TMI Tax Updates - e-Newsletter
October 22, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. TRANSFORMATION OF MANUSCRIPTS OF AUTHORS IN COMPUTER DISCS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. TRAI Decides to Specify Access Facilitation Charges, Co-Location Charges and Other Related Charges for Submarine Cable Landing Stations

2. Coal Production Records 9 Percent Increase

3. Quality of XBRL Filing Certified by Professional Members

4. Steel Minister Reviews Performance of HSCL and KIOCL

5. International Crude Oil Price of Indian Basket Declines to US$ 111.79/BBL on 17.10.2012

Notifications

Central Excise

1. 38/2012 - dated 18-10-2012 - CE

Amendment in Notification No. 64/95-Central Excise, dated 16/03/1995 - Extend excise duty exemption to Long Range Surface to Air Missile (LR-SAM)

2. 354/78/2010-TRU(Pt-1) - dated 17-10-2012 - CE

Corrigendum Notification No. 34/2012 - Central Excise, dated 10/09/2012 - Regarding Mega/Ultra mega power projects.

Customs

3. F.No.354/140/2012-TRU - dated 18-10-2012 - ADD

Corrigendum Notification No. 43/2012-Customs(ADD), dated 21/09/2012 - Anti dumping duty on resin or other organic substances bonded wood or ligneous fibre boards, regarding

4. 57/2012 - dated 18-10-2012 - Cus

Exempt from customs duty to project Long Range Surface to Air Missile (LR-SAM) Programme of Ministry of Defence

5. 354/78/2010-TRU(Pt-1 - dated 17-10-2012 - Cus

Corrigendum Notification No. 49/2012-Customs - Regarding Mega/ Ultra Mega power projects.

6. 95 /2012 - dated 18-10-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 19th October, 2012

7. F.No. 437/09/2012-Cus. IV - dated 27-7-2012 - Cus (NT)

Corrigendum Order F.No.437/09/2012-Cus.IV dated 17th April, 2012

DGFT

8. 24 (RE – 2012)/2009-2014 - dated 19-10-2012 - FTP

Extension of ban on export of edible oils till further orders.

Circulars / Instructions / Orders

VAT - Delhi

1. PUBLIC NOTICE - dated 10-10-2012

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

DGFT

2. 25 (RE-2012)/2009-2014 - dated 19-10-2012

Amendment in Para 2.64 of the Handbook of Procedures Vol I(RE 2012)/ 2009-14 – Dispensing with the submission of physical copy of RCMC by the exporters.

3. 27(RE:2012)/2009-2014 - dated 19-10-2012

Amendments in Appendix 5 - Pre Shipment Inspection Agencies (PSIA)

4. 26 (RE: 2012)/2009-2014 - dated 19-10-2012

SION for new product “Aluminium Beverage Cans” under Engineering Product Group.

Highlights / Catch Notes

Income Tax

• Rental Income from License Fee and Amenities Services Classified as House Property Income.

  Case-Laws - AT : Rental income - two separate agreements - one for rent i.e monthly license fee and another for services of amenities - Entire amount is to be treated as income from house property. - AT
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• Tax Exemption Denied: Excess Collection Beyond Student Admission Fees Not Eligible u/s 11.

  Case-Laws - AT : Exemption u/s 10(23C) or u/s 11 - The assessee is not entitled for exemption u/s 11 in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students. - AT
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• Joint Venture Income: Individual Member's Share Prevents Double Taxation on Contract Receipts Under JV Consortium Rules.

  Case-Laws - AT : Diversion of income - Joint venture - If each member of the JV offered the income derived from respective share of contract works in their hands it is not possible to tax the same contract receipt in the hands of the consortium of JV. - AT
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• Cash Payments to Sister Concerns Disallowed u/s 40A(3) of Income Tax Act; Banking Channels Required for Compliance.

  Case-Laws - AT : Disallowance of Payments made in Cash u/s 40A(3) - there is no exemption if payment made to sister concerns - AT
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• Reassessment u/s 147 Not Permissible with Same Material Used for Block Assessment u/s 158BC.

  Case-Laws - AT : Once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - AT
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• Dispute Resolution Panel Must Provide Clear, Reasoned Decisions for Transfer Pricing Disputes u/s 144C.

  Case-Laws - AT : Transfer Pricing Adjustment - when a quasi judicial authority like the DRP deals with a lis u/s 144C, then, it is obligatory on its part to give cogent reasons for the decision. - AT
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• Directors' Enhanced Remuneration Claim Approved Under Tax Laws: Whole-Time Directors Eligible for Increased Pay.

  Case-Laws - AT : Provision for remuneration of whole time directors – Enhanced directors remuneration – claim of assessee was allowable - AT
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• Interest from deposits for a new unit is a capital receipt, not taxable, reducing project costs.

  Case-Laws - HC : Interest earned on deposits and advances made for the new unit being established - it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. - HC
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Customs

• Provisional Release Denied: No Lawful Seizure Means Imported Goods Cannot Be Indefinitely Detained.

  Case-Laws - HC : Provisional release would arise when there was seizure in accordance with law. There was no seizure in this case - goods imported cannot indefinitely be detained. - HC
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• Customs Authority Issues Corrigendum to Correct Errors in Previous Tax Notification, Ref: F.No.437/09/2012-Cus.IV.

  Notifications : Corrigendum Order F.No.437/09/2012-Cus.IV dated 17th April, 2012 - Notification
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• Corrigendum Updates Customs Duties and Exemptions for Mega and Ultra Mega Power Projects, Streamlining Compliance and Development.

  Notifications : Corrigendum Notification No. 49/2012-Customs - Regarding Mega/ Ultra Mega power projects. - Notification
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• New Exchange Rates for Foreign Currencies Effective October 19, 2012 for Customs and Tax Calculations.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 19th October, 2012 - Notification
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DGFT

• DGFT Extends Ban on Edible Oil Exports to Stabilize Domestic Supply and Prices Until Further Notice.

  Notifications : Extension of ban on export of edible oils till further orders. - Notification
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• DGFT Amends Appendix 5 to Update Regulations for Pre-Shipment Inspection Agencies, Streamlining Trade and Ensuring Quality Control.

  Circulars : Amendments in Appendix 5 - Pre Shipment Inspection Agencies (PSIA) - Public Notice
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• DGFT Announces New SION for Aluminium Beverage Cans in Engineering Product Group to Guide Manufacturers and Exporters.

  Circulars : SION for new product “Aluminium Beverage Cans” under Engineering Product Group. - Public Notice
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• Exporters No Longer Need to Submit Physical RCMC Copies: Amendment to Handbook of Procedures Paragraph 2.64.

  Circulars : Amendment in Para 2.64 of the Handbook of Procedures Vol I(RE 2012)/ 2009-14 – Dispensing with the submission of physical copy of RCMC by the exporters. - Public Notice
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Indian Laws

• Supreme Court of India: Auctions Not Always Mandatory for Natural Resource Allocation; Context-Dependent Decisions Permissible.

  Case-Laws - SC : Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions. - the answer could be in the affirmative, as well as, in the negative. - SC
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Service Tax

• Appellant's Service Tax Refund Claim Denied Due to Late Filing Beyond Limitation Period for Free Warranty Services.

  Case-Laws - AT : Refund claim - appellant, by mistake paid service tax in respect of free services undertaken during the warranty period - claim beyond the limitation period stands rejected - AT
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Central Excise

• Exemption Notification No. 50/2003-C.E.: Service Providers Not Considered Manufacturers, No Excise Declaration Required.

  Case-Laws - AT : Manufacture - area based exemption - Benefit of Notification No. 50/2003-C.E. - When the appellant is being treated as the service provider, he cannot be held to be a manufacturer liable to pay excise duty in which case and he cannot be expected to file a declaration. - AT
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• CENVAT Credit Disallowance Contested Due to Lack of Substantial Basis in Show Cause Notice Validity.

  Case-Laws - AT : Duty paying documents – disallowance of cenvat credit - When the receipt of the goods was not questioned nor delivery of the seller is questioned, the Show Cause Notice lost its foundation. - AT
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• Authority Upholds Demand of Rs. 2.2 Crore for Missing AR-4 Export Proof Forms.

  Case-Laws - CGOVT : Proof of Export – Since original AR-4 were not submitted by respondent in some cases, the demand of Rs. 2,20,83,368.71 was rightly confirmed by the adjudicating authority - CGOVT
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• Excise Duty Exemption Extended to Include Long Range Surface to Air Missiles (LR-SAM) under Notification No. 64/95-Central Excise.

  Notifications : Amendment in Notification No. 64/95-Central Excise, dated 16/03/1995 - Extend excise duty exemption to Long Range Surface to Air Missile (LR-SAM) - Notification
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• Corrigendum Notification No. 34/2012: Updates on Tax and Compliance for Mega and Ultra Mega Power Projects.

  Notifications : Corrigendum Notification No. 34/2012 - Central Excise, dated 10/09/2012 - Regarding Mega/Ultra mega power projects. - Notification
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Case Laws:

• Income Tax

• 2012 (10) TMI 580
  Income from licence fee - income from house property v/s business income - Held that:- The assessee was the owner of a factory shed measuring 1210 sq. yards out of which he was in possession of an area of 135 sq. yards where he was running a proprietary business of M/s Supreme Auto Works. The remaining portion of the factory premises was found to be in the possession of other persons, from whom, the assessee was charging licence fee. The AO treated the licence fee as income from house property, following the Tribunal orders in the assessee’s own case, for A.Y.s 1990-91 to 1993-94. It is the very same licence fee earned by the assessee during the year under consideration, which is under challenge herein - against assessee.

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• 2012 (10) TMI 579
  Addition of capital gain u/s. 45(4) - CIT(A) directed to delete the addition - Held that:- Allocation of assets of the firm to the retiring partners is the basis for invocation of provisions of Section 45(4). In the case under consideration, neither there was any dissolution nor other event took place that had an effect of allocation of exclusive interest in any capital asset to the retiring partners. In these circumstances, FAA was justified in holding that conditions of Section 45(4) were not fulfilled as during the relevant AY there was only admission of HDIL as new partner in the firm, that there was neither retirement nor distribution of assets, nor revaluation of plot of land during the assessment year under consideration. Retiring partners had relinquished their rights in the assets of the firm and in lieu of that firm had paid the retiring partners money lying in their capital account. Obviously, assessee-firm had not transferred any right in capital asset to the retiring partners rather it is the retiring partners who have transferred the rights in capital assets in favour of the continuing partners. So, even if capital gain has to be taxed it has to be in the hands of the retiring partners not in the case of the assessee-firm. Thus there was no transfer of a capital asset by the assessee-firm by way of distribution or otherwise in the AY under consideration . From the very beginning of the partnership the plot of land in question was treated stock in trade by the assessee firm. Even on 31.03.2008 it was shown as current asset (i.e. W-I-P) in the balance sheet. AO has nowhere rebutted/ doubted this factual position, therefore, no reason to disagree with the logical findings given by the FAA - in favour of assessee.

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• 2012 (10) TMI 578
  Unaccounted jewelery - search & seizure - Held that:- As decided in CIT Versus Ratanlal Vyaparilal Jain [2010 (7) TMI 769 - GUJARAT HIGH COURT] Central Board of Direct Taxes Circular No. 1916, dated May 11, 1994, lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by the family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in the Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus, although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in the Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. In the present case also the marriage of the assessee took place 25 years ago from the date of search and only jewellery was found of 1164 gms consisting of six family members. Therefore, these are not such jewellery which could not be said that could not acquired on account of marriage of the assessee and on account of the other occasions i.e birthdays of the children and various others religious occasions etc. - in favour of assessee.

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• 2012 (10) TMI 577
  Claim of deduction of Lease Rent - disallowance from income from the House Property - Held that:- Assessee submitted that the lease rent paid by it to the NOIDA is actually tax levied to a local authority in respect of the property in question u/s 23 also he had produced a copy of the allotment letter of the said property in support before the CIT (A) but the same has not been considered. Remand the matter to the file of the AO to decide the issue afresh considering the contents of lease deed and any other documents filed by assessee to establish his contention - in favour of assessee fir statistical purposes.

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• 2012 (10) TMI 576
  Addition by DVO - CIT(A)deleted the addition - further addition made by AO while passing order u/s 154 - Held that:- CIT(A) by observing that there was no iota of evidence before the AO to arrive at a conclusion that assessee had received something more than what has been disclosed in the books of accounts and there is no room for any estimation for making addition u/s 69B, and for extending the implication of the expression ‘expended’ used in Section 69B, so far as the sale of the shares is concerned. Accordingly, the addition made in the original assessment by taking the value of Rs.5000 per sq. yard was deleted by the CIT(A). Since CIT(A) observed that since the original order has been decided in favour of the assessee, therefore, the present rectification of the said order which merely goes on to enhance the value of the land for calculation of the value of shares is also consequentially and logically required to be deleted. Enhancement of income on the basis of valuation report of the DVO is itself a debatable issue and, therefore, cannot form part of rectification per se. Thus as the addition made originally has already been deleted by the predecessor of the present Commissioner of Income Tax(A) therefore, further enhancing any addition without any material was also liable to deleted - against revenue.

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• 2012 (10) TMI 575
  Rental income - Income from other sources v/s income from house property - two separate agreements have been made by the assessee: one for rent i.e monthly license fee and another for services of amenities. - Held that:- Character of income cannot be changed either by entering two agreements or by making other evidence. The amount of license fee earned by assessee on account of two agreements infact is on account of property given on license and the entire income of the property, in our considered view, has to be treated as income from house property and not income from other sources which is treated by Assessing Officer for the reason that a separate agreement has been entered on account of amenities provided by assessee. Entire amount received by assessee on account of two separate agreements is to be treated as income from house property.- in favour of assessee.

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• 2012 (10) TMI 574
  Expenditure on consultancy charges - capital v/s Revenue - Held that:- As decided in Alembic Chemical Works Company Limited Versus CIT, Gujarat [1989 (3) TMI 5 - SUPREME COURT] that the consistent guiding principles in matters of understanding an expenditure as capital or revenue in nature, is to find out the aim and object of the expenditure and the commercial necessities of making such an expenditure and also by considering the nature of areas which the assessee wanted to cover by the study and by making the consultancy expenditure, no hesitation in holding that the expenditure referred to above are to be treated as only revenue expenditure and not as capital expenditure - in favour of assessee.

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• 2012 (10) TMI 573
  Reopening of assessment - deduction claimed u/s 80HH and 80I before first setting off the unabsorbed losses of the earlier years - Held that:- There was no denial of the fact that the assessee had disclosed the details as regards the carry forward of the losses as well as the income computed and all these details were very much there before the Assessing Officer & that there is no denial of the fact that there was no failure on the part of the assessee in disclosing the facts necessary for assessment and that there is no such allegation that the escapement of income was on account of the failure of the assessee in not disclosing fully and truly all material facts. In the circumstances, applying the Supreme Court decision in CIT, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] AO has no power to review and has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed then in the garb of re-opening the assessment, review would take place - to reopen an assessment tangible material should be there & reasons must have a live link with the formation of the belief - no hesitation in accepting the plea of the assessee that the assumption of the jurisdiction beyond four years is hit by limitation as provided under Section 147 proviso - in favour of assessee.

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• 2012 (10) TMI 572
  Interest on interest on delayed refund – Held that:- Following the decision in assessee’s own case that where refund is granted without any delay, the question of granting interest on interest will not arise. Issue decides in favour of revenue Interest u/s 234D – Held that:- If the regular assessment is made after 01-06-2003, interest u/s 234D becomes applicable. In favour of revenue Disallowance u/s 40(a)(i) – Payment of export sales commission and service charges to non-residents for service rendered outside India without deduction of TDS – None of the entities to whom payment has been made, PE in India - Held that:- As the articles of the DTAA entered into by India with the respective countries, the income earned is taxable only in those countries. From the above, it is, therefore, clear that no part of the said amount is taxable in India Following the decision in case of GE India Technology Centre Private Ltd. (2010 (9) TMI 7 - SUPREME COURT OF INDIA) that “the scheme of subsections (1),(2)&(3) of Sec. 195 and Sec. 197 leaves no doubt that the expression “any other sum chargeable under the provisions of the Act” would mean “sum” on which income tax is leviable. Since the amount paid by the appellant is not chargeable to tax in India, the question of deducting tax at source on the said payment does not arise. Issue decides in favour of assessee Validity of notice u/s 148 - Reopening of assessment u/s 147 – AO argued that the assessee has not disclosed all the material facts fully and truly – Assessee contended that issuance of notice u/s. 148 Act after four years is not valid – Held that:- If the assessee failed to disclose fully and truly all the material facts necessary for his assessment, the AO has jurisdiction u/s. 147 proviso to reopen the assessment even after 4 years also. Issue in favour of revenue Computing the deduction u/s 80HHC - AO has excluded the sub-contract charges for the purpose of computation – Held that:- The sub-contract charges received by the assessee were income akin to rent. Remit the matter back to his file with the direction to examine whether the sub contract charges received by the were akin to rent or not and to decide the issue de novo in accordance with law after giving opportunity to the assessee. Issue remand back to AO

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• 2012 (10) TMI 571
  Deduction u/s 80IB - Assessee had constructed flats based upon individual agreements entered with prospective flat buyers - Power of attorney from land owner was only in the name of Managing Partner – AO argued that the prospective flat buyer had appointed assessee, only as a contractor for constructing the apartment i.e. consider as job works contract – Held that:- Cost of the land all the development costs of the project were also charged in the assessee-firm. Just because assessee-firm entered into separate agreements with prospective flat buyers for construction of flats, we cannot say that the project was not being developed by the assessee. We are of the opinion that in this situation, assessee’s claim u/s 80- IB(10) was not hit by the Explanation added thereto vide Finance (No.2) Act, 2009 with retrospective effect from 1.4.2001. Issue decides in favour of assessee Deemed dividend u/s 2(22)(e) - Assessee had received a loan from Company wherein partners of the assessee-firm also Directors – Held that:- Assessee did produce number of evidence, which inter alia included journal entry passed reversing earlier sales made to the said company, which resulted in the debit balance turning into a credit balance. Such particulars were never produced by the assessee before AO. Issue remand back to AO.

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• 2012 (10) TMI 570
  Disallowance of claim of bad debts – Revenue or personal expense - Commission for arranging the loan – for Purchase of land – Proposal did not materialize – AO argued that claim was neither revenue in nature nor was it a loan or debt incurred in respect of the business - Held that:- Recording of such transaction by itself would not render it an allowable expense either as bad debt or as a business loss. If it was only a fee paid for arranging loan for the assessee’s business, the amount need not have been shown as debt due with name of commission agent. Partner has suffered a personal loss, and trying to charge such loss in the accounts of the assessee by claiming it as bad debt. Issue decides in favour of revenue Addition on account of unexplained cash - Cash introduced by one of the partner in a firm – AO basis for addition was that the partner could not give any explanation – Held that:- As relevant transaction are available in books of introducing partners. Capital introduced was by the partner and hence it would not come within the definition of “cash credit” automatically. If the partner was unable to give explanation which was satisfactory, an addition no doubt could have been made in the hands of said partner. Thus, in our opinion, addition made in the hands of the assessee cannot be justified. Issue decides in favour of assessee

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• 2012 (10) TMI 569
  Penalty u/s 271B – Audit u/s 44AB - Whether Sec. 44AB is applicable where the assessee has no income from business or profession - Assessee is a Market Committee failed to get audit of books of account u/s 44AB - AO levied penalty u/s 271B – Held that:- Sec. 44AB becomes operative where there is computation of profits and gains of business or profession as a part of total income. As the income of the assessee was exempted u/s 10(20) which falls in Chapter III. There was no income of the assessee which would fall under heading "PGBP". Once that was so, it could not be said that the provisions of Sec. 44AB were applicable and as a sequel thereto, penalty u/s 271B was not leviable. Issue decides in favour of assessee

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• 2012 (10) TMI 568
  Exemption u/s 10(23C) or u/s 11 - Donations - Engineering college, whose receipts have exceeded the prescribed limit of Rs. 1.00 crore, has not obtained the necessary approval u/s 10(23C) and collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students, Income of Society has to be taxed - held that:- matter remitted to AO with a direction to assessing officer that he shall reconsider the entire issue in the light of judgment of Supreme Court in the case of M/s Islamic Academy of Education & Another Vs. State of Karnataka and Another [2003 (8) TMI 469 - SUPREME COURT ] and in the cased of T.M.A. Pai Foundation and Others Vs. State of Karnataka and Others [1993 (10) TMI 308 - SUPREME COURT]. The assessee is not entitled for exemption u/s 11 in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students.

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• 2012 (10) TMI 567
  Exempted capital gains on sale of land - assessee contested against not admitting copy of Agreement to Sale dated 10.05.1998 as additional evidence under Rule 46A - Held that:- As the agreement to sale dated 10.5.1998 goes to the root of the issue and for the substantial interest of justice, the CIT(A) should have accepted the same. Thus the additional evidence should not be refused to be admitted on technicalities. As going through the Sale arrangement the assessee has not shown the purchase of agricultural land in its books of account as an investment. Therefore, there is no reason to accept the contention that he has acquired agricultural land as an investment, profit arising out of which should not be liable to be taxed as business profit or capital gain, when the assessee has grossly failed to show that this agriculture land was situated outside the municipal limit so as to come under the purview of Section 2(14)(iii). As this land never transferred in favour of assessee and it was standing only in the name of Kanha Grih Nirman Sahkari Samiti, who was actually seller of land during the year under consideration. Even in the sale deed alleged to be executed during the year, the assessee was not shown as a seller of the property but merely as consenter to the transaction of sale - thus treating the gain arising out of sale transaction as business income is warranted - against assessee.

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• 2012 (10) TMI 566
  Rectification of mistake - order of ITAT - miscellaneous petition filed by the Revenue against the order of the Tribunal - Amount received on account of time sharing units is to be taxed in the year of receipt when services are to be rendered by the assessee in subsequent years also - Held that:- Amount/ Income relates to admission fee or entrance fee in the case of club and does not relate to the receipt under a time sharing arrangement and is a revenue Income- No mistake in the order of the Tribunal which requires rectification on this issue - ground raised in the miscellaneous petition by revenue is dismissed.

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• 2012 (10) TMI 565
  Freight Charges unpaid - Outstanding Liability - Dispute raised by AO was regarding the outstanding liabilities of Rs.34,14,910/- disclosed by the assessee in his balance sheet. Held that:- Outstanding liabilities disclosed by the respondent-assessee being fake has been drawn by AO basically on the basis of the statements of 21 truck owners examined by him. Cross examination of the truck owners who appeared for cross examination before AO are not found to be creditworthy by the appellate authorities. If the statement of these witnesses are excluded from the consideration , there is no material on record which could justify doubting of the entries by AO - Addition made by AO drawing inference that the outstanding liabilities of the respondent-assessee against the freight payable to the truck owners are not genuine, solely on the basis of statements of a few truck owners recorded as aforesaid, is absolutely unjustified - No Substantial question of law arises in this appeal - decided in favor of assessee.

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• 2012 (10) TMI 564
  Urban vs. Agricultural Land - Measurement of Municipal limits of Land - Held that:- Once the statutory guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow’s flight because any measurement by crow’s flight is bound to ignore the urbanization which has taken place. - Order of CIT(A) on the issue in the impugned orders are set aside and the appeals of the assessees are partly allowed for statistical purposes.

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• 2012 (10) TMI 563
  Commercial profits and its accrual - allegation of diversion of income - Joint venture - sub contractors - Estimation of income being 9% of the turnover - Disallowance under S.40A(2) - excessive and unreasonable payments - The dispute herein is regarding assessability of income in the hands of the assessee as an Association of Persons (AOP). The case of the Assessing Officer is that the JV and its members should be treated as separate persons and hence the contracts allocated to the members should be treated as sub contracting receipts . On the other hand, the assessee made a case that the JV has come into existence only to procure and win the contracts and the contracts were allocated between the members and the members executed the contracts and offered income for taxation in their respective hands. Held that:- If each member of the JV offered the income derived from respective share of contract works in their hands it is not possible to tax the same contract receipt in the hands of the consortium of JV. There is no merit in the argument of the DR that the JV is the main contractor and members are the sub-contractors. Further there is no meaning in estimating the income in the hands of the assessee. - The question of estimating the profit does not arise and the assessing officer has contradicted himself by applying the provisions of S.40A(2) of the Act and also invoking the provisions of S.145(3) - the appellant AOP did not execute any contract work in question and therefore, did not derive any income during the year and the additions made by the assessing officer could not be sustained. In the facts of the case, we hold that there is no mistake in the order of the CIT(A) in holding that the question of estimating profit does not arises and in deleting the addition made in the hands of the assessee. Addition u/s. 43B - the balance amount of VAT at 1.2% which was withheld by the Irrigation Department of the State Government of Andhra Pradesh subject to certain clarifications to be received by them from the Commercial Taxes Department - The assessee JV withheld the same in turn from the amounts paid to the Lead Contractor/Sub-Contractor - Assessing Officer was of the mistaken view that the assessee JV debited the same to Profit Loss Account and did not pay the same to the Department before the due date for filing the return of income which in fact is not correct. - As work was given on back-to-back sub-contract basis and the amount of VAT was not received by the JV as the same was withheld by the Department and therefore, the JV had to withhold an equal amount from the payments to be made to the subcontractor - appeal by revenue dismissed. Addition u/s. 40(a)(ia) - mobilization advance - Held that:- Mobilization Advance stands as Liability in the books of accounts of the Lead Contractor/Sub- Contractor as it is only on capital account and the JV is not liable - having admitted that assesee has deducted TDS on mobilisation advance in para No. (b) at Page No. 16/18 of the Assessment Order, that, what inspired him to make such a disallowance is really incomprehensible. - against revenue. Differences in Balance sheet - Assessing Officer had not followed the principle of double entry book keeping, as he had taken the Receipts and Payments Account of the assessee and the Balance sheet independently or separately, due to which the difference of Balance sheet arises. The Assessing Officer while passing his order was not clear in applying the principles of accounting and made an unwarranted and unjustified addition of Rs. 38,62,05,043. Held that: - No Difference in Balance Sheet or Unexplained Investment as there was no asset found. Therefore, the addition of Rs. 38,62,05,043 made by the Assessing Officer cannot be sustained in law and deletion by the CIT(A) is justified - ground of the Revenue is rejected.

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• 2012 (10) TMI 562
  Interest on Cash Credit - diversion of funds - sister concerns - Held that:- If the work-in-progress is diverted by way of corresponding journal entries, it cannot be considered as funds diverted and interest paid on loan cannot be disallowed - set aside this issue to the file of the AO to examine whether the assessee diverted the funds or work-in progress and decide the issue afresh in accordance with law. Interest on hire purchase loans - Held that:- As this loan is availed for the purpose of acquiring the asset for the purpose of business, interest on the same should be allowed - AO is directed to examine the issue whether the asset on which loan is availed for the purpose of business or not and decide the issue accordingly. Disallowance Interest on TDS - restored to the file of the AO with a direction to examine whether the assessee itself added back the said amount while filing the return of income or not and decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee in the matter - appeal of the assessee is treated as allowed for statistical purposes.

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• 2012 (10) TMI 561
  Disallowance of Payments made in Cash u/s 40A - payment of sister concerns - determination of nature of payment - payment towards expenditure or repayment of loan / advances - held that:- the maximum amount that could be considered for disallowance under Section 40A(3) of the Act was Rs. 75,000/- for assessment year 2003-04 and Rs. 2,96,148.45 for assessment year 2004-05. - Insofar as the claim of the assessee that the payments were all made to sister concerns, there is no exemption given under Section 40A(3) for payments effected to sister concerns. - Decided against the assessee. Reopening of an assessment - supply of reasons to assessee - held that:- when a notice under Section 148 was issued and assessee, after filing the return, sought reasons for the notice, Assessing Officer was bound to furnish the reasons within a reasonable time. - when any objections were filed by the assessee, Assessing Officer was bound to dispose of such objections by passing a speaking order. - If the said procedure is not followed, the orders of lower authorities have to be set aside and the matter remitted back to the file of the A.O. for re-adjudication after supplying copies of reasons recorded.

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• 2012 (10) TMI 560
  Depreciation on the assets of an undertaking engaged in generation or generation and distribution of power - Held that:- Charging of Depreciation @80% on opening value and the value added on due date in the return of income along with audit report and books of account wherein the assessee has adopted the rate as prescribed under second proviso to rule 5(1A) is justified as he complies with time limit as prescribed u/s 5(1A). As decided by Court in case of [K.K.S.K. Leather Processors (P) Ltd.2011 (3) TMI 72 - CESTAT, CHENNAI] that the appellant is entitled to enhanced rate of depreciation and the AO has incorrectly restricted it to 7.69%. The AO is therefore directed to allow the enhanced rate of depreciation to the appellant. The appeal of the appellant is therefore allowed - in favour of assessee.

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• 2012 (10) TMI 559
  Interest Income and Dividend Income - taxable as PGBP or income from other sources - Held that:- As Dividend has been specifically defined as income from other sources in section 56(1)and no case has been made out that dividend in this case was incidental to any business activity, it has to be treated as Income from other Sources. The assessee had deposited the surplus funds from which interest income had been received. Therefore, interest income has been rightly assessed as income from other sources - against Assessee. Rental income - taxable as Business Income or not - Held that:- As the object of the assessee was to run the business centre by exploiting the property and not mere letting out the same on rent. It was accordingly held that the income had to be assessed as income from business. The order of CIT(A) is set aside and the claim of the assessee is allowed - in favour of assessee. Rates and Taxes - Held that:- the expenditure had been incurred in relation to land which was not used for the purpose of business the expenditure cannot be allowed while computing the income from business and not against Capital Gains - decided against the assessee. VRS Expenses - Held that:- As income from business centre has to assessed as business income and therefore, provisions of section 35DDA will be applicable in case of the assessee as per which any expenditure in connection with any VRS scheme has to be allowed in five equal instalments starting with the year in which the expenditure was incurred- decided in favour of the assessee. Expenditure of Rs.11,70,000/- on items such as insurance, telephone, security, travelling, motor vehicle etc and the expenditure on remuneration to the manager. already held that the income from the business centre has to be assessed as business income and therefore we hold that the expenditure will be allowed while computing the income from the business centre.in favour of the assessee. Depreciation - held that:- income from business centre has to be assessee as business income. Therefore, depreciation on all the plants and machinery installed in the business centre has to be allowed. We hold administrative expenses of Rs..34,11,991/- should be allowed as business expenditure. Sales Tax - addition of Rs.1,36,141/- being sales tax written back relating to sales in earlier years he AO had disallowed the claim on the ground that the business of the assessee had closed. CIT(A) has however allowed the claim on the ground that the AO had assessed income on account of sundry creditors relating to earlier year under section 41(1) and therefore the claim was allowable - Held that:- Order of CIT(A) allowing the claim is confirmed - decided against the department. Deduction under Section 54EC - Assessee has invested in NABARD Bond on the capital gains arising out sale transferable development rights of Rs..3,54,43,549/-, and this deduction is not in dispute. Hence, this ground has been rendered infructuous. Assessing Officer is directed that the loss shown under the head short term and long term capital gain is allowed to be carried forward - In the result, the appeal of the assessee is partly allowed and that of the revenue is treated as dismissed.

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• 2012 (10) TMI 542
  Corpus donation - misapplication of corpus fund - Exemption of divided income and the interest income u/s 10(34) and 10(15)denied - assessee trust is registered u/s 12A r.w.s 12AA - Held that:- A conjoint reading of provisions of Indian Trust Act, 1882 leads to inescapable conclusion that the primary object of the trustees is to protect the interest of the trust. In order to discharge this responsibility, the trustees are entitled to take appropriate decisions in the interest of trust. If the revenue's contention is to be accepted then it would imply that since a charitable trust is bound to keep its investments in the securities specified u/s 11(5) then it should not have accepted the shares. In our opinion, too much deliberation is not required to reject this contention of the revenue. Therefore, this objection is devoid of any merit because there is no restriction on accepting shares by a charitable institution. The only restriction is to be found in section 13(1)(d) as per which the assessee charitable trust is required to hold its investments in the modes as prescribed u/s 11(5). The proviso (iia) to section 13(1)(d)(iii) entitles an assessee trust to hold the shares for a maximum period of one year before which it has to be converted into the modes of investment as prescribed in section 11(5). There is no dispute that income of the corpus fund could be utilized towards the objects of the trust. The only objection is that corpus could not be depleted. This objection of department cannot be sustained particularly because the conditions contemplated u/s 11(1)(d) stand satisfied when a voluntary donation is received with a specific direction that they shall form part of the corpus of the trust. No further condition is prescribed in the Act on utilization of corpus fund. Considering provision of Sec.11, 12 & 13 the revenue's contention cannot be accepted that assessee had adopted a colourable device by first accepting the shares and then selling these shares. The assessee's conduct was well within statutory provisions and, therefore, cannot be branded as colourable device. The trustee is bound to conduct himself in the best interest of trust. Therefore, both the conducts viz receiving the shares as a gift from the private trust towards its corpus and its liquidation in terms proviso (iia) to sub-section 13(1)(d)(iii) was fully justified. Revenue's submission that by selling the shares, the assessee has violated section 11(1)(d) suffers from the basic fallacy in not recognizing that by selling the shares, the assessee merely converted one form of investment into another viz. money only. The assessee only realized the market value of shares and, therefore, we fail to appreciate how there was any violation of section 11(1)(d) particularly when the donor, while gifting the shares as corpus donation, never imposed any condition that the shares could not be sold. Only the form of asset was changed from share to cash but the original corpus donation remained as it is in the hands of trust - in favour of assessee.

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• 2012 (10) TMI 541
  Reassessment proceedings u/s 147 - block assessment - cash has been requisitioned under section 132A dated 30.06.1998 (block period 01.04.1988 to 04.06.1998) - Held that:- On a plain reading of provisions of Chapter XIV-B of the Act, it becomes apparent that once a provision has been made for assessment under Chapter XIV-B of the Act, no other provision of the Act shall be applicable, but if there is no provision made in Chapter XIV-B of the Act, all other provisions of the Act shall apply to assessment made under Chapter XIV-B of the Act - the stage of impugned assessment is not an assessment made under section 147/148 after completion of block assessment but it is a case of original block assessment itself. As decided in CIT v. Peer Chand Ratan Lal Baid HUF [2009 (5) TMI 474 - GAUHATI HIGH COURT ] notice under section 148 is required to be issued for the purpose of proceedings under the Chapter XIV of the Act whereas in the case under consideration, the A.O. initiated proceedings under section 147 by issuing notice under section 148 for the A.Y. 1999-2000 which is a part of block period assessment and there was no original block period assessment. Under the facts and circumstances, the action taken by the A.O. is not in accordance with law. The material based on which the A.O. reopened the regular assessment is the material pertained to requisition under section 132A and such material is subject to only block assessment. As decided in Ramballabh Gupta Versus Assistant Commissioner of Income-Tax And Others.(2005 (8) TMI 99 - MADHYA PRADESH HIGH COURT ) wherein it has been held that the A.O. does not have jurisdiction to issue notice under section 148 in respect of those 6 Assessment Years which falls within the exclusive jurisdiction of section 153A. Thus once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - in favour of assessee.

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• 2012 (10) TMI 540
  Reopening of assessment - assessment was not completed u/s 143(3) - AY 2001-02 - Held that:- No much force in the argument of assessee against reopening especially keeping in view the fact that assessment in the assessment year 2001-02 was not completed u/s 143(3) of the Act and the AO had no chance to look into the details of claim made by the assessee. As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] states that Failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings when initiation u/s 143(1) has been issued, reopening of the case in assessment year 2001-02 was justified - against assessee. Reopening of assessment - on the basis of report by an audit party - AY 2003-04 - Held that:- Relying on Commissioner of Income-Tax Versus P. V. S. Beedies Pvt. Limited [1997 (10) TMI 5 - SUPREME COURT] that there can be no dispute that audit party is entitled to point out factual error or omission in the assessment and Hon'ble Court further held that reopening of assessment on the basis of factual error pointed out by the audit part is permissible under the law - against assessee. Disallowance of maintenance expenses and depreciation on electrical installation - assessee had already enjoyed deduction u/s 24(1) - Held that:- Assessee had rented a part of its building and had also entered into a separate agreement for providing maintenance services - the objection of the AO that assessee had already enjoyed deduction u/s 24(1) in respect of depreciation on electrical equipments is not correct. However the disallowance of Rs.14,06,505/- being expenses incurred on building repairs/partition etc. was justified in view of the fact that the assessee had already enjoyed deduction u/s 24(1) against income from house property. Therefore, CIT(A) has rightly allowed the claim of assessee in respect of depreciation and had rightly upheld the disallowance on account of building repairs etc. Deduction under section 10B - disallowance as no new activity was started at new unit at Gurgaon - assessee company was claiming deduction u/s 80HHE on its existing business - Held that:- The assessee though originally was operating from Delhi but had purchased separate land and had constructed building thereon at Plot No.27, Sector-18, Electronic City, Gurgaon and had obtained registration under STPI as a 100% export oriented unit.The building was equipped with computers and other necessary equipments before the financial year 2000-01 as is evident from bills of purchase of computers. Though invoices of computers are addressed to assessee’s address at Delhi but installation reports which are attached with purchase bills mentions that these were installed at Gurgaon i.e. the address where the assessee had claimed to have set up new unit.The assessee, during the course of assessment proceedings also submitted Copy of registration certificate under ESI Act 1948,PF Act, allotment letter for TAN from IT Department,Copy of Form D of Shop & Commercial Establishment Act, 1958,Copy of license for providing bounded warehouse & Copy of agreement with Software Technology Park of India which clears all doubt hat assessee had set up a new unit at Gurgaon which was duly registered as 100% export oriented unit. Electric installation should not be considered for calculation of total value of plant & machinery is not correct in view of the fact that definition of plant & machinery includes in itself electric installation, office equipment and or vehicles. The contention of DR that electric installations carried different rates of depreciation as compared to plant & machinery does not carry any weight as mere classification for depreciation purposes cannot alter the nature of electric installations which indeed is part of plant & machinery - The objection raised by the Dr that assessee had rented the building and therefore was not in a possession of the same also do not carry any force in view of the fact that lease agreement was entered in for 50% of total covered area and balance 50% was available with the assessee to carry on its business - in favour of assessee.

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• 2012 (10) TMI 539
  Additions on Deemed dividend - beneficial shareholder or registered shareholder - Held that:- A.O brought to tax profit of Rs.2,50,000/- received by the assessee HUF in terms of provisions of section 2(22)(e) without recording his specific findings as to whether the conditions stipulated in the said section were fulfilled. The CIT(A) while accepting that the AO did not record any findings regarding the nature of transaction, concluded that the amount was in the nature of loan or advance. Since the company M/s D.N. Kansal Securities (P) Ltd. in which the assessee had 12 % shareholding, reflected accumulated profit less than profit of Rs. 2,50,000/- CIT(A) while observing that the assessee has declared undisclosed income, uphold the findings of A.O in bringing to tax the amount of Rs.2,50,000/-. neither even analyzing the issues in the light of provisions of sec.2(22)(e) or nor attempted to ascertain as to whether HUF is the beneficial shareholder or registered shareholder. Section 250(6) mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision, thus in view of the foregoing, especially when the CIT(A) have not passed a speaking order, consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the aforesaid issues, afresh - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 538
  Unaccounted investment in jewellery - assessee submitted copy of bill by way of additional evidence - CIT(A) deleted the addition - Held that:- CIT(A) admitted the said additional evidence without recording any reasons in her order, in terms of rule 46A(2) of the IT Rules,1962 nor verified even the genuineness of the said additional evidence. CIT(A) has not even identified the circumstances under which the assessee was prevented by any sufficient cause in submitting the aforesaid documents before the AO. The genuineness of the said expenditure nowhere seems to have been examined by the CIT(A) nor allowed any opportunity to the AO to examine the genuineness of bills submitted by the assessee. Thus in the interest of justice and fair play the findings of the CIT(A) are vacated and restore the issues raised back to CIT's file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 after allowing sufficient opportunity to both the parties - in favour of revenue for statistical purposes.

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• 2012 (10) TMI 537
  Retraction of surrendered income - Disallowance of creditors - additional evidence under Rules 46A regarding confirmation of 23 creditors - CIT(A) deleted the addition - Held that:- Though the assessee relied upon a decision of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala [1971 (9) TMI 64 - SUPREME COURT] where it was observed that an admission is an extremely important piece of evidence but it can not be said that it is conclusive and that it is open to the person who made the admission to show that it is incorrect, there is no such dispute with this proposition of law. In the instant case, neither before the ld. CIT(A) nor even before us, the ld. AR attempted to show as to how the surrender was incorrect and what prompted the assessee to file appeal without even retracting the surrender. Even after surrender of the amount, the assessee approached the ld. CIT(A) and furnished additional evidence in terms of rule 46A of the IT Rules,1962. There is nothing in the impugned order as to why the assessee offered the amount to tax suo motu and then preferred the appeal. Nothing to suggest as to whether or not the CIT(A) examined the genuineness of additional evidence submitted by the assessee nor the AO seems to have been asked to verify its genuineness. In these circumstances, it can be concluded that the CIT(A) admitted additional evidence submitted by the assessee in its application under rule 46A of the IT Rules,1962, without following the procedure prescribed therein, thus in the interest of justice vacate the findings of the CIT(A) and restore the issues back to his file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 - in favour of revenue for statistical purposes.

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• 2012 (10) TMI 536
  Transfer Pricing Adjustment - arm’s length price of the international transaction entered by the appellant with its associated enterprises - Held that:- As decided in VODAFONE ESSAR LTD. versus DISPUTE RESOLUTION PANEL-II and ORS [2011 (12) TMI 22 - DELHI HIGH COURT] when a quasi judicial authority like the DRP deals with a lis u/s 144C, then, it is obligatory on its part to give cogent reasons for the decision. DRP has passed its order by just relying on the findings recorded by the A.O./TPO, without considering the various objections raised before it by the assessee. A perusal of the DRP order shows that it is a short order passed in general terms on both the issues involved, i.e., arm’s length price u/s 92CA(3) and excess depreciation on computer accessories and peripherals. The objections raised by the assessee before the ld. DRP have not been discussed in detail - Remit this matter to the file of the DRP, to be decided afresh in accordance with the law by passing a speaking order on affording adequate and proper opportunity of hearing to the assessee

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• 2012 (10) TMI 535
  No reasonable and proper opportunity of hearing allowed - addition to income - Held that:- As per the affidavit filled by the assessee for non-appearance on 16.12.2008 as case was to be attended by the assessee’s CA & that however, the said CA neither attended the proceedings before the AO, nor informed the assessee that he would not be appearing on 16.12.2008 as if the assessee had been informed in this regard, he would have surely attended the proceedings. As before the CIT (A), the assessee’s new counsel inspected the appeal record in the office of the CIT (A), where from, it came to knowledge that the first notice dated 10.02.2010 for 10.03.2010 was sent by speed post on 12.02.2010 and the same was received back unserved in the office of the CIT (A) and that the second and final notice dated 09.04.2010 for 23.04.2010 was sent by speed post on 10.04.2010 and the same had also been received back in the office of the CIT (A) on 21.04.2010, as available from the appeal record, thus, both the notices issued from the office of the CIT (A) remained unserved and the assessee did not at all come to know of the dates of hearing before the Ld. CIT (A). Thus it can be concluded that the assessee was prevented by reasonable cause from attending the proceedings, both before the AO as well as before the CIT (A) - remit this matter to the file of the AO to be decided afresh - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 534
  Provision for various expense transfer to Sister concern - Assessee company had debited an amount towards cost of project in progress including provision for various expenses – Certain sums is stated to have been spent by the Assessee’s sister concern – Held that:- No detailed examination of the expenditure incurred by Assessee’s sister concern submitted in support of the claim amount. We are also of the view that so far as the amount spent by the Assessee itself is concerned, from 01.4.2004 to 31.12.2005, it has successfully discharged its onus in filing corroborative evidence hereinabove. In order to ensure appropriate compliance with the directions of the co-ordinate Bench remit the case back to the assessing authority. Issue remand back to AO

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• 2012 (10) TMI 533
  Disallowance of provision for remuneration of whole time directors – Enhanced directors remuneration – Assessee shown enhanced amount as payable to three directors – Remuneration payable to were enhanced by way of resolution and approved by CG – AO argued that any provision for increase in remuneration of Directors would be void, if it was not approved by the CG u/s 198, 309, 310 and 314 of Company Act. 1956 - Held that:- There is no finding by the Revenue that remuneration claimed by assessee was not commensurate with the service rendered by the said persons. Especially so since assessee had received the approval from Central Government on 19.04.05. Admittedly assessee had finalized its account only thereafter. Directors concerned had worked for the assessee and remuneration was indeed payable and it became a crystallized liability. Since such approval clearly mentioned that it had retrospective effect viz. from the date of expiry of the earlier approval, it will relate to back to the date of expiry of the earlier approval. We are of the opinion that claim of assessee was allowable. Issue decides in favour of assessee Disallowance of provision of PF on enhanced remuneration of directors – Held that:- The issue requires a fresh look by the AO, since the date on which the amount was remitted has not been verified. Issue remand back to AO.

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• 2012 (10) TMI 532
  Disallowance of interest expense u/s 36(1)(iii) - Assessee had paid 18% interest to its related parties on the loans received from relatives - Assessee had received interest only at the rate of 10% -11% from two parties – Interest free loan has been given to two parties – Held that:- As if there was no material to indicate that moneys were advanced out of borrowed funds, the presumption would always be that moneys were advanced out of own funds. As it is to pick out few of the loans given by the assessee and make a comparison of the interest rate, will not be appropriate. There is nothing on record to show that the amounts given by the assessee as loan were coming out of interest bearing funds. - Decided in favor of assessee.

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• 2012 (10) TMI 531
  Determination of arm's length price - Architectural services - Contention of Assessee was that directions issued by the DRP is not justified in treating the international transactions entered into between Appellant and its Associated Enterprises as sham and concluding the arm's length price as Nil in respect of service charges paid to its Associated Enterprises. Held that:- As the assessee has not filed the requisite information before the DRP due to inadvertence. The requisite information asked for by the DRP has been filed by the assessee belatedly after completion of hearing. Information was filed on 23rd Sept. 2010 though the assessment was completed on 20-9-2010. Consideration of the requisite information filed by the assessee is important to come to a conclusion on the issue in dispute by the DRP - remit the issue back to DRP to consider the same in the light of the evidences - appeal is treated as allowed for statistical purpose.

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• 2012 (10) TMI 530
  Search and seizure - additions u/s 68 - held that:- assessee has filed confirmation letters and the creditors are genuine and have explained their sources. Further, all the amounts have been received through banking channels and two of them were paid back through cheques. If the Assessing Officer had any doubt with respect to the genuineness of the transactions, he should have enquired the creditors, which he failed to do. - no addition - in favor of assessee. Taxability of interest in the hands of partners - held that:- . Even the capital account does not have any credit under the head ‘interest’. Interest paid to partners, which has been disallowed in the hands of the partnership firms cannot be assessed in the hands of the partners.

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• 2012 (10) TMI 529
  Disallowance u/s 14A of the Act - Held that:- The section only permits the Assessing Officer, in an indivisible business consisting partly of taxable activities and partly of tax-free activities, to identify expenditure, if any, incurred in relation to the earning of non-taxable income and disallow it. The section cannot be taken beyond this to attribute, by some yardstick, every item of expenditure which has no apparent connection or nexus with the earning of tax free, to the earning of tax-free income - appeals of the revenue are dismissed. Loss on Sale of Shares -short term capital loss to be set off against the long term capital gain - Held that:- Loss on sale of shares of Lanco Net Ltd. are not in accordance with the business activities of the assessee and hence not allowable as capital loss and same cannot be adjusted against capital gains - Order of the CIT(A) is confirmed - Ground of appeal of the assessee is dismissed. Disallowance of legal and professional fees - deduction u/s 80IA. - The assessee contended that he had computed profits of the undertaking and has also filed certificate of the auditor in respect of the eligible undertaking and has maintained proper Books of A/c as required to compute profits - set aside this issue to the file of the Assessing Officer for reconsidering the profitability of the eligible undertaking on the basis of the workings furnished by the assessee, after giving reasonable opportunity to the assessee to put forward its case - appeal of the assessee is treated as allowed for statistical purposes.

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• 2012 (10) TMI 528
  Reassessment - After completion of assessment u/s 143(3), a notice us/ 148 was issued reopening the assessment u/s 147 - claim u/s 80HHC - held that:- Re-opening has been made on the self same materials which are already available on record at the time of assessment u/s 143(3). Therefore, reopening of assessment made on the basis of very same material amounts to change of opinion. Further, the assessee has disclosed all material facts fully and truly, therefore reopening of assessment could not have been made beyond four years from the end of the assessment year in dispute i.e., 2004-05. - Decided in favor of assessee.

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• 2012 (10) TMI 527
  Whether assessee is covered by principles of mutuality and hence, TDR premium received by the Society is not taxable – alleged that TDR premium payment is made by only those members availing the additional FSI – Held that:- consideration has flowed from the members of the Society to the Society which is a Co-operative Housing Society as consideration for allowing the use of extra FSI. The principles of mutuality would apply – TDR premium received by the Society is not taxable

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• 2012 (10) TMI 526
  Short-term capital gains – deduction of liaison charges paid from STCG - sites, which were the subject matter of the sale, were in the occupation of slum dwellers - whether they were in occupation of all the sites or only those sites, which resulted in the short-term capital gains – Held that:- Assessee has paid the money by way of account payee cheque to one Mr. B.G. Koshy to clear the slum dwellers, which amount has been acknowledged by him - slum dwellers were in possession of the land, which resulted in short-term capital gains - no material on record to show that the said contention of the assessee is wrong, misleading or deliberately made with an intention to evade tax - laison charges refers to only short-term capital gains – in favor of assessee

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• 2012 (10) TMI 525
  Payment of rent to group concerns - excessive amount u/s 40A(2) - assessee contended that no two properties can be compared with each other, unless they are identical in respect of the location, the facilities available and the period of tenancy, etc. - held that:- the rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance. Disallowance of interest - interest-free rent deposits – held that:- Once it is established that there was nexus between the expenditure and purpose of business [which need not necessarily be the business of the assessee itself] the revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits. - the deposits were made for taking the premises on rent which was necessitated by business expediency and' are based on marked rent. - in favour of the assessee

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• 2012 (10) TMI 524
  Interest earned on deposits and advances made for the new unit being established - Revenue OR Capital receipt - Held that:- As decided in INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED, NEW DELHI Versus INCOME TAX OFFICER [2009 (2) TMI 32 - DELHI HIGH COURT] when the interest was received by the assessee towards interest paid for fixed deposits & when the borrowed funds could not be immediately put to use for the purpose for which they were taken, the receipt is “inextricably linked” to the setting up of the project, it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. The Tribunal and the lower authorities fell into error in holding that the interest earned on fixed deposit of amounts borrowed, which is the subject matter of the present appeal, would have to be treated as revenue receipt as the funds invested by the assessee company and the interest earned were inextricably linked with the setting up of the power plant. It may be added that the Tribunal has not found that the deposits made as margin monies were not limited to the construction activity connected to the expansion of the business by way of setting up of a new power generation plant - in favour of assessee.

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• 2012 (10) TMI 523
  Income from surrender of tenancy rights - Tenancy rights vested with the firm or with the partners - The partners on receipt of their shares in surrender of tenancy rights, invested the same in NABARD Bonds. - Held that:- if there was a partnership firm, then under all circumstances, it is the firm which shall be taxed and not the partners, as not only Partnership is a separate legislation but in the Income Tax Act, it is a distinct entity in section 2(23) and 2(31)(iv). It is the persons, legal heirs, who have continued to hold the tenancy rights and have used the name of the business only for the sake of convenience, which had been continuance from the pre partition days. Moreover, none of the partners, at no point of time have ever introduced his/her share in the tenancy as capital in the accounts of the firm. The individuals were, thus correct, who had not only taken the compensation for surrender of tenancy rights and deposited the same in NABARD Bonds - Deletion of addition made by CIT(A) at Rs. 2,50,00,000/- as long term capital gain on account of compensation received from M/s. Veera &. Gala Developers on surrender of tenancy rights is right - order of the CIT(A)is sustained - Decided in favor of assessee.

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• Customs

• 2012 (10) TMI 593
  Confiscation of the goods under seizure - demand against them while relying upon Notification No.9/96 - Held that:- Goods involved in this case is rain coats and trousers. The goods are not notified under section 123 of Customs Act, 1962. Thus that once the goods are not notified, the onus lies on the department to show that the goods are smuggled goods. The appellant produced the bill for the said goods i.e. cash memo No.384 dated 30.06.2001 and 22.09.2001. The show cause notice in this case was issued on 12.10.2001. The applicant produced the cash memo prior to issue of show cause notice. Nothing prevented the department to carry out further investigation to check the veracity of the documents - As the department could not discharge the onus to show the smuggled nature of the goods. In these circumstances the Commissioner's order is not sustainable and is accordingly set aside and appeals in the case of above three appellants are allowed with consequential relief - in favour of assessee.

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• 2012 (10) TMI 592
  Waiver of pre-deposit - Mis-declaration – limitation - goods were declared as Condensate by the appellant - Condensate is classified under CTH 2709, whereas the appellants have proposed classification under CTH 2710 - whether the appellants have suppressed the fact or resorted to mis-declaration with intent to evade duty – Held that:- In the case of imports, the goods are assessed by the Customs officers, allowed to be discharged out of the vessel under supervision and in this case, the sample was drawn and therefore, to invoke the limitation, there has to be very strong ground to show suppression or mis-declaration with intention to evade duty. No collusion has been alleged - appellants have a good case since the term ‘Condensate’ itself is a recent term and the quality of Condensate and the specification also vary from source to source - appellants have made out a prima facie case in their favour on limitation - waiver of pre-deposit allowed

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• 2012 (10) TMI 591
  Release of consignments imported - alleged that there were discrepancies between the declaration and the inspection report with regard to the description of certain goods - whether consignments imported can be detained indefinitely without even passing any seizure order – Held that:- Provisional release would arise when there was seizure in accordance with law. There was no seizure in this case - goods imported cannot indefinitely be detained. Necessary action would have to be initiated and expeditiously concluded - respondent authorities are entitled to investigate and ascertain whether the price declaration has correctly been made or whether the goods have been undervalued with ulterior motive. However, such investigation would necessarily have to be concluded with utmost expedition. Apparently this has not been done in the instant case - writ application is, thus, disposed of by directing the respondent authorities to conclude the investigation/proceedings

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• 2012 (10) TMI 584
  Penalty - Prohibition on import of second hand goods – Held that:- Initially Tribunal had reduced fine and penalties to the range of 15% and 5% of the assessable value. From the repeated imports made by the importer it is quite clear that the fine and penalties imposed are not wiping out the profit margin, probably because the wrong value declared also. Considering the repeated nature of the offence there is need to increase this fine and penalty. But still there is no justification for increasing the penalty to about 62% and 25% of the assessable value approved - penalty reduced - appeal is allowed partially.

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• 2012 (10) TMI 554
  Denial of grant of licences to to act as Customs House Agent - change in procedures - old regulation v/s new regulation - Held that:- Those who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. Therefore, the petitioner is eligible for the grant of Customs House Agents Licence, as he had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984 held prior to the coming into force of the new regulations in the year, 2004 - direction to the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner - against department.

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• 2012 (10) TMI 553
  Misdeclaration in the Bill of Entry – confiscation – redemption fine - appellants noticed that the supplier had given two invoices - But the Appellant while authorising the CHA to file Bill of Entry had given only one invoice to the Customs House Agent which resulted in wrong declaration in the quantity of the goods and the value of the goods – Held that:- an error in filing Bill of Entry which error was detected before taking delivery of goods and Customs Act provides for correction of such errors as may be seen from Section 149 of the Customs Act - It to be a case of genuine mistake and ordered that there was no case for confiscation of the goods and therefore redemption fine imposed set aside - appeal filed by Revenue is rejected

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• 2012 (10) TMI 552
  Siphoning foreign currency to the abroad by overvaluing the imported goods – Held that:- Siphoning of money to foreign country was dropped by the FERA against the applicants, therefore, the charge of siphoning of money is not sustainable. Mis-declaration - applicant submits that in this case it is an admitted fact that the importer had declared the goods as per the invoice raised by the foreign supplier and on examination it was found that the goods were not as per the description in the invoice/bill of entry – Held that:- Applicants proceeded the matter with foreign supplier, who admitted the fault that the some other goods had been supplied wrongly to the importer - charge of mis-declaration of goods is also not sustainable against the applicants - applicants have made out a case for 100% waiver of pre-deposit of penalty

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• Corporate Laws

• 2012 (10) TMI 590
  Struck off the name from ROC Register - application for restoration of the name opposed by ROC - whether the Company Court has power to examine the administrative action of the Registrar so envisaged under Section 560 - Held that:- Authority of the Registrar to strike out a name after offering opportunity to the persons being in control of the company to justify existence and being satisfied that the company was defunct. Similarly, the aggrieved party was given right to challenge such action before the learned company Judge. The learned company Judge was competent to issue “such direction” and/or make “such provision” as seen just and proper. The invocation of the power of the learned Company Judge is stipulated under Sub-Section 6 that would enable a company or any member or a creditor feeling aggrieved by the company’s name being struck off, to approach the learned Judge. Hence, the learned Judge would have to be satisfied that pre-requisites were fulfilled meaning thereby the applicant must be either of a company or a shareholder or creditor, any person not falling under any of the three categories would not be entitled to invoke this provision. Hence, the learned Company Judge, to receive an application under Sub-Section 6, must satisfy himself that the petitioner had locus to approach. As in the present case on the date of the striking off not a single document would show the nexus of the respondent no.1 with the company. He came in picture in October 2008 through filing of DIN. Documents filed after 2008 would also show, he was Director since 1998 as claimed by him. Such dispute would have to be resolved in an appropriate forum. Section 560 would not give power to the Court to adjudicate as to such dispute. The court would be relying upon the admitted records that would clearly show, respondent no.1 did not feature in the records. His belated plea would also keep him at bay. His prayer for restoration would wait for a decision in his favour on his status by a competent civil court or any other appropriate forum. The learned Judge should not have restored the name of the company at the instance of someone whose identity is yet to be established. So long he cannot establish his status he would not be entitled to invoke the provision of Section 560. The appeal succeeds and is allowed.

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• 2012 (10) TMI 551
  Prosecution of Nominee Director - Winding up Proceedings u/s 454 - Held that:- It is not for the Official Liquidator to adopt a pick and choose policy; he is a statutory body and must maintain transparency. As decided by Court in case of [Jamna Datwani v. Official Liquidator 2012 (3) TMI 160 - DELHI HIGH COURT] No prosecution has been launched against the appellant as He is only acting to represent the Bank and is not actively involved in working and day to day affairs of co. like attending Meetings,access to Books etc. Held that:- Appellant being only a nominee Director of the Bank and had resigned four years prior to the date of initiation of the winding up proceedings. She had no access to the records of the company and admittedly not having signed even a single document on behalf of the company, no useful purpose would be served in continuing with the prosecution - No Criminal poceeding can be initiated against her - prayer made in the application is allowed and She is accordingly discharged - in favour of appellant.

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• Service Tax

• 2012 (10) TMI 599
  Cenvat Credit - Cargo Handling Services - whether the amount of service tax collected by the appellant from their customers is required to be deposited with the department in terms of provisions of section 73A of Finance Act, 1994 on the ground that the appellant was not required to pay service tax, which they have paid by using the Cenvat credit. Held that:- By reversing the amount of 8 percent, the assessee has paid that amount to the Revenue. Though such amount was strictly not excise duty but the recovery of the said 8 per cent from the buyers cannot be held to be again deposited with the Revenue u/s 11D. appellant have already paid service tax from their Modvat credit, the deposit of the service tax collected from the buyers would amount to double payment. proceedings are for confirmation of demand in terms of section 73A of the Finance Act which relates to the tax collected by an assessee from the buyers, which is not required to be collected. However, the appellant having already paid such collected amount to the Revenue they cannot be made to deposit the same again with the Revenue - Impugned order of CIT(A) is set aside and the appeal allowed with consequential relief to the appellant.

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• 2012 (10) TMI 598
  Refund claim - appellant, by mistake paid service tax in respect of free services undertaken during the warranty period - part of the claim rejected as barred by limitation - appellant submits that in respect of the activities of servicing of vehicles during warranty period, no service tax was attracted and service tax has been paid under mistaken belief. The refund of such amount paid into service tax head should have been refunded without reference to the limitation prescribed under Section 11B of Central Excise Act – Held that:- The amount paid by the appellant cannot be treated to be anything other than service tax and the refund has to be considered in the light of statutory provisions governing service tax - since a statute has provided for specific provisions of limitation, the Limitation Act, 1963 is not applicable - appellant claimed refund in terms of Section 11B and the claim within the normal period of limitation stands sanctioned and the claim beyond the limitation period stands rejected

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• 2012 (10) TMI 597
  Demand of service tax - Business Auxiliary Service - appellant was functioning as a commission agent for AAI by collecting PSF for AAI and remitting the collections to them – Held that:- Collection charges at the rate of 2.5% on PSF were adjusted against a penal interest leviable from the appellant at the rate of 18% on the PSF collected and retained by them till its remittance to AAI. It would appear from these adjustments that collection charges were eventually received by the appellant from AAI. These charges constituted the taxable value for the impugned levy - appellant directed to pre-deposit partly.

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• 2012 (10) TMI 558
  Payment of service tax by using cenvat credit - Goods Transport Agencies (GTA) - period of dispute from April 2007 to February 2008 - Held that:- Explanation to Rule 2(p) output service means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions provider and provided shall be construed accordingly as omitted with effect from 19.4.2006, i.e., prior to the period of dispute. The definition of output service itself was amended with effect from 1.3.2008, i.e., after the period of dispute. Thus when the respondent was paying service tax on GTA service, they were doing so on an output service and, therefore, they were entitled to utilise CENVAT credit for payment of such tax. The definition of person liable for paying service tax and the definition of provider of taxable service given under Rule 2 (q) & (r) respectively seem to be supportive of this argument. As decided in COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Versus M/s NAHAR INDUSTRIAL ENTERPRISES LTD and Others [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services - the service tax was paid out of the Cenvat credit on GTA services and, hence, the assessee were well within their right to utilize the Cenvat credit for the purpose of payment of service tax - in favour of assessee.

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• 2012 (10) TMI 557
  Vocational Training - Benefit of exemption Notification No. 24/2004 – alleged that they are an institute and they are-providing professional coaching in the fields of Fashion Technology, Graphic Art, Media Communication and Digital Communication – Held that:- Appellants are an Institute providing Vocational Training Courses to various students like fashion designing, graphic arts, media communication and digital communication etc. These courses are only vocational course and not an academic course and they are covered by the exemption under Notification No. 24/2004-ST dated 10.9.2004 and not required them to get registered with Service Tax department - appellant was entitled for benefit of exemption Notification No. 24/2004

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• 2012 (10) TMI 556
  Waiver of the pre-deposit – construction of residential construction – sub contractor – Held that:- Period involved in this case is of 2005-2006, 2007-2008 wherein, undisputedly the appellant has been considered as the sub contractor - Prior to 23-8-2007, there was a Board’s circular which indicated that the sub contractors need not discharge service tax liability if the main contractor is discharging the Service tax liability - subsequent to 23-8-2007, though the circular may be pressed into service for the purpose of demand of the Service tax, issue is a contentious one - show cause notice as well as both the orders have not given bifurcation of the amount of the Service tax liability that amount arises on the appellant after 23-8-2007 and also there is a question of limitation – waiver of pre-deposit allowed

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• Central Excise

• 2012 (10) TMI 589
  In-eligible CENVAT Credit - Manufacturing activity - Held that:- It is seen that the appellant had been doing some activities of mixing and packing out of the finished goods returned and received back from their dealer. On a specific query assessee submits that they do have the batch records of this mixing and packing but these records can be produced by them before the adjudicating authority. Since the issue involved in this case is on factual matrix as to whether the appellant has undertaken any activity on these goods remand the matter back to the adjudicating authority to reconsider the issue afresh - in favour of assessee by way of remand.

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• 2012 (10) TMI 588
  Non discharge of Excise duty - mis-declaration of MRP - Stay Petitions filed for waiver of pre-deposit - Held that:- In the cases of identically placed other appellants, the Hon'ble High Court had directed them to deposit an amount of 8% of the duty. As in this case, the appellant has deposited an amount of Rs.6 lakhs, which is more than 8% of the amount of duty, the said amount as enough deposit for hearing and disposing the appeal by first appellate authority. The appeals are remanded to the first appellate authority to reconsider the issue afresh

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• 2012 (10) TMI 587
  Cenvat credit - goods were cleared on payment of duty. Later on, the goods cleared by the appellant were returned by their customers as defective - Held that:- Appellant is entitled to take credit of duty paid by him at the time of clearance of the goods received back by him as defective - no time limit under Rule 16 - As the appellant are entitled to take credit as per Rule 16 of the Central Excise Rules 2002, therefore, they have taken credit correctly - appeal is allowed

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• 2012 (10) TMI 586
  Refund in cash – demand of duty - refund application for refunding the Cenvat credit in cash as they had surrendered registration certificate - held that:- If the final products is not dutiable or if the duty incidence on final product is lower than that on the inputs, there is no provision in the scheme to give cash refund of credit accumulated. After accumulating credit if the factory is closed down the position cannot change. In the case of Gauri Plasticulture (P) Ltd. (2006 (8) TMI 225 - CESTAT, MUMBAI ) - such refund in cash is not warranted in the facts of this case - decided against the assessee.

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• 2012 (10) TMI 585
  Cross objection - cross examination of the Director and Despatch Clerk was not allowed by the lower authorities and they have submitted that they wanted to prove by cross-examination that statements were recorded by coercion and threats and were not voluntary – Held that:- No retraction made by both the persons and no affidavit has been placed and, therefore, it cannot be said that denial of cross-examination was unfair in this case - When the department is able to make out a case for clandestine removal based on documents, there is no case for cross-examination of the Director and Despatch Clerk sought by the assessee and this is a clear case of clandestine removal, which they have failed to disprove.

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• 2012 (10) TMI 583
  Manufacture - area based exemption - Benefit of Notification No. 50/2003-C.E., dated 10-6-2003. – demand of duty and penalty – the benefit of said notification is being denied on the sole ground that the appellant in their declaration so filed has not given the information about the inputs being used by them - Held that:- It has to be kept in mind that the notification in question is a general notification, which is the area based exemption notification and grants exemption to all the manufacturers/excisable units located in that particular area. When all other manufacturers located in that area were enjoying the benefit of said notification, the denial of benefit of the same to the appellant on the sole ground that a declaration was not filed, would not be justified. When the appellant is being treated as the service provider, he cannot be held to be a manufacturer liable to pay excise duty in which case and he cannot be expected to file a declaration. - waiver of pre deposit allowed.

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• 2012 (10) TMI 582
  Rebate claim under Rule 18 of the Central Excise Rules – 100% EOU – export - applicant has cleared certain export consignment on payment of duty under ARE - goods exported from a 100% EOU unit were exempted from payment of Central Excise duty under Notification No. 24/2003-C.E. - Held that:- Amount so paid by applicant is a voluntary deposit made by respondent on their volition with the department and same is to be returned in the way it was initially paid - said excess paid amount may be allowed to be re-credited in their cenvat credit account

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• 2012 (10) TMI 581
  Rebate claim – Duty paid on the Polyester Staple Fibre manufactured and cleared for export from their factory - rebate claims applications under the provisions of Notification No. 19/2004-C.E. (N.T.), - claims were returned back to applicant under letter/deficiency memo to get certificate from Port authorities as Customs seal mentioned in Shipping Bill was found missing on Bill of Lading/Mate Receipt or as an alternative to furnish an undertaking to the effect of submitting the respective Bank Realization Certificate – Held that:- Rebate claims were filed alongwith all the requisite documents. The enquiry made by department from the Customs at port of export regarding genuineness of Bill of Lading/Mate Receipt cannot be a reason of delaying the sanction of rebate claim - no specified document which was not submitted by applicant - claims were required to be sanctioned within 3 months as all the requisite documents were submitted by exporter alongwith rebate claims - interest is admissible and payable to the applicant in terms of Section 11BB of Central Excise Act, 1944.

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• 2012 (10) TMI 550
  Non payment of Pre - deposit - Held that:- SLP dismissed - in the interest of justice one more opportunity granted to the petitioners to make the requisite deposit within two weeks from today on receipt of which appeal shall be revived and disposed of on merits. No further time shall be granted for the said purpose.

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• 2012 (10) TMI 549
  Duty paying document - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers - demand on the ground that the appellants have availed credit on the invoices issued by Simandhar which do not find mention in the RG-23D register maintained by Simandhar – alleged that when the duty paid goods supplied by the ship breakers did not cross the Gujarat Border, the dealers at Bhiwandi/Mumbai could not have received the said duty paid goods physically and consequently they could not have delivered the same to the appellants There is a difference of opinion arose between the Members, therefore the matter is placed before the Hon'ble Vice President/HOD for appointing a 3 rd Member to decide the issue - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers in the facts and circumstances of the case as held by the Member - Whether the demands are barred by limitation in the facts and circumstances or not.

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• 2012 (10) TMI 548
  Demand of excess credit availed on capital goods along with interest and penalty – alleged that assessee took 100% of Cenvat credit in the first financial year – Held that:- As per the provision of Rule 4(2)(b) of the CCR, 2004 and assessee is entitled to 100% of Cenvat credit in the year in which the capital goods, which are under heading 6804 of the First Schedule of the Excise Tariff Act - appellant has taken Cenvat credit only on those goods which are falling under heading 6804 of the First Schedule of the Excise Tariff Act. Therefore the appellants are entitled for 100% of the Cenvat credit as per the provision of Rule 4(2)(b) of the Cenvat Credit Rules, 2004 - order is set aside, appeal is allowed

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• 2012 (10) TMI 547
  Duty paying documents – disallowance of cenvat credit - alleged that appellant had availed Modvat credit on the basis of invoices without serial number, details of manufacturer as required under Rule 57GG read with Notification No. 32/94-C.E. (N.T.), vehicle numbers, the details of supplier and manufacturers as required by both Notification & Circular dated 18-8-1994 – Held that:- Authorities could not find non-receipt of the goods in the premises of the appellant. When they took only two months for issuance of Show Cause Notice they did not make any enquiry at the supplier’s end. When the receipt of the goods was not questioned nor delivery of the seller is questioned, the Show Cause Notice lost its foundation. In absence of any allegation of non-receipt of the goods and also for any allegation of non-delivery of the goods, the appellant succeeds – credit allowed – demand set aside

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• 2012 (10) TMI 546
  Demands - extended period of limitation - clearance to their sister concern was not disclosed to the Revenue – Held that:- No mala fide can be attributed to the appellants - clearance were admittedly being effected on the basis of Central Excise invoices - no suppression or mis-statement with intent to evade payment of duty can be attributed to the appellants - notice is clearly barred by limitation – in favor of assessee

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• 2012 (10) TMI 545
  Rebate claim and drawback – Held that:- Rebate has been claimed along with duty Drawback and both cannot be sanctioned simultaneously - notices to show cause was adjudicated vide orders disallowing the rebate and the amount already sanctioned was to be recovered - applicant has already taken the benefit of drawback and the allowing rebate of duty would amount to double benefit. As such rebate claim cannot be allowed in these cases

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• 2012 (10) TMI 544
  Demand - Proof of Export – alleged that no proof of export submitted within 6 months from the date of export – Held that:- while the handling/submission of duplicate copy of impugned AR-4s has been made as optional but that of original copy has been clearly made as responsibility of the exporter only. In case of any lapse/non-observance of any rule/procedure, the exporter (respondent herein) was not only responsible but had always been at liberty to agitate the matter in writing as per law there and then. He cannot now (or later on) hold the department responsible for not handing, following and submitting at due right time, the relevant original copy of impugned AR-4s of this case. It is clearly a lapse/non-compliance on the part of the respondents herein - Since original AR-4 were not submitted by respondent in some cases, the demand of Rs. 2,20,83,368.71 was rightly confirmed by the adjudicating authority. – against assessee

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• 2012 (10) TMI 543
  Manufacture - Extended period of limitation – alleged that appellant manufactures spare parts and also procures them from the market and clear them as if they have manufactured the same – Held that:- Mere fixation of logo on the goods by supplier of raw materials who does not have even the requisite machines to manufacture the goods, cannot make him manufacturer - they do not have the necessary infrastructure to manufacture the bought-out spare parts - question of invocation of extended time-limit for imposition of penalty does not arise

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• Indian Laws

• 2012 (10) TMI 596
  Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions. - Cellular Mobile Telephone Services Licenses - fixed licence fee for initial three years and subsequently based on number of subscribers subject to minimum commitment mentioned in the tender document and licence agreement - Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances, is by the conduct of auctions? Held that:- the answer could be in the affirmative, as well as, in the negative. It has been held, where the Sate is simply selling a product, there can be no doubt that the State must endeavour to obtain the highest price, subject of course to any other overriding public consideration. The validity of a trading agreement executed by the Government has to be judged by the test, that the entire benefit arising therefrom enures to the State, and is not used as a cloak for conferring private benefits on a limited class of persons. If a contract has been entered into, taking in account the interest of the State and the public, the same would not be interfered with by a Court, by assuming the position of an appellate authority. The endeavour to get the State the "full value" of its resources, it has been held, is particularly pronounced in the sale of State owned natural resources, to the private sector. Whenever the State gets less than the full value of the assets, it has been inferred, that the country has been cheated, in a much as, it amounts to a simple transfer of wealth, from the citizens as a whole, to whoever gets the assets at a discount. The mandate contained in the Article 39 (b) of the Constitution of India that all material resources ought to be distributed in a manner which would "best subserve the common good". It is therefore apparent, that governmental policy for distribution of such resources should be devised by keeping in mind the "common good" of the community i.e., the citizens of this country. It has been expressed in the "main opinion", that matters of policy fall within the realm of the legislature or the executive, and cannot be interfered with, unless the policy is in violation of statutory law, or is ultra vires the provision(s) of the Constitution of India. It is not within the scope of judicial review for a Court to suggest an alternative policy, which in the wisdom of the Court could be better suited in the circumstances of a case. Thus far the position is clearly unambiguous. Section 11A of the MMDR Act also defines the zone of eligibility, for participation in such competitive bidding. To be eligible, the contender must be engaged in the production of iron and steel, or generation of power, or washing of coal obtained from a mine, or an activity notified by the Central Government. Only those satisfying the legislatively prescribed zone of eligibility, are permitted to compete for a coal mining lease. For the sake of fairness, and to avoid arbitrariness, the provision contemplates, that the highest bidder amongst those who participate in the process of competitive bidding, would succeed in obtaining the concerned coal mining lease. The legislative policy limiting the zone of consideration could be subject matter of judicial review. It could be assailed, in case of violation of a legal or constitutional provision. In the aforesaid view of the matter, there can be no doubt about the conclusion recorded in the "main opinion" that auction which is just one of the several price recovery mechanisms, cannot be held to be the only constitutionally recognized method for alienation of natural resources. That should not be understood to mean, that it can never be a valid method for disposal of natural resources. Thus concluding that no part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation. Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to "best subserve the common good". It may well be the amalgam of the two. There cannot be a dissipation of material resources free of cost or at a consideration lower than their actual worth. One set of citizens cannot prosper at the cost of another set of citizens, for that would not be fair or reasonable.

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• 2012 (10) TMI 595
  Forfeiture of earnest money deposit - fault or failure of the purchaser - High court ordered seller is entitled to forfeit only a nominal amount and not the entire amount of Rs.7,00,000/- Held that:- Law is clear that to justify the forfeiture of advance money being part of ‘earnest money’ the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor. Considering the clauses of contract in the instant case, it is amply clear that the clause extracted stipulates that if the purchaser fails to fulfill the conditions mentioned in the agreement, the transaction shall stand cancelled and earnest money will be forfeited. On the other hand, if the seller fails to complete the transaction, the purchaser would get double the amount of earnest money. It was included in the contract at the moment at which the contract was entered into, thus it represents the guarantee that the contract would be fulfilled. In other words, ‘earnest’ is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchaser. There is no other clause militates against the clauses extracted in the agreement dated 29.11.2011. Therefore, of the view that the seller was justified in forfeiting the amount of Rs.7,00,000/- as per the relevant clause, since the earnest money was primarily a security for the due performance of the agreement and, consequently, the seller is entitled to forfeit the entire deposit. The High Court has, therefore, committed an error in reversing the judgment of the trial court - in favour of purchaser.

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• 2012 (10) TMI 594
  International competitive bidding - Tender process for the completion of the “Breakwater” at LNG Terminal at RGPPL site, Dabhol, Maharashtra- appellant-RGPPL - RDS challenging the rejection of its tender and annulment of the entire tender process - High Court recorded its finding on mala fides - Held that:- The order passed by the High Court did not permit RDS to re-open and re-agitate issues regarding rejection of its bid pursuant to the earlier tender notice and the annulment of the entire tender process, even if the second tender notice sought to disqualify it from competition by altering the conditions of eligibility to its disadvantage. The withdrawal of the earlier writ petition was a clear acknowledgment of the fact that the grievance made by RDS regarding the rejection of its bid had been rendered infructuous as the works in question remained available for allotment in a fresh tender process with everyone otherwise eligible to compete for the same being at liberty to do so. Inasmuch as and to the extent writ petition No.534 of 2011 filed by RDS challenged the rejection of the tender and the annulment process in a second round despite withdrawal of the earlier writ petition filed for the same relief, it was not maintainable. The scope of writ petition no.534 of 2011 was and had to be limited to the validity of the amendment in the conditions of eligibility introduced by RGPPL in the second tender notice issued by it. The RGPPL as the owner acting as a prudent and responsible public authority discharging public trust obligations was well within its rights to raise questions and seek answers on an important matter like the eligibility of RDS to participate, no matter EIL and GAIL had on the basis of the certificates produced before them recommended RDS as an eligible bidder. There was in that view no justification for either RDS or the High Court to raise an accusing finger against RGPPL simply because it had demanded proof regarding the claim of eligibility from RDS or collected relevant information under RTI Act and referred the material so collected to GAIL and EIL for evaluation and opinion. The final decision to scrap the project being within its powers under the terms of the tender notice RGPPL’s invocation of that power was not in the facts and circumstances vulnerable to challenge on the ground of malice in fact or law, on the grounds set out by the High Court even assuming that writ petition No.534/2012 was maintainable notwithstanding the withdrawal of the earlier petition filed by RDS. High Court has recorded its finding on mala fides on the sole basis that EIL had reviewed its earlier opinion regarding eligibility of RDS. The High Court was wrong in doing so. While the High Court could find fault with the interpretation which EIL placed on the provisions of clause 8.1.1.1 on the basis of the legal opinion tendered to it, it went too far in dubbing the entire process as mala fide. Thus the findings recorded by the High Court to the effect that the process of annulment of the tender process or the rejection of the tender submitted by RDS was vitiated by mala fides is unsustainable. The High Court ought to have examined the issue on merits, rather than taking a short cut. The High Court has incidentally taken support from the certificate dated 5th April, 2008 and clarification issued on 5th June, 2010 to hold that the RDS had indeed executed the qualifying project at Car Nicobar. As in the course of the hearing to disclose the basis on which the certificate and the clarification had been issued by the officers concerned no satisfactory answer to the query. Also to produce the relevant record including the government files regarding eligibility of RDS but in the absence of any conclusive evidence, and in the absence of a specific finding from the High Court, on the question, we remained handicapped - set aside the judgment and order passed by the High Court and remand the matter back to the High Court to examine and decide afresh whether RDS was eligible to compete for the works in question in terms of the first tender notice based on the works which it claims to have executed at Mus in Car Nicobar.

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• 2012 (10) TMI 555
  Breach of the fundamental right to life under Article 21 of the Constitution - writ of mandamus to the respondents to conduct an investigation into the mysterious disappearance of their husbands/sons who were on board Jupiter - UOI was guilty of violation of the right to life and was liable for compensation to the petitioners - Held that:- Right to life and personal liberty guaranteed under Article 21 of the Constitution is only available against the State and that Article 21 was not intended to afford protection to life and personal liberty against violation by private individuals - Jupiter-6 was carrying the flag of Saint Vincent and the Grenadines, although it had on its board some Indian seafarers. The Director General of Shipping has issued M.S. Notice 26 of 2002, which lays down the procedure with regard to marine casualty investigation involving Indian citizens on board foreign flag vessels. It is provided in para 2 of Notice that the onus of conducting the investigation into the marine casualty lies with the flag State or the coastal State within whose territorial sea the casualty has occurred. Para 4 of M.S. Notice 26 of 2002, however, states that for the purpose of effective casualty investigation, it is imperative that the Maritime Administration of the State, whose nationals are involved in the marine casualty, by virtue of being ship’s crew, is required to be invited to take part in the marine casualty investigation, as a substantially interested State, by the State conducting the investigation. Thus, respondent nos. 1, 2 and 3 became aware of the casualty for the first time when they received the communication dated 10.10.2005 about the incident from respondent no.4 and the Surveyor Incharge-cum-Deputy Director General of Shipping by letter dated 19.10.2005 requested Saint Vincent and the Grenadines to carry out the investigation into the casualty as Indian nationals were part of the crew of Jupiter-6. On these facts, it is difficult to hold that the Union of India was guilty of violation of the right to life and was liable for compensation to the petitioners. In the present case, Jupiter-6 was a ship bearing the flag of Saint Vincent and the Grenadines and was also covered by insurance and the insurers have deposited Forty Thousand Dollars (40,000 Dollars) for each deceased officer seafarer and Twenty Five Thousand Dollars (25,000 Dollars) for each deceased non-officer seafarer. 40,000 Dollars is equivalent to Rs.18,14,800/- and 25,000 Dollars is equivalent to Rs.11,34,250/- as mentioned in the report of Registrar (J). It is difficult to hold that the aforesaid amount of compensation is not adequate in the absence of sufficient materials produced to show the age, income of the seafarers and all other factors which are relevant for determination of compensation in the case of death of seafarers (officers and non-officers). Thus respondent nos.3 and 4 can also not to be directed to pay the compensation as per the Collective Bargaining Agreements in the absence of any materials placed before the Court to show that the respondent nos. 4 and 5 were bound by the Collective Bargaining Agreements. Taking note of the additional affidavit filed on behalf of respondent nos. 1, 2 and 3 proposing for setting up an Indian Maritime Casualty Investigation Cell and for amending the 2005 Rules have been indicated. It will be enough to recommend to the respondent no.1 to expedite the proposals which have been under consideration of the Government and to take immediate steps to amend the Merchant Shipping Act, 1958 and the Rules 2005 in a manner they deem proper to ensure that the life of seafarers employed in different ships in high seas are made more secure and safe and in case of loss of life, their kith and kin are paid adequate amount of compensation - direction to the Registrar (J) to expedite the payment of compensation to the legal heirs of the victims in accordance with the orders passed in this case as early as possible, in any case, within a period of four months from today. The compensation received by the legal heirs of the Indian seafarers on board Jupiter-6 will be without prejudice to their claim for higher compensation in any appropriate proceedings.

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