TMI Tax Updates - e-Newsletter
October 12, 2012

Case Laws in this Newsletter:

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

Articles

1. COURIER IMPORTS AND EXPORTS (ELECTRONIC DELCARATION AND PROCESSING) REGULATIONS, 2010

   By: DR.MARIAPPAN GOVINDARAJAN

2. VALUE OF DIRECTOR'S SERVICES

   By: Dr. Sanjiv Agarwal

News

1. India’s Foreign Trade: September, 2012

2. Two laning with paved side shoulders of Salasar to Haryana border section on National Highway NH-65 in Rajasthan under NHDP Phase IV.

3. Four laning of Rajsamand - Bhilwara section of National Highway NH- 758 in Rajasthan under NHDP Phase IV

4. Setting up of 3,500 model schools at block level through State/UT Governments in Educationally Backward Blocks under the "Scheme for setting up of 6,000 Model Schools at Block Level as benchmark of excellence"

5. Modification in the procedure for release of fertilizer subsidy by Department of Fertilizers with the introduction of Mobile Fertilizer Monitoring System (m-FMS) for all fertilizers

6. Draft Report on Retrospective Amendments Relating to Indirect Transfer

7. JOINT STATEMENT INDIA-U.S. ECONOMIC AND FINANCIAL PARTNERSHIP

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

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

10. 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

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

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

Notifications

Companies Law

1. GSR 730(E) - dated 27-9-2012 - Co. Law

Serious Fraud Investigation Officers, MCA, for the purpose of conducting inspection, under section 209A of the Companies Act, 1956

Customs

2. 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.

3. F. No. 468/16/2012-Cus.V - dated 10-10-2012 - Cus (NT)

Corrigendum Notification No. 93/2012 - Customs (N.T.), dated 09/10/2012

4. F.No.437/04/2012-Cus.IV - dated 9-10-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - In The Case of M/s Nitco Ltd., Worli, Mumbai

DGFT

5. 22 (RE-2012)/2009-2014 - dated 11-10-2012 - FTP

Amendment in ITC (HS) 2012 Schedule 1 – Import Policy with Customs Tariff Schedule-2012.

6. 21 (RE – 2012)/2009-2014 - dated 11-10-2012 - FTP

Effect of Notification No. 7 (RE – 2012)/2009-2014 dated 23.7.2012 - Incorporated the changes in the descriptions of tariff lines in Chapters 24, 26, 74, 75, 76, 78 and 79 in accordance with the changes in the Finance Bill 2012-13

7. 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

8. 42/2012 - dated 4-10-2012 - IT

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

Circulars / Instructions / Orders

FEMA

1. 41 - dated 10-10-2012

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

2. 40 - dated 9-10-2012

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

3. 39 - dated 9-10-2012

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

DGFT

4. 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

• NRIs' Gifts from Non-Resident External Accounts Classified as Undisclosed Income u/s 158B(b) of Income Tax Act.

  Case-Laws - HC : Gifts received from non Resident Indians (NRI) from their Non Resident External accounts - the non genuine gifts to the appellant was undisclosed income and covered by the definition provided in Section 158B(b). - HC
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• Taxpayer's Business Expenses Not Disallowed Even If Third Party Benefits, Says New Rule Interpretation.

  Case-Laws - HC : Expenditure incurred by the assessee in the running of his business cannot be disallowed merely on the ground that a part of the expenditure results in some benefit to a third party - HC
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• Section 194C TDS Exemption: Printed Material Purchase Classified as Contract for Sale, Not Work and Labor.

  Case-Laws - AT : Non deduction of TDS - purchase of printed material - contract for work and labour or contract for sale - provisions of section 194C are not applicable - AT
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• Court Denies Tax Exemption u/s 54 for Land Development, But Section 54F Benefits May Apply.

  Case-Laws - HC : Exemption u/s 54 - land development agreement - they are not entitled to claim benefit under section 54. - At the most they are entitled to benefit under Section 54F. - HC
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• Preference for Substantial Justice Over Technicalities in Delay Condonation Cases, Especially in Income Tax Matters.

  Case-Laws - AT : Condonation of delay - when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred - AT
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• 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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Customs

• Corrigendum Notification No. 93/2012 amends customs regulations for improved compliance and accuracy in procedures.

  Notifications : Corrigendum Notification No. 93/2012 - Customs (N.T.), dated 09/10/2012 - Notification
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• Common Adjudicating Authority Appointed for M/s Nitco Ltd. Case in Mumbai to Streamline Customs Adjudication Process.

  Notifications : Appointment of Common Adjudicating Authority - In The Case of M/s Nitco Ltd., Worli, Mumbai - Notification
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• 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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DGFT

• DGFT Updates Tariff Line Descriptions in Chapters 24, 26, 74-79 to Align with Finance Bill 2012-13 Changes.

  Notifications : Effect of Notification No. 7 (RE – 2012)/2009-2014 dated 23.7.2012 - Incorporated the changes in the descriptions of tariff lines in Chapters 24, 26, 74, 75, 76, 78 and 79 in accordance with the changes in the Finance Bill 2012-13 - Notification
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• ITC (HS) 2012 Schedule 1 Import Policy Amended to Align with Customs Tariff Schedule-2012 by DGFT Notifications.

  Notifications : Amendment in ITC (HS) 2012 Schedule 1 – Import Policy with Customs Tariff Schedule-2012. - Notification
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Corporate Law

• Serious Fraud Officers to Conduct Inspections u/s 209A of Companies Act for Enhanced Corporate Transparency and Accountability.

  Notifications : Serious Fraud Investigation Officers, MCA, for the purpose of conducting inspection, under section 209A of the Companies Act, 1956 - Notification
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• Arbitration Clause Stands Alone: Section 16(1)(a) Confirms Validity Despite Main Contract Termination, Supreme Court Affirms.

  Case-Laws - SC : Arbitration - Section 16(1)(a) provides that an arbitration clause which forms part of the contract shall be treated as an agreement independent of the other terms of the contract - even on the termination of the agreement/contract, the arbitration agreement would still survive - SC
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• 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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Central Excise

• Court Allows Cenvat Credit Due to Lack of Evidence Against Assessee Beyond Transporter's Goods Registers.

  Case-Laws - HC : Denial of cenvat credit – except for the goods registers maintained by the transporter, there is no other evidence on record to indicate that the assessee has in fact not received the goods in question – cenvat credit allowed - HC
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VAT

• Court Rules No Error by Dealer in Interstate Sale; Full Sales Tax Paid, Punjab Tax Not Applicable.

  Case-Laws - HC : Inter state sale - CST - there was no error on the part of the dealer as full sales tax on the transaction being inter state sale had been paid and the element of tax in Punjab State was not involved. - HC
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• 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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Case Laws:

• Income Tax

• 2012 (10) TMI 294
  Addition u/s 68/69 - CIT(A)restricted the addition - Held that:- The CIT(A) found that the assessee himself has disclosed Rs.12,50,000/- in the return of income. Therefore, this amount was also required set off and adjustment in the addition of Rs.1,31,70,346/- is required to be reduced. Even this amount of Rs.12,50,000/- is reduced from Rs.1,31,70,346/- and balance comes to Rs.1,19,20,346/-. In the light of above discussion the assessee was entitled to relief of set of Rs.12,50,000/- amount which has been already incurred in the return of income. Therefore, the relief to that extent was required to be granted but the CIT(A) allowed only Rs.11,70,346/- on the ground that the assessee himself has surrendered the amount at the time of assessment proceedings in the light of fact we do not think that the Revenue should have any grievance against the order of CIT(A) - against revenue. Addition under section 14A - Held that:- The CIT(A) has correctly appreciated the facts and found that entire funds of group has been channelised through Vijay Kumar Agarwal. There is an interest receipt of Rs.2,60,684/-. Therefore, interest pertaining to diversion of borrowed fund in share application is required to be restricted only in respect of net amount of interest. Thus the CIT(A) has rightly allowed relief of Rs.2,60,684/- and has correctly confirmed the addition to the extent of Rs.34,167/-. Activity related to Bardana and advances to farmers and charging of interest - Held that:- The pages of Paper Book referred by the assessee at the time of hearing requires necessary reconciliation. It has also been noticed that there is no consolidated reconciliation on record based on which it can be said that the transaction relating to Bardana and interest has been the entries for amounts which were considered for calculation of peak amount. In the absence of complete reconciliation of details in this regard that the transaction relating to Bardana and interest were included in the consolidated cash book on which basis a peak amount has been calculated. In the absence of complete facts, the issue pertaining to Bardana and interest cannot be decided at this stage the order of CIT(A) is not in accordance with section 250(6) & send back to decide the issue afresh.

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• 2012 (10) TMI 293
  Non deduction of TDS - payment for purchase of three bedroom residential flat in the land at a multistoried residential complex - assessee in default u/s 201(1) - Held that:- From a plain reading of section 195(1) it is clear that the assessee was liable to deduct tax at source at the specified rates (i.e. 20% plus surcharge 10% and education cess 2%) from out of the sale consideration paid by him to the seller of the said flat purchased by him as she was an NRI. If the assessee (i.e. the person responsible for paying such sum to the NRI seller) was of the view that the whole or part of such sum viz. the sale consideration, would not be income chargeable in the hands of the recipient (i.e. in this case the seller, an NRI), Section 195(2) required him to make an application to the Assessing Officer under section 197 r.w.s. 195(2) to determine the amount chargeable and upon such determination deduct tax on such sum so determined. A plain reading of the provisions of section 201 of the Act clearly indicate that it is consequential and gets activated the moment an assessee liable to deduct tax under the Act fails to either deduct or pay the same at source - As decided in CIT Versus Samsung Electronics Co. Ltd. [2009 (9) TMI 526 - KARNATAKA HIGH COURT] the Assessing Officer is competent to quantify and raise demand under section 201 and issue notice of demand under section 156 the moment the assessee failed to deduct tax at source at the specified rate from the sale consideration before making payment of the same to the seller who is an NRI in the relevant period. The action of the AO in charging the assessee, interest under section 201(1A) is consequent to the quantification of tax demand under section 201(1) r.w.s. 195 and is chargeable in respect of any person who has failed to deduct the whole or part of any tax at the rates and period specified therein. Therefore, uphold the Assessing Officer's action of charging of interest under section 201(1A). The CIT (Appeals) has already addressed issue of quantification of interest in which he has directed the Assessing Officer to verify the assessee's claim of payment of taxes to the extent of Rs. 2,61,764 on 24.10.2009 out of demand of Rs. 13,82,820 and rework the interest chargeable under section 201(1A) of the Act. As no submissions have been made with regard to any error by the learned CIT (Appeals) in his order, the assessee's grounds on this issue are dismissed as infructuous - appeal decided against assessee.

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• 2012 (10) TMI 292
  Undisclosed Income - gifts received from non Resident Indians (NRI) from their Non Resident External accounts - Held that:- In the present case the confirmatory letters addressed by the donors to the assessee were identically worded, typed on the same typewriter, the donors seemed were not related to the assessee, the aggregate gifts received by the family of the appellant was over Rs.35 lacs and all gifts were made allegedly out of love and affection for the appellant and/or her family members. Further, no circumstances have been indicated by the appellant before the authorities or during the hearing before us as to what was the occasion for apparent strangers to advance an amount aggregating Rs.35 lacs to the appellant's family as gifts. There is a concurrent finding of fact by the AO and the Tribunal that the amounts shown as gifts were not genuine gifts, but were mere credits taken so as to evade payment of income tax. Further, as gifts are not income being a capital receipt and not subject to income tax its disclosure or non disclosure is of no consequence for the purpose of the Act. It is only on account of search that documents were unearthed / found which showed that the gifts were not genuine, but only a method to convert the appellant's unaccounted money into regular income. Therefore, the non genuine gifts to the appellant was undisclosed income and covered by the definition provided in Section 158B(b). Consequent to the amendment in 2002 to Section 158BB documents and/or information available with the assessing officer and relatable to evidence found during the search is certainly evidence which can be used to compute the undisclosed income for the block period - In fact Parliament realizing the difficulty for the Revenue to prove its case to the hilt provided under Section 158BB(3) of the Act that the burden of proving to the satisfaction of the Assessing Officer that any income had already been disclosed is on the assessee. Further, sub section (2) of section 158BB in terms provided that section 68 relating to cash credits would apply to block assessment and in such cases also it is for the assessee to satisfactorily explain to the AO, the source of the credit found in the books of an assessee - against assessee.

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• 2012 (10) TMI 291
  Admission of additional evidence under Rule 46A - revenue appeal that CIT(A) has not recorded any reason for admission of additional evidence & taking recourse to the provisions of Section 144 - Held that:- Revenue was unable to justify ex parte assessment under Section 144 except to urge a technical plea that the conditions specified in Rule 46A of the Rules were not complied with in letter and spirit while allowing permission to the assessee to lead evidence. According to the revenue, it was the assessee who had not appeared before the Assessing Officer and not that AO had failed to provide sufficient opportunity but no merit in the contention of revenue found as assessee was prevented by sufficient cause in not appearing before the AO while framing the assessment under Sections 143(3) r.w.s. 144 due to confusion relating to the jurisdiction of the AO. Also the revenue was unable to substantiate on merits that the additions made in the original assessment order were justified - against revenue.

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• 2012 (10) TMI 290
  Disallowance of Depreciation u/s 32(1) - Held that:- A plain reading of the Explanation 5 of section 32(1)inserted by Finance Act, 2001 w.e.f. 1.4.2002 that depreciation shall apply wherever the assessee may or may not have claimed deduction in respect of depreciation in computing the income - AO is duty bound to allow depreciation even without there being claim by the assessee wherever the same is admissible to the assessee - in favour of the assessee. Allowance is mandatory u/s 40 (a)(ia) - Held that:- Observations recorded by the Tribunal at the time of hearing that the assessee fairly stated that the assessee was statutorily obliged to deduct tax at source out of rent paid by him but it was not deducted at source by the assessee and, therefore, the provisions of section 40(a)(ia) were applicable and as no material is presented to come to a different conclusion from what has been recorded by the Tribunal or to put it differently, it cannot be said that the Tribunal had recorded the observations noted above erroneously - against assessee.

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• 2012 (10) TMI 289
  Writ of certiorari - quashing an assessment order dated 29.2.2012 u/s 143(3) as it varies a draft assessment order dated 29.12.2011 u/s 143(3) r.w.s. 144C - disallowances of deduction u/s 80IC - Held that:- No intend of exercising jurisdiction under Article 226 for this matter as it involves several points, some of which require a detailed consideration on disputed questions of fact including as to whether the petitioner had made false statements as indicated earlier. It would serve no purpose and would indeed be cumbersome to have these issues decided in different proceedings. There also arises the issue raised by the learned Advocate General to the effect that the petitioner had abandoned the right to proceed under section 144C and had chosen instead to proceed to a regular assessment. Whether such a course is permissible in view of section 144C or not is another matter. If it is permissible, it may well involve a further disputed question viz. whether the petitioner had in fact done so viz. chosen to proceed to a regular assessment and not under section 144C, therefore it is not considered appropriate to deal with these questions in this writ petition. this Writ Petition on this hypothetical basis need to be rejected - leave it to the CIT(A) to use his discretion and judgment in this regard keeping in mind, of course the exigencies of his board and the nature of the other matters before him. It is desirable that the appeal is disposed of within six months from today.

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• 2012 (10) TMI 288
  Entertainment expenditure incurred on employees - ITAT allowed the claim - Held that:- Order of the Tribunal shows that it has considered the claim of the assessee that 35% of the expenditure incurred on entertainment is attributable to the entertainment of the employees while they were entertaining the assessee's customers to be reasonable and therefore such portion of the expenditure has to be excluded at the threshold and the limits prescribed by Section 37(2) have to be applied only on the balance of expenditure. This is not an unreasonable view of the section. The question as to how much is to be attributed to the entertainment of the employees is a matter of esteem, therefore, answer the question in the affirmative - in favour of the assessee. Depreciation on increase in cost of fixed assets due to fluctuation in the foreign exchange rate - ITAT allowed the claim - Held that:- As decided in CIT Versus M/s Woodward Governor India P. Ltd. & M/s Honda Siel Power Products Ltd. [2009 (4) TMI 4 - SUPREME COURT] that the increase on account of fluctuations in the rate of foreign exchange prevailing on the last day of the financial year is not notional or contingent and has to be adjusted in the actual cost of assets in terms of Section 43A, in the year in which there is variation in the exchange rate, irrespective of the date on which it is paid - in favour of the assessee. Payment to the UP State Electricity Board for laying electric transmission lines in the premises - Revenue v/s Capital - Held that:- As decided in CIT Vs. Saw Pipes Ltd.[2007 (1) TMI 101 - DELHI HIGH COURT] that expenditure was incurred by the assessee for laying of electricity transmission lines, which did not become the property of the assessee. It was held that the expenditure did not bring in any enduring benefit and was deductible as revenue expenditure - in favour of the assessee. Addition towards value of the closing stock - CIT (Appeals) deleting the addition - Held that:- The revenue has accepted similar claims in the assessment made for the assessment years 1996-97 and 1997-98. A consistent method of valuing the stock has been adopted by the assessee. It was also accepted by the revenue. It would, therefore, be improper to allow the revenue to change its position only for one year, which would upset the method of valuation of the stock for a particular year thereby resulting in a distorted version of the profits. The method of valuation of closing stock can be disturbed only if it is found that the method followed is such that true profits and gains cannot be deduced therefrom - in favour of assessee. Disallowance of the brand building and dealer loyalty expenditure - ITAT confirming the decision of the CIT(A) in deleting the addition - Held that:- The finding of the Tribunal that a part of the advertisement expenditure is reimbursed by the parent company is not under challenge. This itself should settle the issue in favour of the assessee because even if it is assumed that a part of the expenditure inured for the benefit of the parent company, the assessee is getting compensated for it. The view that in any case, expenditure, the benefit of which inures partly to the assessee and partly to another person, cannot be allowed as a deduction, is not the correct view to take in law since it has been settled by a long line of cases that expenditure incurred by the assessee in the running of his business cannot be disallowed merely on the ground that a part of the expenditure results in some benefit to a third party - in favour of the assessee

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• 2012 (10) TMI 287
  Non deduction of TDS - purchase of printed material - contract for work and labour or contract for sale - default u/s 201(1)- Held that:- As decided in Associated Cement Co. Limited Versus Commissioner of Income-Tax And Another [1993 (3) TMI 1 - SUPREME COURT] provisions of section 194C are not applicable in the case of sale of goods The sample invoices and in many cases M/s Fair Deal Printing Press has charged even VAT/CST. The Revenue has at no point alleged or proved that the assessee had supplied paper or ink to the printer. Therefore, it is simple case of contract for sale/purchase as the assessee has purchased printed material though made according to the specification of the assessee. Therefore, in our humble opinion the provisions of section 194C are not attracted in this case and the assessee is not liable to deduction of tax u/s 194C. Accordingly we set aside the order of the ld. CIT(A) and hold that the assessee is not in default u/s 201(1) and further not liable to pay interest u/s 201(IA) - in favour of assessee.

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• 2012 (10) TMI 286
  Computation of long term capital gain - Exemption under Section 54 - actual cost of construction reported by the Developer v/s market value of the property as on the date of development agreement - Held that:- In respect of the property situated at Aga Abba Ali Road, the assessee and his brothers entered into a Joint Development Agreement with M/s.Embassy Investments and the said property was handed, over to the Developer on 06-05-1995 itself for construction of the residential apartment. As per the Development Agreement, 50% of the apartment shall be handed over to the owners of the property. In that the assessee is entitled to 1/3 share. Hence, the fair market value as on 01-04-1981 has to be adopted though the construction of the apartment was completed in the year 2000. As per the Development Agreement, the value of the apartment was fixed at Rs. 66,00,000/-. Taking into consideration 50% of the cost of construction, the Assessing Authority has arrived at the capital gain, which is totally incorrect - in favour of assessee. The exchange value in consideration of 50% of the land was agreed to be conveyed to the Developer and/or his nominee/s valued at Rs. 1,16,70,000/-. The fair market value as on 01-04-1981 as per the Sub-Registrar valuation has to be taken into consideration. However, the Assessing Authority has not taken into consideration this aspect of the matter. Taking into consideration the project cost incurred by the developer on the basis of their letter dated 01-02-2004, which includes all expenditure connected with the construction of the Residential Apartment. The exchange value as specified in the project development agreement can be taken as the basis for computation of the construction in joint development. The consideration specified in the said document represents the market value on the date of entering into the agreement. The assessment made by assessing authority is contrary to law - against the Revenue. Claim benefit under section 54 - Held that:- As per the Development Agreement entered into between the parties, the assessee and his brothers have demolished this existing residential building and handed over the vacant space to an extent of 16800 sq.ft. to the Developer for construction of the apartment they are not entitled to claim benefit under section 54. At the most they are entitled to benefit under Section 54F. The order passed by the Appellate Authority directing the Assessing Authority to allow the deduction under Section 54 is contrary to law and the same cannot be sustained - against the assessee.

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• 2012 (10) TMI 285
  Transfer pricing adjustment - whether the provisions of sec 92A are applicable to the transactions of the assessee in their service activity ? - M/s Sanchez Computer Associates Inc., USA holds 20% shares in the assessee company & remaining 80% is held by Peninsula Capital Services Private Limited India - Held that:- Assessee has been filing form No.3CEB as an abundant precaution admitting the other two enterprises as associated enterprises. However, just because assessee has been filing Form No.3CEB it cannot be stated that these two are associated enterprises unless provisions of section 92A are satisfied - As far as the conditions in 92A(2) are concerned, assessee has given detailed explanation how these provisions are not applicable so as to hold the two companies as associated enterprises. However, it is not clear on record whether there is any relationship as prescribed u/s 92A(1)(a)(b) which specify that an associated enterprise in relation to another enterprise. Since inquiries are pending before the TPO to examine whether there is any direct or indirect participation of Sanchez in Zenta Private Limited, Mumbai holding 1005 shares of Peninsula Capital Services Pvt. Ltd India, or otherwise and share holding pattern of 80% share holder also has any direct or indirect control in Sanchez, we do not propose to give any finding at this juncture whether there is any relationship of associated enterprise between the parties involved herein. Therefore without adjudicating on this issue the order of the DRP as well as TPO is set aside and restore back to TPO to decide afresh whether there is any associated enterprise relationship between the parties and whether provisions of section 92A are applicable - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 284
  Penalty u/s 271(1)(c) - additions, forming the basis of levy of penalty itself have been set aside - Held that:- Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled - Decided in favor of assessee

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• 2012 (10) TMI 283
  Difference of opinion between two members - Reference to Third member to decide whether matter in relation to Charitable Trust is required to be restored back to the file of CIT(A) for a fresh decision - Held that- It is observed that assessee has produced its books of accounts along with names and complete addresses of the donor along with original receipt book of corpus fund before the AO. AO has chosen not to make further inquiry. Additional evidences in form of declaration from donors to the corpus fund had been admitted before the CIT(A). Revenue has not taken any ground of appeal in relation to violation of provision of Rule 46A. In the absence of any specific ground of appeal to the effect, it is held that JM was justified in not restoring back the issue to the file of the CIT(A) for a fresh decision - Decided in favor of assessee. Whether any inquiry was still required to decide the nature of the said “corpus fund” - Held that:- It was for the AO to make or not to make further inquiry in the facts and circumstances of the case with regard to the genuineness of the donation claimed by the assessee-trust to have received by it towards its “corpus fund”. The Tribunal as a second appellate authority could not direct the AO to make detailed inquiry for the reason that the issue of “inquiry” is not before the Tribunal - Decided in favor of assessee

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• 2012 (10) TMI 282
  Dis-allowance of expenses on adhoc basis without pinpointing any item which is of personal in nature - vehicle expenses, motor car expenses, depreciation on motor car - Held that:- Assessee failed to establish that the entire vehicle expenses and motor car expenses were incurred wholly and exclusively for business purpose. The possibility of the assessee for use of non business purposes cannot be ruled out. However, dis-allowance sustained in appeal by CIT(A) is on a higher side, and dis-allowance is restricted to 10% of the claim. Addition made on ground of low household expenses - Held that:- The undisputed fact is that the A.O. has made an estimation of household expenses, which is not based on any evidence or material on record. In view of these circumstances we direct the A.O. to delete the addition. Dis-allowances on account of shortage in material - Held that:- It is evident that assessee has submitted evidences before the A.O. that the vendor does not entertain the claim of the assessee whether the shortage is less than 100 kg. This is also a fact that the assessee has to buy the material in bulk and sell it in retail. It is not denied that the shortage/ deficit in the case of the assessee is less than 0.5% of the total purchases. It is also not denied that the explanation of the assessee that the shortage/deficit has been accepted in the earlier years in the order passed u/s. 143(3). There cannot be any thumb rule that no shortage will be allowable to the assessee - A.O. is directed to delete the addition - Decided partly in favor of assessee.

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• 2012 (10) TMI 281
  Validity of reassessment proceedings u/s 263 - reassessed on ground that assessee had not included the unutilized CENVAT credit while valuing the closing stock of raw materials and WIP - refund of excise duty not included while computing the total income - wrong claim of “additional depreciation on windmills - AY 2007-08 - Held that:- A bare reading of S263 makes it clear that to justify exercise of jurisdiction by CIT, the order of the A.O. is to be erroneous in so far as it is prejudicial to the interest of the Revenue. In present case, assessee submitted the method of accounting employed consistently followed by it for accounting of Excise duty and CENVAT, and exclusive method of accounting for sales, purchase and closing stock and by following either of the method there is no impact on P/L A/c. The assessee also submitted that the depreciation has been allowed to the assessee before examining the relevant details. The A.O. in the instant case had examined the issue of stock valuation and depreciation on windmills and we are satisfied that the A.O. had made necessary inquiries and the assessee had provided an explanation in that regard. Thus, it can be said the A.O. on being satisfied did not make any addition and dis-allowance. Therefore, we are of the view that the stand taken by the A.O. was not an unsustainable in law so as to render the order as prejudicial to the interest of Revenue. Therefore the order of the A.O. cannot be considered either to be erroneous or prejudicial to the interest of the Revenue. Order of CIT quashed - Decided in favor of assessee

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• 2012 (10) TMI 280
  Penalty u/s 271(1)(c) - profit on sale of land offered as capital gain instead of business income - assessee on realizing the mistake had suo moto offered the income as business income, taxed as same by AO without any change - Held that:- It is clear that the assessee had offered explanation by furnishing necessary details and also substantiated it. The explanation of the assessee was not found to be false by Revenue in view of the fact that the computation as submitted by assessee was accepted by Revenue. Thus, it is clear that no material was found by Revenue to hold that the explanation offered by assessee was false. Therefore, assessee’s case does not fall within the ambit of Part-A of Explanation. So far as Part-B is concerned, it is found that assessee offered an explanation and also substantiated it. Therefore, Part-B is also not applicable. In view of above, assessee’s case does not fall within the ambit of Explanation 1 to Sec. 271(1) (c) and no penalty can be levied by merely disbelieving explanation given by the assessee - Decided in favor of assessee

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• 2012 (10) TMI 279
  Dis-allowance u/s 40(a)(ia) on ground of failure to pay TDS within prescribed time - Civil contractor - assessee contended that amount has been paid before the due date of filing of the return and words used in section 40(ia) were “payable” and not “paid” - Held that:- On perusal of records it is observed that there was no amount payable at the end of the year and although the amounts were paid to the sub-contractors during the entire FY under consideration on different dates but finally the entire payment of TDS to the Government Exchequer was paid before the due date of filing of the return. Hence, dis-allowance directed to be deleted. Addition on account of unexplained and unverifiable expenses - Revenue contended that though the account payee cheques were issued by the assessee but whether that payment had reached to the hands of the said parties was not affirmed by filing other corroborative evidence - Held that:- Apprehension of Revenue is ill-founded because two substantial evidences, i.e. payments made through account payee cheques evidenced through bank statements and second, deduction of tax at source have conclusively proved that the assessee has in fact incurred the expenditure exclusively for the purpose of the business, therefore allowable u/s.37(1) - Decided in favor of assessee

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• 2012 (10) TMI 278
  Dis-allowance on account of payment of bogus purchases made - Held that:- Though assessee has recorded bogus purchases in the books of account based on accommodation bill received, however in view of the maintenance of quantitative details having followed the practice of purchasing goods from the grey market but sales have duly been recorded; would be with the intention to gain some benefit. By adopting this illicit practice the traders have managed to save few percentage of cess/tax being levied on the purchases if made through registered dealers. Keeping that fact in mind that ultimately a reasonable percentage of profit is to be taxed on the sales executed, the Respected Coordinate Benches have arrived at a conclusion to disallow 12.5% of the purchases. Direction given to restrict the disallowance at 12.5% of the impugned purchases - Decided partly in favor of assessee

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• 2012 (10) TMI 277
  Condonation of delay in filing appeal against order of CIT(A) - non-payment of tax on the returned undisclosed income - inordinate delays of more than 2491 - held that:- the assessee has discharged the huge tax liability - Thus, it would be totally unfair for not providing an opportunity to him for disputing the additions made by the AO on merit. Decision in [J.T. (India) Exports v. Union of India [2001 (9) TMI 10 - DELHI HIGH COURT] followed. Curable defect - section 249(2) - held that:- appeal filed in violation of Section 249(4) would be termed as a defective one and the moment defect is cured then those can be disposed of on merit subject to limitation. The Courts and the quasi-judicial bodies are empowered to condone the delay if a litigant satisfies the Court that there were sufficient reasons for availing the remedy after expiry of limitation. Scope of the term "sufficient cause or reason" - held that:- The Hon'ble, Supreme Court in Mst. Katiji (1987 (2) TMI 61 - SUPREME COURT) has observed that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. - Delay condoned.

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• 2012 (10) TMI 276
  Claim of 100% deduction u/s 80P from profits - The dispute was only with regard to the deposits which the appellant accepted from non-members. - Held that:- Acceptance of deposits from non-members on which the assessee bank was under obligation to pay interest does not, in any way, affect the revenue generated by the appellant in providing credit facilities and supply to the members – No income is generated by Society from funds received from non-members – Deduction is allowed – in favour of Assessee.

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• 2012 (10) TMI 275
  Benefit of Tax Deduction in respect of profits retained for export business - Held that:- The assessee is a non-resident in India and is a citizen of Canada as he do not have any Permanent establishment in India - assessee is not a tax resident of Canada, he cannot claim benefits of the Canada DTAA - Benefits under sec.80HHC were claimed by making a wrong claim of being a resident of India - Benefits under sec. 80HHC are now no longer available to assessee - in favour of Revenue. No useful purpose would be served by adjourning the matter, as there is no possibility of getting the notices served on the assessee when the duly constituted Power of Attorney holder acknowledges the receipt of notice but refused to co-operate for the reasons specified in the letter. - Decided against the assessee.

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• 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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• Customs

• 2012 (10) TMI 274
  Writ of certiorari for quashing demand notice - Held that:- As the petitioner has not approached the concerned authority by presenting a representation projecting the points as raised in the present petition, he is directed to do as advised. On moving such a representation to the concerned authority who will decide the same by passing a speaking order in accordance with law expeditiously.

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• 2012 (10) TMI 273
  Search - seizure of the documents – alleged that search of its premises has been conducted by the respondents without there being any “reason to believe” for issuance of authorisation for search that any goods liable for confiscation or any documents or things which in the opinion of the authorising officer will be useful for or relevant to any proceedings under the Act are “secreted” in any place – Held that:- It cannot be said that the authority which had issued the warrant of authorisation, was not having enough material to form opinion about reason to believe that any goods liable to confiscation, or any documents or things which in his opinion will be useful for or relevant to any proceedings under the Customs Act are secreted in any place as contemplated under Section 105(1) of the Customs Act or that the said authorisation was issued without application of mind - no case is made out to interfere in the matter at this stage of seizure – seizure upheld

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• 2012 (10) TMI 272
  Drawback claim – re-export - Held that:- Applicant imported Injection Mould EPAS 14 way (9622) with associated accessories at concessional rate of duty under EPCG Scheme, which was re-exported - applicant as importer cleared the goods at concessional rate of duty under EPCG Scheme on execution of Bond, imposing upon themselves the obligation to pay duty along with interest in case they failed to fulfil condition of the Notification. The applicant after importation found their goods defective and paid the differential duty along with interest before re-export of the goods - as the applicant paid the whole duty along with interest, they are eligible for drawback under Section 74 of the Customs Act, 1962

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• 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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• 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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• Service Tax

• 2012 (10) TMI 298
  Man Power Recruitment & Supply Agency - service tax demand - Stay Petition for waiver of pre-deposit - Held that:- As the appellant during the pendency of the investigation, has deposited an amount of Rs.10 lakhs and has also not filed any defence reply due to his illness and the adjudicating authority has gone through the Show Cause Notice and the statements to come to conclusion that the appellant is to be saddled with the Service Tax liability of Rs.55,49,649/-, interest thereof and various penalties. Thus as adjudicating authority should have given another chance to the appellant for filing the reply before taking up the matter for disposal the appellant is hereby directed to file the reply to the Show Cause Notice within a period of six weeks from this Order date - in favour of assessee by way of remand.

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• 2012 (10) TMI 297
  Cenvat Credit - Input Service - Held that:- Cenvat credit can be availed on Service tax paid on outward freight of final goods cleared from the factory to the premises of the customer.As decided in case of [COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others 2011 (3) TMI 248 - KARNATAKA HIGH COURT], Outward Transportation can be treated as Input Service - in favour of assessee.

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• 2012 (10) TMI 296
  Power of remand - Commissioner (Appeals) - refund – Held that:- Original authority sanctioned refund of the service tax paid on some of the input services which were found to have nexus with the output service - assessee approached the Commissioner (Appeals) and the latter found nexus between the input services (barring Air Travel Agency Service) and the output service exported by the party - matter was sent back to the original authority for quantification of the amount for refund in respect of the input services which were found to have nexus with the output service - this was not a remand

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• 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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• Central Excise

• 2012 (10) TMI 269
  Dismissal of Appeal – Appeal is not maintainable because the Review Order authorizing for filing of the said appeal, has not been signed by the Chief Commissioner appointed by Gazette Notification as required under the law – Held that:- Following the decision in case of T.R.F. Limited (2010 (2) TMI 211 - SUPREME COURT) that appeal of the revenue being is allowed and the impugned dismissing order is set aside. Appeal allowed. Issue remand back & decides in accordance with law on merits.

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• 2012 (10) TMI 268
  Clearances on principal to principal basis v/s job workers to principal basis - duty demand on differential value with interest & penalty - Held that:- Definition of job worker incorporates the words "on behalf of". In the market no one knows the OEMs (five appellant firms). Air Coolers are recognised as of Symphony only. There is no sale to Symphony nor to anyone else. In such a situation, what the OEMs are doing is nothing but manufacturing on behalf of Symphony. The fact that in this case Symphony used their clout and capacity to market the products and their reputation to ensure that the profits made by OEMs was always limited and had nothing to do with the demand for products in the market. While there is a cap for the profit and the earnings of job workers based on Symphony's market, there is no cap for the earning of Symphony, who has exercised total control over every aspect of the transaction with the OEMs and the transaction of the OEMs with the Vendors. Under these circumstances, it would be appropriate to require Symphony also to deposit a portion of the penalty since they are the main party and main beneficiary of the whole arrangements and the transactions. Moreover when the law was amended Symphony had the responsibility to change the system of Valuation being the driving force behind the whole operation. It would be totally unfair and unjust to require only job workers to make pre-deposit of duty and allow Symphony to go scot free without requiring any deposit in spite of the fact that maximum profit accrued to Symphony and not the job workers in this case. Thus the OEMs are required to deposit 10% of the duty demanded within eight weeks from today & M/s. Symphony Comfort Systems is required to deposit an amount of equal to 20% of the penalties imposed on them in various orders within eight weeks from today. Subject to such pre-deposit of the amounts detailed above, the requirement of pre-deposit of balance dues from all the appellants, is waived and stay against recovery of the same is granted during the pendency of appeals.

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• 2012 (10) TMI 267
  Waiver of pre-deposit - Denial of cenvat credit wrongfully availed on the exempted inputs - iron ore concentrate is exempted fully from payment of duty in terms of Notification No. 4/06-C.E., Held that:- Duty was paid by the assessee’s supplier despite exemption Notification - supplier was unaware of such notification or it may be that some condition of the notification was not complied with but, nevertheless, the fact remains that duty was paid by the assessee’s suppliers - assessee’s supplier in fact paid the duty on raw materials supplied to assessee and the department accepted this excise duty. The concept of modvat is that if the raw material suffered duty then relief should be given so far as excise duty on the final product is concerned - raw material supplier has already paid duty with the Government Exchequer. Therefore, the department shall not suffer irreparable loss - 100% waiver of demand of duty, interest and penalties allowed

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• 2012 (10) TMI 266
  Rebate claim – alleged that goods were exported under claim of rebate under Rule 18 of Central Excise Rules, 2002 and also simultaneously under claim of duty drawback under Customs, Central Excise Duties [and Service Tax] Drawback Rules, 1995 – Held that:- As per Condition No. 12 of Notification No. 68/2007-Cus. (N.T.), dated 16-7-2007, drawback can be claimed only on the condition that no cenvat credit facility has been availed for any of the inputs used in the manufacturer of the export product and another condition is that if the goods are exported under bond or claim of rebate of duty of Central Excise it should be certified that no cenvat facility has been availed for the goods under export - applicant has violated the condition 12(ii) of Notification No. 68/07-Cus. (N.T.), dated 16-7-2007 as he has availed cenvat facility for goods under export in as much as duty on exported goods was paid from the cenvat credit account. Despite this violation, applicant has availed drawback claim for both excise and customs portion. In such a situation extending the benefit of rebate under Rule 18 of Central Excise Rules, 2002 will definitely amount to double benefit - revision application is rejected

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• 2012 (10) TMI 265
  Recall of the order – alleged that appellant was not afforded an opportunity to argue the appeal inasmuch as the matter was heard on the question of stay – Held that:- Petitioner permitted to file an application for review/recall/modification that they were not granted any opportunity to put forth contentions for the purpose of adjudication of the appeal on merits. This is an aspect which has to be gone into by the Tribunal - writ petition is, accordingly, disposed of

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• 2012 (10) TMI 264
  Rebate claims for the duty paid in respect of the inputs and packing materials used in the manufacture of the export products – alleged that applicant failed to file correct declaration and the declaration was not got verified from Assistant Commissioner of Central Excise before export – Held that:- As far as procedural compliance is concerned, applicant has complied the procedural requirement substantially as the declaration was filed - other procedural requirement were duly complied - substantive benefit cannot be denied for procedural infractions/lapses - core aspect or fundamental requirement for claiming rebate is payment of duty on materials and their use in the manufacture of exported goods. Since there is no dispute about this fulfilment of fundamental requirement, the rebate claim cannot be denied - input rebate claim is admissible to the applicant and the same may be sanctioned as per the input output norms approved by the department subsequently - revision applications are allowed

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• 2012 (10) TMI 263
  Denial of cenvat credit – alleged that duty paid raw material as shown in the duty paying documents were not physically received in its factory – Held that:- Merely reliance placed upon the report of the transporter for the purpose of holding that the assessee had in fact not received the goods referred to in the invoices - all documentary evidence on record supported the assessee’s case about the receipt of inputs, whereas there was no independent corroborative evidence produced on record by the revenue in support of its case - except for the goods registers maintained by the transporter, there is no other evidence on record to indicate that the assessee has in fact not received the goods in question – cenvat credit allowed

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• 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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• CST, VAT & Sales Tax

• 2012 (10) TMI 299
  Import by unregistered dealer - detention of goods - Held that:- Tribunal concluded that there was no error on the part of the respondent-dealer as full sales tax on the transaction being inter state sale had been paid and the element of tax in Punjab State was not involved. It was also noticed that there was voluntary reporting at ICC and the goods were accompanied by proper and genuine documents complete in all respects. Also payments for the transactions were made through the banking channels i.e. by cheques and were not kept out of the books of account. There is nothing on the record to infer or conclude that the goods were meant for resale or use of manufacturing activity of the purchasing party. If the department had produced evidence in proof of the fact that M/s Aerens Entertainment Zone Limited has agreed to sell this project after its completion to a third party, then the matter would have been examined from that angle. In the absence of such evidence, there can be no escape from the finding that the goods were meant for self-consumption as these were to be installed by the consignee in the Festival City, Ludhiana Project. These goods having been made specifically for the project could be hardly sent by way of stock transfer to Punjab Branch. This may be the reason for paying full CST on this interstate sale, thus Tribunal have not been shown to be perverse or illegal - in favour of assessee.

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• 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 295
  Off-set price of property was not valued before the conduct of auction - Offer afresh the benefit of One-Time Settlement Scheme (OTS) - No opportunity for repayment of loan after auction as per Court's direction - non compliance of State Financial Corporation Act (SFC) - Held that:- The procedure laid down under Section 29 of SFC Act has been followed by the Corporations. The independent valuer submitted his report on 17.09.2010 and the off-set price of the unit was fixed after getting it valued by an independent valuer. It was based upon the valuation report that the off-set price of the unit was fixed at Rs. 1,77,45,000/- on 17.09.2010. Sale notice was published in the News Papers on 18.09.2010 and the auction was conducted on 29.09.2010. Thus the High Court has committed an error in holding that off-set price of property was not valued before the conduct of auction and that there was no due publication of auction. Sale notice, it is seen, was published in the "Samaj" a vernacular paper and also in the "New India Express" a widely circulated English newspaper on 18.09.2010 and the Corporation had received nine offers and after protracting negotiations with all the bidders, the offer of the appellant was accepted being the highest. The Corporation before putting the appellant in possession again issued a notice dated 21.9.2010 to 1st respondent enquiring whether he would match the offer. 1st Respondent did not avail of that opportunity as well. It is under such circumstances that sale letter dated 1.10.2010 was issued to the appellant with a copy to all the Directors/Promoters/Guarantors of 1st respondent company. The appellant paid the balance consideration of Rs. 5,65,20,000 on 11.10.2010 and the Sale Memo was extended on that date and the property was also delivered. Thus no illegality in the procedure adopted by the Corporation, since 1st respondent had failed to comply with the directions issued by the co-ordinate Bench of the Orissa High Court which gave liberty to the Corporations to proceed in accordance with Section 29 of SFC Act - Section 29 of the State Financial Corporation Act, 1951 - Rights of Financial Corporation in case of default - Respondent-hotel failed to repay loan to Orissa State Financial Corporation (OSFC) repeatedly according to order of High Court - On writ, High Court directed respondent to deposit stipulated amount and on its failure gave liberty to OSFC to take action under Act - Division Bench of High Court had overlooked vital facts as well as binding judgment of a coordinate Bench in writ petition and had wrongly reopened a lis and issued wrong and illegal directions, decision of Division Bench was to be set aside

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• 2012 (10) TMI 271
  Refund of Earnest Money - Held that:- The bids had been closed and accepted on October 13, 2011. In any case, the applicant had participated in sale/auction proceedings knowing fully well the terms and conditions of the sale and therefore, the applicant is bound by the terms and conditions and cannot be permitted to contend to the contrary at this stage. - Tender/Bids binding down the second highest bidder in the event of default by the auction purchaser would be rendered futile - Application is dismissed with costs of Rs. 25,000/- to be paid to the official liquidator within a period of four weeks.

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• 2012 (10) TMI 270
  Application for appointment of the Arbitrator - Memorandum of Understanding for the marketing of the cars of the petitioner – alleged that respondent did not have in place the necessary resources to build the brand of the petitioner – termination of contract - plea of the respondent that the MOU relate to a test and trial period which came to an end on 31st December, 2007, after which the parties decided to enter into a distribution agreement which was sent by the petitioner to the respondent on 15th November, 2007, i.e., 15 days prior to the expiry of the MOU. Therefore, the arbitration clause relied upon by the petitioner does not cover any disputes/claims that relate to any period beyond 31st December, 2007 – Held that:- Section 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that an arbitration clause which forms part of the contract shall be treated as an agreement independent of the other terms of the contract - even on the termination of the agreement/contract, the arbitration agreement would still survive - disputes raised by the petitioner needs to be referred to arbitration - Since the parties have failed to appoint an arbitrator under the agreed procedure, it is necessary for this Court to appoint the Arbitrator

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• 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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