NELLORE BRANCH OF SIRC OF ICAI News Letter ......2015/10/11 · No.2663 (E) dated 29th September 2015 is available on the website of the Department at NELLORE BRANCH OF SIRC OF ICAI

NELLORE BRANCH OF SIRC OF ICAI News Letter@October 2015

Email:[email protected] M: 085000844991

INCOME TAX

e Filing of Form 15G or 15H

Government Simplifies the Format and Procedure for Self Declaration in form No.15G or 15H to Reduce the Cost of Compliance and Ease the Compliance Burden for both, the Tax Payer and the Tax Deductor; Procedure for Submission of the Forms by the Deductor also Simplified;

Payee Can Submit the Self-Declaration Either in Paper form or Electronically; the Deductor will Not Deduct Tax and will Allot a Unique Identification Number (UIN) to all Self-Declarations in Accordance with a well Laid Down Procedure to be Specified Separately

Tax payers seeking non-deduction of tax from certain incomes are required to file a self declaration in Form No. 15G or Form No.15H as per the provisions of Section 197A of the Income-tax Act, 1961 (‘the Act’). In order to reduce the cost of compliance and ease the compliance burden for both, the tax payer and the tax deductor, the Central Board of Direct Taxes (CBDT) has simplified the format and procedure for self declaration in Form No.15G or 15H. The procedure for submission of the Forms by the deductor has also been simplified.

Under the simplified procedure, a payee can submit the self-declaration either in paper form or electronically. The deductor will not deduct tax and will allot a Unique Identification Number (UIN) to all self-declarations in accordance with a well laid down procedure to be specified separately. The particulars of self-declarations will have to be furnished by the deductor along with UIN in the Quarterly TDS statements. The requirement of submitting physical copy of Form 15G and 15H by the deductor to the income-tax authorities has been dispensed with. The deductor will, however be required to retain Form No.15G and 15H for seven years.

The revised procedure shall be effective from the 1st day of October, 2015.

The Notification issued vide S.O. No.2663 (E) dated 29th September 2015 is available on the website of the Department at www.incometaxindia.gov.in



Net Profit Estimated at 5% of Liquor Sales is in Consonance with directions of High Court as against 124% of Cost of Goods Sold adopted by AO

IN THE INCOME TAX APPELLATE TRIBUNAL

Hyderabad ‘A‘Bench, Hyderabad

Before Smt. P. Madhavi Devi, Judicial Member

and Shri B. Ramakotaiah, Accountant Member

ITA No.761/Hyd/2015 (Assessment year: 2008-09)

Income Tax Officer (Appellant) vs Shri Banda Mallesh (Respondent)

Date of Hearing : 07.09.2015 Date of Pronouncement : 18.09.2015

ORDER

Per Smt.P. Madhavi Devi, J.M. This is Revenue’s appeal for the A.Y 2008-09. In this appeal, the Revenue’s grievence is that the CIT (A) has erred in giving relief to the assessee on estimation of the income at a certain percentage of turnover without appreciating that the actual issue involved is determination of ‘suppression of the sale’.

2. Brief facts of the case are that the assessee, an individual, who is in the business of purchase and sale of liquor, filed his return of income for the relevant A.Y 2008-09 on 1.4.2009 declaring income of Rs.5,75,280 which was processed u/s 143(1) of the Act. Subsequently, AO observed that as per the Govt. of A.P, Revenue (Excise-II) Deptt. order in GOMS No.184 dated 7.02.2005, the retailers margin i.e the gross profit is 27% on sale of ordinary liquor products, 20% on sale of medium and premium branded Indian Liquor and 25% on sale of Beers and based on this G.O, the sales should be at a margin of 24% of cost of goods sold. Therefore, AO was of the opinion that the income of the assessee chargeable to tax has escaped assessment. He, therefore, issued notice u/s 148 of the Act and reopened the assessment. During the assessment proceedings u/s 143(3) r.w.s. 147 of the I.T. Act, the AO required the assessee to produce the books of accounts, bills and vouchers for the expenses debited to the P&L A/c. However, the assessee failed to furnish the necessary details but filed a reply stating that the books of accounts were lost and hence could not be produced for verification. AO, therefore, issued a show cause notice requiring the assessee to explain as to why sales amount should not be taken at Rs.5,07,24,503 being is 124% of the purchases or cost of goods sold and why an estimation of 5% on the sales of Rs.5,07,24,503 could not be taken for computing the tax. In reply to the above show cause notice, assessee submitted that his business premises is located in a slum/inside the road and hence assessee could only sell the products at low margin ranging from 1 to 2% with the intention to close the business due to local disturbances. It was further requested that the profits may be estimated at 2% of the turnover as the books of accounts are not available. AO, however, was not satisfied with the assessee’s contention and held that the assessee has not made any objection for considering the sales at Rs.5,07,24,503 but has raised objection for estimating the profit at 5% only, as the shop is allegedly located in a slum area. He held that the assessee is not correct in stating that the shop is located in a slum area, as the shop was located in Road No.12, Banjara Hills, Hyderabad which is a prime locality in Hyderabad. He observed that in the State of Andhra Pradesh, the liquor shops are allotted by the State Govt. on auction basis and on perusal of the purchases made by the assessee during the year, it is seen that the wine shop is running in good condition and made a total turnover of Rs.4,75,90,534. He therefore, held that



3. On consideration of the facts on record, we find that the assessee has requested to estimate his income at 1 or 2% of his turnover, while AO has estimated the income at 24% of the cost of goods sold. The assessee had raised an objection before the CIT (A) stating that the AO has erred in resorting to estimation of sales at 124% of the value of stock put to sale during the year and making the addition of Rs.31,33,969 on the basis of such estimated sales and in estimating the value of sales. During the course of the hearing of the appeal, assessee submitted that the AO’s estimation of sales at 124% of the cost of goods is on the higher side and is not practical. It was further submitted that, as held by the Hon'ble High Court of Andhra Pradesh in the case of CIT vs. Mekala Bal Reddy in ITTA No.28 & 29 of 2013, dated 30.07.2013, the reasonable profit rate to be adopted is 5% of the goods put to sale. The CIT (A) has considered this submission of the assessee to hold that the income of the assessee is to be estimated at 5% of Rs.4,75,90,534 i.e. the sale reported by the assessee. We find that the AO has estimated the sales to be at 124% of the cost of goods sold and therefore, has arrived at a figure of Rs. 5,07,24,503 as the turnover of the assessee. The Hon'ble High Court of Andhra Pradesh in the case of CIT vs. Mekala Bal Reddy (Supra) in a similar set of facts has held that the income of the assessee is to be estimated at 5% of the goods put to sale. The assessee has reported an actual sale of Rs.4,75,90,534, whereas the figure of Rs.5,07,24,503 is the estimated turnover at 124% of the cost of goods sold. In both the cases, the issue is of estimation of turnover by adopting different rates of gross profit. The AO has not determined the suppression of sales as alleged in the ground of appeal of the Revenue. It is the case of actual sale plus gross profit @ 5% thereon vs. estimated sale by adopting 24% G.P. on cost of goods sold. Therefore, we do not find any error in the order of the CIT (A) wherein he has directed the AO to estimate the profit at 5% of the sales reported by the assessee which is consonance with the directions of the Hon'ble High Court in similarly placed assessees. In view of the same, we do not see any reason to interfere with the order of the CIT (A) and the Revenue appeal is dismissed. 4. In the result, Revenue appeal is dismissed. Order pronounced in the Open Court on 18th September, 2015.

Sd/- Sd/-

(B. Ramakotaiah) (P. Madhavi Devi)

Accountant Member Judicial Member

Hyderabad, dated 18th September, 2015.



Employees contribution to PF paid belatedly but before due date of filing return is deductible: Hyderabad ITAT

IT: Where assessee remitted employees' contribution to provident fund belatedly, but within due date of filing of return of income under section 139(1), in view of provisions of section 43B, business disallowance made by Assessing Officer was not justified

IT: Where assessee was in business of software design and development, UPS being part and parcel of computer system, depreciation on UPS was to be allowed at 60 per cent

IT: Internet charges and onsite expenses had to be reduced both from export turnover and total turnover while computing deduction under section 10A

[2015] 61 taxmann.com 299 (Hyderabad - Trib.)

IN THE ITAT HYDERABAD BENCH 'A’

Tetra Soft (India) (P.) Ltd.

v.

Assistant Commissioner of Income-tax*

I. Section 43B, read with sections 2(24)(x) and 36(1)(va), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment (PF/ESI contribution) - Assessment years 2008-09 and 2010-11 - Assessing Officer noticed that assessee had remitted provident fund contribution of employees belatedly - Assessing Officer disallowed said contribution under section 36(1)(va) - However though assessee remitted employees' contribution to provident fund belatedly, but within due date of filing of return of income under section 139(1) - Whether in view of provisions of section 43B, addition made by Assessing Officer was to be deleted - Held, yes [Para 7] [In favour of assessee]

II. Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of (UPS) - Assessment years 2008-09 and 2010-11 - Assessee claimed depreciation on UPS at 60 per cent - Assessing Officer restricted same to 15 per cent on reasoning that it was not part of computer system - Whether since UPS was part and parcel of computer system, depreciation on UPS was to be allowed at 60 per cent as preceribed for computers - Held, yes [Para 10] [In favour of assesses

III. Section 10A of the Income-tax Act, 1961 - Free trade zone (Computation of deduction) - Assessment years 2008-09 and 2010-11 - Assessing Officer reduced internet charges and onsite expenses from export turnover without reducing same from total turnover while computing deduction under section 10A - Whether internet charges and onsite expenses had to be reduced both from export turnover and total turnover while computing deduction under section 10A - Held, yes [Para 12] [In favour of assesses

CASE REVIEW-I

CIT v. Sabari Enterprises[2008] 298 ITR 141 (Kar.) (para 7); CIT v. Magus Customers Dialog (P.) Ltd.[2015] 371 ITR 242/231 Taxman 379/57 taxmann.com 94 (Kar.) (para 7); CIT v. Yum Restaurnats (I) (P.) Ltd.[2015] 371 ITR 139/231 Taxman 691/57 taxmann.com 242 (Delhi) (para 7); CIT v. Nipso Polyfabriks Ltd. [2013] 350 ITR 327/213 Taxman 376/30 taxmann.com 90 (HP) (para 7) and CIT v. Nuchem Ltd. [2015] 371 ITR 164 (Punj. & Har.) (para 7) followed.



CASE REVIEW-III

CIT v. Gem Plus Jewellery India Ltd.[2011] 330 ITR 175/[2010] 194 Taxman 192 (Bom.) (para 12) and ITO v. Sak Soft Ltd.[2009] 30 SOT 55 (Chennai) (SB) (para 12) followed.

CASES REFERRED TO

CIT v. Sabari Enterprises[2008] 298 ITR 141 (Kar.) (para 5), CIT v. Magus Customers Dialog (P.) Ltd.[2015] 371 ITR 242/231 Taxman 379/57 taxmann.com 94 (Kar.) (para 5), CIT v. Yum Restaurants (I.) (P.) Ltd.[2015] 371 ITR 139/231 Taxman 691/57 taxmann.com 242 (Delhi) (para 5), CIT v. Nipso Polyfabriks Ltd.[2013] 350 ITR 327/213 Taxman 376/30 taxmann.com 90 (HP) (para 5), CIT v. Nuchem Ltd. [2015] 371 ITR 164 (Punj. & Har.) (para 5), CIT v. Gem Plus Jewellery India Ltd.[2011] 330 ITR 175/[2010] 194 Taxman 192 (Bom.) (para 12) and ITO v. Sak Soft Ltd.[2009] 30 SOT 55 (Chennai) (SB) (para 12).

G. Venkateswarlu for the Appellant. Phani Raju for the Respondent.

ORDER

Saktijit Dey, Judicial Member - These appeals by the assessee are directed against separate orders both dated December 12, 2014 of the learned Commissioner of Income-tax (Appeals)-II, Hyderabad for the assessment years 2008-09 and 2010-11.

2. The assessee has raised in total eight grounds. Grounds Nos. 1, 2 and 8 being general in nature do not require any specific adjudication, hence, they are dismissed. Ground No. 7 has been raised by the assessee challenging the initiation of penalty proceedings under section 271(1)©of the Income-tax Act, 1961. This ground being premature at this stage of proceeding, do not require adjudication, hence, the same is dismissed.

3. In ground No. 3, the assessee has challenged the disallowance of an amount of Rs. 2,16,412, being employees' contribution of provident fund, under section 36(1)(va) of the Act.

4. Briefly the facts are, the assessee is a company deriving income from software design and development. For the assessment year under consideration, the assessee filed its return of income declaring total income of Rs. 22,27,430. During the assessment proceedings, the Assessing Officer while verifying the books of account noticed that the assessee has remitted provident fund contribution of employees belatedly for the month of April, May, June and October 2007. Referring to the provisions of section 36(1)(va) read with section 2(24)(x) of the Act, the Assessing Officer disallowed the amount of Rs. 2,16,412. Being aggrieved of such disallowance, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) also confirmed the disallowance.

5. The learned authorised representative submitted before us, if the employees' contribution to provident fund is remitted within the due date of filing of return of income as provided under section 139(1) of the Act, the same would be an allowable deduction as per section 43B of the Act. In this context, he relied upon the following decisions :

1. CIT v. Sabari Enterprises[2008] 298 ITR 141 (Kar.);

2. CIT v. Magus Customers Dialog (P.) Ltd.[2015] 371 ITR 242/231 Taxman 379/57 taxmann.com 94 (Kar.) ;

3. CIT v. Yum Restaurants (I.) (P.) Ltd.[2015] 371 ITR 139/231 Taxman 691/57 taxmann.com 242 (Delhi) ;



4. CIT v. Nipso Polyfabriks Ltd.[2013] 350 ITR 327/213 Taxman 376/30 taxmann.com 90 (HP) ; and

5. CIT v. Nuchem Ltd. [2015] 371 ITR 164 (Punj. & Har.).

6. The learned Departmental representative, on the other hand, relied upon the reasoning of the Assessing Officer.

7. We have considered the submissions of the parties and perused the orders of the Revenue authorities as well as other materials on record. Though it is a fact that the assessee has remitted the employees' contribution to provident fund not within the due date as prescribed under the Explanation to section 36(1)(va), however, the assessee has remitted the amount within the due date of filing of return of income under section 139(1) of the Act. Therefore, in view of the provisions of section 43B and ratio of the decisions relied upon by the learned authorised representative, the amount cannot be disallowed. Accordingly, we delete the addition made by the Assessing Officer.

8. The next issue as raised in ground No. 4 relates to restricting the depreciation on UPS at 15 per cent.

9. During the assessment proceedings, the Assessing Officer having noticed that the assessee has claimed depreciation on UPS at 60 per cent., restricted the same to 15 per cent. on reasoning that it is not part of the computer system. Though, the assessee challenged the decision of the Assessing Officer before the learned Commissioner of Income-tax (Appeals), but, he also confirmed the view expressed by the Assessing Officer.

10. We have considered the submissions of the parties and perused the materials on record. We hold that UPS being part and parcel of computer system, depreciation allowable on UPS is at 60 per cent. as prescribed for computers. There are number of decisions of different Benches of the Income-tax Appellate Tribunal including Hyderabad Benches expressing similar view. In the aforesaid view of the matter, we allow the assesses claim of depreciation at 60 per cent.

11. In grounds Nos. 5 and 6, the assessee has challenged the decision of the Assessing Officer in reducing the internet charges and onsite expenses from export turnover without reducing the same from total turnover while computing deduction under section 10A of the Act.

12. Having heard the parties and perused the materials on record, we are of the view that in view of the decisions of the hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd.[2011] 330 ITR 175/[2010] 194 Taxman 192 and the Special Bench decision of the Chennai Tribunal in the case of ITO v. Sak Soft Ltd.[2009] 30 SOT 55 and a number of decisions of various Benches of this Tribunal, internet charges and onsite expenses have to be reduced both from the export turnover and total turnover while computing deduction under section 10A of the

Act. Accordingly, we direct the Assessing Officer to compute deduction under section 10A of the Act by reducing internet charges and onsite expenses both from export turnover and total turnover.

13. In the result, the assesses appeal is allowed.

I.T.A. No. 219/Hyd/2015 for the assessment year 2010-11

14. Grounds Nos. 1, 2 and 8 being general in nature do not require any specific adjudication, hence, they are dismissed. Ground No. 7 has been raised by the assessee challenging the initiation of



penalty proceedings under section 271(1)©of the Act. This ground being premature at this stage of proceedings, do not require adjudication, hence, the same is dismissed.

15. In ground No. 3, the assessee has challenged the disallowance of an amount of Rs. 2,32,344 being employees' contribution of provident fund under section 36(1)(va) of the Act.

16. As this ground is similar to the ground No. 3 in I.T.A. No. 218/Hyd/15, following the conclusions drawn therein vide para No. 7, we delete the addition of Rs. 2,32,344 made by the Assessing Officer towards the employees' contribution to provident fund.

17. The next issue as raised in ground No. 4 relates to restricting the depreciation on UPS at 15 per cent.

18. This ground is also similar to the ground No. 4 raised in I.T.A. No. 218/ Hyd/2015. Therefore, following the conclusions drawn therein vide paragraph 10, we allow the assessee's claim of depreciation at 60 per cent.

19. In grounds Nos. 5 and 6, the assessee has challenged the decision of the Assessing Officer in reducing the internet charges and onsite expenses from export turnover without reducing the same from total turnover while computing deduction under section 10A of the Act.

20. As the issues raised in the said grounds are identical to that of the grounds Nos. 5 and 6 raised in I.T.A. No. 218/Hyd/2015, following the conclusions drawn vide paragraph 12, we direct the Assessing Officer to compute deduction under section 10A of the Act by reducing internet charges and onsite expenses both from export turnover and total turnover.

21. In the result, the appeal of the assessee is allowed.

22. To sum up both appeals of the assessee are allowed.

RANJAN

*In favour of assesses

COMPANIES ACT, 2013

Quoting of PAN is now mandatory in Form No. MGT-7

COMPANIES (MANAGEMENT AND ADMINISTRATION) SECOND AMENDMENT RULES, 2015 - AMENDMENT IN FORM NO.MGT-7

NOTIFICATION GSR NO. 737(E) [F.NO.01/34/2013-CL-V-PART-I], DATED 24-9-2015

In exercise of the powers conferred by sections 88, 89, 91, 92, 93, 94, 101, 105, 108, 109, 110, 115, 117, 118, 119, 120 and 121 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Management and Administration) Rules, 2014, namely:—

Short title and commencement

1. (1) These rules may be called the Companies (Management and Administration) Second Amendment Rules, 2015.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Management and Administration) Rules, 2014, in Form No. MGT-7, in paragraph I, under serial number (Iafter "Global Location Number (GLN) of the Company", the following shall be inserted, namely:—

"Permanent Account Number (PAN) of the Company



SERVICE TAX

No service-tax on entrance fee collected by club which doesn't confer any access to services

Service Tax : Where collection of entrance fee by club from its members : (a) did not confer members any access to services, facilities or advantages; and (b) was to meet expenses necessary for sustenance and survival of club and maintenance of its assets, then, entrance fee, not being a consideration, was not chargeable to service tax

[2015] 62 taxmann.com 2 (Mumbai - CESTAT)

CESTAT, MUMBAI BENCH

Cricket Club of India Ltd.

v.

Commissioner of Service Tax*

FACTS

■ Assessee was a members' club as opposed to the other category of clubs, viz., proprietary clubs. While both accord facilities to its members, the former are run by the members themselves through appropriate management bodies and the latter by promoters in the business of running clubs.

■ Assessee-club paid service tax on 27 February 2006 on entrance fee under protest under "club or association service" under section 65(105)(zzze).

■ Assessee sought refund of this amount on ground that —

■ entrance fee was not liable to tax on account of principle of mutuality;

■ entrance fee is not a consideration for any service;

■ it is a fee paid for acquiring membership which is neither a service nor, of itself, assures any other facility without further payment.

■ The department denied refund claim and same was upheld by Commissioner (Appeals); however, Commissioner (Appeals) allowed benefit of cum-tax. Department argued that -

■ entrance fees would tantamount to advance payment for facilities of the club and

■ the charging section relating to taxation of "clubs or associations" was extendable beyond subscriptions to include "any other amount" collected from members.

HELD

I. Basics

■ The principal of mutuality applies squarely to the assessee as a members' club and the ruling of the High Court of Gujarat would settle the case in favour of the assessee. Nevertheless, the fundamental question raised by the assessee calls for a response from this Tribunal for two reasons:



■ firstly, the pendency of the appeals before the Supreme Court is likely to be construed as sufficient cause for continuing to not only demand service tax on clubs and associations but also to adjudicate thereon without acknowledging the mutuality principle and

■ secondly, the incorporation of Explanation 3 in section 65B(44) of Finance Act, 1994 is likely to be interpreted as extending latitude to overcome the impediment of mutuality.

Accordingly, the assesses argument that "it was never the intent of the legislature to tax the entirety of payments received by a 'club or association' from its members" was to be considered. [Para 8]

■ Our jurisdiction to entertain this plea exists only in a limited sphere in the context of the general supposition that legislation will not ever stray beyond the bounds of constitutionality and is derived from that supposition. This does not, however, rule out the possibility of the tax administrator assuming a jurisdiction beyond legislative intent; all too often, this is the outcome of ignorance of or the assumption that the statute administered by them is not bound by the limits embodied in the parent statute - the Constitution - to circumscribe legislative and executive authority. While Chapter V of Finance Act, 1994 is unambiguously clear about the objectives and scope of the tax, the provisions therein often resorted to without regard to the nature of the tax. This occurs when provisions of the statute are selectively read. [Para 9]

CENTRAL EXCISE

Circulars contrary to Supreme Court's judgment need not be followed: CBEC

CLARIFICATION REGARDING BINDING NATURE OF CIRCULAR AND INSTRUCTIONS

CIRCULAR NO. 1006/13/2015-CX, DATED 21-9-2015

A large number of judgments have been delivered by the Hon'ble Supreme Court on various aspects of Central Excise, Service Tax or Customs consequent upon the constitution of special bench on 28-2-2015 to expeditiously decide appeals in Indirect taxes. However, there may be Board circulars on some of these issues which are contrary to the judgement delivered by Hon'ble Supreme Court. The issue is whether the field officers are bound by such circulars, during the period the circular has not been rescinded.

2. In this regard, attention is invited to the judgement of Hon'ble Supreme Court dated 14th October 2008 [2008(231) E.L.T.22(SC)/[2008] 17 STT 103 (SC)] in case of M/s Ratan Melting &Wire Industries v. Commissioner of Central Excise, Bolpur. In the said judgement Hon'ble Supreme Court has held at paras 6 & 7 that—

"6.Circular and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not to a view expressed in a decision of this court or the High Court. So far as the clarification/circulars issued by the central Government and of the state Government are concerned they represent merely their understanding of the statutory provisions. They are not upon the court. It is for the court to declare what the particular provision of statute says and it is not for the Executive. Looked at from other angle, a circular which is contrary to the statutory provisions has really no existence in law...

7......... to lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by Supreme Court and the binding effect in terms of Article 141 of the Constitution"

3. Therefore, it is clarified that Board Circulars contrary to the judgements of Hon'ble Supreme Court become non-est in law and should not be followed. Reference of such circulars should be made to the Board so that further action of rescinding these circulars can be expeditiously taken up. Board may also initiate such action suo-moto. All pending cases on the issue, including those in the Call-Book, decided after the date of the judgement should, confirm to the law laid by the Hon'ble Supreme Court or High Court, as the case may be, irrespective of whether the circular has been rescinded or not.

4. The above direction would also apply to the judgements of Hon'ble High Court where Board has decided that no appeal would be filed on merit. However where appeal has been filed by revenue against the High Court's order, pending adjudication should be transferred to the Call-Book and such appeals should be kept alive.

5. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

Excise Act doesn't contain any provision for proceeding against legal heir of deceased

Excise & Customs : In absence of any machinery provisions to assess and collect tax from a deceased person/dissolved firm, all proceedings against such deceased person/dissolved firm

abate and therefore, proceedings cannot be continued against legal representatives

[2015] 61 taxmann.com 95 (SC)

SUPREME COURT OF INDIA

Shabina Abraham

v.

Collector of Central Excise & Customs*

Facts

■ The assessee, a sole proprietor, had stopped manufacture and production of tread rubber.

■ The department alleged that the assessee had manufactured and cleared tread rubber from the factory premises by suppressing the fact of such production and removal with an intent to evade payment of excise duty.

■ The sole proprietor died and department issued second show-cause notice to his wife and daughters asking them to pay duty.

■ The wife and daughters submitted that proceedings had abated on death of sole proprietor.

■ The department argued that section 11A read with section 11 empower adjudication and recovery of dues pertaining to assesses

Issue Involved

■ Whether the dead person's property, in the form of his or her estate, can be taxed without the necessary machinery provisions in a tax statute ? Whether an assessment proceeding under the Central Excise Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead ?





HELD

■ The definition of 'assessee' contained in section 4(3)(a) of the Central Excises and Salt Act is similar to the definition of assessee contained in the Income Tax Act, 1922. Under that Act, an assessee means 'a person by whom income tax is payable'. Under the Central Excises and Salt Act, an assessee means 'the person who is liable to pay the duty of excise under this Act'. The present tense being used, it is clear that the person referred to can only be a living person. Further, the only extension of the definition of 'assessee' under the Central Excises and Salt Act is that it would also include an assessee's agent, which has nothing to do with the facts of the present case. It is well settled that a 'means and includes' definition is exhaustive in nature and that there is no scope to read anything further into the said definition. [Para 17]

■ The notice that is served under section 11A is only on the person chargeable with excise duty, which takes us back to 'assessee' as defined. [Para 18]

■ Apart from the fact that there is nothing about dead persons in section 11, section 11 is limited only to recovery of sums that are due to the Government. The very opening words in section 11 show that duty and other sums must first be payable to the Central Government under the Act or the rules. If such sums are not 'payable' then the provisions of the section do not get attracted at all. The Act contains no machinery provisions for proceeding against a dead person's legal heirs, such as are contained in the Income-tax Act. Obviously, therefore, duty and other sums do not become 'payable' without such machinery provisions. Further, section 11 deals with modes of recovery of tax payable and does not deal with the subject matter at hand - namely machinery provisions for assessment in the hands of the estate of a dead person and, therefore, does not have much bearing on the matter in issue in the present case. The argument, therefore, as to the insertion of the proviso to section 11 by an Amendment Act of 2004 so as to provide that if a person from whom some recoveries are due transfers his business to another person, then the excisable goods in the possession of the transferee can also be attached and sold again leads us nowhere. In fact, Legislature's need to add the proviso shows that nothing can be read into the Central Excises and Salt Act by implication. [Para 19]

■ In the absence of any machinery provisions to assess and collect tax from a deceased person, all proceedings against such deceased person/dissolved firm abate. [Para 21]

■ Section 11A does not contain any such provision which equates the jurisdiction to assess or reassess with the original jurisdiction to assess the dealer in the very first place. [Para 22]

■ In the present case an individual proprietor has died through natural causes and it is nobody's case that he has maneuvered his own death in order to evade excise duty. [Para 25]

■ What revenue is asking is to stretch the machinery provisions of the Central Excises and Salt Act, 1944 on the basis of surmises and conjectures. This is not possible. [Para 26]

■ There is no charge to excise duty under the main charging provision of a dead person, which has been referred to while discussing section 11A read with the definition of 'Assesseshence, section 11A cannot be construed to assess dead persons. [Para 27]

■ Definition of a 'person' under the General Clauses Act, 1897 does not take case any further as it does not include legal representatives of persons who are since deceased. Equally, section 6 of the Central Excises Act, which prescribes a procedure for registration of certain persons who are engaged in the process of production or manufacture of any specified goods mentioned in the schedule to the said Act does not throw any light on the question at hand as it says nothing about how a dead person's assessment is to continue after his death in respect of excise duty that may have escaped assessment. [Para 28]

NELLORE BRANCH OF SIRC OF ICAI News Letter ......2015/10/11 · No.2663 (E) dated 29th September 2015 is available on the website of the Department at NELLORE BRANCH OF SIRC OF ICAI

Documents