that
assessee is right in his argument.thanks to Mr.Pavan for raising this
issue so that it acts as an eye opener for us and it is high time we
too stopped issue queries on such frivolous issues which doesnt do
good for anyone..the message is loud n clear that just because Apex
court's decision on a particular frivolous issue not yet come,so we
are justified in writing the objection.we better avoid this viewpoint
now..
On 5/31/13, Pavan Singla <singlapavan@gmail.com> wrote:
> IT : Losses from windmill business, i.e., eligible business under section
> 80-IA, can be set off against other heads of income
>
> ■■■
>
> [2013] 33 taxmann.com 319 (Bangalore - Trib.)
>
> IN THE ITAT BANGALORE BENCH 'A'
>
> Deputy Commissioner of Income-tax
>
> v.
>
> V.B.
> Koujalgi*<http://www.taxmann.com/topstories/101010000000084268/losses-from-windmill-business-being-an-eligible-business-under-sec-80-ia-can-be-set-off-against-other-income.aspx#fn1>
> N. BARATHVAJA SANKAR, VICE-PRESIDENT
> AND N.V. VASUDEVAN, JUDICIAL MEMBER
>
> IT APPEAL NO. 213 (BANG.) OF 2012
> [ASSESSMENT YEAR 2008-09]
>
> OCTOBER 1, 2012
>
> Section 72, read with section 80-IA of the Income-tax Act, 1961 - Losses -
> Carry forward and set off of business losses - Losses of windmill business
> - Assessment year 2008-09 - Whether loss from windmill business, which fell
> under category of eligible business as per section 80-IA, could be set off
> against other heads of income of assessee - Held, yes [Para 6] [In favour
> of assessee]
>
> *CASE REVIEW*
>
>
>
> *CIT* v. *Swarnagiri Wire Insulations (P.) Ltd. *[2012] 349 ITR 245
> (Kar.)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000084178&source=link>
> (para
> 6) *followed*.
>
> *CASES REFERRED TO*
>
>
>
> *Swarnagiri Wire Industries (P.) Ltd.* v. *ITO *[2011] 10 taxmann.com 295
> (Bang.)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000060461&source=link>
> (para
> 3), *CIT* v. *Swarnagiri Wire Insulations (P.) Ltd. *[2012] 349 ITR 245
> (Kar.)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000084178&source=link>
> (para
> 5) and *Synco Industries Ltd.* v. *Assessing Officer (Income-tax) *[2008]
> 299 ITR 444/168 Taxman 224
> (SC)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000081525&source=link>
> (para
> 5).
>
> *S.K. Ambastha* *for the Appellant. **Smt. Pratibha R.* *for the
> Respondent.
> *
>
> *ORDER*
>
>
>
> *N. V. Vasudevan, Judicial Member *.-This is an appeal by the Revenue
> against the order dated November 15, 2011 of the Commissioner of Income-tax
> (Appeals), Hubli, relating to assessment year 2008-09.
>
> *2.* The grounds of appeal raised by the Revenue reads as follows :
> "1. The order of the Commissioner of Income-tax (Appeals) is opposed to law
> and facts of the case.2. The learned Commissioner of Income-tax (Appeals)
> has erred in holding that the loss on account of windmill business, i.e.,
> eligible business as per section 80-IA, is allowable for set off against
> income under other heads.3. The Commissioner of Income-tax (Appeals) has
> failed to appreciate that the windmill business falls under category of
> eligible business as per section 80-IA and also that section 80-IA has
> overriding effect on any other provisions under the Act including sections
> 70 and 71.4. The decision of the High Court of Karnataka, Circuit Bench
> Dharwad, in the case of *CIT* v. *Swarnagiri Wire Insulations (P.) Ltd.
> *[2012]
> 349 ITR 245
> (Karn)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000084178&source=link>
> in
> I.T.A. No. 5050 of 2010 has been accepted by the Department merely on the
> ground of monetary ceilings fixed by the Central Board of Direct Taxes for
> filing special leave petition."
>
> *3.* The assessee is an individual. Among other businesses, the assessee
> also carried on the business of power generation through windmill. It is
> not in dispute that the assessee was entitled to claim deduction under
> section 80-IA(2) of the Income-tax Act, 1961 in respect of profits derived
> from the business of generation of power by windmill. The assessee incurred
> a net loss of Rs. 3,89,130 in the business of generation of power through
> windmill. This loss was sought to be set off against income from other
> businesses. The claim of the assessee was rejected by the Assessing
> Officer. The Commissioner of Income-tax (Appeals), however, allowed the
> claim of the assessee by relying on the decision of the hon'ble Income-tax
> Appellate Tribunal in the case of *Swarnagiri Wire Industries (P.) Ltd.* v.
> *ITO *[2011] 10 taxmann.com 295
> (Bang.)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000060461&source=link>,
> dated 21-5-2010 for the assessment year 2006-07. Aggrieved by the order of
> the Commissioner of Income-tax (Appeals), the Revenue is in appeal before
> the Tribunal.
>
> *4.* We have heard rival submissions and perused the material on record.
> The Tribunal, in the case of *Swarnagiri Wire Industries (P.) Ltd.*
> (*supra*)
> had considered an identical issue relating to the applicability of section
> 80-IA(5) of the Act. The relevant finding of the Tribunal in the case
> of *Swarnagiri
> Wire Industries (P.) Ltd.* (*supra*) is as follows :
>
> "6.5. Thus, for the purpose of determining the quantum of deduction as
> referred to in sub-section (1) to section 80-IA in respect of an eligible
> business, the computation will have to be done as if such eligible business
> was the only source of income to the assessee in all the relevant years of
> claim commencing from the initial assessment year. On a broad reading of
> the Act, it may appear that the carried-forward loss of the eligible
> business were required to be set off first against the income of the
> subsequent years of eligible business while determining the profits
> eligible for deduction under section 80-IA of the Act and set off of losses
> from other sources under the same head is not permissible. However, it
> should not be forgotten that section 80-IA of the Act is a beneficial
> section permitting certain deductions in respect of certain income under
> Chapter VI-A of the Act. A provision granting incentive for promotion of
> economic growth and development in taxing statutes should be liberally
> construed and restriction placed on it by way of exception, should be
> construed in a reasonable and purposive manner so as to advance the objects
> of the provision. It is a generally accepted principle that the deeming
> provision of a particular section cannot be breathed into another section.
> Therefore, the deeming provision contained in section 80-IA(5) cannot
> override the section 70(1) of the Act. The Commissioner of Income-tax
> (Appeals)'s observation on this regard that the specific provisions of
> section 80-IA(5) have overriding effect is not acceptable. In the given
> case, the assessee incurs loss after claiming eligible depreciation. Hence,
> section 80-IA becomes insignificant, since there is no profit from which
> this deduction can be claimed. At this stage, section 70(1) comes to the
> rescue of the assessee, whereby he is entitled to set off the losses from
> one source against income from another source under the same head of
> income. However, once a set off is allowed under section 70(1) from the
> income on another source under the same head, another deduction on the same
> count is not permissible, i.e., during the subsequent years if the assessee
> makes surplus profits after claiming eligible allowances and is entitled to
> claim deduction under section 80-IA, the earlier benefit given under other
> sections of the Act should be taken into account before granting deduction
> under section 80-IA. We here below bring out the following illustration to
> explain the applicability of section 80-IA."
>
> *5.* We find that the facts and the issue considered by the Tribunal in the
> case of *Swarnagiri Wire Industries (P.) Ltd.* (*supra*) are identical and
> with reference to the issue in the instant case. The Tribunal order cited
> supra has been affirmed by the hon'ble jurisdictional High Court in
> *Swarnagiri
> Wire Insulations (P.) Ltd. *[2012] 349 ITR 245
> (Kar.)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000084178&source=link>.
> The hon'ble jurisdictional High Court has followed the judgment of the
> hon'ble Supreme Court in the case of *Synco Industries Ltd.* v. *Assessing
> Officer (Income-tax) *[2008] 299 ITR 444/168 Taxman 224
> (SC)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000081525&source=link>.
> The relevant finding of the jurisdictional High Court is reproduced below
> (page 248 of 349 ITR) :
>
> "The Supreme Court had an occasion to consider the same question in the
> case of *Synco Industries Ltd.* v. *Assessing Officer* (Income-tax)
> reported in [2008] 299 ITR 444
> (SC)<http://www.taxmann.com/fileopen.aspx?Page=CASELAWS&id=101010000000081525&source=link>
> and
> at paragraph 13 it has been held as under (page 454) :
>
> 'The contention that under section 80-I(6) the profits derived from one
> industrial undertaking cannot be set off against loss suffered from another
> and the profit is required to be computed as if profit making industrial
> undertaking was the only source of income, has no merit. Section 80-I(1)
> lays down that where the gross total income of the assessee includes any
> profits derived from the priority undertaking/unit/division, then in
> computing the total income of the assessee, a deduction from such profits
> of an amount equal to 20 per cent. has to be made. Section 80-I(1) lays
> down the broad parameters indicating circumstances under which an assessee
> would be entitled to claim deduction. On the other hand, section 80-I(6)
> deals with determination of the quantum of deduction. Section 80-I(6) lays
> down the manner in which the quantum of deduction has to be worked out.
> After such computation of the quantum of deduction, one has to go back to
> section 80-I(1) which categorically states that where the gross total
> income includes any profits and gains derived from an industrial
> undertaking to which section 80-I applies then there shall be a deduction
> from such profits and gains of an amount equal to 20 per cent. The words
> "includes any profits" used by the Legislature in section 80-I(1) are very
> important which indicate that the gross total income of an assessee shall
> include profits from a priority undertaking. While computing the quantum of
> deduction under section 80-I(6), the Assessing Officer, no doubt, has to
> treat the profits derived from an industrial undertaking as the only source
> of income in order to arrive at the deductions under Chapter VI-A. However,
> this court finds that the non obstante clause appearing in section 80-I(6)
> of the Act, is applicable only to the quantum of deduction, whereas, the
> gross total income under section 80B(5) which is also referred to in
> section 80-I(1) is required to be computed in the manner provided under the
> Act which presupposes that the gross total income shall be arrived at after
> adjusting the losses of the other division against the profits derived from
> an industrial undertaking. If the interpretation as suggested by the
> appellant is accepted it would almost render the provisions of section
> 80A(2) of the Act nugatory and, therefore, the interpretation canvassed on
> behalf of the appellant cannot be accepted. It is true that under section
> 80-I(6) for the purpose of calculating the deduction, the loss sustained in
> one of the units, cannot be taken into account because sub-section (6)
> contemplates that only the profits shall be taken into account as if it was
> the only source of income. However, section 80A(2) and section 80B(5) are
> declaratory in nature. They apply to all the sections falling in Chapter
> VI-A. They impose a ceiling on the total amount of deduction and,
> therefore, the non obstante clause in section 80-I(6) cannot restrict the
> operation of sections 80A(2) and 80B(5) which operate in different spheres.
> As observed earlier, section 80-I(6) deals with actual computation of
> deduction whereas section 80-I(1) deals with the treatment to be given to
> such deductions in order to arrive at the total income of the assessee and,
> therefore, while interpreting section 80-I(1), which also refers to gross
> total income one has to read the expression 'gross total income' as defined
> in section 80B(5). Therefore, this court is of the opinion that the High
> Court was justified in holding that the loss from the oil division was
> required to be adjusted before determining the gross total income and as
> the gross total income was 'nil' the assessee was not entitled to claim
> deduction under Chapter VI-A which includes section 80-I also.'
>
> *6.* In view of the law laid down by the apex court as aforesaid, there is
> no error in the order passed by the Tribunal. As such, no case for
> interference is made out. Accordingly, the substantial question of law as
> framed is answered against the Revenue and in favour of the assessee."
> Since the issue in the instant case is directly covered by the judgment of
> the hon'ble jurisdictional High Court cited supra, we are of the view that
> the order of the first appellate authority directing the Assessing Officer
> to set off loss from windmill business against other heads of income of the
> assessee is justified and no interference is called for. We therefore,
> confirm the order of the Commissioner of Income-tax (Appeals) and dismiss
> the appeal filed by the Revenue.
> I fail to understand why do we have to make additions on such count. The
> law position is very clear. assessee gets deduction on profits of windmill
> as per 80IA and it is not exemption. The income/loss forms part of total
> income. I am sometimes gets very puzzles that we are wasting are limited
> type on fining appeals on frivolous issues.
> this is not helping either the department or the assessee.
> Department is wasting money and manpower ona friolous issues whereas
> assessee has to pay to the advocates or professionals.
> Secondaly , in subsequent years , Assessing Officers without going in to
> other details will make the same addition on the ground that appeal is
> pending at ITAT,high court etc.
> In this case itself , if departments keeps this stand , the how will they
> apply provisions of sec. 80IA(5) , when the assessee claims the deduction
> after generating benfit from the windmill. Department itself is weakening
> its case.God save the country.
S.80-IB : Industrial undertakings – Additional ground – Claim not made in return – Claim cannot be entertained in view of specific provision of section 80A(5) which was inserted by Finance Act, 2009 which is applicable retrospectively from the Assessment year 2003-04. (S.80IB (5))
Assessee did not make a claim of deduction in A.Y. 2003-04 and 2004-05, rather made the claim for the first time before CIT (A) by filing an additional ground. It was held that the provisions of S. 80IB(5) inserted by Finance Act, 2009 which are applicable retrospectively from AY 2003-04, clearly provides that in case assessee fails to make a claim in the return of income, the claim could not be allowed. The provision was applicable for A.Y. 2003-04 and 2004-05. Therefore, in the view of these provisions which are quiet unambiguous and clear, claim of assessee cannot be allowed. (A.Ys. 2003-04, 2004-05)Hindustan Colas Ltd. v. ACIT (2013) 140 ITD 277 / 151 TTJ 421 (Mum)(Trib.)
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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