Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 1, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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For The Convenience of Taxpayers -The Income-tax offices all over India shall make special arrangements by opening of receipt counters on 29th & 30th September, 2012 being Saturday & Sunday - Order-Instruction
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Valuation of closing stock of incentive sugar (free sugar) - One cannot have a stock valuation which converts a capital receipt into revenue income - SC
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If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word `manufacture'. - Section 80P - SC
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Penalty u/s 271D - violation of Section 269SS ranged from just 1.1% to 6.14% for the years under appeal - no penalty - HC
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Investment allowance - The Canteen cannot be said to be an `industrial undertaking' as it does not manufacture or produce any article or thing - disallowance u/s 32A(2)(b)(iii) warranted - SC
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Rectification - Section 154 is not applicable in this case as that the provisions of Chapter VIA dealing with quantification of deductions have been amended at least eleven times. - SC
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Notice u/s 263 has been issued under the signature of Income-tax officer (Technical), whereas in view of the provisions of powers u/s 263 (1), it is only the CIT to issue notice - HC
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Income from house property - it is for the assessee to establish that the property was intended to be let and it remained vacant in the absence of it being occupied by a tenant. - no vacancy allowance - AT
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Deemed dividend u/s 2(22)(e) - Assessee held 97.83% shares - the assessee received the advance against sale of property belonging to her, therefore the transaction could not be brought under the provisions of Sec. 2(22)(e) - AT
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Indo-Swiss DTAA - though eBay India and eBay Motors are dependent agents of the assessee, but do not constitute 'Dependent agent PEs' of the assessee - AT
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Application u/s 154 moved by assessee to carry forward and set off unabsorbed depreciation and losse - DCIT recomputed and reduced the deduction u/s 80HHC - Action of DCIT is correct - SC
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Deduction u/s 36(1)(vii) - bad debts - period prior to 1st April, 1989 - applying the commercial test and business exigency test, both the conditions u/s 36(1)(vii) r.w.s. 36(2)(i)(b) are satisfied. Deduction allowed - SC
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Expenditure incurred by the assessee company on payment of premium for purchase of its own shares from warring group of shareholders - expenditure is revenue in nature - deduction allowed - AT
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Government is obliged to collect only that amount of tax which is legally payable by an assessee. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. - HC
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Blending and bottling of IMFL would amount to ‘manufacture’ for the purpose of claiming deduction under Section 80IB - SC
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Revenue expenditure vs. capital expenditure - assessee being in hotel industry, the expenditure incurred for interior decoration with a view to provide a comfortable stay to customers, the expenditure was nothing but revenue expenditure - AT
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Addition u/s 68 - Share application money – AO directed to reopen the individual cases of all shareholders as listed by AO - AT
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Deduction u/s 54EC - investment after expiry of initial 6 months due to delayed receipt of sale proceeds - benefit of section 54EC allowed - AT
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Addition u/s 68 - cash credit - genuineness of the transaction cannot be doubted as the amount has been re–paid on the same day or within a fortnight of receiving the same - AT
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Capital Gain - Cost Inflation index - the assessee was actually put in possession of the subject property only in year 2001 and not in the FY 1998-99 - indexed cost to be taken for AY 2001-02 - AT
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Ad-hoc addition - If the claim is bogus, the entire amount has to be disallowed and if not bogus the whole amount should be allowed as deduction but no adhoc addition can be made on the basis of presumptions and surmises. - AT
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Depreciation on Windmill – AO contended that windmill did not generate a single unit of energy till the end of the FY - assessee is entitled for depreciation on commissioning itself. - AT
Customs
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Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values - Notification
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Extend the validity of Notification No. 17/2008-Customs dated 19th February, 2008 for a further period of one year - Import of phosphoric acid, technical grade or food grade including industrial grade. regarding - Notification
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Non production of end use certificate - As the contemporaneous evidences which have been shown by the appellant are enough to hold that the goods which were imported were consumed for the manufacture of leather goods - benefit of exemption allowed - AT
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Classification - Assemblies and evaporator assemblies - heat exchangers - goods can be classified under Heading 84.19 is not acceptable as the same are not for purposes other than air-conditioning machinery used for domestic purposes - AT
DGFT
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Amendment in Appendices and ANF 2 D - Replaced as per specimen of revised ANF-2D annexed with this Public Notice - Public Notice
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Amends Schedule – I (Imports) of the ITC (HS) - Import Licensing Note (4) at the end of Chapter 25 and Import Licensing Note at serial no. (2) of Chapter 68 - From India-Sri Lanka Free Trade Agreement (ISFTA) only through any EDI Port . Regarding - Notification
Corporate Law
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Demerger - The decision in the other Court might have a persuasive value in the latter proceeding. However, it would not operate as res judicata as parties were not same that would take care of the plea of res judicata - HC
Indian Laws
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Right to Information Act - the provisions of Sections 12(5) and 15(5) of the Act of 2005 are held to be constitutionally valid, but with the rider that to hold and declare that the expression ‘knowledge and experience’ appearing in these provisions would mean and include a basic degree in the respective field and the experience gained thereafter. - SC
Service Tax
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Service Tax return in Form ST-3 shall be submitted by 25-10-2012 for the period 1-4-2012 to 30-6-2012 only - rule 7(2) amended - Notification
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Construction of residential complexes on own land and sale thereof of residential units - receipt of advance - department is binding by the circular issued by Board and hence activity in question is not subject to service tax. - AT
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With respect to the members of the Association who are engaged in repair of work of vessels, the authorities are justified in insisting that they must register themselves and also pay service tax as may be payable. - HC
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Penalty - service tax with interest was deposited before issuance of SCN - the assessee has not committed any illegality in not depositing any penalty amount. Penalty levied against the assessee in excess of 25% u/s 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal - HC
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Rejection of appeal on ground of limitation - condonation of delay - Tribunal has no power to drag Revenue to litigation reviving a litigation which came to an end with the passage of time. - AT
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Cenvat credit - input services utilized for authorized motor vehicles service center and business auxiliary services - trading activity - credit in respect of the services other than advertisement expenses and hotel expenses are allowed - AT
Central Excise
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There is no prescribed time limit for availing Cenvat credit - Credit availed in the year 2009 for the period from October 2004 to March 2009 - AT
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Clandestine removal of goods – alleged that clandestine removal of the goods in the connivance with the dealers and transporters – The link cannot be established on mere assumption. - AT
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Valuation - As the test kit and IAS column are traded item, the same cannot be considered as a part of the manufactured goods i.e marker. - AT
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Refund – unjust enrichment - upheld the order of refund on the ground that there is no variation in the price of the product both before and after the period the duty was paid by the assessee - HC
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Whether duty debited in RG 23A Part-II could be refunded in cash - refund claim filed in 2007 for this amount of credit which lapsed as early as on 1-4-1999 stands rightly rejected - AT
VAT
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Functioning of the Appellate Tribunal VAT - that after two members heard the case substantially and closed hearings on its behalf, the third member sought join the bench and participate in the proceedings - HC
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Syndicate Bank added for e-tax payment. - Notification
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Submission of information in Form T-2 shall come into force w.e.f. 15-10-2012. - Notification
Case Laws:
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Income Tax
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2012 (9) TMI 848
Valuation of closing stock of incentive sugar (free sugar) - levy price v/s cost price - Held that:- As it is the case of the assessee, that following the judgment of this Court in Ponni Sugars & Chemicals Ltd.(2008 (9) TMI 14 - SUPREME COURT ) the closing stock of incentive sugar should be allowed to be valued at levy price, which on facts, is found to be less than the cost of manufacture of sugar (cost price). We find merit in this contention. In Ponni Sugars & Chemicals Ltd. (supra), this Court, on examination of the Scheme, held that, the excess realization was a capital receipt, not liable to be taxed and in view of the said judgment, thus the assessee is right in valuing the closing stock at levy price. The stock valuation of incentive sugar has a direct impact on the manufacturer's revenue or business profits. If to accept the case of the Department that the excess amount realized by the manufacturer(s) over the levy price was a revenue receipt taxable under the Act then the very purpose of the Incentive Scheme formulated by Sampat Committee would have been defeated. One cannot have a stock valuation which converts a capital receipt into revenue income - in favour of assessee.
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2012 (9) TMI 847
Entitlement to benefit of Section 80P(2)(a)(iii) - marketing of sugar - Held that:- As decided in CIT vs. Oracle Software India Limited [2010 (1) TMI 9 - SUPREME COURT OF INDIA] if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word `manufacture'. As the above test has to be applied and adjudicated on case to case basis. It depends on the type of product which ultimately emerges from a given operation. As this aspect has not been examined by the Courts the case is to be remitted back to the CIT(A) to re-examine the matter.
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2012 (9) TMI 846
Penalty u/s 271D - Disallowance of share application amounts in cash - ITAT deleted the levy - Held that:- As decided in CIT, West Bengal I Versus Vegetable Products Limited [1973 (1) TMI 1 - SUPREME COURT] where two High Courts had confirmed a view acceptable to the assessee where as two other High Courts had taken a diametrically opposite view, interpretation which is favourable to the assessee, that cannot be considered as an unacceptable or untenable one, at least for purposes of penalty. Thus it is held that there is no infirmity in the order of the Tribunal since there were two possible views – one directly in favour of the assessee is need to be taken as per COMMISSIONER OF INCOME-TAX Versus RUGMINI RAM RAGAV SPINNERS P. LTD [2007 (7) TMI 237 - MADRAS HIGH COURT] that the share application money was not deposit or loan under the provisions of Section 269T and therefore, the penalty u/s 271D was liable to be deleted as Tribunal rightly held that cash payments pertains to refund of share application money and not repayment of deposit or loan - in favour of assessee.
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2012 (9) TMI 845
Penalty u/s 271D - non comply with the provisions of Section 269SS - ITAT deleted the levy - Held that:- The Revenue is not correct in his contention that the basis of the decision of the Tribunal is untenable. The Tribunal has not rested its decision on the only circumstance that it is the business of the assessee to collect deposits and, therefore, it was entitled to collect them in cash even if it involves violation of Section 269SS, that is not the substratum of the decision. The circumstances which were taken note of were that the depositors came predominantly from rural areas where there was either no proper banking facilities or such facilities were inadequate, that the deposits were basically saving schemes involving small amounts of daily or weekly savings, that there were logistical problems and fear of cumbersome procedure involved in the opening of the bank accounts and that contribution of small amounts were made as savings, that there was evidence in the shape of correspondence to show that some banks were reluctant to allow the agents of the assessee to open bank accounts for various reasons and so on and so forth - As the violation of Section 269SS ranged from just 1.1% to 6.14% for the years under appeal which was very low considering the total amounts of deposits collected. As no penalty proceedings were initiated for the intervening assessment years namely 1994-95 to 1998-99 and for the assessment years subsequent to the assessment year 2001-02.Thus it was not correct to state that the Tribunal based its decision on the only ground that Section 269SS cannot be applied to the assessee whose business itself was the collection of deposits - in favour of assessee.
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2012 (9) TMI 844
Remand matter to CIT(A) by Tribunal - assessment of fringe benefit - Held that:- As at this stage it would be essential to notice that the assessee claims that it was unaware of the order passed by the CIT(A) dismissing its Appeal No.157/2008-09, since it was disposed of ex-parte. It would be in the fitness of things that if the assessee approaches the Tribunal with an appeal against the said order the same would be considered having regard to the totality of the facts and if any application for condonation of delay is made the same shall be considered and the appeal will be heard.
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2012 (9) TMI 843
Capital expenditure incurred out of anonymous donation - ITAT grant the benefit of exemption to undisclosed income to the assessee - Held that:- The donations received by the assessee are not anonymous donations. The details in respect of the name and address are available in possession of the AO in the form of the name and address are available in possession of the AO in the form of donation receipts, which were impounded in the course of survey - The discrepancy in respect of the amount of Rs.2,49,000/- has occurred on account of computer malfunctioning, but the details as above are available in the donation receipts. Therefore, no donation can be said to be anonymous. The income tax authorities were not right in holding that the amount received by the assessee as donations was not “anonymous donations” within the meaning of Section 11(3) because the receipts issued by the assessee trust were still in the custody of the department as the receipt books were impounded in the course of the survey and no confirmations were required to be filed by the assessee. In these circumstances the Tribunal held that Section 68 cannot be applied as the amount has already been shown by the assessee as income - no substantial question of law arises out of the order of the Tribunal - in favour of assessee.
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2012 (9) TMI 842
Deduction paid as upfront fee and bank charges - disallowance u/s 40 (a) (ii) - ITAT allowed the claim - Held that:- As per section 35AB that deduction is permissible in respect of any lump sum consideration for acquiring any know-how for use for the purposes of the assessee’s business. “Consideration” in section 35AB is to be understood in the sense in which it has been used in the Indian Contract Act. Therefore the word “consideration” would include the entire obligation of the assessee, without which the assessee would not be able to acquire the know-how. Having no reason to disagree with, and the language of Section-40 (a) (ii) - which in our opinion is expansive enough to cover payments of the kind as the Court has now to deal with – we feel that no substantial question of law arises for consideration - in favour of assessee.
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2012 (9) TMI 841
Investment allowance u/s 32A(2)(b)(iii) - Refrigerator, Cooking Range and Fans installed in its Factory Canteen - Held that:- The Canteen may be a part of production Unit or Factory, however, it cannot fall under sub-clause (iii) which refers to any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article specified in the Eleventh Schedule. The Canteen cannot be said to be an `industrial undertaking' as it does not manufacture or produce any article or thing, as required under clause (iii). disallowance u/s 32A(2)(b)(iii) warranted - in favour of revenue.
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2012 (9) TMI 840
Pendency of assessment proceedings - Application before Settlement Commission accepted - assessment years 2005-06 to 2008-09 - revenue petition challenging the order of Settlement Commission - Held that:- As with effect from 1.6.2007, significant changes were made in the definition of the term "case" defined under section 245A(b) defining the term "case" would cover only those situations where an assessment is pending before the AO or it is still possible for him to pass any order of assessment. Accepting the proposition that even where by efflux of time, it is not open for the Assessing Officer to pass an order of assessment, merely because the return was accepted under section 143(1), the case of the assessee should be deemed to be pending for assessment only because the final order of assessment under section 143(3) was not passed, would run counter to the statutory amendments made in section 245A(b) - In the present case, the facts are not in dispute at all. For the assessment years 2005-06 to 2008-09, assessments had become time barred without any notice under section 143(2). Even final time limit for passing the orders even if such notices were issued had expired by the time the assessee filed his application for settlement before the Commission. The assessee's application qua these years, therefore, was not maintainable, ought not to have been accepted. Thus, the Settlement Commission erred in holding to the contrary in the impugned order. The impugned order to such an extent is, therefore, set aside - Request of the assessee that the material disclosed along with the settlement application should not be used in the normal assessments, cannot be accepted without full examination of such a request - petition allowed - in favour of revenue.
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2012 (9) TMI 839
Rectification - Deduction u/s 80IA - notice u/s 154 as claim of deduction allowed inadvertently before setting off the earlier years losses from the profits and gains of the industrial undertaking - Held that:- Section 154 is not applicable in this case as that the provisions of Chapter VIA dealing with quantification of deductions have been amended at least eleven times. Moreover, even Section 80IA, was earlier preceded by Sections 80HH and 80I, which has resulted in plethora of cases. In fact, some of the amendments have been enacted even after the judgment of this Court in the case of Kotagiri Industrial Co-operative Tea Factory Ltd. (1997 (3) TMI 1 - SUPREME COURT) delivered on 5.3.1997 relying on which claim was dismissed. In the circumstances the view that one cannot say that this is a case of a patent mistake. The assessee followed the judgment of the Madhya Pradesh High Court in K. N. Oil Industries (1996 (7) TMI 101 - MADHYA PRADESH HIGH COURT)wherein the High Court held that losses of earlier years were not deductible from the total income for purposes of computation of special deduction under Sections 80HH and 80I. Hence, the assessee is right in submitting that the issue involved a moot question of law, particularly at the relevant time (assessment year 1997-98) - in favour of assessee.
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2012 (9) TMI 838
Non remanding the matter to AO for providing opportunity to the assessee to furnish relevant documents - Held that:- The assessment order is bereft of any discussion as to what were the materials adverse to the assessee and what was the inference that could be drawn in the light of those materials and documents. Resultantly these matters have to be remitted for fresh consideration by the AO who shall proceed to make available the necessary documents, adverse to the assessee, and proceed in accordance with Section 69A.
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2012 (9) TMI 837
Re-opening of assessment u/s 147/148 - Held that:- As during the course of assessment proceedings for A.Y 2004-05 AO noticed that there were certain discrepancies in the bank account leading to a belief that certain income had escaped assessment in the hands of the assessee which was not denied by the assessee - as all these assessments were framed under section 143(1) there is no infirmity in the order passed by CIT(A) vide which validity of reassessment proceedings has been upheld - against assessee. Estimation of 5% agency income in the hands of the assessee - Treating appellant as Permanent Establishment of a Foreign Company - Held that:- As the existence of the foreign party and its genuineness has not been doubted by the AO as the assessee apart from receiving separate funds has also imported goods from the said party for its own trade no material placed on record by the revenue to establish the same - As right from the beginning it is the case of the assessee that the said amount was placed with it in "Trust" and assessee has been submitting the accounts of the same to the said party which did not have any objection upon such spending. In the account also no commission has been charged by the assessee. Therefore, the addition is made simply on the basis of presumption, which is not sustainable. Therefore, the addition in respect of assessment years 2000-01 to 2002-03 is deleted - in favour of assessee. Disallowance of 20% of expenses - "telephone, postage, courier, sales promotions and conveyance" - Held that:- There is no dispute to the fact that the assessee has not been able to produce all documentary evidences to establish that the entire expenditure has been incurred by the assessee under the above heads for its business purposes. It is a fact that the assessee has also undertaken promotional activities to promote brand products of M/s. Miraj PTE Ltd in India and the receipt as well as expenditure have not been routed through P&L account of the assessee. Substance in the observations of CIT(A) that a part of expenditure claimed by the assessee under the above heads could be for the purpose of promotional activities for the purposes of promotional activities. As decided in CIT v. Calcutta Agency Ltd.(1950 (12) TMI 4 - SUPREME COURT) that if the assessee fails to establish the fact of necessary documents to claim for deduction under section 37(1), the claim is not admissible. Thus disallowance of 20% as confirmed by CIT(A) out of the expenses claimed by the assessee is reasonable - against assessee.
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2012 (9) TMI 836
Addition on account of alleged excess cash as per cash flow statement, alleged bogus advance liability, unsecured loans, unexplained investment and dis-allowance of long term capital loss - Held that:- It is found that initially the case was built by AO on the basis of statement of affairs filed by assessee on the basis of which AO prepared cash flow statement and added back the shortage of cash as his income. Similarly on this basis only the AO had added back amount claimed as advance from Tawri Colonizers. Instead during investigations u/s 133(6) M/s Tawri Colonizers had claimed to carry liability. These amounts were also added by AO. These additions were deleted/reduced by CIT(A) on the basis that these represented amounts received from M/s Tawri Colonizers being part of sale consideration. If that be the case then these should have been shown as credits in the statement of affairs of assessee for calculation of short cash in hand and consequent addition should have been upheld by CIT(A). Similarly, calculation of long term capital gain has been done on the basis of rate adopted u/s 50C whereas from the facts of the case it emerges that assessee along with his brothers had sold whole land to the company, then how assessee had shown in his return a single piece of land measuring 100.64 sq. yds. The findings of AO and CIT(A) are contradictory in nature. Therefore, we are of the view that the whole issue should be examined by AO afresh -Appeals filed by the assessee as well as by revenue are allowed for statistical purposes.
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2012 (9) TMI 835
One time Commission income - Business income or unexplained income u/s 68 taxable under the head income from other sources - assessee engaged in business of share trading for last 25 years had suffered losses heavy losses during last few years - Held that:- It is observed that assessee had been suffering heavy losses during last few years in this regular trade and suddenly, during the year under consideration, the assessee received huge commission. Assessing Officer has elaborately dealt with his apprehension in the assessment order and has treated the same as unexplained income. CIT(A) in his order has not addressed the observations made by the AO and instead had allowed the claim of the assessee simply on the basis of facts that assessee had been filing income tax returns for a long period and commission income has been credited in the books of accounts and books of accounts are subject to the audit u/s 44AB. Since, before CIT(A), assessee had not been able to rebut any of the observations made by AO. Moreover, the order of CIT(A) is not a speaking order therefore, case is set aside to the CIT(A) for fresh adjudication - Decided in favor of Revenue for statistical purposes
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2012 (9) TMI 834
Penalty u/s 271(1)(c) - search and seizure - penalty levied in respect of additions made due to filing of inaccurate particulars of income and the resultant attempt to conceal its true income chargeable to tax - Held that:- In respect of addition made on account of payment of sub-brokerage to Mr Jain on ground of ingenuity of transaction it is observed that Mr jain entered into a contract for the purchase of unit of UTI totaling to Rs. 13.48 crores, surprisingly without paying a single rupee as margin money and amount of 15 lakhs became due to him on sale of such units. It is observed that assessee has grossly failed to substantiate its explanation and establish the genuineness of the transaction. Also, assuming yet not accepting, in this transaction also assessee must have received brokerage and the profit on the above said transactions is earned by Mr Jain, which the assessee has paid to Mr Jain, then , how can this payment of Rs.15 lacs be claimed as expenses by the assessee. In view of aforesaid, penalty is confirmed Payment of sub-brokerage to Shri Rana - fixed monthly payments - Held that:- Brokerage is always paid as a fixed percentage agreed by the party on the value of the transaction. However, in the instant case, the payment is majorly uniform throughout the year. Though payments have been paid by account payee cheque, but the assessee has failed to substantiate as to why a fixed sum of money has been paid to a sub – broker. Genuineness of the transaction has not been proved by bringing any cogent material on record. Penalty confirmed. Payment to D&Co - cash method of accounting - dis-allowance on ground that cheque was not cleared before the end of the accounting year - Held that:- No penalty can be levied on this dis-allowance which is only based on the accounting principles. Payment to R&Co. - difference in security - Held that:- Whatever has been brought on record has only confirmed the payment but the genuineness of the transaction has not been proved. Even the bank advice and the confirmation filed do not have the details of transaction nor any contract note has been filed or brought on record. As the assessee has grossly failed to substantiate its explanantion on each account and is hit by explanation 1B of sec 271[1][c] - Decided partly against assessee
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2012 (9) TMI 833
Block-assessment - search and seizure - addition made on account of undisclosed investment based on the entries found on the seized documents - Held that:- From records it is observed that there was justification for AO for coming to the conclusion that the figures were coded and CIT(A) was not justified in concluding that AO had acted on presumptions. In case, there is material to show that the figures are coded, the computation of income from the transactions has to be done on the basis of real figures and not coded figures. We are therefore, unable to sustain the order of CIT(A) in allowing relief to the assessee and same is therefore, set aside and addition is upheld. Addition as unaccounted sales - whether the entire sales should be added to the total income or only GP on the sales - Held that:- Once certain sales are found as unaccounted in the books, the assessee has to explain the investment in the corresponding purchases. In case the purchases are accounted, the entire sales had to be added to the trading account and in case sales as well as corresponding purchases both are unaccounted then, in addition to GP, the corresponding investment i.e. purchase value is also required to be added. Thus, in either case the total sales will have to be treated as undisclosed income. CIT(A) has not given any basis as to why only GP should be added. Order of CIT(A) set aside and addition made by the AO is confirmed. Addition on account of undisclosed stock - assessee had explained the stock as belonging to M/s. P Corporation - AO did not accept the explanation as figures were not matching - CIT(A) while deleting addition observed that discrepancy found represented the stock position of different dates - Held that:- In case no date is mentioned the document has to be taken as of the current date unless the assessee explains with evidence that the same related to earlier period. Therefore, the transactions had to be treated as part of the block period. The assessee had not produced any evidence to show that the said stock was part of the common business and had already been declared in the common accounts. addition made by AO is confirmed - Decided in favor of Revenue
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2012 (9) TMI 832
Trading addition - rejection of books of account - authenticity of labour charges - partial payment in cheque, partial by cash - non-confirmation by laborers - CIT(A) while making trading addition observed that no addition can be made u/s 69C and only possibility is to reject the books of accounts and estimate the income - Held that:- It is not in dispute that the A.O. neither rejected the books of accounts u/s 145 nor applied the percentage of profit on the gross receipt. CIT(A) without giving any opportunity of being heard to the assessee has rejected the books of account. In the absence of any finding recorded by the CIT(A) that he is not satisfied about the correctness or completeness of the accounts of the assessee or that the method of accounting has not been regularly followed by the assessee, CIT(A) was not justified in rejecting the books of accounts and in estimating the profit. This being so, and keeping in view that the outstanding payment made by the assessee during April, 2006 to October, 2006 was not disbelieved by the A.O., addition sustained by CIT(A) is not sustainable in law and accordingly the same is deleted. Addition u/s 68 - unsecured loans - non-confirmation - Held that:- It is observed that assessee at this stage has filed the same along with the PAN with a request to admit the same as an additional evidence. Matter remitted back to decide the same afresh - Decided partly in favor of assessee
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2012 (9) TMI 831
Determination of annual letting value (ALV) in terms of section 23(1) - as per Municipal Valuation or market value as contended by Revenue - assessee owns two commercial premises, however, no income from house property was shown in the return of income on ground that neither the property nor any part of the said property was let out during the year - Held that:- It has not been disputed that both the properties have not been let out at all and, therefore, annual value has to be determined as per section 23(1)(a). From the plain reading of the section, it would be seen that nowhere it has been provided that market rent is to be applied for the purpose of determining ALV. Rather, it envisages that “property might reasonably be expected to let from year to year”. For the purpose of Section 23(1)(a), the municipal valuation has been held to be correct value for determining ALV by various Courts. Assessing Officer directed to adopt the municipal valuation/rateable value adopted by the municipal authorities - Decided in favor of assessee
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2012 (9) TMI 830
Validity of revisionary order passed u/s 263 on 19-3-2012, setting aside reassessment order passed on 18-11-2009 u/s 143(3), r.w.s. 147 - period of limitation - assessee submitted that the assessment for 2002-2003 was completed u/s 143(1) by intimation dated 28.02.2003 and as such the period of limitation u/s 263 expired on 31.03.2005, being 2 years from the end of the FY in which the assessment was originally completed - Held that:- Contention of the assessee that the limitation for the purpose of the impugned revision order should be reckoned with the earlier order passed u/s 143(1), is not sustainable in law. This is because section 143(1) does not permit an Assessing Officer to make any addition or dis-allowance, and thus cannot be a basis for examining whether the final assessment order passed by the AO is erroneous or prejudicial to the interests of the Revenue. Moreover any proceeding of an authority under the Income-tax Act is amenable to the revisional jurisdiction of the Commissioner of Income-tax. Therefore, assessment order passed by the AO u/s 143(3), r.w.s.147, by itself is independently amenable to the revisional jurisdiction of the CIT - Ground of assessee rejected On merits it is held that Section 14A, read with Rule 8D, is not applicable to the impugned AY 2002-03. In view of aforesaid, revision order is not sustainable in law. Moreover, while examining the reassessment order in the light of section 14A, the CIT has not made any prima facie finding that in fact the assessee had incurred expenditure to earn the tax-free income and that expenditure has been claimed as a deduction in computing its taxable income. Hence, impugned revision order passed by the CIT is not sustainable on facts also - Decided in favor of assessee.
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2012 (9) TMI 829
Appeal against order of Tribunal setting aside the order passed by CIT on the ground that CIT has nowhere recorded his satisfaction, but it was the satisfaction of Income-tax Officer (Technical), who is not competent to revise order u/s 263 - Held that:- Provisions of Section 299-BB deals with the procedure for service of notice and in case, there is a defective service of notice, it provides that if the assessee has cooperated, it will not be open for him to raise the plea, whereas in the instant case, it is not the case of the service of notice, but the initial issuance of notice, which has not been signed by the competent authority as a finding has been recorded by the Tribunal that the notice has been issued under the signature of Income-tax officer (Technical), whereas in view of the provisions of powers u/s 263 (1), it is only the CIT to issue notice. Order of Tribunal upheld. It is also relevant that pleas can be raised only out of the judgment passed by the Tribunal or other authorities, but the plea, which was not raised at any stage, cannot be raised for the first time before this Court. No other arguments have been advanced in respect of other questions framed in the memo of appeal.
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2012 (9) TMI 828
Whether transacting in shares/mutual funds by engaging a Portfolio Management Services(PMS) held as an investment or trading activity – AO treat trading in shares by PMS provider is to be seen as one which has been done on behalf of the assessee and all the transactions carried out through the PMS provider were short term in nature with the motive of selling the shares at higher rates and booking profits – Held that:- As envisages that what the assessee was looking for by engaging the services of an expert, namely, the PMS provider, was appreciation and maximization of wealth and not merely en-cashing of profits with a view of a trader. Therefore, investments carried out by the assessee through the PMS provider do not result in a gain assessable as business income. - Decision in favour of assessee Annual value of property u/s 23 under head house property - Assessee had declared its annual value at NIL by applying Sec.23(1)(c) on the ground that such property remained vacant during the year under consideration - Annual value of the property was adopted on the basis of fair rent of ₹ 20,000/- per month and after allowing statutory deduction of 30% u/s 24, income chargeable under the head house property was computed at ₹ 1,68,000/ - Held that:- As concluded from the facts in the case allowing the benefit of Sec 23(1)(c) to the assessee, it is for the assessee to establish that the property was intended to be let and it remained vacant in the absence of it being occupied by a tenant. Therefore, it cannot be made out that the property was “intended to be let out”. Appeal decides in favour of revenue. Disallowance of expenditure incurred on earning exempt income u/s 14A - Whether the provisions of Sec. 14A are applicable to the expenses incurred in the course of its business merely because earning dividend income when there was no material brought to show that incurred expenditure for earning dividend income which is exempted from taxation – Held that:- Following the decision in case of CCI Ltd (2012 (4) TMI 282 - KARNATAKA HIGH COURT) when assessee has not retained shares with the intention of earning dividend income and dividend income is incidental to the business of sale of shares, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income so as to be disallowed. Appeal decides in favour of assessee
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2012 (9) TMI 827
Unexplained cash credits u/s 68 – AO added the entire amount from sale of shares as income from undisclosed sources – Held that:- As the purchase of shares, sold during the respective assessment years was already disclosed by the assessee in her regular books of account as well as in the returns of income filed. AO made the addition mainly relying on the statement of a broker. The AO was relying on the statement of a person, the onus was on the AO to enforce the attendance of that person for cross examination of the assessee but no such opportunity was provided in spite of the fact that the assessee requested to cross examine the share broker who earlier had confirmed but later on contradicted the confirmatory letter. Therefore appeal decides in favour of assessee Addition on account of low household withdrawal - AO had noted that certain invoices of expenditure were found from the premises of the assessee during the search - Held that:- income of the assessee AO had considered withdrawal made by the assessee only-he completely ignored the withdrawals made by the husband of the assessee. The assessee, her husband and HUF were withdrawing sufficient amounts in all the five assessment years under consideration. Therefore appeal decides in favour of assessee.
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2012 (9) TMI 826
Deduction u/s 43B – Whether deduction u/s 43B can be claimed for pre-paid expenses – AO reject the said claim on ground that only expenses incurred during the year can be allowed u/s 43B – Held that:- As these amounts in respect of which deduction has been claimed are covered u/s 43B and have actually been paid during the year. Thus, the sum which is actually paid irrespective of the year in which the liability to pay such sum had incurred even according to the method of accounting regularly employed by the assessee, has to be allowed in view of the provisions of Sec 43B. Assessee also contended that these amounts which have been debited in the profit and loss account has not been claimed in the subsequent year and has been accepted by the department as well as by the assessee. Therefore deduction allowed. Issue decides in favour of assessee Taxability of Advance licence benefit receivable - The benefit of concession in custom duty during import goods - Imports were not done during the accounting year and, therefore, no benefits is derived - The entries made in the P&L are notional in nature as the same represents the notional value of benefits under EXIM – Held that:- Following the in assessee own case for another assessment years, the issue is decided against the department. Disallowance u/s 43B - PF and employees contribution to the Provident Fund and EPF paid beyond the due date but before the end of the previous year – Held that:- Following the decision of the Tribunal in the earlier years, that no disallowance is called for as the same is covered by the decision of the Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT), wherein it has been held that the amendment in second proviso is with retrospective effect. Therefore, the amendment takes retrospective effect and accordingly any contribution to approved PF paid before the filing of the return has to be allowed as a deduction. Decision in favour of assessee Whether Excise Duty and Sales Tax is part of total turnover while computing deduction u/s 80HHC – Held that:- Following the decision in case of Lakshmi Machine Works(2007 (4) TMI 202 - SUPREME COURT) wherein it was held that excise duty and sales tax would not have an element of turnover and they ought not to be included in the total turnover or export turnover. Appeal decides in favour of assessee Whether other income is a part of total turnover while computing deduction u/s 80HHC - AO has included the items of other income like dividend, interest, royalty and technical fees, rent, sales-tax refund etc as part of turnover - Since, the Hon’ble Supreme Court also has confirmed in the case of Laxmi Machine Works that even excise duty and sales tax which do not have any element of profit cannot be included in the total turnover, similar logic also applies to the other incomes which does not have any bearing on the export turnover and total turnover, while working out the deduction under section 80HHC. Appeal decides in favour of revenue Exclusion of export proceeds not realized within Six months from the total turnover for the purpose of deduction u/s 80HHC – Held that:- Following the decision in case of Abad Fisheries (2002 (8) TMI 95 - KERALA HIGH COURT) wherein the Hon’ble High Court held that if the exports sales proceeds which could not be brought into India in convertible foreign exchange and could not be included in the profits, the same cannot also be included in the total turnover for the purpose of computation u/s 80HHC. Decision in favour of assessee Whether Profits of foreign branch is part of the turnover while calculating deduction u/s 80HHC – AO while computing the deduction u/s 80HHC has not reduced the profit of foreign while computing the profits of the business as per Clause (baa) of Explanation Section 80HHC(4B) – Held that:- From the reading of the said clause, it is abundantly clear that the profit of the foreign branch has to be reduced and if there is any loss, that should be added back. Issue decided in favour of assessee Deduction u/s 80IB - Profit of the unit calculated without deducting the losses incurred by the other units – Following the decision in case of Canara Workshops Ltd. (1986 (7) TMI 5 - SUPREME COURT) and ITAT in earlier years in assessee own case and decided in favour of assessee. Appeal decides in favour of assessee Deduction of penalty under Sales Tax Act – Assessee contended that nature of fines and penalties, were compensatory in nature – Held that:- Following the decision in case of Lachmandas Mathuradas (1997 (12) TMI 16 - SUPREME COURT) which was a penalty levied u/s 45(6) of Gujarat Sales Tax Act, is compensatory in nature and not in the nature of penal violation. Decision in favour of assessee Deduction in respect of advances written off – Assessee invest in a project turned out to be non-viable and was thus abandoned before any installation took place – Said expenditure incurred for development of the project was written off during the current assessment year - AO treated the said expenditure as capital expenditure and disallowed the same – Assessee contended that the said expenses incurred were mostly revenue in nature relating to travelling, salary and other administrative expenses – Held that:- Following the decision in the case of Indo Rama Synthetics (I) Ltd (2009 (9) TMI 635 - DELHI HIGH COURT) if the advances are completely in the nature of salary, wages and other administrative expenses as contended by assessee, then the same is to be treated as revenue expenditure. However, this finding is purely subject to verification by the AO. Appeal decided in favour of assessee subject to verification by AO Deduction of demerger expense u/s 35DD - AO did not grant deduction u/s 35DD in respect of 1/5th pertaining to the relevant AY on the ground that the said expenses were not debited in accounts for the AY – Held that:- Assessee incurs an expenditure on or after 1st day of April, 1999, wholly and exclusively for the purpose of amalgamation or demerger of an undertaking, the assessee shall be allowed the deduction of an amount equal to one-fifth of such expenditure for each of five successive previous years beginning with the previous year in which the amalgamation or de-merger takes place. Hence, 1/5th of the expenditure has to be allowed in this year which is beginning of the previous year in which de-merger has taken place. Appeal decides in favour of assessee
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2012 (9) TMI 825
Deemed dividend u/s 2(22)(e) - Assessee held 97.83% shares in the company from which advance was received against sale of property - Assessee furnished a copy of the agreement to sell before the AO – Held that:- As the advance received by the assessee from the company in which she is a substantial shareholder, was for a transaction relating to sale of property, the deeming provisions of Sec. 2(22)(e) of the Act were not applicable. If the advance was not in the nature of lending money, it cannot be held as dividend. In the present case, the assessee received the advance against sale of property belonging to her, therefore the transaction could not be brought under the provisions of Sec. 2(22)(e). Appeal decides in favour of assessee
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2012 (9) TMI 807
Indo-Swiss DTAA - assessee, a Swiss company, operated India specific websites providing an online platform for facilitating the purchase and sale of goods/services to users in India - entered into a Marketing Support Agreement with eBay India and eBay Motors which are eBay group companies in connection with its India specific websites - assessee contended that such revenue from the operations of its websites was not taxable as business profits as per Article 7 of the Indo-Swiss DTAA since it did not have a PE in India as per Article 5 – AO contended that assessee had connection in India as eBay India and eBay Motors were group companies rendering services to it and the entire income of Indian companies was derived from such services and accordingly held income to be taxable as 'Fee for Technical Services' – CIT(A) however, in the absence of the assessee furnishing any supporting evidence to prove the genuineness of the claim of expenses, invoked Rule-10 and held that 10% of the revenue to be taxed as business profits. The term 'managerial services' refers to managing certain affairs, a quid pro quo for which will be described as fees for technical services. Assessee becomes entitled to the user fee when there is a successful completion of sale between the buyer and seller through its website. The assessee's websites are analogous to a market place where the buyers and sellers assemble to transact. By providing a platform for doing business, the assessee can, by no standard, be considered as having rendered any managerial services either to the buyer or to the seller, for which it received fee from the seller, hence it is in nature of 'Business profits'. There is no dispute about the fact that eBay India and eBay Motors are providing their exclusive services to the assessee. It has been fairly admitted that these two entities have no other source of income except that from the assessee in lieu of the provision of service as set out above. In view of the fact that eBay India and eBay Motors are exclusively assisting the assessee in carrying on business in India, they definitely become dependent agents of the assessee. The next question, however, is whether or not these dependent agents constitute permanent establishments of the assessee as per conditions of Article 5(5). Clause (ii) of Article 5(5) has no application in this case because there is no requirement on the part of eBay India or assessee to maintain any stock of goods or merchandize on behalf of the sellers. Clause (iii) is also not applicable since eBay Motors is not required to manufacture or process the goods or merchandise on behalf of the assessee. As per Clause (i), it is to be seen whether eBay India and eBay Motors do or habitually exercise 'an authority to negotiate and enter into contracts for or on behalf of the assessee.' Simply by providing marketing services to the assessee or making collection from the customers and forwarding the same to the assessee, it cannot be said that eBay India entered into contracts on behalf of the assessee. Neither there is any mention in the assessment order nor the Revenue has specifically pointed out towards any contract entered into by eBay India or eBay Motors, during the discharge of their functions or otherwise, for or on behalf of the assessee. Thus the test laid down as per clause (i) of Article 5 (5) also fails in the present case. Therefore, though eBay India and eBay Motors are dependent agents of the assessee, but do not constitute 'Dependent agent PEs' of the assessee in terms of Article 5. Further, these concerns cannot be treated as the PEs of the assessee in terms of Article 5(2)(a) of the DTAA. Since the assessee has no PE as per Article 5, there can be no question of computing business profits of the assessee as per Article 7 in relation to the revenue generated from India – Decided in favor of assessee
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2012 (9) TMI 806
Plea against rectification order passed u/s 154 - application u/s 154 moved by assessee to carry forward and set off unabsorbed depreciation and losses of earlier AYs - DCIT while determining the taxable income, reduced the deduction admissible u/s 80HHC allowed in the original assessment order by reducing the unabsorbed depreciation and brought forward losses for the earlier AYs from current year's business profits for determining "profits of the business" - assessee contesting the re-computation of deduction u/s 80HHC(3) Held that:- Section 154 finds place in Chapter XIV which deals with PROCEDURE FOR ASSESSMENT. If one examines the scheme of Chapter XIV, it becomes clear that the said Chapter not only deals with assessment and re-assessment, it also deals with re- computation. The object of re-computation is to assess (quantify) the correct taxable income. Such re-computation of a correct taxable income is a matter of procedure. In order to arrive at a correct amount of taxable income, DCIT had to compute deduction u/s 80HHC(3) which had to be deducted from the gross total income - Decided against assessee
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2012 (9) TMI 805
Deduction u/s 36(1)(vii) - bad debts - period prior to 1st April, 1989 - Held that:- Deduction for bad debts required satisfaction of two conditions at the relevant time, namely, that (a) bad debt must be established to have become bad in that year; and (b) bad debt should have been written off in the books of account of that year. In present case, appellant satisfied both the conditions for claiming deduction for bad debt u/s 36(1)(vii) r.w.s.36(2)(i)(b). Firstly, the appellant is a State Public Sector Undertaking; and secondly, the appellant was the promoter of M/s. V Ltd. Assessee in the course of business of promoting industrial development in the State of Kerala, had promoted M/s. V Ltd. As a promoter, it was in a position to find out whether M/s. V Ltd was in a position to carry on business in future. Thirdly, M/s. V Ltd was a typical Public/Private partnership(PPP). None of these aspects have been considered by the Tribunal as well as by the High Court. Lastly, the Reference Application was made in February, 1988; declaration was made in February, 1988, by BIFR that M/s. V Ltd has become a sick Company. Till the end, the Company could not even be revived. It has been wound up. In the circumstances, applying the commercial test and business exigency test, we are of the view that both the conditions u/s 36(1)(vii) r.w.s. 36(2)(i)(b) are satisfied. Deduction thus allowed - Decided in favor of assessee
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2012 (9) TMI 804
Addition made on account of alleged consideration in the form of constructed area as capital gain - assessee company, owner of two plots of land 256 & 257, sold development rights in respect of plot no 257 to a builder for total consideration of 16.11 crores and construction of 18000 sq.ft. of carpet area for the benefit of the assessee on plot No. 256 for the benefit of the assessee - capital gain arising from sale of plot No. 257 was offered to tax by taking into account the consideration of Rs.16.11 crores and constructed area of 18,000 sq.ft. was not taken into account - assessee contended that before said Builders could start the construction work, the entire property comprising of plot No. 256 and 257 was sold to a third party M/s F Ltd. by a tripartite conveyance deed for a total consideration of Rs.29.11 crores - assessee thus never received the constructed area of 18,000 sq.ft. and whatever was received as additional consideration of Rs.13 crores (29.11 crores - 16.11 crores) was offered to tax in AY 2008-09 as capital gain Held that:- Consideration in the form of constructed area of 18,000 sq.ft. as agreed in terms of the development agreement was not actually accrued to the assessee as a result of subsequent developments/events going by the doctrine of real income and the same, therefore, cannot be taken into account for the purpose of computation of capital gain arising from transfer of capital asset as pet the development agreement. It is also worthwhile to note here that the total consideration actually received by the assessee from transfer of its entire property comprising of plot No. 256 and 257 as per the tripartite conveyance deed was Rs.29.11 crores and the same having been entirely offered to tax in AYs 2007-08 and 2008-09, there is no loss to the Revenue on this count as rightly contended by assessee. Addition made is therefore deleted - Decided in favor of assessee. Expenditure incurred by the assessee company on payment of premium for purchase of its own shares from warring group of shareholders - revenue or capital expenditure - Held that:- Tribunal in case of Echjay Industries (P) Ltd (1987 (12) TMI 68 - ITAT BOMBAY-D) has held that even if it is assumed that an enduring benefit has been obtained, such enduring benefit is not relatable to fixed capital structure of the assessee company because it has neither increased the assessee's assets nor the assessee company could be said to have acquired any right of income yielding nature. Amount in question was paid to secure peace and harmony and smooth management of the company in the interest of business and the amount paid for this purpose was on revenue account. In view of aforesaid it is held that impugned expenditure is revenue in nature and the same being wholly and exclusively incurred for the purpose of its business, is allowable as deduction. Dis-allowance stands deleted - Decided in favor of assessee
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2012 (9) TMI 803
Plea against failure of CIT to assume jurisdiction u/s 264 by dismissing the petitioner's revision application - petitioner on coming aware of the fact that exemption of dividend income and long term capital gains u/s 10(34) and 10(38) respectively were not claimed mistakenly at page 11 of the return of income where the computation of total income was worked out, moved the revision application on ground that it was an inadvertent error, obvious from the fact since in the return of income itself at page no. 24, the petitioner had claimed the dividend income and long term capital gains as being exempt, as income not to be included in total Income - Held that:- Government is obliged to collect only that amount of tax which is legally payable by an assessee. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is clear that the CIT committed a fundamental error in proceeding on the basis that no deduction on account of dividend income and income form capital gains u/s 10 was claimed, when the same has been claimed at Page 24 of the ROI under head 'Details of exempt Income". Therefore there is an error on the face of the order dated 7.04.2011 and the same is not sustainable. Order of CIT(A) set aside. Since petitioner's application for rectification u/s 154 filed on 8.02.2010, has not yet been disposed of, A.O. is directed to dispose off the application - Decided in favor of assessee
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2012 (9) TMI 802
Apex Court upheld the view taken by Tribunal (2007 (2) TMI 267 - ITAT MADRAS-C) and sustained by High Court(2007 (10) TMI 521 - MADRAS HIGH COURT) that that blending and bottling of IMFL would amount to ‘manufacture’ for the purpose of claiming deduction under Section 80IB - Civil appeal dismissed - Decided against Revenue
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2012 (9) TMI 801
Disallowance of expenditure on repairs to furniture and fixture - CIT(A) allowed it - By examining the invoices and other details of the expenses, it can be noticed that no new asset was created. The labour was engaged for replacement of old wooden panel and repair of the damaged furniture. On the basis of these facts, it can be held that the assessee being in hotel industry, therefore the expenditure incurred for interior decoration with a view to provide a comfortable stay to customers, the expenditure was nothing but revenue in nature allowable u/s.37. By the study of the nature of expenditure, it can be ascertained whether the assessee has started a new line of revenue generation or started getting an altogether new advantage of enduring benefit. Therefore, it can be concluded that substantial repair may be advantageous for retaining an existing asset but such an enduring benefit may not lead to a conclusion that a capital asset has been created through which a new enduring advantage was created, thus expenditure in question was a business requirement as decided by the assessee to incur such huge expenditure on commercial consideration - in respect of hotel industry it was held that even the modernization of hotel building is allowable as revenue expenditure because such an expenditure was found to be incurred with a view to create a conducive and beautiful atmosphere for running hotel business - in favour of assessee.
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2012 (9) TMI 800
Addition on account of deemed rent - property was deemed to have been let out. - Held that:- On perusal of the agreement of sale dated 19th day of Septebmer-2007, it is evident from the schedule of payment that the same was agreed to be paid on the basis of the stage-wise completion of the construction. Due to this reason, the respondent-assessee has shown an outstanding current liability of Rs.11 lacs of Rajyog Enterprises as on 31.03.2008. The assessee has placed on record a possession letter through which it has also been established that the same was delivered in the following years on 15.12.2010. Under the totality of the circumstances, it is to be concluded that the addition made by the AO was merely on presumption, hence deserves to be reversed - in favour of assessee. Addition on account of deemed rent of motor garage - Held that:- AO has presumed that the motor-car garage might have been let out by the assessee. In the absence of any evidence in his possession of letting out of the motor-car garage, thus AO has faulted in taxing an income merely on hypothesis - in favour of assessee. Deemed dividend by invoking the provisions of section 2(22)(e) - assessee happened to be a beneficial holder of 50% share in company imparting loan - Held that:- As it was a trade transaction as evident from the copy of accounts placed on record and there are certain correspondences way back dated 8.2.2006, placed in the compilation, stated therein that the said deposit of Rs.5,00,000/- was towards supply of material on regular basis and that deposit was required to be adjusted against the pending dues, if any, thus the nature of deposit was not a “loan deposit” but in the nature of a “trade deposit” and out of purview of section 2(22)(e) - in favour of assessee.
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2012 (9) TMI 799
Addition on unaccounted purchase - Held that:- As it appears that the assessee has not disclosed these three items i.e. Fiberisor-25 units, Electric Spares-3 units and Nut Bolts-2 units in the closing stock and the CIT(A) has also confirmed this addition after giving detailed reasonings in his order. The appellant also furnished the inventory of closing stock for A.Y. 07-08 to 09-10. The appellant requested to set aside this issue to the CIT(A)is not acceptable as the issue is related to the closing stock and it requires verification by the A.O. Therefore, this order is set aside to the A.O. for de novo. The A.O. is also directed to give reasonable opportunity to the appellant - in favour of assessee for statistical purpose. Relief of undisclosed income on the basis of fabricated evidences and overlooking the fact that entertaining fresh evidences is in contravention of rule 46A - Held that:- As grounds of revenue appeal revolve around Rule 46A & as the assessee’s appeal as discussed above, has been set aside to the A.O. Therefore, Revenue’s grievance automatically has been redressed - Revenue’s appeal is allowed for statistical purpose.
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2012 (9) TMI 798
Dis-allowance of selling and distribution expenses on the basis that samples and models for foreign buyers were sent by other party (M/s R) and not by the assesse – Held that:- CIT(A) deleted the dis-allowance on observation that these expenses are necessary for obtaining the export orders and have been incurred throughout the year. The samples to the prospective buyers abroad were sent through M/s R who in turn procure export orders for the assessee company. The assessee had also produced the details of foreign buyers to whom these samples and models were sent. Keeping all these material facts in mind, it is held that CIT(A) has rightly deleted the disallowance Dis-allowance of write off of irrecoverable advances to the fabricators, employees and suppliers during the year 1996-1999 – claim dis-allowed on the basis that the assessee could not furnish documentary evidence in support that the expenses were related to business – Held that:- Contention of the assessee remained that advances were irrecoverable on ground that employees had left their job and the business with the old fabricators, suppliers were also discontinued. We are of the view that maintenance of books of account in regular course of business is also a good evidence to be relied upon. The same cannot be ignored simply because it is not supported with documents thereto when the details of the persons to whom the advances in question were made, were made available. Thus, CIT(A) has rightly accepted the claimed written off irrecoverable advances – Decided against Revenue
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2012 (9) TMI 797
Addition u/s 68 - Share application money – addition made on ground that though Share applicants are assessees but their level of income is not sufficient enough to make investments in the company, moreover they are first time assessee – Held that:- CIT(A) has deleted the addition on the basis that applicants are long time assessees and they might have taken some loans from family members for making investment into the company which does not seem to be correct as there is no evidence of old income tax return or statement of share applicants that they had taken loans from some family members for investment into the company. However in view of decision in case of CIT v. Lovely Exports Pvt. Ltd.(2008 (1) TMI 575 - SUPREME COURT OF INDIA ) wherein it was held that if the names & addresses and confirmation from shareholders has been provided by the company to the AO then the share application money cannot be added in the income of the company u/s 68 and instead the Department is free to reopen the assessment of such individual in accordance with law, we do not see any reason to interfere in the order of CIT(A). Yet, it is opined that the individual assessments of the alleged shareholders should be reopened and in view of that Department is directed to issue instructions to all jurisdictional AO to reopen the individual cases of all shareholders as listed by AO – Decided against Revenue
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2012 (9) TMI 796
Deduction u/s 54EC - assessee entered into a development agreement in respect of jointly owned property with developer - sale proceeds arising out of the transfer of capital asset, was invested in specified bonds and exemption u/s 54EC was claimed - denial on ground that last payment of instalment received in pursuance of development agreement dated 21.9.2002, received on 28.3.2003 through cheque (returned back and redeposited on 16.4.2003) and the investment in the specified bond was made on 21.4.2003 and 26.4.2003, which falls beyond the period of six months, hence, not eligible for deduction u/s. 54EC - Held that:- Benefit of exemption intended in this section can only be given, unless and until the assessee receives the payment from transfer of a capital asset, otherwise it cannot be expected from an assessee to invest the same within the period prescribed. It will frustrate the entire purpose and spirit of the section itself. Looking to this hardship in a similar situation, the CBDT vide circular No.791 dated 26.2.2000 has clarified that such an investment can be made within the period of six months from the date of receiving of money from transfer of capital asset. Assessee’s claim for exemption u/s 54EC from capital gains, is allowed - Decided in favor of assessee.
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2012 (9) TMI 795
Penalty u/s 271(1)(c) - assessee having income from commission/service charges from direct marketing/selling agency of ICICI Bank Ltd. on car loan sanctioned through it - dis-allowance of commission paid to sub brokers on ground of non-confirmation and encashment by assessee of cheques issued by ICICI in favor of sub-brokers - Held that:- Out of the payment of commission of Rs.35.65 lacs, only sum of Rs.1.73 lacs has been disallowed on the ground that addresses and confirmations could not be submitted. Assessee explained that it was only in some of the cases, where sub-brokers were reluctant to encash the bearer cheques, the assessee has assisted them in the bank at the time of encashment. Further, in most of the cases, it has been encashed by sub-brokers which are verifiable by the bank itself. Thus, the explanation of the assessee cannot be brushed aside as it carries some probability looking to the fact that huge amount of commission paid has already been accepted. Also, AO has not carried out any enquiry or has brought any material on record to show that payments were bogus. The explanations offered by the assessee have not been found to be false. Therefore, penalty for concealment of the income u/s 271(1)(c), cannot be levied and same is deleted - Decided in favor of assessee
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2012 (9) TMI 794
Addition under the head “income from house property’ - assessee contended that shops were the commercial asset of the appellant, and since no rent was received, there was no question of determining the notional income and taxing the same under aforesaid head - Held that:- For determination of ALV u/s 23(1), AO has first to find out the reasonable expected rent which the property might fetch by letting out from year to year and then this reasonable expected rent has to be compared with the annual rent received or receivable. In the case in hand, when the property was never let out, than the AO has to consider all the relevant factors including the standard rent, if any as determined under the provisions of Rent Control Act or Municipal Rateable Value of the property for computing the Annual Letting Value. Since no such exercise was carried out, matter restored back Long term capital loss - computation at reduced figure in comparison to computation of assessee - AO denied the claim of expenditure incurred by the assessee on the improvement of the property - Held that:- Since it is not clear from the records that whether the assessee has capitalised the cost of improvement and shown in the balance sheet for the respective assessment years; therefore, in the interest of Justice, we remit this issue to the record of the AO for deciding the same afresh after considering the aspect of capitalisation of the expenditure incurred on the improvement, stamp duty and interest etc
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2012 (9) TMI 793
Profit arising out of purchase and sale of shares as well as units of mutual fund through Portfolio Management Services - Business income or Capital Gains - AY 03-04 - assessee showed it as business income in return, however during the course of assessment proceedings, claimed it to be capital gains - whether head of income can be changed without filing of revised return - Held that:- Merely because assessee claimed an income under the head ‘business income’ but is to be assessed under the law under another head cannot be rejected only on the ground that no revised return has been filed. AO has to decide the assessability of income under correct head on the basis of the facts and as per provisions of I.T.Act. It is a legal ground and the same could be considered by CIT(A) on the basis of the facts and as per provisions of law. Non-filing of the revised return of income should not come in the way if all the relevant facts are available on record. On perusal of the contents of the agreement, it is observed that assessee has placed funds with PMS to make investment in shares/mutual funds and not with a view to do trade. Assessee also made direct investments in shares and there was short term capital gain and long term capital gain being accepted by department. Considering the scheme of Portfolio Management, it is observed that investments made by the assessee through PMS is meant for maximization of wealth and not with a view to do trade in purchase and sale of shares. Further, department has not disputed the fact that the Portfolio Manager have the sole and absolute discretion to make the investments for and on behalf of the assessee and the assessee has no role to play on the same. The assessee has not taken any borrowing for making investments for placing its funds with Portfolio Manager. Very nature of PMS is such that investments made by the assessee cannot be said to be scheme of trading of shares and stocks and, accordingly, the profit is to be assessed under the head ‘capital gains’ - Decided in favor of assessee
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2012 (9) TMI 792
Addition on account of unexplained cash credit - deposit in bank - search and seizure operation conducted u/s 132(1) in the case of S.K.S. Ispat Group including the directors of different associates and sister concern as well as in assessee’s own case - assessee being supporting staff of one of the company was also registered as director in few concerns of the group - assessee contended that said amount was received on behalf of Samardhan Securities and the same has been given back to them - Held that:- It is observed that assessee has established the identity of the party by submitting the PAN, Election Card, I–Card, etc. Bank statement, confirmation of account and confirmation regarding receipt and payment of the aforesaid amount. Since said sum was given back also; and that too through banking channels, hence, the assessee has proved the genuineness of the transaction also. CIT(A) rightly deleted the addition on observation that genuineness of the transaction cannot be doubted as the amount has been re–paid on the same day or within a fortnight of receiving the same - Decided against Revenue.
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2012 (9) TMI 791
Addition u/s 68 on account of cash deposited in banks - assessee engaged in the wedding card business had also purchased and sold shares - addition made on ground that gross receipts of the assessee from Wedding card business, consultancy charges, interest and dividend etc. were to the tune of Rs.7.17 lacs but there were deposit of Rs.46.81 lacs in the two bank accounts of the assessee which were not explained satisfactorily - Held that:- Explanation of assessee that source of funds is from sale of shares, out of which a sum of Rs 1.48 lacs was shown by assessee as short term capital gain and Rs.39.67 as long term capital gain was not accepted by AO on ground that assessee had not given details and evidence regarding date of purchase, purchase price etc. Case of the assessee is that assessee could not furnish details and evidence in relation to shares as documents were lost in the unprecedented floods on 26.7.2005. Contracts notes now produced are admitted as additional evidence to meet the ends of justice. The matter is thus restored to CIT(A). Matter in relation to addition on account of unexplained cash and addition on account of loans is also restored to file of CIT(A) - Appeal allowed for statistical purposes.
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2012 (9) TMI 790
Disallowance u/s 14A – Assessee is a Bank – AO disallow 0.5% of average of investment yielding tax free income - Assessee contended that the same cannot exceed the proportionate expenditure incurred by the treasury department and amount relating to tax free income proportionately arrived at based on exempt income to total income amounts to ₹ 15,76,875 – Held that:- As the disallowance is to be made on a reasonable basis. Assessee have not shown any working on the disallowance, and how they arrived at figure of ₹ 15,76,875 and why 0.5% of average of investment yielding tax free income was excessive. Issue remand back to AO. Disallowance of Prior Period expense – The expenditure stated as relating to prior period consisted of rent, electricity charges, payment to R & T agents, repairs etc – Held that:- Following the decision in case of Union Bank of India (2012 (6) TMI 500 - ITAT MUMBAI), even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction. Issue decided in favour of assessee Disallowance of Lease premium expenses – Assessee claim lease premium as revenue expenditure – Following the decision in case of Mukund Limited(2007 (2) TMI 358 - ITAT MUMBAI), the claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed. Issue decide in favour of revenue Disallowance of claim of Bad debts – AO hold that the bad debt is allowable only if it is irrecoverable and is actually written off in the books of accounts – Held that:- Following the decision in case of Vijaya Bank(2010 (4) TMI 46 - SUPREME COURT) debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for “impugned bad debt”, the assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an actual write off by the assessee in his books. Disallowance cannot be made on an apprehension that if the assessee failed to close each and every individual account of its debtor, it may result in the assessee claiming deduction twice over”, allowed the appeal of the assessee, allowing the claim of bad debts. Issue decides in favour of assessee Income from foreign branches – Assessee excluded the income from foreign branches as per provision of DTAA – AO denied the benefit of foreign except branches at Singapore and Japan – Held that:- In all the foreign countries the operation is carried out through its branches which is a PE situated outside India. Hence the income attributable to these branches cannot be taxed in India. Therefore, consistent with the earlier finding of the Tribunal in assessee’s own case for the earlier years case, we do not see any merit in the ground taken by the Revenue. Therefore issue decides in favour of assessee
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2012 (9) TMI 789
Capital Gain - Cost Inflation index - while computing indexed cost of acquisition under head capital gain, Cost inflation index is used for which year FY of possession of property acquired or FY of registration of property - Assessee went on to claim that he was put in the possession of the property in the FY 1998-99 and the indexed cost of acquisition claimed by her effective from the FY 1998-99 – Whereas property was register in name of assessee in 2000-01 – Held that:- As the above sale deed makes it abundantly clear that the assessee was actually put in possession of the subject property only in year 2001 and not in the FY 1998-99 itself as claimed by the assessee. In essence, the subject property was transferred and the assessee was put in possession of the said asset only on in year 2001. Appeal decides in favour of revenue
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2012 (9) TMI 788
Ad-hoc addition on account of variation in the yield and higher wastage in comparison to previous years – Assessee was engage in business of manufacturing and trading of Printed Circuit Boards – Products are manufactured as per specification of customers - Held that:- As the generation of wastage on cutting of large copper clad laminates into smaller pieces of PCBs which are of different sizes as per the requirements of the customers. The manufacturing process involves some wastage and no addition was made in the past on account of such low yield and also the addition has been made by AO on the basis of presumptions. Appeal decides in favour of assessee. Ad-hoc disallowance on account of carriage inward/outward – AO found that some of these expenses are not fully supported with proper evidences - Vouchers since certain vouchers are of self-made – Held that:- Since neither the details in respect of carriage inward/outward was submitted nor any evidence was produced or claim made about the genuinuity of self-made vouchers questioned by the Assessing Officer could not be controverted by the assessee. Restrict the disallowance upto 50% of disallowed amount. Addition on account of Bad debts – AO disallow the same on the basis of that the assessee had not taken any steps to recover the bad debts – Held that:- As the assessee submitted that these are really not bad debts but various outstandings on account of sales which should have been reversed. Issue remand back to AO. Disallowance on account of stipend to trainees - Training was given at the factory premises by the Senior Member of the factory - AO noted that no statistical data, no dates of training, no agenda of the training, no venue of the training are submitted – Held that:- As concluded from the facts of the case addition made by the AO on the ground that such huge expenditure under the head “stipend” does not look justified. Merely because the disallowance is a small percentage of the total expenditure cannot be a ground for sustaining the addition. If the claim is bogus, the entire amount has to be disallowed and if not bogus the whole amount should be allowed as deduction but no adhoc addition can be made on the basis of presumptions and surmises. Therefore disallowance of stipend is not justified. Decision in favour of assessee
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2012 (9) TMI 787
Taxability of profit on sale of shares as capital gain or business income – AO contended that there were several purchases and sale transactions of shares during the year and treat profit derived as business income – Held that:- As the assessee had shown the shares as investment in the balance sheet and in some cases the shares have been held fairly for a longer period. The AO in the past has accepted the profit on sale of shares as capital gain. And during the impugned AY a part of the profit on sale of shares has been accepted as LTCG. Rule of consistency will be applicable to the facts of the present case and the profit on sale of shares in our opinion should be treated as “Short term capital gain”. Appeal decides in favour of assessee
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2012 (9) TMI 786
Deduction under section 80HHC – AO compute turnover on pro-rata basis. The assessee has two separate business divisions - For both the divisions separate books of accounts are being maintained – Held that:- The assessee had rightly claimed deduction u/s 80HHC only in respect of business profits of export division. Where the assessee had maintained separate accounts and maintained trading receipts and profit and loss account separately for export sales and domestic sales and had produced sufficient material in support of the claim there is no warrant for disallowing any portion of export earnings pro rata by invoking the provisions of Sec. 80HHC(3)(b). Therefore assessee is entitled to deduction u/s 80HHC on the income of export division only. Appeal decides in favour of assessee Depreciation on P&M - Windmill was ready to use as the same was commissioned on 30.03.2004 - TNEB issued a certificate on 30.03.2004 certifying the commissioning and connection of the windmill – AO contended that the said windmill did not generate a single unit of energy till the end of the FY i.e. 31.03.2004 - Held that:- Following the decision in case of Orchid Chemicals (2012 (3) TMI 551 - ITAT CHENNAI), it is beyond any dispute that it has been officially recognized by the competent authority that the commissioning of the generators was completed in the impugned assessment year itself. This is the condition which is to be satisfied to claim depreciation on the windmill. Once the said condition is satisfied, the question of actual generation of electricity, perhaps in the next previous year, does not defeat the claim of the assesse, as the assessee is entitled for depreciation on commissioning itself. Therefore, assessee is entitled for depreciation. Appeal decides in favour of assessee.
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Customs
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2012 (9) TMI 824
Non-declaration of gold in the baggage of the passenger - appeal to tribunal rejected on lack of jurisdiction - Held that:- When the goods are brought into India from a place outside India (in this case, baggage) till they are cleared for home consumption, they are considered as imported goods. In this case, before the clearance has taken place from the airport, the goods have been seized. The definition of the importer also provides that the person is considered to be importer till the goods are cleared for home consumption and when he holds himself to be an importer or the owner of the goods. In terms of above provisions, it becomes quite clear that in this case, whatever is brought by a passenger from abroad is considered as baggage and the passenger is required to make a declaration under Section 77 and till the goods are declared and cleared from Customs area (airport) after declaration, the goods remain imported goods and the person remains the importer. Going by this analogy also, the goods in this case can be considered as imported goods only and as already mentioned earlier, Section 129A provides that the Tribunal has no jurisdiction in respect of any goods imported or exported as baggage - the appeal has to be rejected as not maintainable on the Tribunal having no jurisdiction and since the jurisdiction lies with Government of India Registry is directed to transfer the file to GOI for necessary action. Since the goods under seizure are rough as well as cut and polished diamonds, they would be correctly classifiable under Heading No. 71.02 of the Customs Tariff for the purpose of levy and we hold accordingly.
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2012 (9) TMI 823
Penalty - smuggling of foreign currency or gold biscuits into India. - confiscation of gold biscuits – Held that:- Appellant from whose possession the gold biscuits were seized is the person physically associated with the contraband - There is preponderance of evidence on record to indicate that Haris was carrying the gold biscuits at the instance of the appellant for a monetary consideration - appellant also could not adduce evidence of licit nature of the goods. Hence he can be held to have rendered the goods liable to confiscation under Section 111(d) of the Act - quantum of penalty can be reduced
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2012 (9) TMI 822
Whether the quantity of coke lost in transit or by handling should be charged to differential duty of Customs or to Anti-Dumping duty – exemption from payment of Anti-Dumping duty and also claiming the benefit of concessional rate of duty - The benefit was availed subject to the condition that the imported material should be used in the manufacture of excisable goods falling under Chapter 72 - Held that:- It could not be said that any portion of the imported LAM Coke had not been imported for the intended purpose - percentage of handling losses/ground losses, when taken together, appeared to be well within reasonable limits and hence liable to be ignored
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2012 (9) TMI 785
Non production of end use certificate from the concerned jurisdictional Central Excise authority - demand of differential duty - stay filed for waiver of pre-deposit - Held that:- That the appellant imported Midsole Insole material availing the benefit of Notification No.224/85-Cus, dt.9.7.85 which grants benefit of concessional rate of duty subject to the condition that the goods are used in the leather industry and the said notification does not have any condition of giving the end use certificate from the Central Excise authorities. It can also been seen that the said notification also does not include any condition of executing a bond by the importer of the goods. As the contemporaneous evidences which have been shown by the appellant are enough to hold that the goods which were imported were consumed for the manufacture of leather goods which were finally exported and that the Chartered Accountant's certificate coupled with the affidavit of the partner (who is now deceased) is considered as enough evidence to hold that the appellant had consumed the goods imported in the manufacture of leather goods - thus benefit of notification is to be given to assessee which does not have any condition of giving the end use certificate from the Central Excise authorities - in favour of assessee.
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2012 (9) TMI 784
Second-hand goods - Enhancement of value of goods - Revenue wants to enhance the value of the monitors from US$ 13 to US$ 20 as suggested by the dock staff – Held that:- There is no data or evidence produced by the Revenue regarding the price of comparable goods - in case of second-hand goods there cannot be a price for comparable goods - appeal is dismissed
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2012 (9) TMI 783
Classification - Assemblies and evaporator assemblies - heat exchangers - classification claimed by the appellants in respect of these items under Heading 8419.50 - under the sub-heading 84.19 only those machinery which are other than machinery or plant of a kind used for domestic purposes are included - heat exchanger unit covered under sub-heading 8419.50 can only include a heat exchanger unit which is not used for domestic purposes - goods can be classified under Heading 84.19 is not acceptable as the same are not for purposes other than air-conditioning machinery used for domestic purposes - appellants have described the goods differently as heat exchangers to claim assessment under Heading 8419.50 at a lower rate which is not permissible – appeal rejected
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Corporate Laws
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2012 (9) TMI 821
Demerger - challenge the principle of res judicata - prayer for correction of the drawn up order as according to them, since jute division stood transferred by demerger, the North Mill also came through such demerger, subject to the agreement for sale. Since sale was frustrated in absence of permission from the Land Ceiling Authority, it should retain with them. However, because of the mistake crept in the order so drawn up, it would need correction. - Held that:- the parties to the arbitration proceeding and the company proceeding are different, having Gloster a common feature. Section 11, on a close reading, would depict two requisites, the matter in issue, must be the same and both the proceedings must be between the same parties. The decision in the other Court might have a persuasive value in the latter proceeding. However, it would not operate as res judicata as parties were not same that would take care of the plea of res judicata The jute business and cable business as of 1992 would be divided between two groups of Bangurs through demerger. We thus allow prayer (a) to the extent that the order dated May 31, 1998 as drawn up be corrected by incorporating the following words, “and all other the property, rights and powers of the transferor company in jute division”.
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2012 (9) TMI 782
Winding up petition u/s 433 r.w.s. 434 of the Companies Act, 1956 - non-payment of creditor - respondent contended that goods were defective and coupled with the fact that the Commission Agent has filed his affidavit supporting the stand of the respondent that the defective goods had been promised to be lifted by the petitioner clearly shows that a dispute has arisen on facts which cannot be cannot be entertained in a winding up petition - Held that:- Admittedly there is no communication on record to show that the defect which the respondent had allegedly noticed in the goods supplied by the petitioner had ever been communicated to the petitioner. It is also relevant to note that in the first affidavit the Commission Agent has not mentioned any date when the petitioner would lift the so called defective material but in the later affidavit, he has made a substantial improvement that the petitioner had agreed to lift the defective material in March, 2009 and that is how the 'C' Form came to be issued on 17.03.2009. The defence of the respondent largely based on these affidavits clearly appears to be suspect. Considering all the aforenoted aspects, this Court is satisfied that the respondent owes a debt to the petitioner; despite service of the statutory notice by the petitioner to the respondent, it has failed to liquidate the demand of the petitioner. Petition is accordingly admitted. Respondent directed to make the payment with interest within stipulated time - Decided in favor of petitioner
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Service Tax
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2012 (9) TMI 852
Application for waiver of pre-deposit of the amount of service tax, interest and penalties - applicant is a statutory corporation established by the Maharashtra State Government - Revenue issued a show cause notice demanding service tax on the ground that the applicant was providing maintenance and repair service which is taxable - Held that:- As per the Board's circular No.89/7/2006 dated 18.12.2006 that activities performed by a public authority under the provisions of law are not taxable under the Service Tax. Since applicant is a public authority hence pre-deposit of service tax, interest and penalties is waived and recovery of the same is stayed - Decided in favor of applicant
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2012 (9) TMI 851
Construction of residential complexes on own land and sale thereof of residential units - non-payment of service tax on ground that building was being constructed on their own land - Revenue contended that though the sale of the flats took place after completion, the respondents had taken advances from the respective buyers, hence it fall under "Construction of complex" u/s 65(105)(zzzh) of Finance Act, 1994 - assessee placing reliance on circular No. 332/35/2006-TRU and No. 19/7/07-ST issued by CBEC clarifying that when flats were constructed on the land belonging to a builder and flats are sold after completion of construction, no service tax will be leviable - period 16.6.05 to 25.3.06 - Held that:- High Court in case of Magus Construction Pvt Ltd. vs UOI (2008 (5) TMI 18 - HIGH COURT OF GAUHATI) held that department is binding by the circular issued by Board and hence activity in question is not subject to service tax. In view of aforesaid, during the impugned period, the activity in question could not be considered as service and subjected to service tax - Decided in favor of assessee.
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2012 (9) TMI 850
Levying and demanding service tax in respect of activities undertaken by the members of Association at port - Held that:- With respect to the members of the petitioner-Association who are engaged in repair of work of vessels, in our opinion, the authorities are justified in insisting that they must register themselves and also pay service tax as may be payable. With respect to those members who do not provide any such repair work, but provide exclusively the provisions to crew and for the utility of the vessel, we are of the opinion that material is scanty for us to express any opinion thereon. Any service rendered by a port or other port or any person authorized by such port or other port. The section does not provide that the authorization that may be granted by the port must be of such service which the port as exclusively obliged to undertake, under the statute. Association only wrote a small letter in the nature of representation requesting to drop the demand for registration. Before HC, except singular document showing the trade license issued by the port authorities in favour of one of the ship chandlers, no further evidence or material is produced to demonstrate the nature of activities carried on by such members. It would, therefore, be hazardous to express any legal opinion on the basis of such scanty material. Therefore Petition stands dismissed.
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2012 (9) TMI 813
Whether CESTAT was right in invoking the provisions of Section 73(1A) and setting aside the penalty levied in excess of 25% - Revenue contended that once show cause notice has been issued then the assessee is required to make payment of penalty, even if before the issuance of show cause notice, service tax and interest has been deposited - Held that:- Board's Circular No.137/167/2006-CX dated dated 03.10.2007 has considered the proviso to section 73 that where a person has paid service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person to whom notices are served under sub-section (1) shall be deemed to be concluded. In the instant case was not contesting the Service Tax liability and had deposited the entire service tax and interest much before the issuance of show cause notice and discharged 25% of the amount of service tax liability, and at that time, neither any penalty was levied by the appellant nor any quantum of penalty was fixed. Therefore, the assessee has not committed any illegality in not depositing any penalty amount. Penalty levied against the assessee in excess of 25% u/s 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal
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2012 (9) TMI 812
Rejection of appeal on ground of limitation - condonation of delay - OIO received on 30.12.2009, appeal filed with Office of the Commissioner of Service Tax, Chennai inadvertently on 12.3.2010 without filing the same before the Commissioner (Appeals) - appeal came before Commissioner (Appeals) on 2.1.2012 - delay of more than 2 years - Held that:- According to section 85 of the Finance Act, 1994, learned first appellate authority has no power to condone delay beyond the statutory period of three months plus the discretionary period of another three months under the proviso to sub-section 3(3) of section 85 of Finance Act, 1994. Accordingly, any appeal coming to his record beyond prescribed period of limitation fails to be maintainable being barred by limitation. Therefore, Commissioner (Appeals) was right to confine his jurisdiction to section 85(3) of the Finance Act, 1994 to dismiss the appeal of the appellant. Tribunal has no power to drag Revenue to litigation reviving a litigation which came to an end with the passage of time. There is nothing on record to show bona fide of appellant's averments when record of Commissioner of Service Tax does not contain the appeal papers said to have been filed in his office under an acknowledgement. Appellate authority also has no power to take shelter of section 5 of the Limitation Act at all. Accordingly, appeal is liable to be dismissed - Decided against assessee
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2012 (9) TMI 811
Cenvat credit - input services utilized for authorized motor vehicles service center and business auxiliary services - trading activity - appellant had taken CENVAT credit on several services, which according to the revenue related to the sale of motor vehicles and not to the services provided by them – Held that:- Revenue denied cenvat credit on various input services such as transportation charges, pre-delivery inspection charges, warehousing charges, advertisement charges and hotel expenses. The credit in respect of the services other than advertisement expenses and hotel expenses are allowed and with regard to services relating to hotel expenses and advertisement expenses, the demand within the normal period of limitation is upheld.
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Central Excise
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2012 (9) TMI 820
Time limit for availing Cenvat credit - Credit availed in the year 2009 for the period from October 2004 to March 2009 - Held that:- No where in the Central Excise Act as well as in the Cenvat Credit Rules not prescribed any period in which credit has to be taken. Although it is mentioned in the Cenvat Credit Rules that assessee can take the credit immediately, but there is no prescribed time limit. - in favour of assessee.
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2012 (9) TMI 819
Refund of accumulated CENVAT credit - CESTAT committed an error in ignoring Notification No.5/2006-CE (NT) dated 14.3.2006 in allowing the claim - Held that:- Considering the Circular No. 390/Misc./163/2010-JC dated 17.08.2011 no appeal shall be filed in the High Courts if the duty involved does not exceed ₹ 10 lakhs with or without penalty and interest. No other circular has been issued by the Ministry of Finance, Department of Revenue, Central Board of Excise & Customs, authorizing the Department to file appeal where the amount is less than ₹ 10 lacs. While it is true that the present appeal was filed and notice was issued prior to the circular dated 20.10.2010 where appeal shall be filed in the High Courts if the duty involved does not exceed ₹ 2 lakhs with or without penalty and interest. In that light, it is not being disputed that the issues involved and the questions formulated in this appeal need not be decided as the amount involved in the appeal is ₹ 60,774/-.
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2012 (9) TMI 818
Review Order – alleged that Review Order is also undated by one of the Commissioner not disclosing whether he has at any point of time participated in the decision making process – Held that:- Cases after cases of Revenue is coming up with casual approach to law and without disclosing the reason why the order-in-appeal neither legal nor proper - Revenue has proceeded on the premises that on 2-2-2009 it has been given time to cure the defect by 9-2-2009 as the next date fixed is 18-2-2009. The aforesaid premise is factually incorrect as the appeals were dismissed vide order dated 2-2-2009 (A.4). In any case once the fundamental element of formation of opinion of filing the appeal is missing then no appeal is deemed to be instituted in the eyes of law – appeal dismissed
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2012 (9) TMI 817
Denial of cenvat credit – assessee is ineligible to avail Cenvat credit as the said Cenvat credit was availed after a lapse of six months of the date of issue of bill of entry - manufacturer who receives the inputs in the factory under cover of “Bill of Entry” from what date the period of six months specified in sub-rule (5) of Rule 57(G) is to be calculated – Held that:- though we accept the finding of the Larger Bench that Bill of Entry is a document issued as provided under Rule 57G, insofar as the date from which the limitation is to be computed for the purpose of sub-rule (5) of Rule 57G is concerned, it would be the date on which the order under Section 47(1) of the Act that is ‘out-of-charge’ order is handed over to the importer. - matter remanded to the original authority to verify the dates and find out whether the claim for credit was made within six months from the date of such order being handed over to the importer and then pass an appropriate order This case is a glaring example of how precious judicial time is wasted because of the lethargy of the department in not bringing to the notice of the Tribunal and the Larger Bench of the Tribunal the notification that was issued as far as back in the year 1996. It is time that appropriate steps are taken and a responsibility be fixed on the concerned officials and the officials will keep in mind the circular issued by the Board and pass orders in terms of the circular and not play hide and seek game with the judicial authority which is evident in this case.
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2012 (9) TMI 816
Whether biris manufactured by assessee are manufactured with or without the aid of machines - Manufacturers of handmade labelled biris - higher rate being applicable to biris manufactured with the aid of machines – Held that:- Where the packing materials were manufactured with the aid of machines - manufacture of packing materials through job worker using machines will not tantamount to use of machines in the manufacture of biris – In favor of assessee
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2012 (9) TMI 815
Clandestine removal of goods – alleged that clandestine removal of the goods in the connivance with the dealers and transporters – Held that:- Finding by the Commissioner is that there was no excess quantity of tobacco (input) found in the appellants premises nor the shortage thereof - there is also finding that the entire premises of the appellants factory was inspected - cash recovered from the premises there is also no attempt on the part of the adjudicating authority to ascertain its link with the proceeds of the goods alleged to have been clandestinely removed. The link cannot be established on mere assumption. There must be some material on record which is to be ascertained by analyzing the same - findings which are arrived at by the Commissioner are merely based on assumption without proper analysis of the materials on record. Hence, the same are not sustainable - confirmation of demand and/or imposition of penalty cannot arise - order is quashed and set aside and the matter is remanded for consideration thereof afresh.
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2012 (9) TMI 814
Waiver of pre-deposit – consignment wise payment of duty in cash - rule 8(3A) - alleged that Appellant did not pay the duty payable by cash, as per their ER-1 return by the due date - Neither did they pay it with interest – Held that:- Department has not taken the initiative to make use of the provisions regarding confiscation since no seizure has been effected. So the only consequence will be penalty - there is no case for demanding the duty paid through Cenvat credit to be paid again through cash/PLA - there is no case for imposing penalty equal to duty defaulted - Appellant should make a deposit of Rs. 10,000/- towards penalty and interest payable
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2012 (9) TMI 781
Whether penal provisions can survive against the assessee when demands are dropped on any account - demand dropped on ground that CENVAT Credit cannot be denied on account of incorrect depreciation claimed initially and later rectified, however penal action sustained on ground that admitted mistake by assessee cannot escape penal action - Held that:- It is settled law that once the demands are dropped, then in such a situation, the question of imposing the penalty does not arise - Decided in favor of assessee.
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2012 (9) TMI 780
Application for waiver of pre-deposit – demand - addition of value of the IAS column and kits to the value of the marker for the purpose of Central excise duty – assessee contended non-inclusion on ground of same being traded items – Held that:- In the present case, the marker is used for mixing in the kerosene by the Petroleum companies and the ‘test kit' and ‘IAS column' are used for checking the adulteration in other petroleum product such as petrol and diesel. As the test kit and IAS column are traded item, the same cannot be considered as a part of the manufactured goods i.e marker. Therefore, applicant had made out a strong case for waiver of pre-deposit of dues. Stay petition is allowed – Decided in favor of assessee
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2012 (9) TMI 778
Maintainability of appeal - whether they have taken a decision forming a Committee, while law requires that the Committee of the Commissioners should decide maintainability of the appeal disclosing reasons why order of appeal is neither legal nor proper – Held that:- Appeals were dismissed vide order dated 2-2-2009 (A.4). In any case once the fundamental element of formation of opinion of filing the appeal is missing then no appeal is deemed to be instituted in the eyes of law - Revenue’s appeal is dismissed.
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2012 (9) TMI 777
Refund - unjust enrichment – Held that:- No variation in the price of the product both before and after the period the duty was paid by the assessee; and the respondent-assessee had produced a detailed Chartered Accountant’s Certificate before adjudicating the authority; and in view of the fact that the Revenue failed to marshal any countervailing evidence to counteract the material produced by the assessee to disclose the passing of the duty liability to the consumer, the respondent-assessee is liable for refund
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2012 (9) TMI 776
Whether duty debited in RG 23A Part-II could be refunded in cash - duty claimed as refund by the assessee was an amount of duty debited in RG 23A Part-II – Held that:- Claim of refund by the appellant was of an amount in RG 23A Part-II which remained unutilized and eventually lapsed on 1-4-1999 by reason of switch-over to SSI Exemption Scheme - appellant has not been able to substantiate their claim for refund of the balance amount of credit which was part of the credit which lapsed on 1-4-1999 - refund claim filed in 2007 for this amount of credit which lapsed as early as on 1-4-1999 stands rightly rejected - appeal is dismissed
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CST, VAT & Sales Tax
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2012 (9) TMI 853
Challenge the functioning of the Appellate Tribunal VAT - that after two members heard the case substantially (in the absence of the third member, who had proceeded on leave) and closed hearings on its behalf, the third member sought join the bench and participate in the proceedings - Held that:- VAT Tribunal in the present case; it is a statutory tribunal, tasked with deciding appeals preferred by aggrieved parties against decisions of VAT adjudicatory authorities. Its membership comprises of those who hold or are entitled to hold judicial office; there are Administrative members too. There is a certain formality in the procedure it has to adopt, or follow - A basic component of fair hearing is that a man likely to be affected by a decision, should be heard by an unbiased or impartial tribunal or authority. The corollary to this – and perhaps equally so, is that the officer, or authority who hears the litigant or individual, should issue the order. In view of the above discussion, this Court hereby directs the Delhi VAT Tribunal to forbear hearing of Appeal in the composition it had on 29-8-2012 and 7-9-2012, and continue the hearing with the two members (i.e. the Chairman and Mr. D.C. Anand) according to its previous composition, when the matter was part heard, and the petitioner’s arguments had been concluded, on 27-8-2012. It is clarified that Ms. Nita Bali, Member (Administrative) shall not participate in the proceedings and she is however entitled to sit and hear all other cases in which she was a participant, either before her leave of absence, or after her re-joining the Tribunal, except in part heard cases or appeals, like in the present instance. The Tribunal shall take up the Petitioner’s appeals, subject to the above directions, at its utmost expedience, and decide its merits - Petition allowed.
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Indian Laws
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2012 (9) TMI 849
Excise duty burden - initially the bids always included Excise Duty to be borne by HCL whereas the Work Order suggest Excise Duty to be borne by the appellant - Held that:- When the price was negotiated and terms were fixed through negotiation, the final contract that was entered into would be the final important document to be looked at, that did not specifically provide, HCL would bear the Excise Duty. The notice inviting tender also did not stipulate such clause. NIT says otherwise. When the parties entered into a contract, if such clause was specifically excluded they should have made a mention of the same in the contract. Contract was silent. The contract was followed by Work Order issued by April 14, 2007 incorporating clause 4.9.1. Thus notice inviting tender categorically imposed Excise Duty on the appellant, Work Order was consistent. Rothery being the only witness of the claimant had signed the Work Order. Whether or not Ahlawat being the local representative missed the issue, is immaterial. The Managing Director that also did not finally incorporate the clause mentioned above, signed the price bid.
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2012 (9) TMI 810
Condonation of delay - Held that:- The High Court was justified in condoning the delay in filing the appeal by the Defendant and further directing the Defendant to deposit certain amounts - while disposing of the appeal the Plaintiff to withdraw a sum of Rs.2,50,000/- deposited by the Defendant before this Court. However, he is restrained from withdrawing any amount deposited by the Defendant before the Trial Court.
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2012 (9) TMI 809
Right to Information Act - eligibility criteria for appointment to the posts of Chief Information Commissioners and Information Commissioners, both at the Central and the State levels - petitioner challenged to the constitutionality of Section 12(5) and (6) and Section 15(5) and (6) of the Act of 2005 stating that the eligibility criteria given therein is vague, does not specify any qualification, and the stated ‘experience’ has no nexus to the object of the Act - Held that:- The Chief Information Commissioner and members of the Commission are required to possess wide knowledge and experience in the respective fields. They are expected to be well versed with the procedure that they are to adopt while performing the adjudicatory and quasi judicial functions in accordance with the statutory provisions and the scheme of the Act of 2005. They are to examine whether the information required by an applicant falls under any of the exemptions stated under Section 8 or the Second Schedule of the Act of 2005 particularly, sub-sections (e), (g) and (j) have been very widely worded by the Legislature keeping in mind the need to afford due protection to privacy, national security and the larger public interest. All these functions may be performed by a legally trained mind more efficaciously. The most significant function which may often be required to be performed by these authorities is to strike a balance between the application of the freedom guaranteed under Article 19(1)(a) and the rights protected under Article 21 of the Constitution. In terms of sub-Section (5), besides being a person of eminence in public life, the necessary qualification required for appointment as Chief Information Commissioner or Information Commissioner is that the person should have wide knowledge and experience in law and other specified fields. The term ‘experience in law’ is an expression of wide connotation. It pre-supposes that a person should have the requisite qualification in law as well as experience in the field of law. However, it is worthwhile to note that having a qualification in law is not equivalent to having experience in law and vice-versa. ‘Experience in law’, thus, is an expression of composite content and would take within its ambit both the requisite qualification in law as well as experience in the field of law. Thus the provisions of Sections 12(5) and 15(5) of the Act of 2005 are held to be constitutionally valid, but with the rider that to hold and declare that the expression ‘knowledge and experience’ appearing in these provisions would mean and include a basic degree in the respective field and the experience gained thereafter. As opposed to declaring the provisions of Section 12(6) and 15(6) unconstitutional it would be preferred to read these provisions as having effect ‘post-appointment’. In other words, cessation/termination of holding of office of profit, pursuing any profession or carrying any business is a condition precedent to the appointment of a person as Chief Information Commissioner or Information Commissioner at the Centre or State levels. The Information Commissions at the respective levels shall henceforth work in Benches of two members each. One of them being a ‘judicial member’, while the other an ‘expert member’. The judicial member should be a person possessing a degree in law, having a judicially trained mind and experience in performing judicial functions. A law officer or a lawyer may also be eligible provided he is a person who has practiced law at least for a period of twenty years as on the date of the advertisement. Such lawyer should also have experience in social work.- Chief Information Commissioner at the Centre or State level shall only be a person who is or has been a Chief Justice of the High Court or a Judge of the Supreme Court of India & the appointment of the judicial members to any of these posts shall be made ‘in consultation’ with the Chief Justice of India and Chief Justices of the High Courts of the respective States. Under the scheme of the Act of 2005, it is clear that the orders of the Commissions are subject to judicial review before the High Court and then before the Supreme Court of India. In terms of Article 141 of the Constitution, the judgments of the Supreme Court are law of the land and are binding on all courts and tribunals. Thus, it is abundantly clear that the Information Commission is bound by the law of precedence, i.e., judgments of the High Court and the Supreme Court of India. In order to maintain judicial discipline and consistency in the functioning of the Commission, we direct that the Commission shall give appropriate attention to the doctrine of precedence and shall not overlook the judgments of the courts dealing with the subject and principles applicable, in a given case - Writ partly allowed.
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2012 (9) TMI 808
Appeals against the order of High Court wherein Court has refused to interdict the proceedings pending in the Court of District Judge filed by the respondents herein on ground that provisions of Order II Rule 2 of the CPC would be applicable only when the first suit is disposed of - agreement to sale of land and superstructures thereon between plaintiff and respondent - plaintiff seeking a decree on 29.05.07 against the defendant for execution and registration of the sale deeds in respect of the same property and for delivery of possession thereof to the plaintiff in respect of the which plaintiff had earlier filed on 27.07.2005 seeking the relief of permanent injunction. Held that:- In the present case second set of suits were filed during the pendency of the earlier suits. High Court following the judicial discpline, held that the provisions of Order II, Rule 2(3) will not be attracted. However, we are unable to agree with the same in view of the object behind the enactment of the provisions of Order II Rule 2 of the CPC, namely, that Order II Rule 2 of the CPC seeks to avoid multiplicity of litigations on same cause of action. If that is the true object of the law, the same would not stand fully subserved by holding that the provisions of Order II Rule 2 of the CPC will apply only if the first suit is disposed of and not in a situation where the second suit has been filed during the pendency of the first suit. Rather, Order II, Rule 2 of the CPC will apply to both the aforesaid situations. In view of aforesaid, present appeals deserve to be allowed. Accordingly order of High Court is set aside. Consequently, we strike off the plaint in O.S.Nos.202 and 203 of 2007 on the file of District Judge, Thiruvallur.
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