Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 11, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
News
Notifications
Highlights / Catch Notes
Income Tax
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If the assessee is not liable to tax in view of the Article 8 of DTAA between India and Japan, then, irrespective of the amendment to section 9(1) the assessee would not be liable to tax - HC
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Sec. 50C is a deeming provision and hence, the question of gift of property does not arise. - Since the transaction of gift is considered as taken place in the form of gift, the provision of sec. 47(iii) shall not apply to it - AT
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Penalty u/s 271E - it may be stated that the assessee company gave Rs. 2 lakh to its director with a bona fide belief that an urgency to ensure honoring of the cheque issued to the landlord constitutes a reasonable cause u/s 273B where no penalty shall be imposable on the assessee for any failure referred to in the said provisions inter alia Section 269T. - AT
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Method of operation of proviso to section 36(1)(vii) – Bad debts written-off – The credit balance for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year - HC
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Reopening of assessment - ‘Alleged under pricing of goods’ if any as mentioned in the order of 1997-98 and in the reopening orders cannot be termed non-disclosure of material facts by the assessee-company. - AT
Customs
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Anti-dumping - Customs Tariff Heading 3904 21 10 - Poly Vinyl Chloride Paste Resin - Emulsion PVC Resin - PVC Suspension Resin - Final Findings of the D.A. is vitiated - AT
Case Laws:
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Income Tax
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2013 (1) TMI 219
Reopening of assessment - non-eligibility of deduction u/s 80IA in respect of the steam turbine of the combined cycle gas power stations belonging to the petitioner - AY 2000-01 - Held that:- The entire process of generation of electricity, both by the gas turbine unit and the steam turbine unit, has been explained by the petitioner in great detail in the assessment proceedings for the assessment year 1998-99 which has been taken notice of by the AO. He was fully aware that there is a gas turbine unit which generates electricity and which has a waste product which is in the form of hot waste gases. It is through the technology of the waste heat recovery boiler that these hot waste gases are utilized for driving the steam turbine which, in turn, generates additional electricity. So both the gas turbine as well as the steam turbine generate electricity independently. It is another matter that the waste product of the gas turbine is utilized as the only input for driving the steam turbine. It was not as if it was a fact or a figure hidden in some books of accounts which the AO could have, with due diligence, discovered but had not done so. The AO had asked specific queries with regard to the manner of functioning of the two units and the petitioner had provided detailed answers. All facts were staring the Assessing Officer at his face. He could have drawn his own inferences and, in fact, he did by treating them as separate units. On the very same facts, he is now trying to draw a different set of inferences which is nothing but a mere change of opinion. The inspection report of September, 2004 does not indicate anything new. While considering the fuel cost argument in the earlier assessment year, when the matter travelled right up to the Tribunal, the entire factual position was examined by the AO, the CIT (A) as well as by the Tribunal and also by the Committee on Disputes and the two units were treated as separate units.Therefore, this is not a case where the assessee/ petitioner can be said to have failed to disclose fully and truly all material facts necessary for assessment in respect of the assessment year 2000-01 - in favour of assessee. Taxability of income tax recoverable by NTPC from the State Electricity Boards - amount of income tax recoverable by NTPC from the State Electricity Boards for the assessment year 2000-01 have not been fully reported by NTPC Limited as revenue receipts and instead major portions of such amounts had been kept out of the credit side of the Profit & Loss Account - Held that:- Petitioner had paid tax on the generation income by grossing up the rate of tax instead of grossing up the income. The rate of grossed up tax is 62.60162% as against the normal rate of 38.50% [35% tax + 10% surcharge] - By virtue of either method, the total tax payable by NTPC, as per the assessment order would come to Rs. 1819.05 crores. Therefore, this is a clear case where no income has escaped assessment. Also that there was no failure to disclose material facts inasmuch as the figures which have been referred in the recorded reasons were all taken from the audited accounts and, in any event, the respondent No.1 has not alleged as to which material fact was omitted to be disclosed. There was due application of mind on this issue at the stage of the original assessment itself as there was a reference of issue of grossing up - thus as no income has escaped assessment no reopening is warranted - in favour of assessee.
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2013 (1) TMI 214
Offshore supply of equipments and offshore services - whether be taxed within the purview of section 9(1) - Held that:- ITAT followed the decision of Ishikawajima Harima Heavy Industries Co. Ltd. v. DIT [2007 (1) TMI 91 - SUPREME COURT] wherein held that the amount receivable by the assessee in respect of offshore supply of equipments and offshore services cannot be taxed under section 9(1). Also apart from non-applicability of section 9(1) in the present case Article 7 of the DTAA between India and Japan is also applicable and, hence, the income arising on account of offshore services and offshore supply of equipments would not be taxable. Thus if the assessee is not liable to tax in view of the Article 8 of DTAA between India and Japan, then, irrespective of the amendment to section 9(1) the assessee would not be liable to tax - no fault in the order of the ITAT.
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2013 (1) TMI 213
Block assessment - search in the residential premises of the assessee & business premises of the company - notice u/s 158BC - assessee contested on jurisdiction to make assessment u/s 158BC as there was no search warrant shown in the assessee's name to result in a block assessment - Held that:- The search warrant reads under Caption A, "the warrant in the case of M/s.Tamil Nadu Textile Corporation". Under Column B, "warrant to search (Details and ownership of place of search)", the name of the assessee is shown. The operative portion of the search warrant also pointed out that the warrant of authorisation dated 30.1.1996, issued in the case of M/s.Tamil Nadu Textile Corporation Limited, was shown to the assessee to search the place of the assessee mentioned at Column 'B', who was present in the said place at the time of search. The details as stated above are available in the search warrant as well as in the Panchnama. Rightly, on the basis of these documents, the Tribunal came to the conclusion that the search was conducted in the assessee's premises, leading to the assessment under Chapter XIVB. It is no doubt true that the search in the assessee's premises was a result of the search in the case of M/s.Tamil Nadu Textile Corporation Limited. This, however, does not mean that there was no search warrant issued in the assessee's case under Section 132 - no hesitation in rejecting the said plea of the assessee. Issue regarding the assessment made in Coimbatore - Held that:- File referring to the Notification of the CIT in the letter dated 07.08.1996, AO Chennai, addressed a letter to the ACIT, Coimbatore, forwarding the files of the assessee and R.Venkatakrishnan relating to the assessment year 1996-97 who called upon the assessee to file the return of income in the prescribed form within ten days from the date of service of notice dated 01.08.1996. Admittedly, the assessee addressed a letter dated 07.10.1996 seeking time to file the return & prayed for transfer of file to Madras, since the business activities were based at Madras. With reference to the request of the assessee for retransfer to Chennai the ACIT Coimbatore directed him to approach the CIT Central-I, Madras-34 and called upon the assessee to file the return. On 29.12.1996, the assessee once again wrote a letter to the ACIT, Central Circle-I, Coimbatore, reporting filing of the return and as to the discharge of the liability of tax, the assessee agreed that the gold jewellery seized could be disposed of and the proceeds credited towards the tax liability. The family members from whom gold jewellery were seized, had also expressed their willingness and consent letters were obtained from them also. The letters, however, did not say anything as to whether the assessee had addressed the CIT for transfer of the files to Chennai. Thus, as the matter stood, the assessment was completed by the Officer and no justifiable ground to accept the plea of the assessee herein that the assessment done by the Commissioner suffered from want of jurisdiction. Assessment made at the hands of the assessee in respect of the shares held by the assessee's relatives is without basis - Held that:- In the absence of any substantial material from the assessee's side, it is too difficult to accept the case of the assessee that there was no consideration passed on, on the allotment of shares. But as there being no further enquiry made on the aspect of allotment, no other option but to except to accept the plea of the assessee that the assessment could be sustained only to the extent of shares, which stand in the name of the assessee and his wife alone and that the value of the shares standing in the name of his other relatives could not be included as unexplained investment, for the purpose of assessment under Chapter XIVB. In the circumstances, the extent to which the investment income has to be assessed in respect of these two companies, has to be worked out by the Assessing Officer pro-rata. The total investment made in the two companies was taken at Rs.17,50,000/- and Rs.9,00,000/-. The investment is reflected in the books of accounts of both the companies in the year 1993-94. Having thus valued, the Officer directed to fix the value of the shares allotted to the assessee and the assessee's wife to be assessed at the hands of the assessee. Valuation of shares of M/s.Anchor Breweries based on the valuation of the property done through the Valuation Officer - Held that:- A reading of the order of the AO shows that nowhere the assessee was favoured with a copy of the Valuation Officer's assessment, enabling the assessee to place his objection on this value. Even though the Officer has a right to refer the document for valuation by a Valuation officer, yet, when he seeks to make use of this piece of evidence to arrive at the undisclosed income, in fairness to the claim of the assessee, a copy of the valuation report should have been given to the assessee, so as to enable him to place his objection, by following the principles of natural justice. In the absence of any material shown that this requirement had been complied with, no hesitation in accepting the plea of the assessee that this portion of the order merits to be set aside and the matter be remitted back to the AO so as to furnish a copy of the valuation report to the assessee. In the absence of any material to show that the entirety of the shares of M/s. Anchor Breweries Limited were to be taken in as the shares proved by the assessee, the liability that could be fastened on the assessee has to be only with reference to the 1320 shares, which stood in the name of the assessee and his wife - remand the assessment back to files of the AO.
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2013 (1) TMI 212
Addition on account of TP adjustments - reimbursement/allocation of COE3 [Common Operating Environment System] related expenses - Held that:- As fresh details were furnished by the assessee for the first time before the CIT(Appeals) giving complete details of the said expenses as well as the basis of allocation thereof. The said details were forwarded by the CIT(Appeals) to the AO/TPO and on verification of the same, the TPO accepted in his remand report that allocation/reimbursement of COE3 expenses to the extent of Rs. 2,20,83,188/- was in order. Keeping in view this finding recorded by the TPO in the remand report, the addition made on this issue to the extent of Rs. 2,20,83,188/- has been deleted by the CIT(Appeals) and has quite rightly so - revenue appeal dismissed. No justification in the action of the TPO in taking the ALP of the relevant transactions at Nil & ignoring all these details - assessee appeal - Held that:- It is incumbent upon the TPO to work out the ALP of the relevant transactions by following some authorized method and the entire cost borne by the assessee cannot be disallowed by taking the ALP at Nil keeping in view the facts and circumstances of the case and the relevant details furnished by the assessee. The exercise of ascertaining ALPs has to be done by the TPO keeping in view the well laid down scheme in the relevant provisions of the Act and addition, if any, on account of TP adjustment, has to be made only after doing such exercise. Therefore, restore this issue to the file of the AO/TPO with a direction to do such exercise and make addition - in favour of assessee for statistical purposes. Disallowance of depreciation of unit located at Silvassa - Held that:- Assessee's appeal is squarely covered against the assessee and in favour of the Revenue as decided in the case of Plastiblends Ltd. v. Addl. CIT [2009 (10) TMI 39 - BOMBAY HIGH COURT] wherein held that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable under section 30 to 43D of the Act, including depreciation allowable under section 32. Deduction u/s 80-IB - disallowance of Other Income directly linked to Silvassa Unit,Interest received, Miscellaneous Income,Reversal of excess provision of Doubtful debts - Held that:- This issue is covered against the assessee relying on decision of Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT] wherein held that the provisions of section 80-IB are code by themselves as they contain both substantive as well as procedural provisions. The word 'derived from' is narrower in connotation as compared to the words 'attributable to'. The assessee has claimed deduction u/s 80IB in respect of receipts which are incidental to the business and so beyond the first degree. Thus uphold the order of the CIT(Appeals) on confirming the disallowance - against assessee. Deduction u/s 80-IB in respect of insurance claim - Held that:- As decided in J.K. Aluminium Co. v. ITO [2011 (4) TMI 90 - ITAT NEW DELHI] refund of excise duty being refund of assessee's own money cannot be regarded as separate income at all and the AO, therefore, was not justified in denying the relief u/s 80-IB on that amount. Insurance claim received by the assessee inasmuch as the same being reimbursement/recovery of expenses actually incurred by the assessee, it has no effect on the final income of the assessee so as to warrant exclusion thereof while computing deduction u/s 80-IB - in favour of assessee.
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2013 (1) TMI 211
Assessee's entitlement to opt for tonnage tax scheme - revenue appeal - Held that:- The assessee company has filed the application in Form No. 65 before the Addl. CIT on 03-12-2004 opting for tonnage tax scheme u/s. 115VP(1). Hence, it would be correct and justifiable only to consider the data that were available as on that date in order to ascertain whether the main object of the company is to carry on the business of operating ships or not. However, CIT(A) has considered the financial accounts relating to 31-03-2005, 31-03-2006 and 31-03-2007 and held that the main objective of the assessee company is to carry on the business of operating ships. As stated earlier, the assessee company filed its application on 03-12-2004, on which date the data pertaining to 31.3.2005, 31.3.2006 and 31.3.2007 would not be available before the Addl. CIT. Hence,CIT(A) is not correct in considering data pertaining to the subsequent periods - the present issue needs to be examined afresh at the end of CIT(A) - in favour of revenue for for statistical purposes Applicability of provisions of sec. 50C to the transaction of sale of the property effected by the assessee - assessee appeal - Held that:- Sec. 50C is a deeming provision and hence, the question of gift of property does not arise. There is no finding that the assessee has transferred the asset for inadequate consideration, which may possibly result in gift. On the contrary, sec. 50C only contemplates only substituting the sale consideration. Thus even if for a moment, the contention of gift is accepted in the present case, the question that arises is what was actually gifted. The entire property has been sold for a consideration of Rs.4.82 crores as against the stamp duty value of Rs.5.67 crores. Hence the difference between both the amounts has to be treated as constructive of receipt of money in the form of cash by the assessee and constructive payment of money in the form of gift to the Trust. Since the transaction of gift is considered as taken place in the form of gift, the provision of sec. 47(iii) shall not apply to it - against assessee.
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2013 (1) TMI 210
Penalty u/s 271E - contravention of the provisions of mode of repayment of certain loans or deposits (Section 269T) - Held that:- The director of assessee company Mr. Varun Sarup Agarwal issued a cheque on 1.2.2007 on behalf of the assessee company for payment of rent and assessee company opened its account after issuance of this cheque. The amount of Rs. 2 lakh was deposited in the bank account of Mr. Varun Sarup Agarwal with a bona fide intention to prevent dishonoring of the cheque issued to the landlord of the assessee company and the remaining amount was returned back to the assessee company’s bank account. In the facts and circumstances of the case, it is doubtful whether the amount received by director with an intention to deposit it to the bank account with a bona fide belief that this would save the prestige of the company can be characterized as a loan or a deposit within the meaning of Section 269T The assessee company was perhaps justified in believing that it is entitled to rely on the position which was in its favour. Thus, it may be stated that the assessee company gave Rs. 2 lakh to its director with a bona fide belief that an urgency to ensure honoring of the cheque issued to the landlord constitutes a reasonable cause u/s 273B where no penalty shall be imposable on the assessee for any failure referred to in the said provisions inter alia Section 269T. Evaluating the impugned transaction as depicted in CIT Versus Idhayam Publications Limited [2006 (1) TMI 97 - MADRAS HIGH COURT] in the present case the ledger account of Shri Varun Sarup Agarwal with the assessee company reveals that there was a current account between the assessee company and its director and no interest was being charged for the transactions and the same could not be termed either as a loan or a deposit with the assessee company. Accordingly, the penalty levied was not based on justified and reasonable grounds - in favour of assessee.
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2013 (1) TMI 209
Method of operation of proviso to section 36(1)(vii) – Bad debts written-off – Provision for doubtful debts - Assessee is in banking business - Circular No.17/2008 dated 26-11-2008 - Assessee had claimed a deduction u/s 36(1)(vii) by way of bad debt - Simultaneously claimed deduction u/s 36(1)(vii)(a) for provision for bad and doubtful debts - The revenue's contention is that by virtue of such proviso, the claim of the assessee for deduction for debts written off, should be reduced by the closing balance of the assessee in his account for the provision of bad and doubtful debts. On the other hand, the assessee contends that such diminution should be limited to the opening balance of such account Whether for the purpose of section 36(1)(vii) only the closing credit balance in the provision account of the earlier years is to be considered, despite the provision of section 36(2)(v) Held that:- As the statutory provision is silent on the precise method of working out the deduction. The issue has been made sufficiently clear by the CBDT Circular No.17/2008 dated 26-11-2008.(i) u/s 36(1)(vii), deduction on account of bad debts which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of such debs to the provision for bad and doubtful debt account u/s 36(1)(viia), as required by section 36(2)(v) - (ii). While considering the claim for bad debts u/s 36(1)(vii), the A.O. should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad & doubtful debt account created u/s 36(1)(viia). The credit balance for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year Therefore, bearing in mind the circular issued by CBDT dated 26-11-2008 appeal decides in favour of assessee
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2013 (1) TMI 208
Deduction u/s 80IB (10) - CIT(A) allowed the deduction - Held that:- CIT(A) has examined the matter giving detailed finding that all the four shops located on the ground floor has area of (i) 6.50 × 3.085 sq. meters, (ii) 6.50 × 2.915 sq. meters, (iii) 6.50 × 2.915 sq. meters and (iv) 6.50 × 3.085 sq. meters aggregating to 78 sq. meters which is approximately 2% of the built-up area. Thus as the Revenue has not produced any materials to substantiate its claim no interfere with the order of the CIT(A) is required. Deduction u/s 80IB (10) on the addition made u/s 40 (a)(ia) - revenue contested as the addition was not on account of disallowance of any expenditure but on account of infringement of law - Held that:- It is settled principle that the deeming fiction created under any provisions of the Act cannot be imported into a beneficial provisions of the Act. In this case, the addition made on account of disallowance of expenditure is due to the deeming fiction created by the penal section 40(a)(ia) thus, the effect of the same cannot be imported into a beneficial provision of section 80-IB(10) As decided in Executors & Trustees of Sir Cawasji Jehangir v. CIT [1958 (9) TMI 58 - BOMBAY HIGH COURT] unless it is clearly and expressly provided, it is not permissible to impose a supposition on a supposition of law. It is not permissible to sub-join or track a fiction upon fiction - in favour of the revenue As from the facts of the case, it is not clear whether the assessee has deposited the tax deducted at source to the government treasury within the due date of filing of the return remit this issue back to the file of AO for such verification and to pass appropriate order as per law and merits. Accordingly, this issue is allowed for statistical purpose.
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2013 (1) TMI 207
Reopening of assessment - assessee-company had sold goods to its subsidiary concern at price less than the cost of producing those goods and sold to the other parties - Held that:- Reasons disclosed by the AO do not set out as to what facts the assessee had failed to disclose fully and truly. Even a prima facie reference to the basis on which it was sought to be inferred that there was a failure to disclose all material facts had not been set out in the reasons. The primary jurisdictional requirement for reopening the assessment beyond a period of four years had not been fulfilled in the assessee's case. The reasons recorded by the AO and have found that except for the statement that there was omission on the part of the assessee to furnish the true and correct affairs of the company, there is nothing whatsoever in the reasons recorded to indicate the nature of the omission and as to which facts had not been truly and fully disclosed. If the AO had any reservation about the sale price of the goods sold to the group concerns, he should have questioned the genuineness of the transaction in the earlier AYs.i.e.1993-94 to 1995-96. All information regarding the sale by the assessee-company was before him. ‘Alleged under pricing of goods’ if any as mentioned in the order of 1997-98 and in the reopening orders cannot be termed non-disclosure of material facts by the assessee-company. Full and true facts of sale-price were made available to the AO who had passed orders for earlier years. If AO did not or could not draw particular inferences from the facts narrated in the returns of earlier AYs, then assessee cannot be accused of not disclosing full and true information - the said failure is apparently on the part of the AOs who had framed the assessments for AYs.1993-95 and had accepted the genuineness of the sale transactions entered in to by the assessee and sister concerns. Non-supply of reasons recorded by the AO to the assessee-company - Held that:- Awareness about the reasons recorded is totally different from supplying the copies of reasons to the assessee. FAA has admitted that it is no doubt true that appellant had requested for copy of the reasons recorded but this request was not repeated after that till filing of appeal before CIT(A). We fail to understand that why a request for supplying a copy of the reasons recorded should be repeated ? Only the AO knows why he preferred not to supply the copy of the reasons recorded, even after receiving a request form the assessee, though he chose to re-produced the same in the Assessment Order.In our opinion conduct of the AO was against the settled principles of justice - Thus reassessment completed without furnishing the reasons actually recorded by the AO for reopening of assessment is not sustainable in law because the A.O. is duty bound to supply the same within reasonable time as held in case of GKN Driveshafts (India) Ltd (2002 (11) TMI 7 - SUPREME COURT). In the case under consideration, AO had failed to furnish the reasons recorded for re-opening to the assessee within the reasonable time-prior to the completion of reassessment proceedings. Re-assessment order passed without supply of reasons, is invalid and cannot be sustained - appeals filed by the assessee-company allowed for all the three Assessment Years.
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2013 (1) TMI 206
Search & Seizure - Scope of assessment u/s 153A – A.O. could examine any issue or only issues for which incrimination material has been found during courses of search for assessments which are already completed prior to date of initiation of search – Assessments relating to the A.Ys. 2002-03 to 2006-2007 has concluded - Assessments relating to the A.Ys. 2007-08 can be considered as pending on the date of initiation of the search - Held that:- The completed assessments, though automatically reopened as per the provisions of sec. 153A, yet they can be disturbed only in respect of those issues for which some incriminating materials requiring such disturbance is unearthed during the course of search proceeding Concluded assessments can be disturbed only if the department has unearthed any incriminating material warranting such disturbance or the any identical issues are available in the concluded assessments as in the case of pending assessments. Suppressed consultation fee - Seized records – Entries in booking diary – A.O. found details from dairy during search for the A.Ys 2006-07 to 2008-09 – A.O made addition for all the 6 A.Ys. on the basis of average number of patients – Held that:- AO has computed the suppressed consultation fee by taking the details from the books of accounts maintained by the assessee and not on the basis of the seized record. The seized records numbered as MMA-1 and MMA-2 contained patient details for the years relevant to the A.Ys 2006-07 to 2008-09. Thus the department did not unearth any record pertaining to the years relevant to the A.Ys 2002- 03 to 2005-06. In view of the legal position discussed above, the AO could not make any addition for A.Ys 2002-03 to 2005-06. No addition could be made for A.Y. 2008-09 also, as the department has failed to bring on record any actual suppression of consultation fee on the basis of seized record. Partly allowed in favour of assessee Suppression of income from surgeries and sale of lenses – Held that:- The profit on PMMA lens during the years relevant to the A.Ys. 2007-08 and 2008-09 can only be treated as the suppressed income in the hands of the assessee. It is also quiet common that the businessmen fixes different selling price to different customers. Hence the selling price charged to one customer cannot always be taken as the base for determining the selling price for others. Profit that might have accrued to the assessee on purchase of PMMA lens may be taken at Rs.600/- per lens (30% of the sales value). Partly allowed in favour of assessee Disallowance of salary expenses - Sworn statement - AO computed that the assessee was incurring a sum of Rs.10,000/- per month as salary and accordingly restricted the salary payment to Rs.1,20,000/- per annum for A.Ys. 2008-09 and 2007-08. For other years, he proportionately reduced the allowable salary – Held that:- Replies given on the basis of memory should have been corroborated with other available evidences before taken any adverse inference. the assessing officer’s case would have been stronger, had he called for the break up details like employees name, type of services rendered by him, the hours of work, the salary paid etc. and objectively analysed them to find out any bogus or excess payment. It is not clear whether the AO did call for such kind of details. The annual payment is taken as 14.5 months salary, i.e, 12 months + 2 months bonus + customary payment ˝ month as base to calculate salary. Partly allowed in favour of assessee Disallowance of expenditure of Consumables and medicines - Assessee was collecting payments from the surgery patients towards medicines and consumables – A.O. disallowed 80% of the amount claimed – Held that:- It would be unreasonable to presume that the clinic shall not have any expense on consumables and medicines. Accordingly, the disallowance of 80% made by the AO is on the higher side. Since the assessee has failed to furnish required details, a disallowance of 30% of the expenses claimed by the assessee on consumables and medicines would be reasonable. Partly allowed in favour of assessee Cash Credit u/s 68 – Gift - Credit worthiness - Received gifts from close NRI relatives through cheques during A.Ys. 2002-03 to 2007-08 – via NRE bank Account – Held that:- the peculiar characteristics of the NRE bank accounts and the assessee has brought to the notice of the AO that the donors have made gifts from their respective NRE accounts. Thus the material and the attending circumstances show that the assessee could not have funded these donors for making the impugned gifts to the assessee. Assessee has discharged the primary burden of proof placed upon him. In favour of assessee Additions on the basis of fund flow statements – Statements are prepared on the basis of books of account - Held that:- It is possible that the assessee might have maintained books only for his profession and hence the fund flow statements might have been prepared to combine both professional and non-professional items. Revenue authorities did not properly understood the significance of the financial statements. Accordingly, the additions made on account of cash deficiencies require re-examination. Remand back to AO Unexplained expenditure - Assessee claimed that items were gifted by his father in law - the father in law of the assessee did not declare cost of these items in his cash flow statement – Held that:- It is the duty of the assessee to substantiate his claim that the imported interior decorated items have actually been gifted by his in laws. From the record, it’s notice that the assessee has failed to substantiate his claim. In favour of revenue Addition towards the difference in the purchase cost of property – In sworn statement assessee mentioned that he paid the consideration in cash as per the requirement of seller and the purchase consideration was Rs.45 lakhs - actually accounted only Rs.28.25 lakhs in his books – Held that:- AO did not bring on record any material in this regard except placing heavy reliance on the sworn statement given by the assessee. Assessee had mentioned in the sworn statement that he paid the entire consideration in cash, whereas the AO himself has noticed that a sum of Rs.26 lakhs was paid by way of cheque. This example itself shows that the reply given out of his memory could not be relied upon fully. the assessee has also given explanation with regard to the amount of Rs.45.00 lakhs. Authorities on the basis of surmises and conjectures without placing reliance on any tangible material or without examining the matter further confirm addition. Delete the addition. In favour of assessee Addition of difference in cost of construction of residential building - Declared the cost of construction at Rs.1.10 crores - Department seized a report of registered architect for the purpose of bank, in which the cost of construction was shown at Rs.1.70 crores – Held that:- The assessee had obtained loan from HDFC bank on the basis of the report of the architect for some other purpose and not for the purpose of construction of residential building and hence the assumption made by the AO was proved to be wrong. In favour of assessee
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2013 (1) TMI 205
Jurisdiction power u/s 263 by CIT(A) - assessee using borrowed funds for the purpose of business has diverted the same for the purpose of investment in shares and has claimed an interest towards interest on loan - assessee received Rs. 1.55 crores as advance from Sri S.V. Sriramulu towards the facilitator for the purchase of land - AO has not examined whether there was any transfer in accordance with the provisions of section 2(47) - Held that:- Perusal of the assessment order passed by the AO does not show any application of mind on his part as there is no enquiry by the AO while passing assessment order u/s. 143(3). He simply accepted the income declared by the assessee mechanically accepting what the assessee wanted him to accept without any application of mind or enquiry. The evidence available on record is not enough to hold that the return of the assessee was objectively examined or considered by the AO. It is because of such non-consideration of the issues on the part of the AO that the return filed by the assessee stood automatically accepted without any proper scrutiny. The assessment order is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee. The AO has completely omitted to examine the issues in question from consideration and made the assessment in an arbitrary manner. His order is a completely non-speaking order. Thus it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order considering the issues raised by the CIT. The assessee should have no grievance in the action of learned Commissioner in exercising the jurisdiction u/s. 263 as the view so taken by the Assessing Officer without making the requisite inquiries or examining the claim of the assessee will per se be an erroneous view and hence will be amenable to revisional jurisdiction under Section 263. Second reason is that it is not taking of any view that will take the matter under the scope of Section 263 - against assessee.
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Customs
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2013 (1) TMI 204
Import of L-Argenine not for medical use - confiscation of consignment with an option for redemption against payment of a fine of Rs. One lakh and also ordered for re-export of the goods within 30 days and also imposed a penalty of Rs.50,000/- - NOC from the Drugs Control authorities required for release - Held that:- Remand the case to the original authority as though the Hon'ble High Court by order dated 18.4.2012 in W.P.filed by the respondent directed that their representation dated 7.3.2012 be considered and disposed of on or before 25.4.2012, the Addl. Commissioner of Customs ordered confiscation of the goods and directed its re-export without considering the said representation. The adjudicating authority relied mainly on the letter dated 20.4.2012 sent by the Deputy Drugs Controller to the Customs authorities. That letter projected L Argenine as a product defined under Section 3 of the Drugs and Cosmetics Act, 1940 and also advised against release of the goods to the respondent. The adjudicating authority heavily relied on the contents of the letter. But no copy of the letter was supplied to the respondent. In other words, the principles of natural justice were violated by the adjudicating authority. Though, before the original authority, the respondent relied on case of Drugs Controller General & Anr. Vs. M/s. S.Kesarimal & Ors. [2013 (1) TMI 119 - MADRAS HIGH COURT] the judgment was not considered. Letter dated 16.3.2012 of the Deputy Drugs Controller addressed to M/s. K.P. Manish Global Ingredient (P) Ltd. Chennai indicating that NOC was given to the said company to import 2000 kilograms of L Argenine from China for the purpose of sale to actual user for manufacture of health supplement ingredient was not placed before the Original authority and hence could not be considered - Thus set aside the impugned order and allow this appeal by way of remand to the original authority for fresh adjudication giving the party a reasonable opportunity of adducing evidence and of being personally heard.
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2013 (1) TMI 203
Anti-dumping - Customs Tariff Heading 3904 21 10 - Poly Vinyl Chloride Paste Resin - Emulsion PVC Resin - PVC Suspension Resin - Customs Notification No. 104/2004 dated 7-10-2004 - Customs Notification No. 70/2010 dated 25-6-2010 – Classification given by Customs are only indicative or dispositive – Section 9A(5) of the Customs Tariff Act, 1975 Designated Authority initiated an Anti-dumping Investigation concerning imports of PVC Paste Resin falling under CTH 3904 22 10 - D.A. after investigation issued Final Finding and stated that correct classification of PUC is 3904 21 10 - Ministry of Finance acting on the recommendation of D.A. imposed anti-dumping duty on products of CTH 3904 21 10 by notification 104/2004 Sunset Review - D.A. suo motu initiated the Sunset Review of the anti-dumping duty imposed on products of CTH 3904 21 10 for examining whether duty imposed vide Notification 104/2004 can be extended or not - D.A. recommended imposition of anti-dumping duty on products of CTH 3904 22 10 - Fixed duty was recommended in SSR as opposed to reference price based duty on notification 104/2004 - Ministry of Finance vide Notification No. 70/2010-Cus. imposed anti-dumping duty on goods falling under the CTH 3904 22 10 Held that:- Final Findings of the D.A. is vitiated not only for the reason that the anti-dumping duty which was imposed on PVC Paste Resin falling under Heading 3904 21 10 during the original investigation has been recommended to be imposed on PVC Paste Resin falling under 3904 22 10 after the sunset review, there has also been a breach of natural justice by not giving adequate time and opportunity to the appellants to put forth evidence to support their claims before the D.A Further, the Ministry of Finance, Department of Revenue has imposed fresh anti-dumping duty on Plasticized PVC Paste Resin falling under Heading 3904 22 10 on 25-6-2010 instead of continuing the levy which was earlier imposed on Non-plasticized PVC Paste Resin falling under Heading 3904 22 10. Hence the said notification is in contravention of the provisions of Section 9A(5) of the Customs Tariff Act, 1975 The amending Notification dated 16-1-2012 has included two more Tariff items namely 3904 21 10 and 3904 21 90 and such inclusion is not supported by a recommendation from the D.A. Therefore inclusion of these fresh items is in contravention of Rule 18 of the AD Rules, 1995 which requires the Central Government to levy anti-dumping duty only on the articles covered by the Final Finding of the D.A., and it also specifies a time limit of three months from the date of the Final Findings. Hence, set aside the impugned Final Findings of the D.A. dated 26-4-2010 as well as the Customs Notification No. 70/2010 dated 25-6-2010 along with amending Notification No. 8/2012 dated 16-1-2012 and remand the matter to the D.A
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Corporate Laws
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2013 (1) TMI 202
Refund amounts collected through RHPs - direction to furnish the details with supporting documents to establish whether they had refunded any amount to the persons who had subscribed through RHPs as directed in [2012 (9) TMI 559 - SUPREME COURT] dated 31st August, 2012 - whether the time for implementing the directions contained in the earlier order of 31st August, 2012, may be extended or not? - Held that:- Since, in the order of 31st August, 2012, it has been indicated that if any payments had been made, the details thereof, along with supporting documents, were to be submitted to SEBI to verify the same. Essentially, the appellants have failed on both counts, since neither the amount indicated in the order, together with interest @ 15% per annum, accrued thereon, has been paid, nor have the documents been submitted within the time stipulated in the said order. Appellants shall immediately hand over the Demand Drafts as produced in Court, to SEBI, for a total sum of Rs. 5120/- Crores and deposit the balance in terms of the order of 31st August, 2012, namely, Rs. 17,400/- Crores and the entire amount, including the amount mentioned above, together with interest at the rate of 15% per annum with SEBI, in two installments. The first installment of Rs. 10,000/- Crores, shall be deposited with SEBI within the first week of January, 2013. The remaining balance, along with the interest within the first week of February, 2013. The time for filing documents in support of the refunds made to any person, as claimed by the appellants, is extended by a period of 15 days. On receipt of the said documents, SEBI shall implement the directions contained in the order passed on 31st August, 2012 & if default occurs the directions contained in order dated 31st August, 2012, shall immediately come into effect and SEBI will be entitled to take all legal remedies, including attachment and sale of properties, freezing of bank accounts etc. for relisation of the balance dues.
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Service Tax
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2013 (1) TMI 218
Courier Service - Penalty u/s 76 - Non-payment of service tax - Assessee contended that two amounts though included as gross revenue for the months of May & July 2007, inadvertently were also reflected as revenue received during September 2007 and this has happened due to introduction of new software programme - the same is only a clerical mistake - Held that:- Since dispute relates to verifiable facts appellant should produce necessary documentary evidence like invoices relating to the two payments, the details of cheques under which the amounts were received from the service recipient and Bank statement (self certified copy of computer generated statement) and other relevant documents to show that this was merely due to arithmetical mistake. For fresh consideration remand back to AO
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2013 (1) TMI 217
Waiver of pre-deposit - Service Tax liability on NSE/BSE transaction charges and SEBI turnover fees - Held that:- Following the decision in case of SHAH INVESTORS HOME LTD.(2011 (3) TMI 727 - CESTAT, AHMEDABAD) that Service Tax is not leviable on such payments received by the assessee. Appellant has made out a case for waiver of pre-deposit. Stay granted
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2013 (1) TMI 216
Waiver of Pre-deposit - Non-inclusion of cost of free material supplied by the service recipient - October 2005 to March 2008 - Held that:- The post service tax valuation rules, the said rules provides for inclusion of free material supplied by service recipients and has been directing the assessee in other cases to deposit some amount of the Service Tex liability for the period post service Tax valuation rules as a condition to hear and dispose the appeal. Appellant has already deposited an amount of Rs. 9.04 lakhs against the demand of Rs.38.53 lakhs for the entire period. Waiver of pre-deposit of balance amounts involved is allowed and recovery thereof stayed
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2013 (1) TMI 215
Manpower Recruitment and Supply Agency Services - Appellant is doing the job for cutting, welding, fabricating, pipe fittings etc. on the engineering raw materials supplied by the Tube Product Incorporate (TPI) - The said work was done in the premises of TPI for which they were engaging skilled/ semi-skilled and unskilled technical workers and contractors and raising lump sum bill on the TPI - Held that:- As concluding from the facts work force employed for doing this job was paid by the appellants herein and not by the TPI. Following the decision in case of Ritesh Enterprises (2009 (10) TMI 182 - CESTAT, BANGALORE) Appellants have made out a prima facie case for waiver of pre-deposit of the amounts involved. Waiver of pre-deposit and stay granted
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Central Excise
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2013 (1) TMI 201
Rebate claim - Central Excise duty without physical movement of goods - Held that:- As the respondents admit that they had simply debited the cenvat credit in their books and without supply of any goods issued invoices and facilitated M/s. Ruby Silk Mills to show that they have received fabrics and make false claims for rebate. As decided in M/s Vee Kay Enterprises, Faridabad Versus Commissioner of Central Excise [2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT] the person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. Thus, unable to hold that appellant was not liable to pay any penalty - appeal filed by the Revenue has to be allowed. Penalty imposed equal to the cenvat credit availed on the basis of fraudulent invoices issued by the appellant is somewhat excessive. In view of the fact that penalty has been imposed on the others who have claimed rebate and cenvat credit also has been denied and rebate sanctioned has been demanded and also in view of the observations of the Hon'ble High Court that the penalty under Rule 26 does not have minimum prescribed amount, the quantum of penalty has to be commensurate with the gravity of the offence. Thus penalty is required to be reduced to Rs.Two lakhs.
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2013 (1) TMI 200
Wrong availment of Cenvat Credit - assessee contested that non-reversal of CENVAT Credit was purely a clerical mistake on part of the operating persons - appellants only challenged the imposition of penalty under Rule 15 of CCR r.w.s. 11AC - Held that:- The appellants were aware that no duty was being paid on the clearances of the optional accessories as the same were optional and bought out items. In terms of provisions of Rule 3(5) of the Cenvat Credit Rules, they were required to reverse/pay the amount equal to the CENVAT Credit availed on such accessories while clearing the same along with the final product, which they have not done and such a mistake cannot be accepted as a clerical error and the appellants' submissions in this regard are rejected. Since they have availed such credit despite knowing that the value of such accessories is not included in the assessable value of the final products and nor these accessories/inputs are capital goods for such product, the intention to wrongly avail CENVAT Credit is quite obvious and consequently they are liable for penal action under Rule 15 of the Cenvat Credit Rules read with Section 11AC. As the appellants have cleared the input to their sister unit without raising any invoices for such clearance and have neither paid the duty nor reversed the CENVAT Credit, appellants have clearly violated the provisions of the Cenvat Credit Rules and accordingly, liable to penalty under Rule 15 of the Cenvat Credit Rules - assessee's reliance on the case of Mafatlal Industries Ltd. (2008 (10) TMI 517 - CESTAT, AHMEDABAD) on the ground of revenue neutrality is not applicable as wherever the intention to evade the payment of duty is found, in such situation the benefit on ground of revenue neutrality is not available to the appellants - against assessee.
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2013 (1) TMI 199
Exemption under Notification No. 49/2003-C.E - had undertaken substantial expansion of installed capacity by not less than 25% on or after 7-1-2003 and that they have completed the expansion work - assessee opted for provisional assessment under Rule 7 of the Central Excise Rules, 2002 pending the acceptance of their claim for exemption - waiver of predeposit - Held that:- Admission of SLP by the Apex Court against the judgment dated 9-4-2010 of the High Court confirming demand against assessee does not mean that the High Court’s order has been stayed or has been reversed - all it means is that it is in jeopardy and its correctness or otherwise is under consideration of the Apex Court. In view of the admission of appeal against Hon’ble High Court’s judgment dated 9-4-2010 while the jurisdictional Central Excise authorities would not be able to take coercive measures for recovery of duty and penalty, this by itself, cannot be the ground for granting dispensation from the requirement of pre-deposit under Section 35F. As held in case of Vijay Prakash D. Mehta (1988 (8) TMI 109 - SUPREME COURT OF INDIA) right to appeal under Section 129A of Customs Act, 1962, (corresponding to Section 35B of Central Excise Act, 1944), is not an absolute right and when it is subject to condition of pre-deposit under Section 129E the conditions prescribed for the same have to be satisfied. Thus, when for maintainability of an appeal filed under Section 35B, the condition of pre-deposit under Section 35F has to be satisfied, the provision of Section 35F would have to be complied with. In term of the provision of Section 35F, the requirement of pre-deposit can be waived only on the ground of “undue hardship”, for which the appellant have to establish that they have prima facie case in their favour, and there is likelihood of the final decision being in their favour. But in this case on the basis of the evidence on record, the judgments of the Tribunal and Hon’ble Utranchal High Court are against the appellant. In view of this, it cannot be said that the appellant have prima facie case in their favour - direct the appellant to deposit the full amount of duty demand confirmed against them within a period of eight weeks from the date of this order.
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2013 (1) TMI 198
Remand back the matter back for re-adjudication – Power of Commissioner (Appeals) u/s 35A – Held that:- Section 35A(3), as amended, confers powers on the Commissioner (Appeals) to annul the order-in-original and also to pass just and proper order. There may be circumstances where only just and proper order could be to remand the matter for fresh adjudication. For example, if the order-in-original is passed without giving opportunity of being heard to the assessee or without permitting him to produce evidence in support of his case, in such event while setting aside the order-in-original only just and fair order would be to remand the matter back for fresh adjudication after giving due hearing to the assessee. Thus, power to remand the matter back in appropriate cases is inbuilt in Section 35A(3) of the Central Excise Act, 1944. In favour of assessee
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2013 (1) TMI 197
CENVAT Credit wrongly availed - Rule 15 of Cenvat Credit Rules, 2004 – Rule 2(a) of Cenvat Credit Rules - CENVAT Credit availed on capital goods received when the factory was still under construction - Circular No. 88/88/94, dated 26-12-1994 – Held that:- There may be dispute about the eligibility for Cenvat credit in respect of Chapters 72 and 73 items as to whether the same were used in the foundation for erection of capital goods or as supporting structures for machinery and only to this extent the Cenvat credit would be inadmissible. For rest of items covered by the definition of capital goods, as given in Rule 2(a) are concerned, during the period of dispute there was no provision that the Cenvat credit in respect of such items of capital goods cannot be taken prior to commencement of production and eligible for Cenvat credit. CENVAT Credit on inputs used in fabrication of P&M manufactured by contractor – appellant who is not the manufacturer of these items of capital goods – Held that:- Prima facie view denial of Cenvat credit would be correct only to the extent the items had been used purely in erection work, i.e. foundation for erection of machinery and making supporting structures for the machinery, or other structures fixed to earth, but to the extent the steel items have been used in fabrication of identifiable items of machinery, covered by the definition of capital goods as given in Rule 2(a) of Cenvat Credit Rules, the credit would be admissible. CENVAT Credit of service tax of various input services used in the construction and setting up of the factory - Circular No. 345/6/07-TRU., dated 4-1-2008 – Held that:- Prima facie view that work contract service and consulting engineers service are the services relating to setting up of a factory and, hence, would be covered by the definition of input service. Similarly, inward transportation of input or capital goods was also specifically covered by the definition of input service and, hence, the GTA service used for inward transportation of the goods would also be eligible for Cenvat credit. Similarly, the service of security, telephone, rent-a-cab operator service, used in connection with setting up of a factory would also be covered by the expression “activities relating to business” in the definition of input service and would be eligible for Cenvat credit The bulk of the Cenvat credit has been incorrectly disallowed except items of Chapters 72 and 73. Not the case for total waiver.
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Indian Laws
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2013 (1) TMI 196
RTI - Appellant had sought information on seven points - Appellant sent postal order of Rs. 20/- instead of Rs. 18/- and stated that excess amount of Rupees 2/- is waived in his favour - It was informed to appellant that CPIO of the Commission cannot accept anything less or anything more than what is admissible as per the Rules - Held that:- looking into the practicality the request of the appellant be accepted and directed to provide information to the appellant within 5 working days of the receipt of payment by the appellant. In favour of assessee
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2013 (1) TMI 195
Scope of explanation to Rule 17(1) of Order 41 CPC - Whether the High Court was justified in deciding the appeal on merits when there was no appearance on behalf of the appellant - Held that:- Following the decision in case of ABDUR RAHMAN & ORS Versus ATHIFA BEGUM & ORS (1996 (8) TMI 471 - SUPREME COURT) wherein the scope of explanation to Rule 17(1) of Order 41 CPC came up for consideration. While interpreting the said provision, this Court took the view that the High Court could not go into the merits of the case if there was no appearance on behalf of the appellant. Therefore, set aside the judgment of the High Court and direct the High Court to dispose of the same in accordance with law. In favour of assessee
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