TMI Tax Updates - e-Newsletter
October 11, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. VALUE OF DIRECTOR'S SERVICES

   By: Dr. Sanjiv Agarwal

News

1. Rs. 2,72,133 Crore Direct Tax Collections during First Half of 2012-13

2. CCI emphasises the need for encouraging Competitive practices in public procurement

3. Report of the Expert Committee on Retrospective Amendments made by the Finance Act, 2012 to Income-Tax Act, 1961 Relating to Taxation of Non- Residents on Indirect Transfer; Comments and Suggestions on the Draft Report to be submitted by 19th October, 2012

4. Finance Minister Shri P. Chidambram leaves for his first Official Visit Abroad tonight to attend Annual Meetings of World Bank and IMF in Tokyo

5. Repayment of GOI Floating Rate Bond, 2012 on November 10, 2012

6. Dr. M. Veerappa Moily Details MCA Initiatives at EEC 2012

7. Rate of Exchange of Conversion of Foreign Currency into Indian Currency or Vice Versa Relating to Imported and Export Goods Notified; to come into effect from today

8. 14 Proposals of Foreign Direct Investment approved

9. Will Take Full Advantage of Soil Moisture to Maximise Crop Production in Coming Rabi: Shri Pawar Agriculture Minister Confident of 4% Annual Growth of Farm Sector in 12th Plan

10. Online issue of Central Declaration Forms

11. Auction for Sale of Government Stocks

Notifications

Customs

1. 48 /2012 - dated 8-10-2012 - ADD

Seeks to levy definitive anti-dumping duty on imports of Melamine, originating in or exported from the European Union, Iran. Indonesia and Japan for a further period of 5 Years.

2. 47/2012 - dated 8-10-2012 - ADD

Anti-dumping duty on imports of new/unused pneumatic non radial bias tyres, tubes and flaps with or without tubes or flap of rubber, having nominal rim dia code above 16" used in buses and lorries originating in or exported from People’s Republic of China and Thailand

3. 93/2012 - dated 9-10-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 10th October, 2012

DGFT

4. 20 (RE-2012)/2009-2014 - dated 9-10-2012 - FTP

Policy for allocation of quota for import of Rough Marble Blocks for Indian companies investing abroad in marble mining, for the year 2012-13.

Income Tax

5. 42/2012 - dated 4-10-2012 - IT

Income-tax (fourteenth amendment) rules, 2012 - insertion of rule 112f

Circulars / Instructions / Orders

VAT - Delhi

1. 20 - dated 9-10-2012

Review of Assessment of the dealers on the basis of 2A and 2B data mismatch for the Tax period First Quarter 2012-13.

2. 19 - dated 8-10-2012

Department of Trade & Taxes shall henceforth issue Central Declaration Forms or Certificates to the dealers only on every Wednesday and Friday. And Central Declaration Forms or Certificates shall not be issued on Mondays henceforth

3. PUBLIC NOTICE - dated 6-10-2012

Waiver of Security for registration under DVAT Act, 2004.

Income Tax

4. 8/2012 - dated 5-10-2012

Income-tax deduction from salaries under section 192 during the financial year 2012-13

FEMA

5. 41 - dated 10-10-2012

Foreign investment in NBFC Sector - Amendment to the Foreign Direct Investment (FDI) Scheme

6. 40 - dated 9-10-2012

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

7. 39 - dated 9-10-2012

Trade Credits for Imports into India – Review of all-in-cost ceiling

DGFT

8. 21(RE2012)/2009-14 - dated 9-10-2012

Amendments in Handbook of Procedure, Vol.I Appendices and Aayat Niryat forms.

Highlights / Catch Notes

Income Tax

• No Penalty for Delayed TDS Form 16A Issuance Due to Missing PAN Numbers.

  Case-Laws - HC : Due to non availability of the PAN numbers there was a delay in issuing TDS Certifications in Form No. 16A - no penalty - Tri
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• Land Confirmed as Agricultural in Official Records; No Grounds to Reclassify as Non-Agricultural.

  Case-Laws - HC : Agricultural land - The land being registered in Land Revenue Records as Agricultural land, then there is no basis for holding the said land and as not agricultural land. - HC
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• Employer-Paid Tax Excluded from Rent-Free Accommodation Perquisite Value, Clarifies Taxable Income Rules.

  Case-Laws - HC : Tax borne and paid by the employer has to be excluded while computing the perquisite of "rent free accommodation" - HC
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• Indo-US DTAA Article 26(3) Ensures Equal Tax Deductions for Non-Residents, Promoting Fairness in International Taxation.

  Case-Laws - AT : TDS - Article 26(3) of Indo-US DTAA seeks to provide against discrimination and says that deduction should be allowed on the same condition as if the payment is made to a resident. - AT
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• Voluntary Spending on 20-Point Programmes for Oppressed Classes Qualifies as Business Expenditure, Not Just Statutory Obligations.

  Case-Laws - AT : Expenditure on 20-Point Programmes for the welfare of the oppressed classes of Society, - Just because the expenses are voluntary in nature and are not forced on the assessee by a statutory obligation, these expenses cannot cease to be a business expenditure - AT
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• Penalty u/s 271G of Income Tax Act Requires Caution, Applied Only When Clearly Justified Circumstances Exist.

  Case-Laws - AT : Levy of Penalty u/s 271G - When the penalty provision is very severe, it should be applied with great caution and only if circumstances sufficiently justify invoking the penal provision. - AT
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• Assessee Denied Exemption u/s 54: Property Lacks Amenities, Not Qualified as House Under Income Tax Act.

  Case-Laws - HC : Exemption under the head Income from House Property - lack of amenities - the property was not a house and the assessee was not entitled to the benefit under Section 54 of the Act. - HC
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• Technical Service Receipts Taxed at 10% Due to Permanent Establishment in India, Not 25% as Revenue Authorities Claimed.

  Case-Laws - AT : Fees for Technical Services - The receipts are liable to tax @10% as Fees is received in connection with PE and Place of Profession in India as against 25% claimed by revenue. - AT
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• Illegal Space Use Fines Non-Deductible Under Income Tax Act Section 37(1.

  Case-Laws - AT : Deduction u/s 37(1) - Misuse charges were also paid for illegally using the space for a period of time till the infraction was noticed by the DDA and it ordered the removal of the infraction - No deduction - AT
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• High Court Affirms ITAT's Decision on Deductions for Unit Expansion u/ss 80I and 80IB of Income Tax Act.

  Case-Laws - HC : Deduction under section 80I / 080IB - allocation of expenses - expansion of existing unit or setting of new identifiable unit - ITAT has correctly found the facts and allowed the deduction - HC
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Customs

• Deemed Exports Should Include Advance Licenses, Not Just REP, When Earning Foreign Exchange is the Primary Goal.

  Case-Laws - HC : "Deemed exports” cannot and should not be restricted to REP Licenses only if the prime objective is to earn foreign exchange which is also the objective under the Advance Licenses as well. - HC
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• Pre-deposit mandatory for appeals; waivers rare, based on financial capacity and potential undue hardship.

  Case-Laws - HC : Condition of pre-deposit before filing an appeal - Pre-deposit is the rule and waiver is an exception and having regard to the financial ability and undue hardship to be caused to the appellant and not otherwise - HC
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• High Court Rules Bill of Entry Presented on June 13, 2002, Affects Customs Duty Rate Calculation.

  Case-Laws - HC : Filing of bill of entry before arrival of ship - rate of duty - Bill of Entry must be is deemed to have been presented on 13-6-2002 and not on 12-6-2002 - HC
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• Anti-dumping duty imposed on certain rubber tires for buses and lorries from China and Thailand.

  Notifications : Anti-dumping duty on imports of new/unused pneumatic non radial bias tyres, tubes and flaps with or without tubes or flap of rubber, having nominal rim dia code above 16“ used in buses and lorries originating in or exported from People’s Republic of China and Thailand - Notification
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Corporate Law

• Sick Industrial Companies Act, 1985 Overrides Transfer of Property Act, 1882 in Conflicts.

  Case-Laws - SC : Provisions of Sick Industrial Companies (Special Provisions) Act, 1985 shall have precedence and overriding effect over the provisions of Transfer of Property Act, 1882. - SC
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• Cheque Dishonor Prosecution Permissible on Subsequent Occasions u/s 138 of the Negotiable Instruments Act.

  Case-Laws - SC : Dishonour of a cheque - prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. - SC
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Service Tax

• No Cenvat Credit for Hiring Buses to Transport Employees' Children for School and Tuition, Not an Input Service.

  Case-Laws - AT : Hiring of buses for children of the employees for transportation to the schools and tuition is not an Input Service and Cenvat Credit cannot be taken on this activity - AT
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Central Excise

• Goods Cleared Under MUL Brand Excluded from Turnover Calculation for Small Scale Industry Exemption Benefit.

  Case-Laws - AT : The value of the goods cleared under brand name of MUL on payment of duty can not be included for the purpose of computation of turnover under SSI exemption benefit. - AT
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• Refund Claim Denied: Missing Duty Payment Confirmation from Jurisdictional Central Excise Superintendent, No Triplicate Certification Provided.

  Case-Laws - CGOVT : Rejection of refund claim - no confirmation of duty payment from the jurisdictional Central Excise range Superintendent in the form of duty payment certification in triplicate. Copy of ARE-1 - rebate claim inadmissible - CGOVT
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• Voluntary Overpayment of Duties Treated as Deposit, Not Duty Liability.

  Case-Laws - CGOVT : Any amount paid in excess of duty liability on ones own volition cannot be treated as duty, but it has to be treated simply a voluntary deposit - CGOVT
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• Appellate Tribunal lacks jurisdiction in central excise rebate matters; appeal entertained in error due to statutory limits.

  Case-Laws - HC : Rebate – jurisdiction of Tribunal – exclusion of the jurisdiction of the appellate Tribunal is expressly stated in the Statute - Tribunal was in error in entertaining the said appeal - HC
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VAT

• High Court Rules Film Processing Contracts Are Services, Not Works Contracts, Impacting VAT and Sales Tax Treatment.

  Case-Laws - HC : A contract for processing exposed photographic film rolls and negatives is not a works contract - HC
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• Guidance on Resolving Form 2A and 2B Data Mismatches for 2012-13 Q1 to Ensure VAT Compliance.

  Circulars : Review of Assessment of the dealers on the basis of 2A and 2B data mismatch for the Tax period First Quarter 2012-13. - Circular
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• Central Declaration Forms Now Issued Only on Wednesdays and Fridays, No Longer Available on Mondays.

  Circulars : Department of Trade & Taxes shall henceforth issue Central Declaration Forms or Certificates to the dealers only on every Wednesday and Friday. And Central Declaration Forms or Certificates shall not be issued on Mondays henceforth - Circular
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• Delhi VAT Act Waiver: Simplified Registration Process Removes Security Deposit Requirement for Businesses Under DVAT Act 2004.

  Circulars : Waiver of Security for registration under DVAT Act, 2004. - Order-Instruction
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Case Laws:

• Income Tax

• 2012 (10) TMI 257
  India UAE DTAA - as appellant had entered into a turnkey project the net taxable income is estimated by him @ 25% of such gross turnover - assessee contested that A.O. exceeded in his jurisdiction in holding that the appellant has a P.E. in India - Held that:- Turnkey contracts means where a contractor has to complete the contract as a whole i.e. from the stage of procurement of material, erection, construction, fabrication and supply thereof. However, where the terms of the contract provide that either party can withdraw or abandon the contract, the company or the contractor has not to make entire payments under the terms of the contract or refund the amounts received, which will accrue only on the completion of the contract, cannot be regarded as a turnkey contract. Hence, agreeing with the contention that even if the contract is a turnkey contract, it does not lead to taxability of the entire contract revenues in India but only as much of the profits as is attributable to the PE India can be taxed in India. The assessee fabricated the platform in Abu Dhabi and after fabrication the said platform was brought to India with the help of its barges and then the possession is handed over to ONGC. In this regard, it is worth noting that before sailing the platform after fabrication, the same is certified by ONGC through it's approved surveyor. Furthermore, as per the insurance policy though to be taken by the assessee, but ONGC is the joint beneficiary. Further, insurance policy also exhibits that, in case there is a loss suffered in the course of transportation the payee of the insured amount would be ONGC. Thus, under the contract there are different phases of execution of contract. The first phase was completed when it was fabricated, erected and brought to India through its barges, to be physically supplied. Thus, agreeing with the contention of the assessee that income attributed to PE in India could not extend to the activities carried outside India and had to be therefore confined to incomes from activities carried out from the PE.- All the activities prior to installation and commissioning are carried out in UAE and thus having regard to Article 7 of the DTAA, no income can be attributed to the PE in India - Thus it is to be opined that assessee did not have a PE in respect of erection and fabricating the platform in Abu Dhabi. The assessee had a PE in respect of installation and commissioning - partly in favour of assessee Assessee has contended that taxability of the assessee should be the same as in preceding years - Held that:- The contention of the Renenue that any formula or any agreement whatsoever arrived at between the assessee and department which is against the provision of law is not enforceable under the law. The Revenue is not bound to follow and perpetuate the mistake which has been committed in the past. In this regard, the case of Distributor (Baroda) Pvt. Ltd. (1985 (7) TMI 1 - SUPREME COURT) may be referred where Hon'ble Apex Court has held that there is no heroism in perpetuating a mistake - against assessee. Section 44BB applies in two situations when non-resident is engaged in the business of providing services or facilities in connection with OR supplying plant and machinery on hire used or to be used, in the prospecting for, of extraction or production of, mineral oils. Thus as the assessee is not in the business of providing services, neither any plant or machinery has been supplied on hire basis. The assessee is under the contract engaged in successful installation of off-shore platform. This activity cannot be characterized as facility provided by the assessee. Thus, business activity of the assessee does not fall within the meaning of section 44BB. Interest u/s 234B, 234C & 234D levied - Held that:- Section 234B is attracted where in any financial year an assessee is liable to pay advance tax under sec. 208 and has failed to pay such tax or where the advance tax paid by the assessee under sec. 210 is less than 90% of the assessed tax. Similarly, section 234C is attracted wherein in any financial year, an assessee is liable to pay advance tax under section 208 and he failed to pay such tax or the advance tax paid by the assessee and its current income on or before the specified dates is less than the specified percentage of the tax due on returned income. In this regard, assessee's contention is that its entire income is subject to tax at source under section 195 & the payer has also taken certificate from the AO under section. 195(2) and thus, there was no liability to pay the advance tax under section 208 and in the absence of any liability, Sec. 234B and 234C could not be applied.

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• 2012 (10) TMI 256
  Addition made on account of excess stock & excess cash - CIT(A) restricted the addition - Held that:- The case of the assessee is entirely based upon provisional trading account prepared at the time of survey showing the figure of purchase and sales differently as against the figures pointed out by the assessee. Also that the assessee prepared the working of the purchase and sales figures on the basis of the impounded bills and value of the sale was arrived at Rs. 67,58,352/- and the purchases have been found at Rs. 71,79,376/- as against the sales and purchases of Rs. 74,20,097/- and Rs. 49,00,581/- as per the provisional trading account. The correct figures pointed out by the assessee of sales and purchases were based upon the impounded documents. As the CIT(A) verified all the figures at the appellate stage in the presence of the AO and after verification of purchase and sales found that correct figures have been pointed out by the assessee. Thus, the sole basis of making addition, i.e., provisional trading account was not having correct figures of purchase and sales. Whatever items have been declared by the assessee on account of excess stock have been given benefit correctly by the CIT(A). Since the figures of the sales and purchases were based on factual figures, therefore, it is a case of factual mistake committed by the Survey Party as well as by the AO, which has been rightly corrected by CIT(A). Thus, the assessee on the basis of seized material itself has been able to show that the admission made at the time of survey surrendering the additional income on account of excess stock was not correct and did not show correct state of facts. Therefore, no addition could be made against the assessee on the basis of mere admission according to the facts and circumstances of this case - in favour of assessee.

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• 2012 (10) TMI 255
  Penalty u/s 271(1)(c) - dis allowing exemption u/s 10(22) - CIT (A) deleted the levy by allowing the claim - A.Y. 1997-98 - Held that:- CIT(A) has rightly allowed the assessee’s claim after a detailed discussion that the assessee is an Educational Institution existing solely for the that purpose and not for the purpose of profit and thus fulfilled the conditions of section 10(22) of the Act. The CIT(A) has rightly deleted the addition which was made in the hands of the assessee on protective basis as the addition in the hands of Shri S. Anwar Saeed has been added on substantive basis. Even on merit, the CIT(A) found that merely because the employee has gained personal benefit, it cannot change the character of the Institution as a whole from non-profit Institution to a profit making Institution - as the additions made by the A.O. have been deleted there is no question of levy of penalty under section 271(1)(c) Disallowance under section 40A(3) - Held that:- As CIT(A) has deleted the addition holding that the income of the Institution is exempt under section 10(22) the disallowance under section 40A(3) became academic - appeal decided in favour of assessee.

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• 2012 (10) TMI 254
  Claim of exemption u/s. 11 - denial on violating the provision of section 13(1)(c)/2 (c) - Held that:- As regards the interest free loans/advances, it was found that same have been given in earlier years on which exemption has already been granted by the AO. There were no fresh loan/advances given in the assessment year under appeal. Whatever loans were given in earlier year have been given with adequate securities against the properties and same were also authorized by the resolution of the assessee society. Thus, the CIT(A) rightly found that there were no violation of section 13. Therefore, the AO should not have denied the claim of exemption u/s. 11 in favour of the assessee. Since the assessee exists wholly and exclusively for the education and all the amounts have been spent for educational purposes and for aims of the society, therefore, the assessee was entitled for exemption u/s. 11. It is well settled law that though principle of res judicata does not apply in the Income-tax proceedings, but rule of consistency should have been maintained and followed by the Income-tax Authorities while finalizing the assessment - in favour of assessee. Amount written off treating the same as capital expenditure - Held that:- It is well settled in law that in the case of charitable institutions, any expenditure whether revenue or capital in nature, incurred for the furtherance of its objects is an application of income to the objects of the institution and, therefore, allowable as per provisions of section 11(1) - The amount on account of bad debt was spent by the assessee as per AO for capital purposes for the object of the assessee-society and in case, it was not returned, even after the matter was settled by the Civil Court, the writing off the debt are normally to be noted in the books of account as per law. Therefore, the assessee was entitled for deduction of the same on account of application of income towards the objects of the assessee society. Therefore, addition of Rs. 11,37,483/- is hereby deleted - in favour of assessee. Disallowance of honorarium - marginal increase as compared to earlier years - Held that:- The AO has nowhere doubted the payment of honorarium to the office bearers of the society for bona fide services rendered by them. The honorariums have been paid in earlier year also and have been accepted by the Revenue department in the proceedings u/s. 143(3). All the amounts have been made for wholly and exclusively for the purpose and benefit of assessee society as all the persons have rendered actual services to the assessee and even in the statement of Shri Narendra Singh, he has explained the details of the services rendered by him against the payment. There is only marginal increase in the case of some of the officer bearers, which have been duly approved by the resolution of the society. CIT(A) also found that the total number of students in the educational institution run by the assessee have increased. Therefore, the increase in the honorarium was justified as compared to the earlier years. The CIT(A), thus, rightly found that there were no violation of provisions of exemption claimed in this case - in favour of assessee. Donations - non-business expenses OR Business - Held that:- Assessee gave donations through banking channels to the trusts having similar objects, which is recorded in the books of account of both the concerns. CBDT vide Instruction No. 1132 noted by the CIT(A) in the appellate order clearly clarified and decided that the payment of sum by one charitable trust to another for utilization by the donee trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust and donor trust would not lose exemption u/s. 11 - in favour of assessee.

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• 2012 (10) TMI 253
  Exemption under Section 12A accorded by CIT Patiala - petitioner-Authority contested that AO overlooked the exemption - Held that:- The effect of exemption granted or claimed by the petitioner-Authority pursuant to order dated 28.9.2005 can be raised by the petitioner before the Appellate Authority who shall be obligated to consider the same while deciding the petitioner's appeal - as not in dispute that the assessment order dated 30.12.2011 raising demand of Rs. 19,32,36,475/- towards income tax, penalty/interest etc. for the AY 2009-10 is already under challenge in appeal before the CIT (A), thus dispose of this writ petition with a direction to the CIT(A)-respondent No. 2 to decide the petitioner-Authority's pending appeal within a period of 4 months from the date of receipt of certified copy of this order. In order to protect the interest of the Revenue the petitioner- Authority is directed not withdraw or encash its fixed deposits to the tune of Rs. 20 crores till the decision of appeal by respondent No. 2, while it shall be at liberty to encash the rest of the FDRs.

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• 2012 (10) TMI 252
  Penalty u/s 271(1)(c) - provisions of section 36(viia) as claimed were not applicable to assessee's case - Held that:- No dispute that the provisions of section 36(viia) were not applicable to assessee's case as the primary cooperative agricultural development bank is explicitly excluded from claiming deduction on account of provisions for NPA but as it is seen that the assessee has contended that the provisions for NPA was made as per RBI guidelines in respect of which it has become sub-standard/bad and doubtful. The NPA provision was checked and verified by the auditor before finalizing the balance sheet. It is also seen that non performing assets are classified and quantified as per guidelines of RBI by the banks in respect of cases where recovery becomes difficult. Hence, the provision for NPA is integral part of the business of banking wherein such provision more or less corresponds to the bad debts. It is also true that the assessee, being a co-operative bank is eligible to claim deduction of its entire income from the business of banking u/s 80P. Keeping in view the above facts it could be safely held that there was not a deliberate attempt to claim deduction of provision for NPA. As decided in CIT Versus RELIANCE PETROPRODUCTS FVT. LTD.[2010 (3) TMI 80 - SUPREME COURT] a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Thus as the revenue was unable to show that the assessee had intentionally not furnished correct particulars no penalty can be levied - in favour of assessee.

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• 2012 (10) TMI 251
  Non issuance of form 16A to the deductee within time as required u/s 203(1) - non ascertaining the PAN Number from the payees - penalty levied under Section 272A(2)(g)- Held that:- The explanation of the assessee for non-issuing the certificates within time prescribed was that the interest component in the compensation paid to the District Court for disbursement to the land owners/right holders is taxable as per Income Tax Act, 1961 and tax @ 11.2% have been deducted and deposited in the Government Account. Also that it was difficult to file return as the payment of compensation was made by the Hon'ble Court and no PAN numbers were available with the office. It is also submitted that its office has filed all the TDS returns in form No. 24Q for the Ist, 2nd, 3rd and 4th quarters of the financial years 2006-07, 2007- 08, 2008-09 and 2009-10. The delay has been attributed on the part of the land owners due to the fact that land owners have not submitted their PAN numbers required for the purpose. However, the land owners had been asked to submit their PAN numbers vide this office letters dated 22.11.2007, 9.1.2008, 3.3.2009 and Public Notice has also been given in Daily Ajit Newspaper on 17.8.2010. As the assessee categorically stated before the lower authorities that due to non availability of the PAN numbers there was a delay in issuing & the assessee was prevented by sufficient cause from issuing Certifications in Form No. 16A within period prescribed hence there was only technical and venial breach of provisions contained in Rule 31 of the Income Tax Rules, 1962 read with section 200(3) of the Income Tax Act, 1961 - in favour of assessee.

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• 2012 (10) TMI 250
  Agricultural land - income on sale of said land consisting of carved out plots - Long Term Capital Gain v/s income from business and profession - Held that:- The said asset being held by the assessee cannot be said to be a business asset and its sale in small plots of land to different purchasers is not adventure in the nature of trade, in the absence of the assessee having floated the same or having developed its land for the purposes other than agricultural land. Further for converting the usage, prior permission is required from the authorities and in the absence of any permission being obtained by the assessee from PUDA authorities in respect of the land sold, merely because the land is sold in small plots to persons who intended its residential use, does not change the nature of land sold in the hands of the assessee and its taxability. As assessed by ITAT that the said land was part of notified forest area where admittedly no other activities except agricultural, if allowed, could be carried out & the Girdawari of the landholdings of the assessee proves the stand of the assessee that it was agricultural land and also the notification issued for the urban usage/non-agricultural activities certifies that prior to its notification the said land was used for agricultural purposes. The land being registered in Land Revenue Records as Agricultural land, then there is no basis for holding the said land and as not agricultural land. The gain arising on the sale of the aforesaid agricultural land cannot be taxed as income from business as revenue was unable to show that the activity undertaken by the assessee was an adventure in the nature of trade - in favour of assessee.

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• 2012 (10) TMI 249
  Penalty u/s 271(1)(c) - booking losses on forward contract tantamounts to furnishing of inaccurate particulars of income - Held that:- The assessee had made a claim of loss on account of losses arising on a maturity of the forward contract, which in fact matured during the preceding year i.e. assessment year 2004-05 but were booked as expenditure during the year under consideration on the bank advice received for the aforesaid forward contracts. The said claim being rejected by the Assessing Officer as being not relating to the year under consideration cannot tantamount to furnishing of inaccurate particulars of income. As decided in CIT Versus RELIANCE PETROPRODUCTS FVT. LTD.[2010 (3) TMI 80 - SUPREME COURT] a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - no question of law arises in the present appeal as the revenue was unable to show that the assessee had intentionally not furnished correct particulars or the claim made was bad in law - in favour of assessee.

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• 2012 (10) TMI 248
  Denial of grant of exemption under Section 10(23C) (iiiad) to registered society - Held that:- As the accounts and the balance sheets for the earlier years and the year under consideration were produced before the AO & the report which was furnished by the AO stating that no such material had been produced was wrong and on the assessee submission that even if what has been recorded by respondent No.3 in the order, the petitioner is now prepared to produce the relevant record once again before him for deciding the application for exemption afresh in case an opportunity is provided to it in the interest of justice, it appropriate to remand the matter to respondent No.3 to adjudicate the same after affording an opportunity to the petitioner to produce the books of account including balance sheets - in favour of assessee by way of remand.

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• 2012 (10) TMI 247
  Dis-allowance u/s 14A of interest paid on O/D Account and other interest - assessee in receipt of dividend income, exempt from tax other than salary income and interest income - assessee contended that over-draft facility was used towards investment in shares on which the assessee has shown “gain” and offered to tax - Held that:- Applicability of the provisions of section 14A is now to be determined in the light of the order in the case of Godrej Since Assessing Officer had not enquired the issue in the light of the above legal pronouncement. Specially the pronouncement of the High Court was not available at that time, hence, the Assessing Officer’s assessment order was devoid of merits as also the law applicable. Matter restored back.

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• 2012 (10) TMI 246
  Deduction u/s 80IB - Real Estate Developers - dis-allowance on ground that land is not owned by the assessee-firm and approval of the local authority for the construction of the said housing project was not in the name of the assessee and that the beneficial ownership was also not in the name of the assessee - also that proceeds are attributable to the sale of unutilized FSI - Held that:- CIT(A) deleted dis-allowance placing reliance on decision in case of Radhe Developers (2011 (12) TMI 248 - GUJARAT HIGH COURT) wherein it was held that Section 80IB(10) provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances. It does not provide that the land must be owned by the assessee seeking such deductions - Revenue’s appeal is dismissed. As regards allowing deduction u/s 80IB(10) in respect of profits attributable to sale of unutilized FSI it is held that there is no requirement as to the FSI under the scheme of the provisions of section 80IB(10) and in any case, assessee had not sold FSI plot, even if the unutilized FSI rights are available with the assessee, it is the only way left out of utilizing such unutilized FSI is to make construction on top of the ground floor, which is already being sold to prospective buyers, and this concept of element of unutilized FSI sold is imaginary and based on surmises and conjectures - Decided in favor of assessee

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• 2012 (10) TMI 245
  India Japan DTAA/treaty - Existence of PE - Assessee's contention is that Indian company acted as a communication channel between the prospective customers and assessee - Indian company facilitated the flow of information and documents like enquiries, proposals, quotations, purchase orders, invoice etc. between the assessee and the customers - AO has not accepted assessee's explanation as required documentary evidences were not furnished – Held that:- As concluding from the facts of the case there are conflicting claim by the Revenue and the assessee. Before the AO assessee had pleaded that the person who was in charge of the requisite details had fallen ill. It has also been a claim of the assessee that its submission had not been appreciated properly. Issues are remitted to the file of the AO for de novo consideration. Appeal remand back to AO

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• 2012 (10) TMI 244
  Assessment - Held that:- Assessing Officer should confine himself to the directions issued by the Income-tax Appellate Tribunal and cannot reopen an assessment duly completed. He does not have jurisdiction to go beyond the direction given by the Tribunal – in favour of assessee.

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• 2012 (10) TMI 243
  Review Application - Held that:- Tax borne and paid by the employer has to be excluded while computing the perquisite of "rent free accommodation" - Application dismissed as no merit in review petition and application for condonation in filing and refiling. Refer: CIT v. Telsuo Mitera [2012 (6) TMI 88 - DELHI HIGH COURT]

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• 2012 (10) TMI 242
  Renewal of Approval u/s 80G - Assessee runs an educational Institution and enjoyed continuous registration u/s. 12AA of the IT Act and is also registered under the Societies Registration Act. In earlier year, it was also granted approval u/s. 80G(5) of the IT Act. The assessee filed required documents and satisfied the requirements u/s 80G. Held that:- Issue of donation is not relevant for extension of renewal u/s 80G(5) of the IT Act. As decided in case of [Gaur Brahmin Vidya Pracharini Sabha. Versus Commissioner Of Income-Tax. 009 (9) TMI 81 - ITAT DELHI-B], if the institution is established for educational and charitable purpose, registration u/s 80G cannot be denied – in favour Of assessee.

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• 2012 (10) TMI 241
  Disallowance of Expenses – Capital vs. Revenue Expense - Held that:- RTO Tax expenses payable on vehicles are to be allowed as they do not create capital asset. car is already in existence and the road tax is required to be paid for running the car - can be claimed as Revenue Expense - in favour of assessee. Other Legal Incidental Expenses:- Disallowance is restricted to the extent of 10% of total expenses instead o 25% to meet the ends of justice - Partly allowed in favour of assessee. Commission by way of Gift Cheque -Not a real business transaction - Disallowed - against the assessee. Professional service charges - Payment done by assessee for repairs in other plant of assessee - Disallowed in absence of Evidences to prove the charges are in connection with business - against the assessee. Web site exp- Expenses incurred for developing and maintaining the website which is required to be continuously updated - Recurring expenditure - Allowed in favour of assessee. Sales promotion/export expenses - incurred for development of own business in export market and accordingly should be allowed as business expenditure - in favour of assessee. Entertainment Expenses - Allowed to the extent used in relation to entertainment of company’s clients or customers - Partly allowed in favour of assessee Gift Presentation Articles - Gifts of expensive items such as Television, gold jewellery and silver articles of Personal nature not a business exp. - Disallowed - against the assessee. General Repair Expenses - As Expenses belong to annual maintenance Contract and are common in nature and hence rightly claimed as revenue expenditure – in favour of assessee. Inflate Job-work Expenses - necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee. This ground is allowed for statistical purpose.

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• 2012 (10) TMI 240
  Restoration of the matter - Purchase of Software from associate concern – The Assess contended that Microsoft software purchased by the associate concern on behalf of the assessee and payments made, when not for the transfer of right in the software is not a payment for royalty. Revenue contended as decided in case of [Samsung Electronics Co. Ltd. Versus Deputy Director of Income-tax (International Taxation), Circle-II(1) ]2012 (8) TMI 112 - ITAT BANGALORE payment made by the assessee to non-resident companies would amount to Royalty. Held that:- Issue restored back to COM(A) to examine the nature of software purchased by the assesse - Both the appeals are allowed for statistical purposes.

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• 2012 (10) TMI 239
  When the issues in relation to deduction under Section 80-O on account of the fees for management services received outside India and the deduction of Excise Duty and Customs Duty on payment basis under Section 43B, were not pressed before the learned Tribunal by the learned counsel for the assessee rather conceded to accept the decision of CIT (Appeals), we think that this Court cannot re-open the issue. Mere pendency of the appeal in connection with computation of deduction under Section 80HHC before the Supreme Court cannot be a ground for taking different decision by this Court to accept the contention. - Decided against assessee.

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• 2012 (10) TMI 238
  Expenditure on advertisement and sale promotion - revenue or capital in nature - The assessee contended that as the expenses have been incurred for creating awareness about branded jewellery in India and to make potential buyers aware about availability of such branded jewellery. Therefore, the expenses incurred are for sales promotion only which is wholly and exclusively for the purpose of business and have not brought into existence any asset of enduring nature. Therefore the expenditure cannot be treated under Capital Expenses head. - held that:- As decided in case of [Commissioner of Income Tax vs. Salora International Limited2008 (8) TMI 138 - DELHI HIGH COURT] Advertisement expenditure for launching of products – As there was a direct nexus between the advertising expenditure and the business of the assessee and that unless the assessee made its products known to the market. - Held that:- The entire expenditure of Rs. 3,89,62,423/- incurred by the assessee on sales promotion is on revenue account and is an allowable as an expenditure incurred wholly and exclusively for the purpose of business and is not capital in nature – in favour of assessee.

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• 2012 (10) TMI 237
  Disallowance u/s 40(a)(i) - Income accruing or arising in India - Fees paid for Technical Services to Non- Resident - The assessee contended that Disallowance u/s 40(a)(i) is permissible as the Income is not chargeable to tax under the Act and tax ought not to have been deducted at source. As no income was chargeable u/s 9(1)(i) as no operations of the non resident are carried out in India and no part of his income is attributable to any Indian operation and India has DTAA with France, the assessee is entitled to opt for the provisions of the said Treaty which are beneficial.As decided in case of [Carborandum Company Versus Commissioner of Income-Tax, 1977 (4) TMI 2 - SUPREME COURT] That if all operations are carried out in the taxable territories, the profit & gain of the business deemed to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. Held that:- Article 26(3) of Indo-US DTAA seeks to provide against discrimination and says that deduction should be allowed on the same condition as if the payment is made to a resident. Thus this clause in DTAA neutralizes the rigour of the provisions of section 40(a)(i). - The payment in question by assessee attracts the provisions of the Indo-US DTAA, and will not be taxable in India as it is a payment for included services within the meaning of Article 12(4) of the said DTAA and the recipient does not have a permanent establishment in India - in favour of assessee.

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• 2012 (10) TMI 224
  Disallowance of depreciation on civil work in the installation of windmill @ rate of 80% - AO contended that depreciation at the rate of 80% was allowable only on the device of windmill and not on the entire cost including civil works, electrical installation, development expenses and other machinery etc. - Held that:- The depreciation is allowable on renewable energy device which also includes windmill. The depreciation at the rate of 80% is allowable on the entire device which is capable of generating electricity using wind energy. There is no provision in the Act to bifurcate the device into several parts and allow depreciation thereon at different rates of depreciation. The foundation, civil and electrical works are necessary for the installation of the windmill and is clearly part and parcel of the windmill project. Therefore depreciation at the rate of 80% is allowable. Issue decides in favour of assessee Disallowance of expenditure u/s 14A r.w.Rule 8D – Assessee contended that introduction of Rule 8D is w.e.f. AY 2008-09 and is not applicable for the year under consideration i.e. AY 2007-08 - No internet bearing funds have been used for earning exempt income - Held that:- Issue need to be remand to the AO to decide issue with reference to the decision in case of Walfort Share & Stock Brokers P. Ltd. (2010 (7) TMI 15 - SUPREME COURT). Issue remand back to AO.

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• 2012 (10) TMI 223
  Disallowance of expense incurred on earning exempt income - AO has disallowed 10% of the exempted income – Held that:- Following the decision in case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) that Rule 8D which has been notified on 24th March 2008 would apply from the A.Y. 2008-09 only. Since we are concerned with the A.Y. 2004-05, the said Rule cannot be invoked. Respectfully following those guidelines issue remand back to AO. Disallowance of renovation expense – Renovation expense incurred on leased property, and the lease period is remaining for few months, is a capital or revenue in nature - Assessee took space on lease for a period of five years on lease and license basis – Assessee contended that expenditure was incurred wholly and exclusively for the purpose of business - No enduring benefit had accrued to the assessee nor was any capital asset created - Held that:- Since the expenditure was incurred in the month of March 2004 as per the terms of the license agreement and the license period was coming to an end in June 2005. They are routine maintenance and repair expenses which the assessee would have had to incur in the normal carrying on of its business. The nature of the work shows that no additional space or capital advantage was derived by incurring the expenditure. Issue decides in favour of assessee. Mark to Market Loss - Disallowance of the provision for loss on “Mark to Market” basis in respect of trading in derivatives - Assessee holds derivatives as its stock-in-trade - Follows the principle “cost or market price, whichever is lower” in valuing the derivatives – Held that:- As the loss due to a fall in price below cost is allowed even if such loss has not been actually realized. The derivatives have been treated as stock-in-trade then there is nothing unusual in the assessee valuing each derivative by applying the rule cost or market whichever is lower. ICAI in its guidelines have also approved of the rule of prudence which really means that while anticipated losses can be taken note of while valuing the closing stock, anticipated profits cannot be recognized. The anticipated loss cannot be treated as a contingent liability. Issue decides in favour of assessee

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• 2012 (10) TMI 222
  Deduction u/s 80IB – Assessee engage in business of construction and developer – AO argued that assessee has violated the provisions of 80IB (10) by constructing, more than 1500 sq.ft. per unit – Assessee contended that total built up area of none of the flats exceeds 1500 sq.ft. if balcony/terrace are excluded – Held that:- Following the decision in case of HAWARE ENGINEERS & BUILDERS PVT LTD (2012 (6) TMI 386 - ITAT MUMBAI) that definition of built up area as per Sub-section 14(a) of Sec. 80 IB is inserted by Finance Act (No.2) w.e.f. 1st April 2005 and therefore, the same is applicable only in respect of the projects approved after 1st April 2005 and consequently balconies/terrace cannot be included in the built up area of the flats in the assessee’s housing project which was approved prior to 1st April 2005 and A.Y. involved in the impugned appeal is A.Y. 2004-05. Since after excluding the projections and balconies, none of the combined flat exceeds the built up area of 1500 sq.ft., a fact brought on record by the Ld CIT(A) and not controverted by the Revenue. Therefore benefit of deduction u/s. 80 IB (10) cannot be denied. Issue decides in favour of revenue

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• 2012 (10) TMI 216
  Disallowance u/s 43B(f) towards provisions for leave encashment - Held that:- As decided in assessee’s own case in the preceding years that both the parties admitted that as per sec 43B(f) amount unpaid in respect of leave encashment deserves to be disallowed - against assessee. Disallowance u/s 14A - Held that:- Respectfully following the decision in the preceding year, in the current year also, we feel it appropriate to restore the issue to the file of the AO, with the direction to recompute the disallowance u/s 14A - in favour of assessee by way of remand. Interest u/s 234B & 234C - exclusion while computing the book profits under section 115JB - Held that:- As decided in Jtc. I. T., Mumbai Versus M/s Rolta India Ltd.[2011 (1) TMI 5 - SUPREME COURT OF INDIA] there is no exclusion of section 115J/115JA in the levy of interest under section 234B. The expression “assessed tax” is defined to mean the tax assessed on regular assessment which means the tax determined on application of section 115J/115JA in the regular assessment. Interest under section 234B is payable on failure to pay advance tax in respect of tax payable under section 115JA - against assessee. Carry forward of unabsorbed depreciation loss of earlier years without setting off the same against the capital gains - Held that:- The provisions of the Act are very clear and the plain meaning simply suggests that adjustment is required to be made and the AR’s reliance of the word may used in section 71(2), saying, it means that the Act gives an option to the assessee either to adjust or not to adjust business loss with capital gains will be of no use, because in the General Clauses Act, the word may has been interpreted to mean as shall, also, and in that case, the provisions of section 71(2) shall become absolute. View taken by the revenue authorities and pointed out that under all circumstances unabsorbed depreciation shall become current years’ depreciation, which shall in any case will have to be given first adjustment against any income is acceptable - against assessee.

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• 2012 (10) TMI 215
  Disallowance u/s 14A - 0.5% of average investments yielding tax free income - Held that:- No working on the disallowance are found, and how the assessee has arrived at figure of Rs. 8,16,657/- and how and why 0.5% of average of investment yielding tax free income was excessive. In this sense, it would be appropriate to restore the issue to the file of the AO, as done in the preceding year with a direction, that a reasonable disallowance under section 14A may be arrived at, as per law. Disallowance of prior period expenses - Held that:- As decided in Union Bank of India Vs ACIT [2012 (6) TMI 500 - ITAT MUMBAI] even though such expenses 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 - in favour of assessee. Disallowance of lease premium expenses - Held that:- The claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed, has been decided by the Special Bench in the case of JCIT Vs Mukund Limited [2007 (2) TMI 358 - ITAT MUMBAI], as conceded by the AR. Respectfully following the decision rendered by the Hon’ble Special Bench, we sustain the disallowance of Rs. 1,55,20,622/-, as made by the revenue authorities - against assessee. Short allowance u/s 36 - Held that:- CIT(A) erred in not deciding on the issue of short allowance under section 36(1)(viia), based on total income computed by the AO. We, therefore, set aside the order of CIT(A) on this issue and direct the AO to decide the issue afresh - in favour of assessee by way of remand. Disallowance of bad debts claimed - CIT(A) allowed claim - Held that:- As decided in M/s. Vijaya Bank Versus Commissioner of Income Tax & Anr. [2010 (4) TMI 46 - SUPREME COURT] though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful debt, yet that would not constitute actual write off. But where besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has 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 - in favour of assessee.

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• 2012 (10) TMI 214
  LPG Bottling Plant - disallowance of Deduction u/s 80HH,80I/80IA - Held that:- every manufacture characterised as production but every production need not amount to manufacture. Even the activity, which is something which brings the commercially new product into existence, then the activity constitutes production. - the process of bottling of LPG makes the LPG capable of being marketed and used by the individual consumers as a domestic kitchen fuel. The process by which the LPG is filled up in the cylinder makes it possible and viable commercial product - in favour of assessee. Denial of claim for 1/6th under section 35 AB - Held that:- Considering the claim of assessee that if under section 35AB is allowed for 1/6th of the amount, then the assessee does not press the allowance of the claim at 100% under section 37 (1) AO is directed to allow the claim under section 35AB to the extent of 1/6th of the amount for the assessment year 1993-94, 1994-95 and 1995-96 as it was allowed in the first year. Deduction u/s 43B in respect of excise and custom duty paid during the year and included in the value of closing inventory - Held that:- Following the order in Berger Paints India Ltd. Versus CIT [2004 (2) TMI 4 - SUPREME COURT] allow deduction for entire amount of excise duty and custom duty paid by the assessee irrespective of the excise duty and custom duty included in the valuation of assessee’s closing stock at the end of the accounting year. The assessee gets relief accordingly - in favour of assessee. Expenditure on 20-Point Programmes - Disallownce of expenditure u/s 37(1) - Held that:- the expenditure on 20-Point Programmes was incurred in view of specific directions of the Government of India solely for the welfare of the oppressed classes of Society, for which even the Constitution of India sanctions positive discrimination, and for contribution to all around development of villages, which has always been the central theme of Government’s development initiatives. Thus even if an expense is incurred voluntarily, it may still be construed as ‘wholly and exclusively’. Just because the expenses are voluntary in nature and are not forced on the assessee by a statutory obligation, these expenses cannot cease to be a business expenditure which was, beyond dispute or controversy, at the instance of the Government, and was to discharge the assessee’s obligations towards society and as a responsible corporate citizen - in favour of assessee. Entertainment expenses towards employees accompanying the guests - Held that:- In the absence of any material and details regarding the exact number of staff and guest on these occasions, no reason to interfere with the orders of the lower authorities on this issue. Accordingly, confirmed the disallowance made by the authorities below - against assessee. Disallowance of dividend expenditure - Held that:- The distribution and payment of dividend is application of income and not an expenditure laid out for earning the income or incurred wholly and exclusively for the purpose of business of the assessee. Accordingly, we do not find any merit in the additional ground raised by the assessee claiming that dividend paid as the business is business expenditure - against assessee.

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• 2012 (10) TMI 213
  Non giving reasonable opportunity to the assessee by the AO - Undisclosed income - search and seizure - Held that:- Though AO issued 3 to 4 show cause notices one after another without giving sufficient time to the assessee to file the necessary details, however, when the CIT(A) issued a remand order and the assessee was given another opportunity to file all the details and evidence as well as defend the case during the remand proceedings, then the said grievance of the assessee against the AO is no more exist. Accordingly, no substance or merit in the ground of the assessee and the same is dismissed - against assessee. Unexplained investment in paintings - Holding the assessee as Trader in paintings - Held that:- For AY 2003-04 only part payment was shown to be made as per the invoices seized during the search operation and despite the opportunities given by the CIT(A), the assessee failed to furnish any evidence to show that the balance payment was made by the ultimate purchaser and the company has received the commission income. The addition has not made solely on the ground that the assessee purchased and owned these paintings, but it was made on the ground that only part payment has been shown in the invoices, which are in the name of the assessee and therefore, the balance payment was made through hawala route - against assessee. Trader in paintings - For AY 2009-09 find force and merit on the point that some of the paintings belong to the company and written off because of low/commercial value, if the said claim of the assessee is supported by the relevant record. Both AO and CIT(A) have not examined the said factual claim of the assessee and rejected the same on technical grounds that the assessee did not declare the same at the time of search, thus set aside the issue of addition on account of unexplained investment in paintings for the assessment year 2008 – 09 to the record of AO to reconsider it afresh as assessee is at liberty to produce any evidence with regard to the valuation of the paintings - in favour of assessee for statistical purposes. Addition on account of low drawings - unexplained expenditure on account of personal household expenses under section 69C - Held that:- the issue requires a proper verification and examination at the level of AO - Also as regards the estimate of personal expenditure at Rs.40,000/- to Rs. 50,000/- per month by the CIT(A) the assessee is directed to produce the electricity bill and telephone bills for the relevant period before the AO in this respect. Unexplained source for purchase of land - Held that:- AO has made an addition of Rs. 4 lakhs as unexplained investment whereas in view of the new facts brought out by the assessee that the actual consideration paid for purchase of land is Rs. 15 lakh, the issue requires to be considered afresh. As that the issue was not properly verified by the authorities below and decided the same summarily accordingly the issue remitted back to AO for deciding the same after considering all the relevant facts and material. Unexplained increase in the capital account - addition on account of opening capital balance - Personal effect - Held that:- it is clear from the order of CIT(A) that the explanation of purchase and sale was rejected without examining the correctness of the same. Therefore, the issue is required to be examined on the point of correctness of the factual aspect as claimed by the assessee. Cash found in the locker - Held that:- It is clear from the record that the assessee never took this plea that the locker of HDFC Bank belongs to the company and not to the assessee. Even no record was filed to show this fact. Therefore, this fresh plea cannot be accepted without investigation of facts. Hence, no entertainment of this fact at this stage is required. In the absence of any material to show the availability of the funds to correlated with the cash found in the locker, no merit in the grounds of the assessee hence the same is dismissed - against assessee.

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• 2012 (10) TMI 212
  Cancel the registration granted u/s 12AA - as per Memorandum of Association assessee's activities have not been found to be genuine - Held that:- On going through the MOA and other Bye-laws it is an institution registered in India for all purposes of law. The assessee, The Institute of Chartered Shipbrokers (ICS) having its headquarters at London cannot be construed as an agent of a foreign institution. The foreign institution, ICS of London, is a world professional body controlling the profession of shipbrokers around the world and granting professional affiliations. The programme of professional education imparted by the assessee Institute in India is not in the nature of coaching or tuition. The Institute at London is an Institute established by a Royal Charter and recognized world-wide as the nodal agency of design, improving and controlling the profession of ship-broking. The examinations conducted by the Institute to enable the registered students to enroll as members of the Institute require continuous study for a period of three to four years. What is imparted by the assessee Institute in India is professional education like chartered accountancy, law, architecture, etc. The syllabus prescribed for the examination covers almost all areas of shipping industry including maritime laws. Thus here is nothing on record to show that the assessee is engaged in any commercial or professional activities in India by way of consultancy or professional advices and they are not earning any income by way of carrying on any trade or commerce. The income of the assessee is the fees collected from the students and the expenses are incurred for running the Institute for imparting professional education to its registered students. The income of the assessee Institute is not utilized for any private initiation or for the benefit of any interested person. The expenditure is incurred only for the purpose for which the Institute is established - Thus the assessee continues to enjoy the registration under section 12AA, as if there was no interruption - in favour of assessee.

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• 2012 (10) TMI 211
  Non speaking order and non grant of sufficient opportunity of being heard - dispute regarding allowance of business expenditure - Held that:- Perusal of the order shows that Assessing Officer has not applied his mind on any of the issues. The only reason assigned by the AO is that reply of the assessee is not acceptable, but why it is not acceptable is nowhere disclosed. It emerges out from the record that CIT(A) has called for certain information and assessee was in the process of collecting those information. It has filed adjournment application through registered post also because the first appellate authority refused to entertain them. Considering the assessment order being non speaking and non grant of sufficient opportunity of hearing demonstrated by the assessee in the adjournment application, it is held that end of justice would be met if issues are set aside to the file of CIT(A) for re-adjudication.

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• 2012 (10) TMI 210
  Dis-allowance u/s 14A - non-claim of any expenditure by assessee in relation of dividend income - assessee contended that mode of acquisition of shares was through amalgamation and no shares having been acquired either out of interest bearing funds or surplus funds - Held that:- It is evident from the record that the assessee has earned dividend mainly from shares of 'OBC' and 'CG' which was acquired through amalgamation of two companies. Further, it is also noticed that most of the expenses are directly attributable to assessee's business as per the details furnished. Hence, it cannot be held that assessee might have incurred any kind of expenditure for earning of dividend income. Moreover, looking to the fact that assessee has itself disallowed 1% of the dividend income as an expenditure. Hence, no further disallowance is called for. Deduction of Short Term Capital Loss on sale of shares of M/s BILT - acquired vide transfer from holding company at book value (Rs 128.02 per share) as per the provisions of section 49(1)(iii)(e), when market value was Rs. 73.3 per share - dis-allowance - Held that:- It is seen firstly, that transaction is between parent company and subsidiary company which cannot be treated as transfer as it is undisputed fact that assessee is a 100% subsidiary of its parent company; secondly, the shares have been transferred as per the book value and, therefore, the cost of acquisition of the asset shall be deemed to be the cost of which it has been shown in the books of the parent company i.e. previous owner. In these circumstances whether the cost of the shares was higher or lower does not make any difference. In view of clear cut provisions of S47(iv) r.w.s. 49(1)(iii)(e), deduction of short term capital loss by the AO is legally not correct - Decided in favor of assessee

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• 2012 (10) TMI 209
  Validity of notice issued u/s 148 beyond a period of 4 years from the end of relevant AY - assessment reopened on ground that payment of royalty and FTS is not allowable as 100% revenue expenditure and was to be treated as 25% capital expenditure - Held that:- It is observed that reasons recorded by the AO for issuing notice u/s 148 are based on the material which was before him at the time of original assessment. Also, “reason to believe” should come into existence only when some material facts have not been disclosed or furnished by the assessee at the time of assessment u/s 143(3) and which came to the knowledge of the AO subsequent to completion of original assessment. Assessee having made full disclosure of material facts in the return accompanied by several annexures and enclosures, the assessment could not be reopened beyond four years from the end of relevant assessment year only for the reason that certain income has been wrongly assessed under a wrong head of income. In present case, we are unable to see existence of any additional material or opinion subsequent to the completion of assessment for the year under consideration. Therefore, on merits, the action of the AO for reopening of assessment by issuing notice u/s 148 after substantial lapse of time and after expiry of four years from the end of relevant AY is not justified - Decided in favor of assessee Condonation of delay in filing appeal by Revenue - 48 days - Held that:- It is observed that the initial decision and action was taken at appropriate time and a letter of authorization was sent. However, due to transfer and handing over and taking over charge by respective officers, this communication was delayed and finally this appeal could be filed with a delay of 48 days. Since there is no malafide or willful omission of duty on the part of the officers of the Revenue and the cause offered for the same seems to be bonafide and acceptable, delay is condoned

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• 2012 (10) TMI 208
  Dis-allowance of business expenses - assessee having agricultural income, and other income comprising of interest on FDR, rental income, profit on sale of mutual fund and provision written off - Revenue contended that none of the receipts bear the character of business receipts and unless, there is any business activity, business expenses cannot be allowed - Held that:- It is observed that assessee is in real estate business. Assessee has conducted preliminary activities which are necessary for business of the assessee. They include identification of suitable sites and getting them evaluated by lawyer. These activities are very much part of assessee’s business. In subsequent period assessee has also acquired two plots for development. In this regard it is incorrect to state that only business income can prove the existence of business. Aforesaid activities would include vehicle and other transportation expenses, administrative expenses, Lawyer fee, depreciation on the assets used for business. Hence, in the background of the aforesaid discussions there is considerable cogency in the proposition that assessee’s business has commenced. Accordingly, order is set aside - Decided in favour of the assessee.

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• 2012 (10) TMI 207
  Validity of assessment framed u/s 143(3) – assessee contesting order on ground of notice being issued on 22.12.07 after the expiry of 12 months from the end of the month in which the return of income was filed i.e. 28.11.06 whereas Revenue contended notice being issued within the prescribed limitation on opinion of it being first issued on 12.10.2007 by speed post – Held that:- Section 27 of the General Clauses Act contains a presumption that where any Central Act requires any document etc. to be served by post, then the service shall be deemed to be effected where the envelope is properly addressing, proper stamps affixed thereon and posted by registered post, and unless the contrary is proved, the service is deemed to have been effected at the time at which the document would be delivered in the ordinary course of post. In view of this provision, a presumption arises that the notice has been served on the assessee within 2-3 days of posting. In present case, it is not the case that there is no office copy of this notice or that the notice was not addressed properly, or notice has been received back. Furthermore, the corresponding address on the said notice was same as on which subsequent notice u/s. 142(1) was complied with and it is held that the notice has been duly served on the assessee. Since, CIT(A) has not decided the merits of this case, we remit the issues on merits of the case of the files of the CIT(A).

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• 2012 (10) TMI 206
  Transfer pricing adjustments - ALP - AO while framing the assessment did not carry out the directions of the DRP in this behalf. - held that:- AO has not carried out the rectification order passed by TPO and passed the assessment order without carrying out the DRP directions. - the issue of assessee being a non-risk bearing agent has to be looked into along with the suitability comparables. - matter remanded back to AO to reconsider the issue of transfer pricing in accordance with law after giving the assessee an opportunity of being heard. - at the time of dictation of this order, the issue of 92C [(+) (-)] adjustment is proposed to be amended which shall be kept in mind.

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• 2012 (10) TMI 205
  Levy of Penalty u/s 271G - Question of determination of arm’s length price - Penalty equal to 2% of the value of international transaction i.e. worth Rs. 43,16,682/ - has been imposed on the assessee - Held that:- No Penalty can be imposed in a case where the assessee proves that there was reasonable cause for a particular failure - in favour of assessee. The penalty prescribed under section 271G is very severe. - When the penalty provision is very severe, it should be applied with great caution and only if circumstances sufficiently justify invoking the penal provision.

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• 2012 (10) TMI 204
  Expenditure of Rs.12,00,000/- under the head "Provisions on Standard Assets" Section 36(1)(viia) - Held that:- Deductions made on account of provision on standard asset and was disallowed and added to the returned income of the assessee as the assessee was unable to give any explanation and documentary evidence in support of his claim. Payments made to petrol pump of Rs.28,33,460/- For purchase of petrol used in such hired vehicles- Held that:- addition of Rs.28,33,460/- made by the AO was disallowed and added to the returned income of the assessee as the payment made was not liable to TDS. Admission of addition evidence - Rule 46A - held that:- The Ld. CIT(A), without application under Rule 46A and without recording any reason for admitting the documents and explanation filed before him and without affording reasonable opportunity to examine such evidence or documents filed before him by the AO had decided the issue in favour of the assessee, which is clear violation of principle of natural justice. It is not a case under Rule 46A(4) that the ld. CIT(A) had directed the assessee for production of any document to enable him to dispose of the appeal. - Matter remanded back to AO for denovo decision.

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• 2012 (10) TMI 203
  Exemption under the head Income from House Property - Section 54 - purchase of residential house - Held that:- a house was one which could be used by the assessee for his residence and putting up of tin sheds for being used by somebody to reside without there being basic living amenities like bathroom, kitchen, electricity etc., would not pass the definition/test of "dwelling unit" or a "house". - the property was not a house and the assessee was not entitled to the benefit under Section 54 of the Act. - in favour of Revenue.

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• 2012 (10) TMI 202
  Fees for Technical Services - Assessee carried out work with ONGC, Reliance Industries Ltd., Hardy Exploration & Production (India) Inc. & Westerngeco International Inc. GSPC & Cairn Energy India Pvt. Ltd. for the acquisition and processing of 3D seismic data along with its personnel and equipments. Question is whether The contention of revenue was justified in imposing Tax @25% on Revenues worth Rs. 671,54,604 earned from Cairn Energy India Pty. Ltd. and Hardy Exploration & Production (India) Inc. as against charging the whole revenue of Rs. 756,17,15,932/- @10%. The Assessee contended that fee for technical services whether rendered in connection with prospecting for or extraction or production of mineral oil or otherwise will be assessable either u/s 44DA or section 115A of the Act depending on fact whether such receipts are effectively connected with Permanent establishment or Fixed place of Profession. As decided in case of [CGG Veritas Services, SA Versus Additional Director of Income-tax, (International Taxation 2012 (4) TMI 280 - ITAT DELHI] as entire project has to be executed by the assessee and all the terms of contract are similar with the only difference that the other party is a non-resident company. The amount received by the assessee will be assessable u/s 115A of the Act. Held that:- The receipts are liable to tax @10% as Fees is received in connection with PE and Place of Profession in India - Appeal is allowed in favour of assessee.

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• 2012 (10) TMI 201
  Revision u/s 263 - Restoring the matter back to Tribunal - Order of assessment passed found erroneous in so far as it was prejudicial to interest of revenue - held that:- The Assessing Officer has not done the mistake but it has been committed by the Tribunal of not giving the reasons for maintaining the order of the Commissioner of Income Tax, which has been impugned before the Tribunal. - Appeal is allowed and Case remanded back to the Tribunal.

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• 2012 (10) TMI 200
  Additions on account of royalty - revenue expenditure or capital expenditure - Assessing Officer has made the impugned addition by comparing the royalty paid vis-a-vis sales of a particular year – Held that:- Assessee has submitted various copy of agreements with authors as well as detailed chart of royalty calculation - Considering these agreements and detailed chart of royalty, Ld. Commissioner of Income Tax (A) has held that the entire royalty payment is on revenue account and the disallowance made by the Assessing Officer - matter is remitted to the file of the Assessing Officer

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• 2012 (10) TMI 199
  Disallowance u/s 14A - investments in shares of companies and units of mutual funds - It is mentioned that the investments have been made with a view to earn dividend - investments have been made in this year from interest-free funds available with the assessee - no dividend had been received from various companies – Held that:- No evidence on record to suggest that any investment in shares or units has been made in this year out of borrowed funds on which interest is payable by the assessee - payment of interest is in respect of income other than dividend income. In such a situation, the interest cannot be said to be a kind of general expenditure incurred for earning of various kinds of incomes. Therefore, the provision contained in Rule 8D(2)(ii) is not applicable - AO has to examine the expenditure and its nexus with the earning of tax-free income, as provided in sub-section (2) of section 14A. If there is no such nexus, the disallowance cannot be made - no interest expenditure had been incurred for earning tax-free income - provision contained in Rule 8D(2)(ii) cannot be invoked Disallowance of misuse charges - assessee constructed commercial space in the basement which was not permissible as per master plan - misuse charges were paid in respect of the aforesaid space – Held that:- Misuse charges were also paid for illegally using the space for a period of time till the infraction was noticed by the DDA and it ordered the removal of the infraction - nature of interest on misuse charges is the same as misuse charges - Explanation-1 to section 37(1) provides inter-alia that any expenditure incurred for any purpose which is prohibited by law shall not be deemed to have been incurred for the purpose of business and no deduction or allowance shall be made in respect of such expenditure - this provision is clearly applicable to the case of the assessee – in favor of revenue

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• 2012 (10) TMI 198
  Deduction under section 80I / 080IB - allocation of expenses - expansion of existing unit or setting of new identifiable unit - Alleged that Unit at Urse which was described as Unit-II was in fact an expansion of the existing unit, Unit-I - depreciation of Unit-II at Urse – Held that:- (i) There was a substantial investment of funds in the Unit which was set up in the previous year relevant to the Assessment Year 1994-95; (ii) New plant and machinery was installed; (iii) The Unit was housed in a new building constructed at site and was an independent viable Unit capable of producing goods manufactured by itself; and (iv) There was a substantial increase in the capacity of production. - Order of ITAT upheld – in favor of assessee

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• Customs

• 2012 (10) TMI 236
  Scope of Deemed Exports - whether it includes sale to foreign tourists - whether it is restricted to REP Licenses only or include advance licence - petitioner obtained an advance license for 212.8 Metric Tons against which the petitioner had actually imported only 180 Metric Tons of the stainless steel - thereafter, on account of conflict between the President and the Managing Director of the Foreign importer, which couldn't be resolved in the near future, the export order on the basis of which the advance license was obtained had been terminated - petitioners were stuck with a huge consignment of steel utensils made to the unique specifications demanded by the Foreign Company, for which reason the petitioners found no other buyers in the Foreign Market - petitioners fulfilled export obligation by selling the said utensils to foreign tourists within the country Held that:- "Deemed exports” cannot and should not be restricted to REP Licenses only if the prime objective is to earn foreign exchange which is also the objective under the Advance Licenses as well. Since the main objective of both the licenses is to earn foreign exchange, which is achieved even when sales are made to foreign tourists, the plea of the respondents that deemed exports can be done only in case of REP license cannot be accepted. In the facts and circumstances it is clear that the respondents have turned a blind eye to the genuine problem faced by the petitioners, the real cause for the termination of the export order, and the subsequent foreign exchange earned by the petitioner, beyond the export obligations attached to the advance license has not been denied. Thus solely on the technical ground that the petitioners had not sought the permission of the competent authority before affecting the deemed exports, and that the DEEC Books were not maintained, such strict mechanical application of the provisions of Import and Export Policy in the facts and circumstances cannot be accepted, when the substantive intent behind the issuance of the advance license has been achieved by the petitioners. In these circumstances imposition of any penalty on the petitioners will be iniquitous and not justifiable considering the objective of the policy. Thus, for the forgoing reasons the impugned order dated 14th May, 1986 is set aside and the writ petition is allowed. The petitioners shall also be entitled for release of their bank guarantee in the facts and circumstances - Decided in favor of assessee

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• 2012 (10) TMI 235
  Whether the Tribunal should have permitted waiver of 100% of the pre-deposit amount as the appellant was a public sector undertaking – Held that:- Pre-deposit is the rule and waiver is an exception and having regard to the financial ability and undue hardship to be caused to the appellant and not otherwise - appellant is a public sector undertaking and very solvent. If it is so, nothing wrong in depositing amount as is indicated by the Tribunal - Even otherwise when the Tribunal has examined the matter and has exercised its discretion in favour of the assessee to dispense with the requirement of deposit in respect of a part of the amount, we do not find any occasion at all to set aside or in anyway modify that order in an appeal under Section 130 of the Act - appeal is dismissed.

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• 2012 (10) TMI 234
  Filing of bill of entry before arrival of ship - rate of duty - On 12-6-2002 the petitioners filed a Bill of Entry for Home Consumption in respect thereof and in conformity with Notification No. 29/2002-Cus. - ‘subject shipment’ actually arrived in India only on the following day on 13-6-2002 - Respondents contended that by that date enhanced tariff became payable by virtue of Notification No. 38/2002-Cus. – Held that:- Bill of Entry must be is deemed to have been presented on 13-6-2002 and not on 12-6-2002. Secondly, Notification dated 13-6-2002 would apply to the subject shipment since it was published in the Official Gazette on that date and accordingly it was efficacious from the commencement of that date itself. Thirdly, the Parliament itself is empowered to prescribe and modify from time to time, the different tariffs for each class of goods dealt with in the sundry Headings 15.01 to 15.22 of Chapter 15 of Section III of the Customs Tariff Act, 1975 - writ petitions are dismissed - shortfall of the duty paid as against the duty demanded/leviable under the subject Notification dated 13-6-2002 together with interest thereon at the rate of 12% per annum be deposited

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• 2012 (10) TMI 196
  Appeal against continuation of suspension of CHA license pending enquiry under Regulation 22 of CHALR, 2004 - assessee contended that prescribed time limit under Regulation 20(2) of CHALR, 2004 has not been followed - whether the timeframe prescribed under Regulation 20 is to be followed strictly or is to be interpreted liberally - whether the timeframe work as prescribed under the guidelines issued by CBEC through Circular No. 09/2010 dated 08.04.2010 are to be followed strictly by the Licensing authority or not - Held that:- In present case, investigation started in the month of December,2010, statement of the appellant recorded in June, 2011, Inquiry Report received in the month of April 2012 and licence has been suspended on 23.05.2012, vide order dated 18.06.2012. Since, vide order dated 23.5.2012. the licence was suspended by the Commissioner of Customs and also afforded an opportunity of post decisional hearing and thereafter order dated 18.6.2012 was passed. In these circumstances, the order dated 23.5.2012 is merged with order dated 18.6.2012 which is under challenge. Hence it cannot be said that the appellants are required to file separate appeal against the order passed by licensing authority dated 23.5.2012. The question is answered accordingly. As per provisions of the Regulation 20(2) of CHALR, 2004 the suspension order is to be passed within 15 days from the date of receipt of the report of investigating agency. From the records, it is found that report of the investigating agency was received on 25.4.2012 and the proposal to suspend the licence was put up before the Commissioner of Customs and the proposal was approved on 10.5.2012. From the record, further, it is found that draft suspension order in respect of the CHA is prepared and it was put to the Deputy Commissioner on 18.5.2012 and thereafter put to the Additional Commissioner on 21.5.2012 and ultimately signed by the Commissioner of Customs on 23.5.2012. Since order suspending the licence is only passed on 23.5.2012, hence no merit found in the contention of the Revenue that the order of suspension was passed on 10.5.2012 i.e. 15 days after receipt of the report of the Investigating Agency, and it is passed in violation of the provisions of Regulation 20 (2) of the CHALR, 2004 - Decided against Revenue

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• 2012 (10) TMI 195
  Rate of conversion for measurement of timber imported – Held that:- There is no attempt on the part of the dealer to suppress the Turnover as alleged - petitioner filed an application for refund, which however was considered by the second respondent, allegedly in a wrong and perverse manner, leading to Ext. P7, whereby only a partial refund has been ordered – Matter requires to be re-considered by the second respondent, so as to assess the actual facts, as to whether the petitioner is entitled to have the balance refund, if any, on applying the correct conversion table - Ext. P7 issued by the second respondent is set aside and the second respondent is directed to re-consider the matter

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• 2012 (10) TMI 194
  Loss of Bill of lading – Held that:- Petitioner has apparently advertised the Loss of the bills of lading in the issue of ‘The Statesman’ published on July 15, 2010. According to the petitioner, there has not yet been any response. The respondent No. 4 being the shipping agent apprehends that the original bills of lading might have been endorsed and the shipping agent and/or its Principal may be liable for compensating the endorsee of the bills of lading - goods covered by the two consignments shall be released subject to clearance of all freight, demurrage and other charges as also the requisite to customs duty as assessed on the said goods

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• Corporate Laws

• 2012 (10) TMI 233
  Sick Industrial Companies - BIFR - overriding application over the provisions of Transfer of Property Act - Respondent-Company was declared a 'sick industrial company' – Company dispose of the surplus land and payment of the sale consideration in instalments - Possession of land was given to appellant in part performance of sale agreement - all instalments were not paid - BIFR passed its order and fixed cut-off date and issued directions that sale of land will require BIFR's prior approval - Appellant argued that they had interest in land by virtue of agreement and, therefore, their interests were duly protected under Transfer of Property Act as provisions of Transfer of Property Act would prevail – Held that:- scheme for rehabilitation or restructuring of a sick industrial company undertaken by a specialized body like the BIFR/AAIFR should, as far as legally permissible, remain obstruction free and the events should take place as pre-ordained, during consideration and successful implementation of the formulated scheme - jurisdiction is vested in BIFR/AAIFR to issue directives, declarations and prohibitory orders within the rationalized scope and limitations prescribed under Section 22(1), 22(3) and 22A of the Act of 1985. Provisions of Sick Industrial Companies (Special Provisions) Act, 1985 shall have precedence and overriding effect over the provisions of Transfer of Property Act, 1882.

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• 2012 (10) TMI 232
  Dishonour of a cheque - Whether payee or holder of cheque can initiate proceeding of prosecution under Section 138 of Negotiable Instrument Act, 1881 for the second time if he has not initiated any action on earlier cause of action? - Held that:- The holder of a cheque can present it before a bank any number of times within the period of six months or during the period of its validity, whichever is earlier. This right of the holder to present the cheque for encashment carries with it a corresponding obligation on the part of the drawer to ensure that the cheque drawn by him is honoured by the bank who stands in the capacity of an agent of the drawer vis-a-vis the holder of the cheque. If the holder of the cheque has a right, as indeed is in the unanimous opinion expressed in the decisions on the subject, there is no reason why the corresponding obligation of the drawer should also not continue every time the cheque is presented for encashment if it satisfies the requirements stipulated in that clause (a) to the proviso to Section 138. There is nothing in that proviso to even remotely suggest that clause (a) would have no application to a cheque presented for the second time if the same has already been dishonoured once. Nothing either in Section 138 or Section 142 to curtail the said right of the payee, leave alone a forfeiture of the said right for no better reason than the failure of the holder of the cheque to institute prosecution against the drawer when the cause of action to do so had first arisen - a prosecution based on a second or successive default in payment of the cheque amount should not be impermissible simply because no prosecution based on the first default which was followed by a statutory notice and a failure to pay had not been launched. If the entire purpose underlying Section 138 of the Negotiable Instruments Act is to compel the drawers to honour their commitments made in the course of their business or other affairs, there is no reason why a person who has issued a cheque which is dishonoured and who fails to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque has not rushed to the court with a complaint based on such default or simply because the drawer has made the holder defer prosecution promising to make arrangements for funds or for any other similar reason. Thus overruling the decision in Sadanandan Bhadran’s case (1998 (8) TMI 541 - SUPREME COURT) and hold that prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act.

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• 2012 (10) TMI 193
  Scheme of arrangement (Demerger) - insufficient authorized share capital of the resulting company to accommodate allotment of equity shares to the shareholders of the demerged company as per report of Regional Director, Northern Region, MCA - Held that:- In response to the affidavit filed by the Regional Director, Northern Region, the petitioner companies through its Director, Mr. Ashwani Khurana, filed a reply on September 29, 2012 stating that there was a typing error in the valuation report submitted to the office of Regional Director, N.R. and the present authorized share capital of the resulting company is adequate and sufficient to allot equity shares to the shareholders of the demerged company. Also the petitioner company has not been done any wrong, nor is the purpose of the demerger to destroy evidence of any nature. He undertakes to cooperate in investigation, if any, ordered against the company. As no objection has been received to the Scheme of Arrangement (Demerger) from any other party. The petitioner companies have filed the affidavit dated 28th September, 2012 through Mr.Ashwani Khurana, Director submitting that he has not received any objection pursuant to the citations published on 18th August, 2012, and also Deputy Registrar of Companies appearing for Regional Director (Northern Region) has also stated that he has no objection to the present Scheme of Arrangement (Demerger) being sanctioned by this Court, thus the Scheme of Arrangement (Demerger) is hereby approved/sanctioned under Sections 391 and 394 of the Companies Act, 1956 - Resulting Company would deposit a sum of Rs.1,00,000/- in the Common Pool Fund of the Official Liquidator within three weeks from today.

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• FEMA

• 2012 (10) TMI 197
  FEMA - Writ petition - provisions of the Revenue Recovery Act for recovery of the amount - search in the house of the petitioner as per the provisions of Section 37 of the Foreign Exchange Regulation Act, 1973 on 8-10-1993 - Tribunal directed the petitioner to deposit the penalty amount which is the pre-deposit - petitioner was unable to comply with the said order and ultimately, the second respondent has dismissed the appeal on 17-7-2007 - After dismissal of the appeal nearly 2½ years, at the instance of the Department, the third respondent Tahsildar has initiated proceedings under the provisions of Revenue Recovery Act to recover the amount and that has been challenged by the petitioner on the ground that the same is opposed to the principles enunciated under the Foreign Exchange Regulation Act - Held that:- It is certainly not open to the petitioner to quash the validity of such order of the Appellate Tribunal especially when the third respondent has proceeded to recover the amount under the Revenue Recovery Act - Tribunal’s order was on 17-3-2007 and the petitioner has chosen to challenge the same only in the year 2010 without resorting to the remedy of appeal to the High Court within 60 days and therefore, this writ petition is liable to be dismissed - writ petition fails and the same is dismissed

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• Service Tax

• 2012 (10) TMI 261
  Demand of service tax - Disallowance of CENVAT credit - reimbursed expenses are includible in the taxable value of the services - Invoking the extended period of limitation - Held that:- This is a fit case for remand mainly because the crucial aspect of this case pertains to evidence but the evidence adduced by the assessee was not examined. Both the lower authorities, seemingly, required the assessee to prove that the expenses in question were reimbursed on actual basis by their clients but the evidence produced by the assessee were not considered. Needless to say that the plea of limitation raised by the assessee also should be considered - in favour of assessee by way of remand.

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• 2012 (10) TMI 260
  Rectification of Mistake- Imposition of Penalty - Held that:- Penalty u/s 80 cannot be waived or the benefit of reduced Penalty cannot be taken on the basis that Penalty u/s 76 ans 78 cannot be imposed simultaneously. - As decided in case of [Asstt. Cce & Ors.Versus V. Krishna Poduval & Ors.2005 (10) TMI 279 - KERALA HIGH COURT], Penalty can be imposed simultaneously u/s 76 &78 of The Act - Application for Rectification of Mistake rejected- in favour of Revenue.

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• 2012 (10) TMI 259
  Condonation for delay in filling the appeal – Disputed order was on demand of service tax is on account of denial of input service credit - Impugned order was issued in May 2009 dispatched through post and might have been received by the appellant in June 2009. They applied for a copy of the order in November 2009 which is well within the extended period of limitation for filing the appeal. But the copy of the order was supplied only in October 2010. Thereafter they filed the appeal within the time also filed an affidavit – Held that:- Considering the reasons, stated in the application for condonation of delay, are satisfactory to this Bench, we allow the application for Condonation of delay and condone the delay in filing the appeal.

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• 2012 (10) TMI 221
  Determination Of Service Tax Liability Under Business Auxiliary Service - Demand Of Service Tax due to Mismatch between Balance Sheet Income and ST-3 RETURN, Commission and Discount for Sale Of Vehicles, GTA Services is raised but assessee is unable to produce evidences and Documents at the time of assessment. Held that:- case is remanded back to adjudicating Authority to decide upon the chargeability to Tax on the basis of Evidences produced now.

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• 2012 (10) TMI 220
  Admissibility of Cenvat Credit- Input Service - Held that:- Service tax paid on transportation services provided to the staff for pickup and drop from their residence to the factory and hiring ambulance for taking injured employees for treatment is an Input Service - Cenvat Credit can be taken as these activities are relating to Business of assessee,as decided in case of CCE v. Stanzen Toyotetsu India (P.) Ltd. [2011 - TMI - 204471 - KARNATAKA HIGH COURT ]- Further hiring of buses for children of the employees for transportation to the schools and tuition is not an Input Service and Cenvat Credit cannot be taken on this activity. - Stay granted partly.

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• Central Excise

• 2012 (10) TMI 231
  Disallowance of Cenvat Credit - pre-deposit directed by Tribunal to deposit a sum of Rs. 32 lacs for hearing the appeal - Held that:- Assessee has not been able to show any illegality or perversity in the impugned orders passed by the Tribunal- as no financial hardship has been pointed out the time for depositing the amount is extended by two weeks from today, as prayed - no substantial question of law arises - against assessee.

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• 2012 (10) TMI 230
  Iron ore fines - clearance without payment of duty in terms of exemption Notification No.4/06 - Held that:- As decided in RALLIS INDIA LTD. Versus UNION OF INDIA (2008 (12) TMI 46 - HIGH COURT BOMBAY) that liability to pay amount under erstwhile rule 57CC and Rule 6 of Cenvat Credit Rules, 2004, arises only for the final products and not for the waste emerging during the course of the final product. The appellant have set up their unit for production of sponge iron using iron ore as a raw material. In the process of handling, sorting, grading, screening of the raw material and to obtain iron ore of desired size to be used in the kiln, iron are fines (i.e., iron ore of smaller size not usable in the kiln) came into existence, as inevitable product which appellant are selling as waste. The input service (GTA) is used for procurement of raw material and of during processing of such raw material for the purpose of production desired product, i.e., sponge iron, some inevitable waste came into existence, it cannot be said that input service is used in the production of such inevitable by product/waste. As iron ore fines emerge as waste product during the manufacture of final product, it stands rightly held by Commissioner(Appeals) that they do not attract the provisions of Rule 6(3)(b) - in favour of assessee.

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• 2012 (10) TMI 229
  Rebate – export of SS Wire drawn from Rod - rebate claims were rejected by the adjudicating authority on the ground that since the process of drawing of wire from rod does not amount to manufacture – Held that:- C.B.E.C. vide Circular No. 831/8/06-CX., had clarified that wire drawing units, which has paid a sum equal to duty leviable on drawn wire, would be eligible to avail the credit at duty paid on inputs and utilises the same for payment of duty on drawn wire for the period of amendment. The sum paid by the wire drawing unit in such cases will be treated as duty and shall be allowed as credit to the buyer of drawn wire, in terms of amendment - sum paid by the units during intervening period 29-5-2003 to 8-7-2004 shall be treated as duty. Once such payment is treated as duty, the rebate claims on duty paid on final product can not be denied in terms of Rule 18 of the Central Excise Rules, 2002 - Once such payment is treated as duty and availment of Cenvat credit has been allowed against payment of such duty, payment of duty against cenvat credit is entitle for rebate claim. As such the applicants are entitled for rebate claim on said exported goods (finished products). The rebate on the exported goods may be sanctioned after adjusting the already paid input rebate amount - Revision Application succeeds

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• 2012 (10) TMI 228
  Application for restoration of appeal – Held that:- Petitioner had merely stated in the application that the petitioner could not deposit the amount in time due to financial difficulty - appeal was filed in the year 2004 and the same was not prosecuted diligently by the petitioner, dismissed the application filed by the petitioner as there was absence of sufficient cause in not depositing the amount of Rs. 9,00,000/- before the Tribunal in terms of the orders dated 18-5-2007 and 20-8-2007 - in the absence of the reasons for belatedly filing the application, the application was liable to be dismissed – appeal dismissed

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• 2012 (10) TMI 227
  Waiver of pre-deposit – limitation – alleged that appeals filed beyond normal period – Held that:- Appeals were filed within the normal period of limitation in the office of Additional Commissioner of Customs. Thereafter the appeal papers were transferred to the office of Commissioner (Appeals) on 3-2-2010 - Commissioner (Appeals) heard the appeal on merits and allowed the appellant to file written submission as evident from the letter dated 30-8-2010. It is not the case of Revenue that appeal papers were returned by the officer of Additional Commissioner, rather the appeal papers were transferred to the Commissioner (Appeals) - there was no delay in filing the appeals - remand the appeals for fresh decision to the Commissioner (Appeals) - appeals are thus allowed by way of remand

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• 2012 (10) TMI 226
  Classification – Fabric Bleach – Held that:- Product of the assessee should be classified under the Heading 2828.90 Regarding interest – Held that:- In the show-cause notice, no allegation of any fraud, collusion, wilful mis-statement, or suppression of fact or contravention with intent to evade payment of duty has been made - there was no scope of invoking the provisions of interest within the meaning of Section 11AB of the Act. Regarding Penalty – Held that:- Penalty can be applied only by taking aid of Section 11 AC of the Central Excise Act, 1944 where there is collusion, wilful mis-statement or suppression of fact or contravention of any of the provisions of the Act with intent to evade payment of duty - in the show-cause notice, all that has been alleged is mis-statement or wrong classification, but no allegation of fraud, collusion, suppression or intention to evade lawful duty has been made. Therefore, for the selfsame reason, penalty also cannot be imposed.

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• 2012 (10) TMI 225
  Penalty – denial of benefit of exemption notification - SSI unit manufacturing biscuits in the brand name of “Priya Glucose V” - Since they did not cross the limit of Rs. 30 lacs in 1997-98, as envisages under Notification No. 16/97-C.E., dated 1-4-1997 (Annexure A/3), they did not apply for registration under the Central Excise Law - appellant replied to the aforesaid notice and stated that the Firm was entitled for exemption under the Notification of Annexure A/3 dated 1-4-1997, as being a small scale industry they did not cross the limit of Rs. 30 lacs, their brand name is “Priya Glucose V”, and not “Priya” which is owned by M/s. Priya Food Products Ltd. - Held that:- On comparison of labels of the goods manufactured by the appellant and the goods manufactured by other manufacturers, has observed that “Priya” is written in the same way on the goods of the appellant as written on the goods manufactured by M/s. Priya Food Products Ltd., - to claim benefit of a notification, a party must strictly comply with the terms of the notification. If on wording of the notification, the benefit is not available then by stretching the words of the notification or by adding words to the notification benefit cannot be conferred - in favour of the respondent-department

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• 2012 (10) TMI 217
  Maintainability of appeal - 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 – Held that:- Aforesaid premise is factually incorrect as the appeals were dismissed vide order dated 2-2-2009 - 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 should not file appeals with scanty regard to law. Certainly, Revenue may be in jeopardy if its appeal is dismissed at maintainability stage. But casual approach in seeking remedy causes peril to Revenue - appeal is dismissed

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• 2012 (10) TMI 192
  Jurisdiction of Zonal Bench - appeal against order passed by the CCE, Thane-II appointed by a specific notification to adjudicate all arising out of the investigation conducted by the DGCEI all over the India - counsel contended that it would be improper to argue the matter before present Bench since the other appeals arising out of the same order in original are filed before the coordinate Bench at Mumbai - Held that:- As per CESTAT public notice 2/2005, matters which arise within the jurisdiction of the Zonal Bench, needs to be heard by that Zonal Bench only. Since in this case, the impugned order in original is falling in the jurisdiction of CESTAT Mumbai, all four stay petitions and appeals are transferred to Mumbai Bench for disposal

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• 2012 (10) TMI 191
  Benefit of SSI Exemption Notification No. 9/2003 - The Department was of the view that affixing the name - ‘Maruti’ of MUL on the transmitter - receivers cleared to the OEM i.e. MUL does not mean that the goods are branded goods for the purpose of exemption Notification No. 9/2003-C.E. as the transmitter - receivers are used by MUL as capital goods by attaching the same to the machinery used in their production line, that in respect of these goods duty at concessional rate should have been paid in respect of the clearances made before crossing the threshold limit of rupees one crore and their value should have been included while calculating the value of clearances eligible for concessional rate of duty, and if this is done, the appellant would reach the threshold limit of exemption much earlier. The intention of the customer whose brand name is affixed on the goods is not relevant for the purpose of this notification and so long as the goods manufactured for a customer bear the brand name of that customer i.e. the brand name of person other than the manufacturer, the SSI exemption would not be available, irrespective of whether the customer sells the goods as such or uses the same as inputs in the manufacture of other goods or uses the same as capital goods or part of capital goods. The value of the goods cleared under brand name of MUL on payment of duty can not be included for the purpose of computation of turnover under SSI exemption benefit.

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• 2012 (10) TMI 190
  Condonation of delay of 579 days - Application is barred by Limitation involving tax amount of Rs.28 lakhs - Held that:- It is true that the department acts on the basis of the action of the departmental officers. But there is a limit of inaction on the part of the departmental officials. Going by the apparent reading of the statements, it is hard to believe that the officials of the department would be inactive to such extent that has been projected in the application as because no document has been annexed supporting such statement. where the tax involvement is upto Rs.10 lakhs, no action shall be taken and for the balance amount of Rs.18 lakhs the proceeding ought not to be continued.

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• 2012 (10) TMI 189
  Rejection of refund claim - Goods were exported under Bond –no confirmation of duty payment from the jurisdictional Central Excise range Superintendent in the form of duty payment certification in triplicate. Copy of ARE-1, so the duty paid nature of the export goods is also not proved, which is the fundamental requirement for claim rebate under Rule 18 of the Central Excise Rules, 2002. In view of above, the rebate claim is rightly held as inadmissible to the applicant

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• 2012 (10) TMI 188
  Rebate claims - duty paid from Cenvat credit account on goods exported - original authority did not find rebate claims admissible as the applicants had claimed duty drawback - Held that:- Any amount paid in excess of duty liability on ones own volition cannot be treated as duty, but it has to be treated simply a voluntary deposit with the Government which is required to be returned to the respondent in the manner in which it was paid as the said amount cannot be retained by the Government without any authority of law - applicant is eligible for re-credit as per law

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• 2012 (10) TMI 187
  Refund – duty paid under protest - rejection of the refund claim on the ground that the payment made under protest was not in accordance with provisions of Rule 233B of Central Excise Rules 1944 – alleged that appellant nowhere mentioned that the appellant paid the duty under protest – Held that:- Demand was finally set aside by the Tribunal as time barred - no dispute that the challan dated 27-6-1998 vide which the appellant has paid Rs. 10,000/- has an endorsement ‘duty paid under protest’. This goes to show that the requirement that duty had been paid ‘under protest’ is met in the case – refund allowed - appeal is allowed

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• 2012 (10) TMI 186
  Rebate – jurisdiction of Tribunal – Held that:- Proviso to Section 35 categorically states that no appeal shall lie to the appellate Tribunal and the appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in Clause (b) that is an order passed by the Commissioner of Appeals under Section 35A, if such an order relates to rebate of duty of excise on goods exported to any country or territory outside India or exercisable materials used in the manufacture of goods which are exported to any country or territory outside India - exclusion of the jurisdiction of the appellate Tribunal is expressly stated in the Statute - Tribunal was in error in entertaining the said appeal - order passed by the Tribunal is illegal, contrary to law and cannot be sustained

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• CST, VAT & Sales Tax

• 2012 (10) TMI 262
  Whether the exposed photographic film rolls and negatives are “goods” or not – Held that:- Dominant intention of the contract is required to be considered as also the marketability of the goods - They have no utility and are not marketable - As such, they are not “goods” - Consequently, a contract for processing exposed photographic film rolls and negatives is not a works contract as defined in Section 2(38) of the Act. To contend that Rainbow Colour Lab [2000 (2) TMI 2 - SUPREME COURT OF INDIA] was completely overruled is not correct

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• Indian Laws

• 2012 (10) TMI 258
  RTI – Single Judge of this Court rejected the Writ Petition on the ground that the appellant is entitled to file an Appeal under the Right to Information Act to the Appellate Authority viz., the State Chief Information Commissioner - alleged that the SPIO did not furnish the information as requested by the applicant. Hence, he filed a complaint under Section 18(1) of the RTI Act to the SIC – Held that:- Complainant has not approached the First Appellate Authority designated under Section 19(1) of the RTI Act. The complaint was filed under Section 18(1) of the RTI Act before the SIC - Single Judge erred in rejecting the Writ Petition on the ground that as against the order of the SIC, Appeal lies under Section 19(1) of the RTI Act - Appeal is allowed

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• 2012 (10) TMI 218
  Information denied under RTI Act by CIC - information pertaining to service career - Held that:- The petitioner herein sought for copies of all memos, show cause notices and censure/punishment awarded to the third respondent from his employer and also details viz. movable and immovable properties and also the details of his investments, lending and borrowing from Banks and other financial institutions. Further, he has also sought for the details of gifts stated to have accepted by the third respondent, his family members and friends and relatives at the marriage of his son. Thus the details called for by the petitioner are qualified to be personal information as defined in clause (j) of Section 8(1) of the RTI Act. The performance of an employee/officer in an organization is primarily a matter between the employee and the employer and normally those aspects are governed by the service rules which fall under the expression "personal information", the disclosure of which has no relationship to any public activity or public interest. Also the disclosure of which would cause unwarranted invasion of privacy of that individual. Of course, in a given case, if the Central Public Information Officer or the State Public Information Officer of the Appellate Authority is satisfied that the larger public interest justifies the disclosure of such information, appropriate orders could be passed but the petitioner cannot claim those details as a matter of right. Thus the petitioner in the instant case has not made a bona fide public interest in seeking information, the disclosure of such information would cause unwarranted invasion of privacy of the individual under Section 8(1)(j) of the RTI Act - SPL rejected.

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