JSW STEEL SALAV LTD Vs CCE: MUMBAI CESTAT (Dated: August 03, 2016)
CX - CENVAT - Rule 2(l) of CCR, 2004 - Fact that the guesthouse is located right next to the factory implies that it is used in relation to the manufacturing activity - credit of repair and maintenance services of the guesthouse is admissible - Appeals allowed: CESTAT [para 4, 5, 6.2]
Appeals allowed
Observations of Tribunal -
+ I find that the Service Tax credit in respect of shipping fees and services availed in respect of vessels and barges is covered by the order of Tribunal in the appellant's own case vide order dated 11.3.2014 and 08.03.2013. In view of the above, credit of these services is available and is allowed.
+ In this case, the insurance is in respect of vehicles and other assets owned by the appellant. Relying on the decision of Hon'ble High Court of Delhi in the case of DSCL Sugar (supra), the credit of the insurance services is allowed.
+ The guesthouse is located right next to the factory premises. It is not the case of the Revenue that these services are used for personal consumption of the employees. The fact that the guesthouse is located right next to the factory implies that it is used in relation to the manufacturing activity. In view of the above, credit of repair and maintenance services of the guesthouse is allowed.
2016-TIOL-1751-HC-AHM-IT
CIT Vs SADBHAV ENGINEERING LTD: GUJARAT HIGH COURT (Date: July 25, 2016)
Income tax - Sections 80IA & 271(1)(c)
Keywords - furnishing inaccurate particulars - penalty - recomputation of deduction - quantum additions & wrong claim
Whether penalty u/s 271(1)(c) can be levied on basis of mere wrong claims by assessee, in absence of any attempt on part of the assessee to suppress the income or provide inaccurate particulars thereof - NO: HC
The Revenue had preferred the present appeal challenging the order, whereby the ITAT had confirmed the CIT(A)'s decision, who while upholding the quantum additions, deleted the penalty imposed by the AO u/s 271(1)(c). The CIT(A) while holding so opined that a different view had been taken by the AO out of the two possible views while rejecting the claim of assessee and while recalculating the deduction u/s 80IA and mere recomputation/recalculation deduction u/s 80IA would not amount to concealment of income or furnishing of inaccurate particulars of income. He further noticed that the claim of assessee was supported by the advice of the tax expert and report of the auditor in Form 10CCB.
Having heard the parties, the High Court held that,
++ we are informed that against the judgement of the Tribunal deleting the additions, the High Court has admitted the appeal. Ordinarily, when therefore the Tribunal had dismissed the Revenue's appeal on penalty only on the ground that the quantum additions have been deleted, we would have waited to watch the development in the Revenue's appeal against the quantum. However, in the present case, we have perused the order of CIT (A) by which, the penalty came to be deleted. Perusal of the order of the CIT (A) on the quantum as well as penalty and perusal of the order of the Tribunal on quantum would persuade us that the entire issue of taxable amount of the principal sum was the highly debatable issue. The CIT(A) noted that the assessee had made full disclosures and presented full accounts which were duly audited. Thus, at best, it was a case of wrong claim in law and not any attempt on part of the assessee to suppress the income or provide inaccurate particulars thereof. In any case, therefore, the penalty would not be leviable.
Revenue's appeal dismissed
2016-TIOL-1750-HC-MAD-IT
MILLER KNITS Vs ITO : MADRAS HIGH COURT (Dated: August 10, 2016)
Income tax - Sections 143(3), 234A & 234B
Keywords - appreciation of evidence - confirmation of creditor & genuineness of liability.
Whether it is open to the ITAT to hold that the assessee's claim of liability was not established as genuine, when the ITAT has itself accepted the existence of the liability - NO: HC
The assessee firm had filed its return admitting a total income of Rs.1,35,480/- and the same was processed u/s 143(1). The case was taken up for scrutiny through CASS and notice u/s 143(2) was issued. The AO thereafter completed the assessment u/s 143(3). The vouchers/bills were produced for the expenses claimed under the heads "General Expenses" and "wages", out of which some of them were self made. Hence, a sum of Rs.1,00,000/- and Rs.2,00,600/- respectively are disallowed and added to the total income returned. Further, the confirmation for advance given in the case of M/s.Yogesh Clothing Company to the tune of Rs.31,65,284/- was called for. The AR of the assesse expressed his inability to produce the confiration for the same and offered the same for taxation. The AO by disallowing the above, arrived at the gross total income of Rs.36,01,364/-. Tax payable was determined at Rs.16,40,340/-, including interest u/s 234A to the tune of Rs.1,95,534/-, interest u/s 234B to the tune of Rs.3,80,205/- and interest u/s 234C to the tune of Rs.565/-.
Having heard the parties, the High Court held that,
++ true that during the course of assessment, confirmation of advance given to the creditor, M/s.Yogesh Clothing Company, to the tune of Rs.31,65,284/-, has been called for and the assessee's counsel has expressed his inability to produce the confirmation. Thus, when there was no documentary proof of confirmation by M/s.Yogesh Clothing Company, Tiruppur, before the AO and the assessee has offered to include the income of Rs.31,65,284/- to tax. Before the appellate authority, the assessee has made vague grounds that the AO was not justified in allowing the payments made as advance, to purchase yarn and cloth from M/s.Yogesh Clothing Company and thus, the AO erroneously added Rs.31,65,284/-, to tax. Here again, before the appellate authority, the assessee has not produced any material document to substantiate the advance made. But before the ITAT, the assessee has produced a letter, addressed to the assessee, by SBI Tiruppur Branch, which indicates that a letter of credit, has been opened in the SBI Overseas Branch, Tirupur and a perusal of the photo copy of the details of the inland letter of credit, issued by SBI Commercial Branch, indicates that a letter of credit was opened for Rs.90,06,890/- and due date is also mentioned in the tabular column in Sheet No.1, stated to have been annexed with the letter, addressed to the assessee. The letter also indicates that some payments have been made to the beneficiary;
++ thus, material on record discloses that though before the AO, the assessee had volunteered to offer Rs.31,65,284/-, to tax, before the Tribunal, he has filed a letter issued by the SBI Trippur Branch, confirming that a letter of credit was opened for value of Rs.90,60,890/-. While adverting to the submission of the assessee, the Tribunal has observed that, "in the normal course, everybody would ordinarily claim the dues and usually they take steps to recover the dues, if it is a genuine liability." and on the facts and circumstances of the instant case, further observed that, "the liability remans to be outstanding in the books of account of the assessee and the assessee was not able to produce confirmation letter from the party." Though the Tribunal has further observed that the assessee has failed to establish the genuineness of the liabilities, by producing supportive evidence, quite contrary to the same, the Tribunal has observed that the assessee was only able to prove the existence of the liability, in respect of Rs.31,65,284/- and the balance was not established, as genuine. The assessment year is 2011-12. Letter of credit has been issued on 10.04.2010 for the previous year, to M/s.Yogesh Clothing Company. Therefore, when the assessee has produced evidence, the Tribunal, having observed that the assessee was able to prove the existence of the liability, in respect of Rs.31,65,284/-, ought to have considered the same in proper perspective, in the light of the trading activity of the assessee, which includes purchase of yarn and clothes, from M/s.Yogesh Clothing Company, Tiruppur;
++ as rightly contended that when existence of M/s.Yogesh Clothing Company, Tiruppur, and trade between the assessee and the said company, have been proved, by production of letter, dated 30.10.2015, issued by the SBI Tiruppur Branch and the details, extracted supra, the Tribunal ought to have addressed the same. The Tribunal has accepted the existence of liability. Having said so, it would not be appropriate to hold that the claim of liability in respect of Rs.31,65,284/- was not established, without proper appreciation of evidence, adduced by the assessee. In the light of discussions, the assessee is entitled to succeed on the substantial question of law. The impugned order is set aside, only insofar as the above issue is concerned. The matter is remitted back to the Tribunal to address the issue, as regards, advance given to M/s.Yogesh Clothing Company to the tune of Rs.31,65,284/-, by providing an opportunity to the assessee and to dispose of the same, within a period of four months, from the date of receipt of a copy of this order. In view of the submission of the assessee's counsel that he is not pressing the substantial question of law No.1, which we have recorded in the foregoing paragraph of this judgment, no answer is called for.
Case disposed of
2016-TIOL-1749-HC-MAD-VAT
HINDUSTAN UNILEVER LTD Vs DCCT: MADRAS HIGH COURT (Dated: August 01, 2016)
TNVAT Act - coercive action - disputed turnover - pre deposit & stay application.
Whether an assessee under TNVAT Act is entitled to pay pre-deposit of 25% of the tax on the disputed turnover which has been calculated by them excluding the turnover which is the subject matter of challenge in the the earlier writ petitions filed by the assessee - YES: HC
The assessee had preferred the present petitions challenging the orders passed by the Joint CCT(A). The assessee did not question the assessment order in its entirety and disputed the turnover only to the extent of Rs.622,62,547/-. In so far as the turnover relating to a sum of Rs.13,69,31,74,98/- and Rs.134,07,58,140/-, the assessee had filed writ petitions before this Court challenging the assessment orders only that extent. The explanation given by the assessee's counsel is that with regard to the said turnovers, the assessee has questioned the orders of assessment on serious violation of principles of natural justice and that the AO had pre-decided the matter and he was implementing the direction issued by the Enforcement Wing Officials that in spite of the assessee having furnished a second explanation along with Chartered Accountant's certificate giving full details, the AO ignored the explanation and completed the assessment stating that the assessee had produced only the CA's certificate. Therefore, it was submitted that to the extent of the above said two turnovers for the A.Ys 2008-09 and 2007-08, the assessee had canvassed the correctness of the same in those writ petitions. However, for the remaining turnover, the assessee had preferred appeals before the Joint CCT(A). The assessee lodged the appeal by remitting 25% of the disputed tax on the disputed turnover of Rs.622,62,547/-. The appeal papers were returned as not maintainable for the reason that this Court though did not grant any stay of the demand of tax in respect of those two turnovers, but had directed the Dy CCT not to take any coercive action against the assessee.
Having heard the parties, the High Court held that,
++ the issue which has been raised by the Dy CCT in the impugned order is that the assessee has not remitted 25% of the tax admitted. In fact, an identical issue arose for consideration before the Supreme Court in the case of Kanpur Vanaspathi Stores. The case was under the UP Sales Tax Act and the rules framed thereunder which are para materia with the TNGST Rules as well as the TNVAT Act. In the said case before the AO, the assessee admitted its tax liability was Rs.10,339.19. When this was put to challenge before the Supreme Court, after taking note of Sections 3A, 3A(I) and 9(1) of UP Sales Tax Act and Rule 41(2) of UP Sales Tax Rules, the Supreme Court pointed out as to what is the tax admitted on the following lines: "....All that an assessee has to do is not to admit his liability in the memorandum of appeal, whatever his stand might have been before the AO. Ordinarily no interpretation should be placed on a provision which would have the effect of making the provision either otiose or a dead letter. Further, to find out the true meaning of the expression tax admitted we must take into consideration the remaining words of the proviso, namely, or such instalments thereof as may become payable. Those words furnish a key to the interpretation. If one of the conditions for maintainability of the appeal is payment of the instalments which have become payable under rule 41(2), it means that the admission that has got to be taken into consideration is that made before the AO and not before the appellate authority....";
++ applying the above decision to the facts of these cases and in conjunction with the observation and finding recorded by this Court on the effect of the pendency of the earlier writ petitions and the effect of the interim order, the assessee was fully justified in contending that he is entitled to pay 25% of the tax on the disputed turnover which has been calculated by them excluding the turnover which is the subject matter of challenge in the the earlier writ petitions filed by the assessee. In the light of the above interpretation, the observation made in the impugned audit calls for interference. Accordingly, the impugned audit is set aside and the assessee is directed to re-present the appeal before the Joint CCT, who is directed to take the same on file and proceed in accordance with law as the assessee has already effected appropriate predeposit.
Case disposed of
2016-TIOL-1465-ITAT-AMRITSAR
HOSHIARPUR DIST COOP MILK PRODUCER UNION LTD Vs ACIT : AMRITSAR ITAT (Dated: August 09, 2016)
Income Tax - Section 271(1)(c)
Keywords - concealment - capital receipts - penalty - repayment of loan - rehabilitation grant - subsidy & utilization certificate
Whether 'rehabilitation grant' provided to a co-operative society by the State government, is liable to be treated as capital receipt, if the same was utilized either for reviving the sick co-operative units or for making repayment of term loans - YES: ITAT
Whether addition can be made to the income of such society on account of the grants received, when it is established that no benefit has been derived out of such grant - NO : ITAT
Whether penalty can be imposed for concealment, merely on the basis that the nature of subsidy is under dispute, when the receipt of subsidy is clearly reflected in the books of account - NO : ITAT
The assessee is a Co-operative Society, deriving income from running Milk Plant. During concerned A.Y, the assessee received subsidy from the Punjab Govt. and Central Govt. Agencies under rehabilitation scheme, grant for milking machine and grant for silage pit construction. The assessee also received certain amount of grants from Govt through milk fed. As per the utilization certificate furnished by assessee to the Govt, the assessee had spent this amount for purchase of fixed assets and for repayment of loan of NDDB and Milkfed. During assessment process, AO treated the amount received by assessee as Revenue Receipt instead of Capital Receipt. The AO also imposed penalty u/s 271(1)(c) for concealment of income in view of the fact that assessee had declared part subsidy as capital receipts and part subsidy as Revenue receipt.
After hearing parties, Tribunal held that,
++ it is an undisputed fact that assessee received Rs.72 lacs as subsidy under rehabilitation grant as matching grants from Govt. of Punjab & Central Govt. Out of this assessee itself credited an amount of Rs.29,09,681/- to its P&L Account treating the same as revenue receipt and rest of the subsidy amounts was treated as capital receipt. However, the AO made addition of the entire amount of Rs.72 lacs. The CIT(A) deleted the addition of Rs.29,09,681/- holding that assessee had already declared this amount as revenue receipt. In the present case receipt of subsidy was capital in nature as the assessee was obliged to utilize the subsidy amount only for making investment in fixed assets and for making repayment of term loans. In a recent decision the Supreme Court has also dismissed an appeal of Revenue in the case of Sh. Balaji Alloys & Ors. Vs. CIT, wherein the Court relied on its earlier judgment in the case of CIT vs. Ponni Sugars & Chemicals. Therefore, keeping in view the facts and circumstances of the present case and relying on the judgments of Supreme Court, this Tribunal holds that the subsidy amount received by assessee was indeed a capital receipt;
++ as far as amount which was distributed by the assessee to various societies for construction of silage pits, it is found that the silage pits were to be constructed on the land provided by respective societies and the assessee was only a facilitator for the construction of silage pits. The scheme was formed to ensure availability of green fodder in kandi area of Dist. Hoshiarpur. We further find that it has not been disputed by authorities below that silage pits had not been constructed by the selected societies. We further find that assessee was not having any beneficiary interest in the amount received as it was acting as a facilitator only. The assessee has implemented the scheme of Govt. for the welfare of the small farmers located in the kandi area of Dist. Hoshiarpur and Gurdaspur. The ledger account shows that an amount of Rs.61.50 lacs as having received from the Govt. for making payments to various societies, who had constructed the silage pits. As per this ledger account the assessee had received Rs.61.50 lacs and had spent the same amount by making cheque payments to various societies for constitution of silage pits. Therefore, the assessee had not derived any benefit from this grant and therefore, the finding of the authorities below is not correct and is not justified;
++ we find that CIT(A) has passed a reasoned and speaking order wherein he has held that assessee had not furnished inaccurate particulars as it had declared the amount received as subsidy in its balance sheet and it was only the nature of subsidy which was disputed by the Assessing Officer and therefore, he had rightly held the penalty was not imposable. While arriving at the conclusion of deleting the penalty, the CIT(A) has relied upon the case law decided by Punjab & Haryana High Court in the case of Gurdaspur Cooperative Sugar Mills, where under similar facts and circumstances, the Punjab & Haryana High Court had deleted the penalty. In view of the above facts and circumstances, we did not find any infirmity in the order of CIT(A).
Assessee's appeal allowed
2016-TIOL-1464-ITAT-DEL
EMPLOYEES PROVIDENT FUND ORGANIZATION Vs DCIT : DELHI ITAT (Dated: August 03, 2016)
Income Tax - Sections 2(38), 10(12), 11, 192, 201(1) & 201(1A).
Keywords: TDS - accumulated balance - settlement - salary - recognized PF - maximum marginal rate .
Whether if in case an employee has included the accumulated balance of provident fund contribution in its total income, the same has to be excluded from income of assessee while making computation of TDS - YES: ITAT
The assessee is a government organisation respponsible for deducting TDS. It came to notice of the department that various officers of the Employees Provident Fund, had been allowing settlement as also withdrawal of accumulated balances due to various employees/ subscribers without making deduction of tax thereon and observed that taxable income accruing to an employee on account of settlement or withdrawal of accumulated balance was governed by various variables laid down in Rule 8 & 9 of Part A of the ivTH Schedule to the Income Tax Act. AO pointed out that the trustees of a recognized provident fund, or any person authorized by the regulation of the fund to make payment of accumulated balances due to employees, should have, in cases where sub-rule(1) of Rule 8 applied at the time of accumulated balances due to an employee was paid, should have deducted therefrom the amount payable under that Rule and all the provisions of Chapter XVII-B would apply as if the accumulated balances were income chargeable under the head "salary". He sought information from the tax deductor viz. The Principal Officer, EPFO as regards the settlement done and withdrawal of accumulated balances allowed to subscribers who had rendered continuous service of less than 5 years with the employer. AO accordingly, determined the total tax liability for non-deduction of tax and interest payable by the assessee u/s 201(1)/201(1A). On appeal, CIT(A) after considering the assessee's detailed submissions recorded that assessee EPFO was a recognized provident Fund RPF, as defined in section 2(38). As per the provisions contained in section 10(12), the taxability of accumulated balance due and becoming payable to an employee participating in a RPF to be governed by Rule 8 of Part A of Schedule IV.
Having heard the matter, the Tribunal held that,
++ that the provisions of section 10(11) are not applicable to the present proceedings but Schedule IV to the Income-tax Act is applicable, this being a case of RPF. We are also in agreement with CIT(DR) that Rule 69 of the EPF and Miscellaneous Provisions Act, 1952 dealing with circumstances in which accumulation in the funds are payable to a member are much broader than Rule 8 of Part A of Fourth Schedule of the Income Tax Act and in no way repugnant to Rule 8,9 and 10 of Part A of Schedule IV. Rule 69 of the EPF and Miscellaneous Provisions Act, 1952 only specifies the circumstances in which the accumulation in the funds are payable to a member but that does not impinge upon the deduction of tax as per Rule 10 of Part A of Schedule IV to Income Tax Act. Rule 69 of the Employees Provident Fund scheme nowhere prohibits deduction of TDS from the accumulated balances to the members of the scheme. Therefore, there is no repugnancy between Rule 69 of EPF Scheme and Rules 8,9 and 10 of part A of Schedule IV;
++ regarding there being no mechanism for deduction of TDS being prescribed in the Act and only after the introduction of section 192A w.e.f. 1.6.2015, tax deduction scheme has been prescribed. The submission of counsel is that as far as section 192(4) is concerned, the same deals only with specifically recognized provident funds which are private in nature and for Employees Provident Fund Scheme 1952, the provisions for the first time have been made in section 192A. We do not find much substance in this plea of counsel because as per Rule 10 of the Part A of Schedule IV, deduction is required to be made from the amount payable under Rule 9 as per provisions of Chapter XVII B by treating accumulated balance being income chargeable under the head "salary". Whenever assessee fails to furnish the necessary information as required by deductor then the TDS is to be made at the maximum marginal rate and that is how the AO had made the TDS at maximum marginal rate. Therefore, it cannot be said that there was no mechanism prescribed for deduction of TDS in respect of payment of accumulated balance due to employees. However, it is true that with the insertion of section 192A from 1.6.2015, the position has become more clear in respect of EPF Scheme, 1952;
++ coming to the third limb of argument regarding computation of amount of deduction of tax. In this regard we find considerable force in the submission of counsel for the assessee that AO was not justified in estimating 50% of the withdrawals as being of employees who had rendered less than five years of continuous service thereby coming within the ambit of Rule 9 & 10 of Part A of Schedule IV. We, therefore, set aside the order of CIT(A) and restore the matter to the file of AO with a direction that assessee will furnish the required details before the AO in respect of withdrawals made by employees within 5 years of rendering continuous service with his employer. The AO will also take into consideration the effect of decision of SC in the case of Hindustan Coca Cola. Accordingly, if employee has included the accumulated balance in its total income, then the same is to be excluded while making the computation. Further, he will take guidance from the provisions of section 192A and, accordingly, no deduction should be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than Rs. 30,000/-. The short deduction is to be computed @ 10% in all the cases where the PAN number is furnished by assessee in respect of the employees from whose income tax was to be deducted. In view of our discussion, assessee's appeals are allowed for statistical purposes.
Case remanded
