Sale proceeds of land/bonds aren't annual receipts; excludible in determining monetary limit of sec. 10(23C)(iiiad)
November 15, 2014[2014] 50 taxmann.com 81 (Madras)/[2014] 226 Taxman 372 (Madras)
IT: Sale proceeds of land and bonds was not an annual receipt therefore, same should be excluded while considering monetary limit prescribed under section 10(23C)(iiiad)
Extended period of limitation cannot be invoked where periodical returns were filed promptly and accepted by audit team but disputed at the time of second audit conducted
Extended period of limitation cannot be invoked where periodical returns were filed promptly and accepted by audit team but disputed at the time of second audit conducted
Urja Engineers Limited Vs. Commissioner of Central Excise & ST., Vadodara [2014 (11) TMI 157 - CESTAT AHMEDABAD]
Urja Engineers Limited (the Appellant) availed the ineligible Cenvat credit and the same was duly reflected in the periodicalreturns filed with the Department. The unit of the Appellant was audited by both the Internal Department's Audit Team as well as CERA but no objection was raised by them.
However, the Second Audit Party noticed the mistake and proceedings were initiated against the Appellant by invoking the extended period of limitation under Section 11A of the Central Excise Act, 1944 ("Excise Act").
Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Ahmedabad.
The Appellant argued that the extended period of limitation cannot be invoked and relied upon the following case laws: -
- Rajasthan Warehousing Corpn. Vs. CCE Jaipur [2011 (23) STR 385 (Tri. Del.)];
- CCE Bangalore Vs. MTR Foods Limited [2011-TIOL-696-HC-KAR-CX];
- Garrison Polysacks Pvt. Limited Vs. Commissioner of Service Tax Vadodara [2013 (292) ELT 513 (Tri. Ahmd.)]("Garrison case");
- CCE Kolkata Vs. ITC Limited [2013 (291) ELT 377 (Tri. Kol.)]
The Hon'ble CESTAT, Ahmedabad relied on the decision inGarrison caseand held that in terms of the proviso of Section 11A of the Excise Act,extended period of limitation cannot be invoked as the periodical returns were filed promptly by the Appellant and it was clearly mentioned in the returns that they had availed the said ineligible Cenvat creditwhich was duly accepted by the First Audit Party.
Accordingly, the appeal filed by the Appellant was allowed with consequential relief.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Interest on delayed refund claim U/s. 11BB also applicable on refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004
Interest on delayed payment of refund claim under Section 11BB of the Central Excise Act, 1944, also applicable on refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004
Sterlite Industries Limited Vs. Commissioner of Central Excise & ST., Vapi [2014 (11) TMI 160 - CESTAT AHMEDABAD]
Sterlite Industries Limited (the Appellant) filed a refund claim of Rs. 7,11,45,917/- on September 27, 2004 for accumulated credit under the provisions of Rule 5 of the Cenvat Credit Rules, 2004 (the Credit Rules) but the Appellant did not annex all the documents required for the purpose of processing the refund claim.Accordingly, the Appellant filed a revised refund claim of Rs. 7,13,28,821/- on December 8, 2005 out of which an amount of Rs. 6,45,83,460/- was sanctioned by the Adjudicating Authority.
Thereafter, the Appellant filed a refund claim of Rs. 49,39,393/- for interest on delayed refund under Section 11BB of the Central Excise Act, 1944 ("the Excise Act") which was denied by the Adjudicating Authority.
The first Appellate Authority upheld the order of the Adjudicating Authority on the following grounds: -
- The delay in sanction of refund claim was due to non-furnishing of documents by the Appellant and not due to the Revenue.
- The Appellant's refund was not filed vide Section 11B of the Excise Act and hence no interest under Section 11BB thereof is admissible.
Being aggrieved, the Appellant preferred an appeal to the Hon'ble CESTAT, Ahmedabad.
The Hon'ble CESTAT, Ahmedabad held that:
- It is apparent from the Order-In- Original dated March 9, 2006 that refund claim was decided under Rule 5 of the Credit Rules read with Notification No. 11/2002-CE (NT) dated March 1, 2002 ("the Notification") and Section 11B of the Excise Act;
- Section 11B of the Excise Act has also been made applicable to the refund claim of Rule 5 of the Credit Rules as per Clause 6 of the Notification;
- It would be inappropriate to say that interest provisions of Section 11BB of the Excise Act not applicable to refunds under Rule 5 of the Credit Rules;
- As per the facts and circumstances of the case, date of filing of refund claim has been taken as September 27, 2004 to reject/ sanction the refund claim of the Appellant which was sanctioned on March 9, 2006;
- The Adjudicating Authority vide letter dated November 3, 2004 raised certain queries but did not return the refund claim filed by the Appellant. No efforts were made by the Department to reject the refund claim as unsubstantiated when the Appellant was not providing the required details/ documents.
Thus there was delay in sanctioning the refund claim of the Appellant and accordingly, interest on delayed refund is payable to the Appellant under Section 11BB of the Excise Act.
Our Comments: Even, the recent Notification No. 27/2012-CE (NT) dated June 18, 2012, allowing refund under Rule 5 of the Credit Rules, contains a clause no. 3(b) which states that "The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed by the claimant, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944)".
Hence, in lieu of existent provisions, the assessee can claim Interest on delayed payment of refund claim under Section 11BB of the Excise Act, also as applicable on refund of accumulated Cenvat credit under Rule 5 of the Credit Rules.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Cenvat credit allowable on Capital Goods acquired on lease basis from a Company which is not a financing Company
Wimplast Limited Vs. Commissioner of Central Excise & ST., Daman [2014 (11) TMI 161 - CESTAT AHMEDABAD]
In the instant case, the First Appellate Authority denied the Cenvat credit on Capital Goods on only ground that Wimplast Limited (the Appellant) had purchased the Capital Goods on hire purchase or loan agreement form a Company which was not a financial Company as prescribed under Rule 4(3) of the Cenvat Credit Rules, 2004 (the Credit Rules), which reads as under:
"Rule 4: Conditions for allowing CENVAT credit
……….
(3) The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company."
Being aggrieved, the Appellant preferred an appeal to the Hon'ble CESTAT, Ahmedabad.
The Appellant relied upon the decision inthe case of Leamak Healthcare Pvt. Ltd. [2010 (259) ELT 554 (Tri. Ahmd.)] ("Leamak case"), wherein it was held that the words used in Rule 4(3) of the Credit Rules are 'even if the Capital Goods are acquired' which does not debar Cenvat credit taken on the Capital Goodsacquired froma Company which is not a financing Company.
The Hon'ble CESTAT, Ahmedabad after considering the facts and circumstances of the case and relying upon the judgment inLeamak case, held that Rule 4(3) of the Credit Rules does not require procurement of the Capital Goods from financing Company but it is enabling and enlarging sub-rule allowing Cenvat credit even in those cases where the Capital Goods have been procured from a financing Company. Accordingly the Appellant is entitled to the benefit of Cenvat Credit.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com
Insertion of new entries in Schedule of Company Law Board (Fees on Applications and Petitions) Rules, 1991
Insertion of new entries in the Schedule of Company Law Board (Fees on Applications and Petitions) Rules, 1991
The Ministry of Corporate Affairs vides Notification No. F. No. 1/19/2014-CL-V dated November 3, 2014 has amended the Company Law Board (Fees on Applications and Petitions) Rules, 1991 (the Rules) which shall come into force on the date of their publication in Official Gazette.
In the Rules, feesfor the following activity has been inserted:
- For allowing any period other than April to March as financial year (Section 2(41) of the Companies Act, 2013);
- Rectification of register of members (Section 58 and 59 of the Companies Act, 2013);
- Directing the Company to pay the sum due or for any loss or damage incurred as a result of such non-payment (Section 73(4) of the Companies Act, 2013); and
- To allow further time as considered reasonable to the Company to repay the deposit (Section 74(2) of the Companies Act, 2013).
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Transaction value cannot be rejected on mere doubt, without any reasonable & justifiable evidence
Mere doubt, without any reason or rhyme cannot be made the basis for rejection of the transaction value, without any reasonable and justifiable evidence
Kelvin Infotech Pvt. Ltd. Vs. Commissioner of Customs, Central Excise & ST, Meerut and Commissioner of Customs, Central Excise & ST, Meerut Vs. M/s. Kelvin Infotech Pvt. Ltd.[ 2014 (11) TMI 164 - CESTAT NEW DELHI]
Kelvin Infotech Pvt. Ltd.(the Assessee) entered into a contract with Argain Company Ltd., Taiwan for purchasing stock lot of LCD TVsof 3600 PCs of Samsung, Sony and Sanyo brand of various assorted models/sizes (impugned goods) on 'as is, where it is basis' and at 15% discount subject to the condition that the Assessee importer accepts the offer within 3 days of the offer letter and picks up the entire lotby December, 2010. On concluding the sales contract, the Assessee intimated the Revenue about the said sales contract vide letter dated June 15, 2010 and furnished certain information as desired by the Revenue.
Thereafter, on import of the impugned goods, the Appellant filed two bills of entries dated July 13, 2010 and July 30,2010 with correct description, size and brand. The Revenue on enquiring from the local dealers of the Sony brand and scrutiny of the NIDB data found that the impugned goods were undervalued, hence assessed the impugned goods imported vide Bill of Entry dated July 13,2010 at enhanced value and issued a Show Cause Notice in that regard which culminated into order passed by the Additional Commissioner confirming the demand, confiscating the goods with an option to redeem the same on payment of redemption fine and imposing penalties.
Said order of the Additional Commissioner was challenged before the Commissioner (Appeals). The Commissioner (Appeals) vide two different Orders-In-Appeals rejected the appeals filed by the Assessee but reduced the amount of redemption fine and penalty. The Commissioner (Appeals) observed that the Assessee has not declared the brand/ size of the impugned goods, and has not obtained the brand name and model of the goods from the consigner as correct brand. Hence, there is mis-declaration and malafide intention on the part of the Assessee. Further, in terms of Section 14 of the Customs Act, 1962 ("the Customs Act"), the transaction value of the goods is the assessable value, in the ordinary course of business but where the said value is doubted by the Customs, the transaction value can be rejected and the assessable value can be determined under the provisions of the Customs Valuation (Determination of Price of imported Goods) Rules, 2007.
Thereafter,the Assessee preferred an appeal before the Hon'ble CESTAT, Delhi.The Revenue also filed an appeal against the reduction of the redemption fine and penalty.
The Hon'ble CESTAT, Delhi relying on the decisions made in the following cases:
- Eicher Tractors Ltd. Vs. CCE Mumbai [2000 (122) ELT 321 (SC)];
- Commissioner of Customs Raigadh [2005 (190). ELT 244 (Tri-Del)]; and
- Commissioner of Customs Vs. Bureau Varitas [2005 (1817) ELT 3 S.C.]
held that:
- Apart from contesting that the Assessee has not disclosed the model number, the country of origin of the LCD TVs, the Revenue has not produced any evidence to show that any money has flown back to the supplier of the impugned goods in Taiwan or the Assessee has paid higher amount to the supplier than the agreed amounts;
- Mere doubt, without any reason or rhyme cannot be made the basis for rejection of the transaction value, without any reasonable and justifiable evidence;
- The impugned goods being stock lot, it was neither possible nor practical for the Assessee to declare the country of origin or year of manufacture of each and every piece.
- This non possibility already stand intimated to the AC, even prior to the import of impugned goods.
Hence, the Hon'ble Tribunal vide common order allowed the appeals filed by the Assessee and rejected the Revenue appeal.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
You decide importance of Majority and Resolutions in your Business
CA Umesh Sharma
Arjuna (Fictional Character): Krishna, In Maharashtra State discussion on proving Majority and resolution for proving trust in Government is going on. It's for the formation and running of the Government. But what if, it happens in business, please explain what the importance of majority and resolutions in business.Krishna (Fictional Character): Arjuna, the foundation of every work is built on Trust. In Businesses there is exclusive importance to majority and resolution, where work is going on together with one or more people. In business each resolution must be in written form. Here oral resolutions are not accepted. Legal negligence is not affordable to business while taking significant decisions. There are many examples of Big Business houses, Co-operative banks, Educational institutions, charitable institutions, Sugar , etc. are found were there ownership got transferred or destroyed for want of majority. In business, as per nature of constitution i.e., Private and Public limited company, LLP, Partnership firm, Co-operative society, etc. rules are framed relating to the majority ,resolution and the same should be followed. If any dispute arises then everyone recalls the law. But due to issues of conflicts in partner, stakeholders, many businessmen's move towards the proprietorship.
Arjuna: Krishna, What are the rules for majority and resolution in Public Limited Company and Private Limited Company?
Krishna: Arjuna, both in Public Limited Company and Private Limited Company there is separation of ownership (shareholders) and management (Board of Directors). For both of them the rules regarding majority and resolutions are different. If shareholder's hold 50% or more share then clear majority can be obtained. Restrictive/special rights can be obtained if 25% or more share ownership is there. Further if the shareholding of one shareholder is more than others, then he has the special rights and the same can be used while passing the resolutions in Annual General Meetings or as the case may be. To prove majority in Board of Directors, simple majority that means more the persons on one's side the majority will be of that side. E.g. if there is a board of 10 directors then majority will form for 6 or more directors. According to section 114 of New Companies Act 2013, there are two types of resolutions.1) General resolution 2) Special resolution. Further unanimous resolutions are also there for specific purpose. There are different rules for the meetings and resolutions of Board of Directors and shareholders. Now Government has introduced many restrictions in new Companies Act 2013, so that issues of directors and shareholders should not be detrimental to companies object. Further the restrictions of SEBI are applicable to Public Limited Company. In case of dispute, Registrar of companies, Company law board, SEBI, Courts will decide whether there is majority or not. Thus while running companies take care of egos of stakeholders.
Arjuna: Krishna, What are the rules for majority and resolution in Co-operative societies and Charitable Institutions?
Krishna: Arjuna, as the provisions of Companies Act are stringent, likewise there are stringent provisions of Co-operative societies or trust related to majority and resolutions. Under these category Co-operative societies, Banks, Sugar Factories, etc. falls. Under Trust, Educational Institutions, Charitable Institutions, etc. falls. The intention of Co-operative societies may be of business but the trusts have no such intention. Co-operative Society's Act 1960 is applicable to co-operative societies. In this the members are the owners and boards of directors are the executors of work. In the society every member has the right of voting and resolutions are approved with simple majority. To prove majority simple majority which means more the persons on one's side the majority will be of that side. E.g. if there are 10 members then majority will form for 6 or more members. In Maharashtra, Bombay Public Trust Act 1950 is applicable to charitable institutions. But the exception in this is that while selling the immovable property of charitable institution and while appointing new trustee the resolution should be approved unanimously. Without majority running such type of originations is very difficult task.
Arjuna: Krishna, Is it necessary to keep record related to resolution?
Krishna: Arjuna, according to respective laws, every resolution should be written in Minute Books. Notice of every meeting should be issued within time and acknowledgement of direct receipt should be kept on record. Also signature on member attendance register should be taken and in next meeting the minutes of last meeting should be read and in this note of proposer and accepters. The details of subject should be provided clearly in notice. The Companies Act 2013 provides many section related to maintenance of records of resolutions of Company. Therefore one must follow them compulsorily. Record should be maintained with advice of Company Secretory and should be filed with Registrar of Companies in time. Many a time's small private limited companies delays in keeping the record. Most of the times dispute arises because of improper maintenance of record, therefore to avoid this; record of every transaction should be kept. Most importantly there should be transparency while passing resolution in businesses.
Arjuna: Krishna, that was of great importance to me. Now please tell what are the rules for majority and resolution in Partnership Firm and Limited Liability Partnership?
Krishna: Arjuna, Partnership and Limited Liability Partnership are different laws, but the rules for majority and resolution are same in both. Rules for resolution are not like companies but there is importance of signature of partner on a particular transaction or record. Partnership Firm runs according to the Indian partnership Act 1932 and there is extreme importance to partnership deed. Similarly, Limited Liability Partnership Act 2008 is applicable to LLP and in this LLP agreement is most important. In Partnership deed/ LLP agreement the ownership of every partner and the rights of every partner in business, is mentioned. Majority will be received if 50% or more ownership is of partner. And the important work i.e. Rights to operate bank Accounts, Assets selling and purchase right, etc. should be mentioned in it. The compliances of Partnership Act/LLP are easy; as compared to Companies Act therefore many businessmen go for Partnership/LLP nowadays.
Arjuna: Krishna, what one should learn from the rules of majority and resolution?
Krishna: Arjuna, when things go in right direction in business then there is negligence on these things, but if ego of any member or partner is hurt, opinion changes or any dispute arises then majority and resolution rules comes to help. Delay in compliance of law or mistake may take the legal battle to unpredictable situation. Different groups may get formed in business and economic hardship may arise in business. Politics in business and Business of politics both are bad, whether in Business or Government. One should continue good deeds, even if there is no majority, same rule applies in social and family life also.
Dear Tax guru lovers, Please share your views.
MUMBAI, NOV 17, 2014: THE issue before the Bench is - Whether undisclosed income revealed post search inquiry can be assessed within the scope of the block assessment, although the time for filing return for such assessment year has not expired as on the date of the search. And the answer is YES.
Facts of the case
The assessee publishes a daily newspaper "Herald". Consequent to a search warrant issued under Section 132 of the Income Tax Act, executed on 01.11.1999 and 02.11.1999, the Deputy Commissioner of Income Tax, made block assessment for the period 01.04.1989 to 01.11.1999. Income generated by the said Unit was claimed as exempted in return for the AY 1999-2000, and in block assessment return as income of new industrial undertaking exempt u/s 80 IA. It was submitted that the search was completed on 02.11.1999 and last date of filing of the said return was 30.11.1999. Hence, following mandate of Section 158BB(1)(d) of the Income Tax Act, the said income could not have been taken into account for the purpose of block assessment. The AO made additions which was maintained by the CIT (A) as also by the Tribunal. Hence, this appeal.
The Counsel for the assessee argued that Stipulation in Section 158 BB (1)(d) of the Income Tax Act has been overlooked. That section excludes from the scope of the block assessment, such income assessable for assessment year for which the time of filing return has not expired as on the date of the search. He submitted that raid was conducted on 02.11.1999, while the normal date for filing the return was 30.11.1999. Accordingly the return was filed within time. He also submitted that the said last date was later on extended upto 30.12.1999. He contended that necessary details were also given in that return and entries were made in books of account before the date of filing of the return
Having heard the parties, the High Court held that,
++ the fact that time to file return was not over on the date of raid and return came to be filed on 30.11.1999, needs to be accepted. Section 158-BA dealing with the subject of assessment of undisclosed income as a result of search mandates that such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years. If this requirement is met with, the said income cannot be included in the block period. Appellant assessee has failed to demonstrate this fact. Section 158-BB is about the computation of undisclosed income of the block period. Its subsection(1)(d) lays down that where the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; the undisclosed income can be computed. Provisions of both these Sections are very clear. Thus, the bar prescribed is not absolute. But then the appellant – assessee ought to have pointed out how the said income was disclosed in books before the date of raid & in its regular return. The I.T.A.T. has observed in paragraph no.11 of its order that no clarification was given as to whether the deductions under Section 80 IA was claimed in that return or not. The accounts officer has noted that the computerized books of account were produced before the DDIT only. The I.T.A.T. has found that said addition was made on the basis of the documents obtained during search and during post search enquiry. During arguments in this appeal, the Counsel appearing for the appellant was asked whether the assessment in terms of the return filed on 30.11.1999 is completed or not. The Counsel replied on 08.10.2014 that he was not having any instructions on this issue. The arguments of this Counsel were again on 13.10.2014 & even on said date, query remained un answered. In this situation, we are not in a position to accept the contentions of the appellant based on Section 158(BB)(1)(d);
++ in this situation, we find that question (d) also cannot be answered in favour of the appellant.
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