TMI Tax Updates - e-Newsletter
October 31, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Capital Gains Accounts Scheme, 1988 as amended and Capital gain on transfer of residential property not to be charged in certain cases u/s 54GB

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• WHEHTER THE EXPENSES INCURRED FOR THE EDUCATION ABROAD FOR THE SON/DAUGHTER OF A DIRECTOR OF A COMPANY CAN BE TREATED AS BUSINESS EXPENSES - Article

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• Exemption u/s 54 - LTCG - assessee has demolished existing residential building before sale - benefit of exemption not available - HC

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• Exemption u/s 54EA-Joint development-land/ flats-definition of net consideration does not refer that the consideration should be received in cash only

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• Anti dumping duty - The term 'domestic industry', as amended, has not taken away the discretionary power of the Designated Authority. - HC

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• Penalty u/s 271-B - failure to get accounts audited - While deleted the penalty, HC hold that discretion has to be exercised fairly and reasonably

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• Not every condition of Sec. 80IB(10) can be seen as mandatory. - If substantial compliance thereof is established the court may allow deduction.

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Articles

1. TAX ABATEMENT IN SERVICE TAX - Part – II

   By: Dr. Sanjiv Agarwal

2. WHEHTER THE EXPENSES INCURRED FOR THE EDUCATION ABROAD FOR THE SON/DAUGHTER OF A DIRECTOR OF A COMPANY CAN BE TREATED AS BUSINESS EXPENSES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Macroeconomic and Monetary Developments : Second Quarter Review 2012-13

2. Second Quarter Review of Monetary Policy 2012-13

3. Second Quarter Review of Monetary Policy 2012-13 Press Statement by Dr. D. Subbarao, Governor, Reserve Bank of India

4. Capital Gains Accounts Scheme, 1988 as amended and Capital gain on transfer of residential property not to be charged in certain cases u/s 54GB

5. Auction for Sale of Government Stocks

6. Filing of SLP against the vacation of stay of recovery proceedings granted by the Karnataka High Court in the case of Kingfisher Airlines

7. Mounting Pendency of Appeals before CsIT(A) & tardy disposal by CsIT(A) - Performance appraisal of CsIT(A)-reg.

8. Statement of the Union Finance Minister Shri P. Chidambaram on Fiscal Roadmap and Consolidation

9. Sachin Pilot takes Over as New Corporate Affairs Minister

Notifications

Companies Law

1. GSR 763(E) - dated 15-10-2012 - Co. Law

COMPANIES (AMENDMENT) REGULATIONS, 2012 - AMENDMENT IN REGULATION 2

Income Tax

2. 45/2012 - dated 29-10-2012 - IT

Scientific Research Expenditure - Approved Scientific Research Associations/Institutions - National Institute Of Ocean Technology, Chennai

3. 44/2012 - dated 25-10-2012 - IT

Capital Gains Accounts (First Amendment) Scheme, 2012- Amendment in paragraphs 1, 2, 3, 4, 10, 13 and Forms A, C & G

Circulars / Instructions / Orders

Customs

1. F.No.450/24/2012-Cus.IV - dated 29-10-2012

Clearance of containers and imported goods – regarding

Highlights / Catch Notes

Income Tax

• National Institute of Ocean Technology Chennai gains approval for tax benefits under scientific research expenditure rules.

  Notifications : Scientific Research Expenditure - Approved Scientific Research Associations/Institutions - National Institute Of Ocean Technology, Chennai - Notification
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• Amendments to Capital Gains Accounts Scheme 2012: Updates to Paragraphs 1-4, 10, 13 & Forms A, C, G.

  Notifications : Capital Gains Accounts (First Amendment) Scheme, 2012- Amendment in paragraphs 1, 2, 3, 4, 10, 13 and Forms A, C & G - Notification
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• No Section 54 exemption for LTCG if taxpayer demolishes residential building before sale.

  Case-Laws - HC : Exemption u/s 54 - LTCG - assessee has demolished existing residential building before sale - benefit of exemption not available - HC
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• Penalty u/s 158BFA(2) Not Automatic Without Appeal; Tribunal's Partial Addition Upheld Not Sufficient for Penalty.

  Case-Laws - AT : Penalty u/s 158BFA(2) - merely because the part of the addition has been confirmed by the Tribunal and the assessee has not filed appeal before the Hon’ble High Court does not mean that the assessee is liable to penalty u/s 158 BFA(2). - AT
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• Section 269SS Allows Cash Loans from Political Parties, Prescribes Alternatives for Certain Transactions.

  Case-Laws - AT : Section 269SS did not prohibit taking of loan in cash from political party or otherwise. It simply provides mode of taking or accepting certain loans and deposits instead of cash. - AT
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• Tax Rectification Denied: Section 154 Application Rejected Due to Errors in XML File Preparation.

  Case-Laws - AT : Rectification application u/s. 154 rejected - The return is prepared electronically which is converted into an XML file through software - there is every possibility of entering incorrect data without having the expert knowledge of preparing an XML file. - AT
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• Delhi AO's Jurisdiction Validated; Reassessment Notices u/ss 148 and 142(1) Considered Valid.

  Case-Laws - AT : Jurisdiction of AO in framing assessment - The assessee’s address was obtained from the bank records in which the assessee has given address of Delhi and on the same address the notice u/s. 148 was issued followed by notice u/s. 142(1). - reassessment held as valid - AT
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• High Court Upholds Rejection of Interest Waiver Claim u/ss 234A, 234B, 234C for Inadequate Financial Records.

  Case-Laws - HC : Interest u/s 234A, 234B and 234C - non maintenance of proper books of accounts - rejection of claim for waiver of interest cannot be said to be illegal - HC
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• Bank Guarantee Commission for Deferred Credit on Machinery Purchase Classified as Revenue Expenditure.

  Case-Laws - HC : Revenue or Capital expenditure - Bank guarantee for commission paid for securing timely repayment of the deferred credit facilities for buying machinery for its running business - held as revenue in nature - HC
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• Interest on Short Payment of Advance Tax Not Applicable u/s 234B for TDS Issues per Section 195(2).

  Case-Laws - AT : Interest on short payment of advance tax – failure on the part of payer to deduct TDS u/s 195(2) - no interest u/s 234B - AT
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• Retired Judges' Dearness Relief Taxable as Income u/s 17(3)(ii) of the Income Tax Act.

  Case-Laws - HC : Profit in Lieu of Salary - the dearness relief is 'profit in lieu of salary' and is included as an amount received by a retired judge u/s 17(3)(ii) and would be taxable as income. - HC
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• Court Clarifies: Section 54EA Net Consideration Includes Non-Cash Payments in Joint Development and Flat Sale Cases.

  Case-Laws - HC : Exemption u/s 54EA - Joint development agreement - sale of flats - The definition of net consideration does not refer that the consideration should be received in cash only. - HC
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• Interest Payments on Debt Capital Allowed: No Thin Capitalization Rules in Effect Currently.

  Case-Laws - HC : There were at the relevant time and even today no thin capitalization rules in force. Consequently, the interest payment on debt capital cannot be disallowed - HC
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• High Court Overrules ITAT, Calls for Investigation into Alleged In-Genuine Transaction Under 'Income from Other Sources'.

  Case-Laws - HC : Disallowance of loss under the head 'income from other sources' - In-genuine transaction - ITAT rejected invitation on the ground that it was not an investigating agency & allowed the claim - ITAT is not correct - HC
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• Supreme Court Rules No Penalty for Assessee u/s 271(1)(c) for Cash Payments u/s 40A(3.

  Case-Laws - HC : Penalty u/s 271(1)(c) - cash payment u/s 40A(3) - The offer made by the assessee was on the basis that it could not give the details of the parties, and in order to buy peace, the AO was requested to tax the gross receipts on net profits basis. - no penalty - SC
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• Income Tax Authorities Must Exercise Fairness in Imposing Penalties for Audit Failures u/s 271B.

  Case-Laws - HC : Penalty u/s 271-B - failure to get accounts audited - Under Section 271B there is discretion with the income tax authorities to award penalty and this discretion has to be exercised fairly and reasonably - HC
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• DRP and TPO's Transfer Pricing Additions Challenged, Case Remanded for Further Review Due to Lack of Consideration.

  Case-Laws - AT : Transfer Pricing additions by DRP/TPO - order reveals that DRP has not applied its mind - It simply opinied that the Draft Assessment order proposed by the Assessing Officer is to be approved. - matter remanded back - AT
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• Court Rules Section 80-IB(10) Conditions Not Mandatory if Substantial Compliance Shown for Income Tax Deduction Eligibility.

  Case-Laws - HC : Deduction u/s.80-IB(10) of the Act - Not every condition of the statute can be seen as mandatory. - If substantial compliance thereof is established on record, the court may allow deduction. - HC
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• Court Rules Assessment Invalid Without Notice u/s 143(2) in Tax Proceedings Linked to Section 143(3) and 147.

  Case-Laws - HC : Reopening of assessment - Completion of the assessment proceedings under Section 143(3) read with 147 without issue of notice under Section 143(2) was bad in law. - HC
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Customs

• High Court Rules Revenue Department Can't Claim Priority Over Section 529 A, DRT Act, SARFAESI Act Provisions.

  Case-Laws - HC : Revenue department cannot claim first charge or priority in recovery over Section 529 A of the Companies Act, DRT Act and the SARFAESI Act - HC
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• Amended 'Domestic Industry' Definition Retains Authority's Discretion in Anti-Dumping Duties; Rule 2(b)'s 'Only' Not Critical.

  Case-Laws - HC : Anti dumping duty - The term 'domestic industry', as amended, has not taken away the discretionary power of the Designated Authority - The word 'only' under Rule 2(b) need not be concentrated much - HC
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Indian Laws

• Tax Relief for Reinvesting Capital Gains in Residential Properties u/s 54GB of Capital Gains Accounts Scheme.

  News : Capital Gains Accounts Scheme, 1988 as amended and Capital gain on transfer of residential property not to be charged in certain cases u/s 54GB
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• Can Overseas Education Costs for Director's Child Be Deducted as Business Expenses? Tax Implications Explored.

  Articles : WHEHTER THE EXPENSES INCURRED FOR THE EDUCATION ABROAD FOR THE SON/DAUGHTER OF A DIRECTOR OF A COMPANY CAN BE TREATED AS BUSINESS EXPENSES - Article
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Service Tax

• CENVAT Credit Approved for Professional and Liaison Fees in Export Incentives Case, Aligning with Service Tax Case Laws.

  Case-Laws - AT : Input service - input services used for obtaining export incentives - Professional and Liaison fees – cenvat credit allowed - AT
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• Visa Facilitation for Embassies and Consulates Exempt from Business Auxiliary Services Tax.

  Case-Laws - AT : Business Auxiliary Services - activities of visa facilitation and providing customer care services to the Diplomatic Mission Embassies/Consulates and the Visa applicants - held as not taxable - AT
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Central Excise

• Rule 18 Excise Rules: No Time Limit for Rebate Claims; Section 11B Six-Month Limit Not Applicable to Deny Claims.

  Case-Laws - HC : Notification issued under Rule 18 of the Central Excise Rules which prescribes no time limit alone is applicable and Section 11B of Central Excise Act which prescribes 6 months time for claiming rebate would not be applicable to deny the rebate claim of the petitioner - HC
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Case Laws:

• Income Tax

• 2012 (10) TMI 861
  Penalty u/s 271(1)(c) - disallowance including addition of sundry creditors u/s 41(1) - Held that:- As it is not in dispute that the outstanding liabilities in the accounts of sundry creditors was added by the A.O. u/s 41(1) without considering the fact that such amount was payable by the assessee from October, 1999, 2000, 2001 & 2003. Thus merely because the assessee did not file the appeal before the CIT(A) against the addition made u/s 41(1) does not mean that the said liability is false or untrue or the assessee has concealed the particulars of its income. As it is not the case of the Revenue that the assessee has unilaterally written back the accounts of the sundry creditors in its P&L account as a matter of fact the liability was shown in the balance sheet as on 31-3-2007. The assessee being a limited company, this amounted to acknowledging the debt in favour of the creditors for the purposes of section 18 of the Limitation Act, 1963. The assessee’s liability to the creditors, thus, subsisted and did not cease nor was it remitted by the creditors and the liability was enforceable in a court of law. This being no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) - in favour of assessee.

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• 2012 (10) TMI 860
  Penalty u/s 158BFA(2) - CIT(A) deleted the levy - Held that:- The facts are not in dispute that there is a difference of Rs. 18,25,849/- between the undisclosed income returned by the assessee and finally assessed. Thus merely because the part of the addition has been confirmed by the Tribunal and the assessee has not filed appeal before the Hon’ble High Court does not mean that the assessee is liable to penalty u/s 158 BFA(2). As decided in CIT vs. Satyendra Kumar Doshi And Another [2009 (1) TMI 240 - RAJASTHAN HIGH COURT] proviso to section 158BFA(2) enumerates the circumstances wherein no penalty is leviable but from that also it cannot be inferred that the absence of the circumstances enumerated will attract the provision of penalty automatically. Of course, as per the provision of section 273B no penalty shall be imposable on the person or the assessee, as the case may be, on their failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. But then the said provision in no manner leads to the presumption that in respect of the cases other than covered by section 273B for any failure or violation imposition of the penalty is automatic. Each provision of penalty has to be construed independently keeping in view the language employed therein - thus as the assessee’s explanation was not found to be false or untrue and keeping in view that the A.O. while imposing the penalty at minimum i.e. 100% has accepted the reasonable cause though for limited purpose, that on the facts and circumstances of the case, the penalty u/s 158BFA(2) is not leviable - in favour of assessee.

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• 2012 (10) TMI 859
  Transfer of inherited land held by assessee with his relatives – Held that:- Entire gain arising out of such transfer cannot be taxable in hands of assessee alone although he has failed to submit details of land found during search - Order passed by the CIT (A) in case of the present assessee also is set aside and restore the matter back to the file of the AO who shall re-examine the issue in the light of given directions - In the result, both the appeals are treated as allowed for statistical purposes. Undisclosed Income – Held that:- Order passed by CIT is in gross violation of natural justice as no proper opportunity of being heard was extended to the assessee, therefore order passed by the CIT u/s 263 is set aside and direct the CIT to pass an order afresh after affording an adequate opportunity of being heard to the assessee. Since we are remitting the matter back to the file of CIT, the other grounds raised in this appeal have become merely academic and therefore not adjudicated upon - In the result, all three appeals filed by the assesses are treated as allowed for statistical purposes

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• 2012 (10) TMI 858
  Deduction u/s 80IB – Built up area - Whether the terrace area would be included in built up area – Held that:- For the period prior to 01.04.2005, no such definition was on the statute and hence, the built up area has to be considered as per the DC rule of the sanctioning authority. The DC rules do not include terrace in the built up area. So the amendment which has come in this regard w.e.f. 01.04.2005 will not affect the projects which have commencement prior to 01.04.2005. In view of this, assessee is entitled for deduction u/s.80IB (10) as claimed. Appeal decides in favour of assessee Deduction u/s 80IB – Inclusion of commercial area in built up area - Housing project of the assessee was started in F.Y. 2003-04 - AO reject the assessee’s claim on the point of commercial area – Held that:- The assessee had no occasion to comply with the new condition introduced w.e.f. 01.04.2005 that commercial operation should not exceed 2000 sq.ft. and hence does not applicable in respect to the projects which have commencement before to 01.04.2005. The housing project of the assessee has started in F.Y. 2003-04 and therefore is not commercial operation includible in housing projects hence there is no justification for denying deduction u/s.80IB(10). The A.O. is directed accordingly. Issue decides in favour of assessee

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• 2012 (10) TMI 857
  Disallowance u/s 14A r.w.r. 8D - interest paid to ICICI bank on purchase of shares and a further amount being ½% of average investment under Rule 8D(2) - Held that:- From the details of the expenditure it is clear that the expenditure incurred and claimed by the assessee has direct nexus with the professional income of the assessee but is not the case of the revenue that the assessee has used his official machinery and Establishment for earning the exempt income. AO has not pointed out that certain expenditure is not incurred for earning the professional income but are incurred in relation to dividend income or such expenditure is incurred for inseparable and indivisible activities comprising professional as well as the activities on which is exempt income has been earned by the assessee, then in the absence of any such instance of expenditure, finding of AO or any material to show that the expenditure incurred and claimed by the assessee against the taxable income has any relation for earning the exempt income, the provisions of section 14A cannot be applied. From the assessment order it is observed that the AO simply kept the assessee's submissions on record without appreciating as to whether these were correct or not. He proceeded on the premise as if the disallowance as per Rule D is automatic irrespective of the genuineness of the assessee's claim in respect of expenses incurred in relation to exempt income. It is an incorrect course adopted by the AO - as the disallowance cannot exceed the total actual expenditure incurred and claimed by the assessee the total expenditure claimed by the assessee in the Profit and Loss account is Rs.45,977/- thus the disallowance should be restricted to this amount - partly in favour of assessee.

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• 2012 (10) TMI 856
  Penalty u/s. 271D - loan or deposit received from Samajwadi Party - ignorance to the provisions of section 269SS - CIT(A) deleted the levy - Held that:- Samajwadi Party deposited the impugned amount on 23.06.2005 in the joint bank account of the assessee in cash & on the same date, the said amount was withdrawn for the purpose of making payment to Nazul Department for getting the joint property of the assessee converted from lease hold to free hold. The AO did not dispute the genuineness of the transaction entered into between the assessee and Samajwadi Party and no addition has been made in this regard. These facts would clearly reveal that on 23.06.2005 when Samajwadi Party deposited the amount in cash in the joint account of the assessee, the assessee was in dire need of (cash) money because on the same day the amount in cash was withdrawn from the joint account of the assessee and was deposited with the Nazul Department. It is supported by the challan of the treasury and the registered deed executed by the Nazul Officer on 23.06.2005 and 24.6.2005. If the assessee would have taken the loan from Samajwadi Party through banking channel through cheque, it would have taken some time for process in clearing. Since the amount is deposited in the joint account of the assessee on 23.06.2005 and was withdrawn on the same day for making cash payment to the Nazul Authority, there can be no reason to doubt the bona fide of the assessee. Thus, the assessee has been able to prove that for bona fide reasons the assessee had taken cash loan from his own party (Samajwadi Party) and entered into the genuine transaction. Routing of the cash deposit through the bank account of the assessee without direct receipt and payment of the impugned cash would further endorse the bona fide of the assessee. Section 269SS did not prohibit taking of loan in cash from political party or otherwise. It simply provides mode of taking or accepting certain loans and deposits instead of cash. The prohibition is provided under these provisions for taking or accepting from any other person a loan or deposit otherwise than by account payee cheque or draft if it exceeded the prescribed limit. Therefore, whether Samajwadi Party had no provision in their Constitution for giving loan or advance to the assessee, would not be relevant criteria to decide the issue of levy of penalty u/s. 271D. Further, Samajwadi Party has filed their confirmation that the impugned loan was given to the assessee and his wife, which was repaid later on through banking channel - a "reasonable cause" for failure to comply with the provisions of law is proved - in favour of assessee.

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• 2012 (10) TMI 855
  Rejection of the books of accounts - invoking the principles of best judgment - Held that:- The provisions of sec. 145(3) invoked by the AO, lay down that if the AO is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the AO may make an assessment in the manner provided in section 144. As is apparent from the facts narrated in the impugned order, the AO nowhere recorded any finding that the books of accounts maintained by the assessee for Koldam project were incorrect, rendering it impossible to deduce the profit and despite that he proceeded to invoking the principles of best judgment. There is no deviation in the method of accounting employed by the assessee in the previous year from the accounting standards prescribed u/s 145 of the Act while the auditor's observations did not affect the taxable income of the assessee, the assessee having provided detailed explanations against each of the observations of the auditors along with the supporting documents - as decided in CIT Vs. Amitbhai Gunwantbhai [1980 (6) TMI 10 - GUJARAT HIGH COURT] if there is no challenge to the transactions represented in the books then it is not open to Revenue to contend that what is shown by the entries is not the real state of affairs. Secondly, even if for some reason, the books are rejected it is not open to the AO to make any addition on estimate basis or on pure guess work. As there being no explanation in respect of claim of expenditure of Rs.3,20,656/- mentioned in observation (f) the amount is required to be added back. As assessee did not raise any objection if the said amount is added back. To that extent impugned order is modified and AO is directed to disallow the claim of these expenses - As regards other observations of the auditors, since there is no challenge to the transactions represented in the books in the light of these observations, then it is not open to Revenue to contend that what is shown by the entries is not the real state of affairs - partly in favour of assessee.

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• 2012 (10) TMI 854
  Rectification application u/s. 154 rejected - Short term capital - normal rate of 30% OR @ 10% as provided in Sec. 111A - Held that:- In the present system of e-filing of return which is totally depended upon the usage of software, then is possible that some clerical errors may occur at the time of entering the data in the electronic form. The return is prepared electronically which is converted into an XML file either through the free down loaded software provided by the CBDT or by the softwares available in the market. In either of the case, there is every possibility of entering incorrect data without having the expert knowledge of preparing an XML file. As the assessee has claimed Short Term Capital Gains and has shown it in the revised e-return but the same figure did not appear under the item where the short term capital gain is to be taxed at special rate u/s. 111A i.e. internal page-19 of the return under Schedule CG – Capital gains under item No. 7. However, at the same time under Schedule SI-income chargeable to income tax at special rates IB the assessee has shown STCG (iiia) special rate @ 10% which clearly establishes that the assessee has shown STCG liable to be taxed at special rate of 10%. Accordingly, reversing the finding of the CIT(A) AO is directed to allow credit subject to special rate of tax as per provisions of Sec. 111A and rectify the intimation u/s. 143(1) accordingly - in favour of assessee.

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• 2012 (10) TMI 853
  Penalty u/s 271(1)(c) - non-disclosure of ROC fee and interest expenditure - Held that:- The explanation of the assessee that non-disclosure of both the above income was indeed due to inadvertence on the part of the assessee and thus the mistake was bona fide is not so convincing. The assessee has offered tax on the above heads in its revised statements only after selection of the case in scrutiny and after issuance of notice u/s 143(2)/142(1) and after raising the specific queries by the A.O with reference to those expenses claimed by the assessee in the Profit & Loss Account. Thus, no substance in the contention of the assessee that the disclosure of additional income while revising the computation of income was voluntary - the mistakes committed in not disclosing the above additional income in its return of income originally filed, was not bona fide to extend the benefit of Explanation-1 to section 271(1)(c) to the assessee - against assessee.

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• 2012 (10) TMI 852
  Penalty u/s 271B - assessee had not got its account audited u/s 44AB - Held that:- As decided in ACIT Versus Smt. Bharti Sharma [2010 (7) TMI 494 - ITAT, NEW DELHI] the assessee cannot be penalized for the act for which there is no failure on his/her part - for the purpose of sec. 44AB, turnover of all the businesses has to be considered but the provisions of sec. 271B will be pressed in operation in respect of the failure only and not in respect of accounts which have been audited. Setting aside the orders of the authorities giving directions to AO to delete the penalty levied in respect of M/s. Rex Engineering & Shares whose accounts were admittedly audited under sec. 44AB and audit report thereof was filed well within the prescribed time limit - partly in favour of assessee.

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• 2012 (10) TMI 851
  Disallowance of renovation property expenditure - Held that:- Earlier sale deal was fixed with Smt. Kavita Agarwal vide agreement dated 16.8.2002 for a consideration of Rs.80 lakhs and sum of Rs.25 lakhs was said to have been received which was alleged to have been refunded on 24.10.2002 due to the fact that the deal could not be materialized. Then again the same property was sold to Shri Amit Sibal for a sum of Rs.1,01,00,000/- but the assessee has claimed to have incurred an expenditure of Rs.52,60,758/- to remove certain defects in the construction and therefore in fact the building was sold for a net consideration of Rs.48.31 lakhs as against the earlier agreement with Smt. Kavita Agarwal for Rs.80 lakhs. It is not understood as to what prudence the assessee had used at the first place by refunding the amount of Rs.25 lakhs received from Smt. Kavita Agarwal without forfeiting which always remains as the standard condition in any agreement to sell and then by agreeing to sell the same to another buyer after a period of about five months at a much lower net consideration after considering the alleged claim of expenses. This situation does not arise in reality and is against the normal human behavior. The assessee did not submit the original invoices of construction alleged to have been done on the property. It had submitted only photo copy of invoices and most of the invoices were in the name of Nahar Theatre Pvt. Ltd. and name of the assessee was written after cutting the name of Nahar Theatre Pvt. Ltd - From the details of invoices as placed it is apparent that major amount was alleged to have been spent between 7.4.2002 to 23.10.2002. Therefore, how it can be claimed that alteration/addition/renovations were done at the direction of ultimate buyer Shri Amit Sibal because agreement to sell could only be entered into with him after termination of first agreement of dated 16.,8.2002 which was said to have been terminated on 24.10.2002. Therefore, it emerges from the above that most of the expenses related to the period before entering into agreement to sell with Shri Amit Sibal which ultimately implies that expenses incurred before agreement with Shri Amit Sibal cannot be said to have been incurred at his behest - against assessee. Disallowance of Festival expenses - Held that:- As assessee had only one property, the disallowance of Rs.50,000/- out of total festival expenses of Rs.2 lakhs was justified.

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• 2012 (10) TMI 850
  Penalty u/s 271(1)(c) - difference in original return and revised return - Held that:- Penalty was imposed due to failure of the assessee to explain the difference in difference in profit figures in the two returns. The explanation before CIT(A) that revised return was without its consent is of no force also the assessee had filed original return and had revised it by lowering the profits and on explanation it could not explain the difference. Thus it can be opined that the assessee took this plea before CIT(A) as it was unable to explain the difference in expenses. Therefore, the assessee was liable to penalty. Though AO had imposed the penalty for a lump sum amount of Rs.5,00,000/-, CIT(A) modified it and directed the AO to calculate the penalty on the basis of tax ought to be evaded. No infirmity in the order of CIT(A) except regarding quantum of penalty which should be calculated on the basis of difference between figures of profits between two profits & loss accounts. Thus direction to AO to calculate penalty accordingly - partly in favour of assessee.

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• 2012 (10) TMI 849
  In genuine brokerage - CIT(A) allowed the claim on admitting additional evidence u/r 46A - Held that:- On perusal of the record, it is found that AO has issued notice u/s 143(2) on 16.09.2009. He completed the assessment on 21.12.2009, meaning thereby the proceeding was alive only for a period of three months. The assessee has submitted before the AO that parties may not be easily accessible after a time gap. With one party, it had dealt with only once. Thus taking into consideration this aspect observed that assessee was prevented by sufficient reasons for not producing the evidence its case falls within the ambit of Rule I of Rule 46A. No reason to interfere in the order of CIT(A)and thereafter rightly deleted the addition - in favour of assessee.

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• 2012 (10) TMI 848
  Reopening of assessment - Long Term Capital Gain had escaped assessment - co-owner holding 50% share in the property - Held that:- Considering the agreement of Partition & documentary evidences AO has erroneously drawn his conclusions that the assessee was having 50% share in the said property, instead of the fact that the assessee has only 50 square yards out of 1050 square yards of the property. AO has also not brought any material on record to rebut the evidences filed by the assessee. The legal heirs of late Shri Arun Kumar Lal had shown the entire sale consideration in its return of income - in favour of assessee.

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• 2012 (10) TMI 847
  Prior period expenses - CIT deleted the addition by admitting additional evidence under Rule 46A - revenue appeal - Held that:- CIT(A) did not consider any additional evidence violating Rule 46A of the Rules as he impliedly followed the provisions of Rule 46A by sending the additional evidence, which was first time submitted by the assessee to the AO for verification and the issue was de novo restored to the file of the AO. In this situation, it cannot be held that CIT (A) granted relief to the assessee by allowing the claimed expenditure but he simply restored the issue to the file of the AO for a decision in accordance with the Act. Thus this appeal of revenue is devoid of merits and deserves to be dismissed - against revenue.

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• 2012 (10) TMI 846
  Jurisdiction of AO in framing assessment - No notice u/s. 148 issued by the AO having jurisdiction over the case - Assessment quashed by CIT(A) - Held that:- The assessee’s address was obtained from the bank records in which the assessee has given address of Delhi and on the same address the notice u/s. 148 was issued followed by notice u/s. 142(1). In response to that notice assessee appeared before the ITO, Ward 25(3), New Delhi and requested that assessee’s case is being assessed with ITO, Ward-I, Rohtak and requested to transfer the records to ITO, Rohtak from New Delhi. Thus, there is no case for assessee to have any grievance in this case as assessee was issued notice u/s. 148 at an address given to the bank by the assessee himself. Thus it can not be said that assessee’s case was reopened and assessed without assuming proper jurisdiction - As assessee never challenged the address at New Delhi in these circumstances CIT(A) erred in quashing the assessment, on the ground that proper jurisdiction was not obtained by the AO. Assessment in this case cannot be said to have been framed without assuming proper jurisdiction as the notice was very much issued at the address given by the assessee himself in the bank account - matter is being remitted back to the CIT(A) to consider the merits of the case and pass a speaking order - in favour of revenue for statistical purposes.

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• 2012 (10) TMI 845
  Penalty u/s. 271(1)(c) - disallowance on foreign travel expenses - Held that:- Assessee’s submissions in this regard is note worthy that both the wives, who were also Directors of the company were receiving considerable salary which was accepted year after year. Hence, the visits cannot be said to be for non-business purposes. It has further been noted that disallowance in this regard in the preceding year was only 20% and on that addition penalty was not imposed, even the penalty notice has been issued by the AO. In this background it is to concluded that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In this case disallowance has been made only on estimate basis. In the preceding year this disallowance was only 20% and no penalty was imposed. Thus on the facts and circumstances of this case the conduct of the assessee cannot be said to be contumacious so as to warrant levy of penalty u/s. 271(1)(c) - mensrea was a essential requirement of penalty u/s 271(1)(c) as decided in Dilip N. Shroff Versus Joint Commissioner of Income-tax And Another [2007 (5) TMI 198 - SUPREME COURT] - in favour of assessee.

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• 2012 (10) TMI 844
  Penalty u/s. 271(1)(c) - excess deduction u/s. 80HHC - CIT(A) deleted the levy - Held that:- Disallowance has resulted on account of retrospective amendment in section 80HHC by way of Taxation Laws (second amendment) Act, 2005 with retrospective effect from 1.4.98. These provisions were not there in the relevant section at time when assessee filed return of income on 31st October, 2000. At this time the assessee made a bonafide deduction u/s. 80HHC, on the basis of certificate issued by the Chartered Accountant in the prescribed Form No. 10CCAC. Moreover, when assessee has disclosed all the material facts for computation of his income, it could not be said that the at time when assessee filed return, he had failed to disclose fully and truly all material facts necessary for assessment. As decided in C.I.T., Ahmedabad Versus Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] it was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) & if the contention of the Revenue is accepted then every Return where the claim made is not accepted by AO for any reason the assessee will invite penalty under Section 271(1)(c) - in favour of assessee.

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• 2012 (10) TMI 843
  Interest u/s 234A, 234B and 234C - non maintenance of proper books of accounts - application for waiver of interest rejected - Held that:- Power of waiver has been conferred on the Chief Commissioner and the Director General by virtue of the Board's notification dated 23.5.1996. Notification also provide in clauses (a) to (e), the circumstances in which the waiver can be granted. The contention raised by the assessee that on account of a bona fide mistake, they could not file the return or pay tax in time cannot be said to be one which is covered by any one of the circumstances mentioned in notification - rejection of claim for waiver of interest cannot be said to be illegal - against assessee.

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• 2012 (10) TMI 842
  Revenue recognition – Accrual of income - Assessee is a non-resident – Providing onshore construction work and onshore services in connection in relation to power & gas projects - Following the percentage of completion method for contracts as per AS 7 – Assessee entered into two Onshore Construction Initial Work Agreement – During the year assessee had received advance and expenditure incurred shown as WIP – AO estimates 40% of contract was completed & addition made for 10% of receipt amount – Held that:- The assessee did not produce invoices before AO. Issue remit back to revenue with direction to allow another opportunity to the assessee to place on record all the invoices on the basis of which assessee had been receiving payments from EDC in respect of Contract If the entire payment received by assessee during the year is in respect of said agreement and is in respect of work done under that agreement then the project having completed more than 20% will be liable to be assessed to that extent during the year under consideration and appropriate assessment will be done by the AO with regard to year under consideration. Issue remand back to AO

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• 2012 (10) TMI 841
  Nature of expenditure - Revenue or Capital expenditure - Bank guarantee for commission paid by the assessee for securing timely repayment of the deferred credit facilities for buying machinery for its running business - Issued Deep Discount Bond (DDB) for financing the DND project - DDB holders were given an option under the offer to redeem the bonds in the 5th or 9th year of its allotment – Company entered into an agreement with another company the take out assistance against charges @ 1.6% per annum – Held that:- Following the decision in case of India Cements Limited (1965 (12) TMI 22 - SUPREME COURT) that the 'take out assistance fees' computed @ 1.6% per annum of the respective amount to take out obligation of both the entities were by way of guarantees on an exit option, independent of the financial position of the assessee company. The fees covers the event, in which the assessee-company may not have sufficient cash flow at the time of premature redemption of the DDBs after the end of the 5th and 9th year respectively at a pre-determined price. The guarantee fee was by way of assistance from financial institution; it was not an asset or advantage of an enduring nature. In favour of assesse

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• 2012 (10) TMI 840
  Interest on short payment of advance tax – failure on the part of payer to deduct TDS u/s 195(2) - Had the payer made the deduction of tax at the appropriate rate, the net tax payable by the assessee would have been Nil - Held that:- Following the decision in case of Jacabs Civil Incorporated / Mitsubishi Corporation (2010 (8) TMI 37 - DELHI HIGH COURT) that once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and, therefore, can take action against the payer u/s 201 and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident it liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of Sec 191 along with Sec. 209 (1) (d). Therefore, it would not be permissible for the revenue to charge any interest u/s 234 B. In favour of assessee

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• 2012 (10) TMI 839
  Profit in Lieu of Salary - Whether the receipt of dearness relief to pensioner is taxable as profit in lieu of salary – Assessee is a retired judge of High Court – Held that:- The exemption from liability to pay income tax on certain perquisites or allowances received by a judge and which may not be included in the computation of his income chargeable under the head 'salaries' u/s 15 IT. Act,1961 is included u/s 22D, in Chapter IV as substituted by Act No. 20 of 1998. All other amounts received by a judge are taxable. The dearness relief will be included in the pension and is not exempt from income tax u/s 22D of the Act of 1954. Therefore, the dearness relief is 'profit in lieu of salary' and is included as an amount received by a retired judge u/s 17(3)(ii) and would be taxable as income. Appeal decides favour of revenue

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• 2012 (10) TMI 838
  Exemption u/s 54EA - Joint development agreement - sale of flats - whether sale consideration on the sale of flats amounts consideration received by the assessee on the sale of long-term capital asset i.e., the land owned by the assessee? - Held that:- Whole or any part of the net consideration of sale is invested in Specified Securities within a period of six months after the date of transfer, the deduction under section 54EA is available. - Net Consideration as per the definition means, the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by the expenditure incurred wholly and exclusively in connection with such transfer. The definition of net consideration does not refer that the consideration should be received in cash only. - benefit of exemption allowed - decided in favor of assessee.

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• 2012 (10) TMI 817
  Deduction of Interest claimed - Held that:- Borrowings on which the interest has been claimed as a deduction are in fact capital of the assessee and brought only under the nomenclature of loan for tax consideration. Debt capital is required to be re-characterized as equity capital. However, the Tribunal held that in India as the law stands there were no rules with regard to thin capitalization so as to consider debt as an equity. It is only in the proposed Direct Tax Code Bill of 2010 that as a part of the General Anti Avoidance Rules it is proposed to introduce a provision by which a arrangement may be declared as an impermissible avoidance arrangement and may be determined by recharacterzing any equity into debt or vice versa. There were at the relevant time and even today no thin capitalization rules in force. Consequently, the interest payment on debt capital cannot be disallowed – As no substantial question of law is involved - Appeal is admitted

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• 2012 (10) TMI 816
  Whether reimbursement of traveling expenses taxable as fees for technical services – Assessee is a non-resident, received a sum in lieu of reimbursement of traveling expenses – AO argued that such reimbursement is taxable as fees for technical services – Held that:- Following the decision in case of SIEMENS AKTIONGESELLSCHAFT (2008 (11) TMI 74 - BOMBAY HIGH COURT) that reimbursement of expenses is not liable to tax. Therefore, reimbursement does not have any element of income comprised therein and hence not liable to tax. In favour of assessee Whether payment of living allowance by the Indian company to expatriates as fees for technical services – Non-resident assessee deputed its personnel for rendering services to Indian companies – Indian company reimburse the living allowances as per the agreement - AO included this amount in fees for technical services – Held that:- Reimbursement does not have any element of income comprised therein and hence not liable to tax. In favour of assessee

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• 2012 (10) TMI 815
  Disallowance of Bad debts - Held that:- No infirmity in the order of CIT(A) in allowing the claim as after the assessment of section 36(1)(vii) w.e.f. 01.04.1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee as decided in TRF Ltd. vs CIT [2010 (2) TMI 211 - SUPREME COURT]. Bad debt should be allowed in the year of write off - in favour of assessee.

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• 2012 (10) TMI 814
  Deduction u/s 80 IB - whether conversion charges, testing charges and interest income would be eligible for deduction? Held that:- Assessee has two activities, the first is where it purchases raw material and converts the same into finished products and secondly where raw material is supplied by the customer and the same is used for manufacturing of finished products and then given to the customer on payment of conversion charges. As far as conversion charges is concerned, there is no dispute that the assessee is entitled for claim of deduction under Section 80 IB as that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking & gains derived from industrial undertakings and so entitled for the purpose of computing deduction under Section 80IB as decided in CIT – III Versus Sadhu Forging Ltd. [2011 (6) TMI 9 - DELHI HIGH COURT] - FAA was right in holding that the assessee is entitled to deduction of conversion and testing charges earned by the assessee for doing job work on the facts and circumstances of the case - against revenue. Interest received from customers for delayed payments - exclusion of only net interest income - Held that :- As decided in Nirma Industries Limited Versus Deputy Commissioner of Income-Tax [2006 (2) TMI 92 - GUJARAT HIGH COURT] while computing deduction under section 80-I interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial undertaking - directed to tribunal to examine the factual matrix of the present case including the balance sheet and accounts of the assessee, to decide the question - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 813
  Revised statements in Form 26Q - errors in reconciliation of TDS rectification - petition under Section 154 - Held that:- The issue raised by the Revenue is an academic question as the Assessing Officer has already rectified his orders passed under Section 200A. There is no grievance to the assessee or to the Revenue as on date. In any event the AO was bound to act as per law and dispose off the petition under Section 154 filed by the assessee, which he did. Dismissal of all these appeals of the Revenue, as infructuous.

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• 2012 (10) TMI 812
  Depreciation on capital assets - disallowance on double deduction - CIT(A) allowed the claim - Held that:- As decided in Commissioner of Income-tax Versus. Tiny Tots Education Society [2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT] the income of the assessee being exempt, the assessee was only claiming that depreciation should be reduced from the income for determining the percentage of funds which had to be applied for the purpose of the trust. It could not be held that double benefit was given in allowing the claim for depreciation for computing income for purposes of section 11 - in favour of assessee. Provision for diminution in the value of investment - CIT(A) deleted the addition - Held that:- CIT(A) has not given a speaking order and not properly dealt with the issue. He has remitted the matter also to the Assessing Officer which was beyond of his jurisdiction. Thus on the facts and circumstances of the case, interest of justice will be served if the matter is remitted to the file of the AO - in favour of revenue for statistical purposes. Exempt income included in the assessed income - CIT(A) directed AO to delete the sum - Held that:- Neither the Assessing Officer nor the CIT (A) has made any addition on account of exempt income. The assessee has not reduced the exempt income from the computation income and the assessee is trying to raise a fresh ground as it is not permissible in view of the decision of Goetze (India) Limited Versus CIT (A) [2006 (3) TMI 75 - SUPREME COURT] that the power of the Tribunal under section 254, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal - against assessee.

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• 2012 (10) TMI 811
  Unexplained cash credits - CIT(A) deleted the addition - Held that:- AO has given notices u/s. 133(6) to these parties, but the notices were received back, since persons were not found in the given address. Since CIT(A) has observed that AO has not brought on record any material to controvert the submissions of the assessee in this regard it is not the case that CIT(A) has himself has done enquiries and found that the assessee’s submissions are cogent. Thus, the proper enquiry of the submissions by the assessee has not been done. Shares of 10/- each were said to have been given at a premium of Rs.40/- each for which apparently there is no justification. The company’s balance sheet and other particulars have not been furnished before us from where it can be adduced that the companies shares can command so much of premium. CIT(A) has not touched upon this aspect, thus the matter needs to be remitted to the files of the AO, to enable the assessee to furnish cogent evidences to prove the justification of such huge share premium being received by the assessee company - in favour of revenue for statistical purposes.

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• 2012 (10) TMI 810
  Penalty u/s. 271 (1) (b) - non-compliance of three notices issued in connection with assessment year 2003-04 - Held that:- Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so as decided in Hindustan Steel Limited Versus State Of Orissa [1969 (8) TMI 31 - SUPREME COURT] In the present case assessee’s conduct was not contumacious to warrant levy of penalty as there was no deliberate attempt on the part of the assessee to evade the assessment proceedings as he claimed that on some occasions, he himself had gone to the office of the concerned Assessing Authority where the concerned assessing authority’s office was found locked and also some of the notices were general notices without requiring any specific documents to be complied with - in favour of assessee.

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• 2012 (10) TMI 809
  Disallowance of loss under the head 'income from other sources' - In-genuine transaction - ITAT rejected invitation on the ground that it was not an investigating agency & allowed the claim - Held that:- Section 57 provides for deductions in computing the income under the residuary head i.e. 'income from other sources'. Clause (iii) of the Section allows deduction of any expenditure (not being in the nature of capital expenditure) laid out or expended wholly or exclusively for the purpose of making or earning such income. Interest paid on borrowings made for making investments with the object of making or earning income falls for consideration under this clause. As rightly pointed out on behalf of the Revenue, the principle would apply to a genuine case of borrowing and lending and if there are materials to show that the transaction of borrowing and lending was sham or was got up with the purpose of avoiding or reducing the tax liability, nothing prevents the revenue authorities from ignoring the claim. The difficulty in the present case with the order of the Tribunal is that despite being told that there are several unusual features which throw considerable doubt on the assessee's claim for deduction of the interest, it did not consider it proper to examine the matter further, but chose to take umbrage on the principle that the Tribunal cannot be expected to act as an investigating agency. It is true that the Tribunal cannot by itself embark upon an investigation and try to raise a new issue or make out a new case for the revenue which has not occurred to the revenue authorities, however, in the present case the AO did indicate the broad contours of the intention of the assessee to reduce his tax liability by claiming interest under Section 57(iii) on borrowings allegedly made from companies belonging to the same group for the purpose of acquiring shares, again in companies of the same group, which were closely held and did not yield any dividend. It is therefore, not a case where the Tribunal, for the first time, was being invited to investigate into an aspect which was not raised by the income tax authorities. The Tribunal, with respect, was not justified in brushing aside the invitation on the ground that it was not an investigating agency and has to limit itself to the issues raised before it. The issue as raised before it was the motive of the assessee and the Tribunal, given the status as the ultimate fact finding authority under the Act, ought to have remanded the matter, so that the motives of the assessee in making huge claims for deduction of interest under Section 57(iii) are made known to those who matter, particularly the taxing authorities - thus set aside the orders of the CIT (Appeals) and the Tribunal on the point of Section 57(iii) and remand the cases to the AO for de novo proceedings - in favour of revenue.

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• 2012 (10) TMI 808
  Penalty u/s 271(1)(c) - Whether the disclosure/admission of Assessee of taxing the income @ 8% when faced with detailed enquiry is a voluntary surrender and not liable for penalty under section 271(1)(c) of the Act - The assessee was asked to explain as to why the cash payments made ought not to be disallowed under Section 40A(3). It was also asked to explain the substantial expenses claimed in the P&L account with the aid of vouchers and bills. Held that:- The offer made by the assessee was on the basis that it could not give the details of the parties, and in order to buy peace, the AO was requested to tax the gross receipts on net profits basis. This, as noticed earlier, resulted in addition of over Rs. 51 lakh, which represented more than the amount disallowable under Section 40A(3). The assessee’s cash payments were concededly not the amount which was disallowed, they had no co-relation to what could not be established, and were disallowable. The assessee did provide particulars, but could not back up its claim with confirmation with the explanation that the payees insisted on immediate payment, to fulfill their contractual commitment to their suppliers. Considering a case for business expediency, the material which led to the penalty order i.e. absence of the payees at their places or address provided, was gathered after notice under Section 271 (1) (c) was issued. Thus assessee ought to have been provided with opportunity in this regard during the assessment and that material which did not exist at time of initiation of the penalty proceeding ought not to have been put against it. Thus addition on the basis of the assessee’s offer to be taxed at 8% on gross receipts cannot be concluded that it had provided inaccurate particulars in its returns & the imposition of penalty was not justified - in favour of the assessee

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• 2012 (10) TMI 807
  Penalty u/s 271-B - failure to get accounts audited - violation of the provisions of Section 44-AB & its 2nd proviso - ITAT deleted the levy - Held that:- Apart from the fact that the audit of the respondent-society under Section 64 of the U.P. Cooperative Societies Act, 1963, has to be carried out by the Accountant appointed by the Registrar of societies, who has specific qualifications, there was an order passed by the High Court directing that no cooperative society in the State of U.P., will get its account audited through the private Chartered Accountants. Thus it cannot be concluded that Tribunal committed any error in law in observing that in view of the order issued by the High Court, which was binding upon all the cooperative societies in the State of U.P. including the respondent-assessee, the respondent cooperative society could have got its account audited through a chartered accountant - in favour of assessee. Under Section 271B there is discretion with the income tax authorities to award penalty and this discretion has to be exercised fairly and reasonably on the facts and circumstances in accordance with the settled judicial principles.

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• 2012 (10) TMI 806
  Exercising jurisdiction u/s 263 by CIT(A) - re assessee assessee's claim under section 10B - ‘live plants’ produced by the assessee through tissue culture the same was concerned with “live article” or things - AO allowed the claim - Held that:- The assessee’s business activity of tissue culture is ‘manufacture or produces’ within the meaning of section 10B(2)(i) and CIT had wrongly held that since assessee’s produce is “plant”, which is a lively object, therefore, it is covered by section 2(29)(BA), as CIT (A)has not proceeded on the correct factual and legal interpretation of section 2(29BA) qua facts and circumstances of the instant case as where the assessee is involved in tissue culture, which can in no way be called any activity other than ‘manufacture or produce’ because one mother plant is tissue cultured, which gives rise to production of voluminous number of plants by artificial processes and stages AO in finalizing the assessment had rightly granted the assessee deduction under section 10B. It was one of the ‘possible view’ as per law, which could not be revised by CIT under section 263. Consequently, once the assessee’s unit is entitled to be treated to be a qualifying unit under the provision of section 10B(2)(1) the order of the Commissioner of Income Tax revising the assessment does not withstand the test of the law - in favour of assessee.

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• 2012 (10) TMI 804
  Transfer Pricing additions by DRP/TPO - warranting provision & provision for sale promotion - Additions to income to arrive at the Arm's Length Price of the International transactions - Held that:- Perusal of the order it nowhere suggest that DRP has considered the facts and circumstances of the case, nature of dispute and what is the defence. The order is running into few lines and does not disclose the mind applied by the Adjudicators. Thus it can safely be said that it is totally a non speaking order. It simply opinied that the Draft Assessment order proposed by the Assessing Officer is to be approved. As in ROADMASTER INDUSTRIES OF INDIA P. LTD. Versus INSPECTING ASSISTANT CIT (ASSESSMENT) AND ANOTHER [2006 (5) TMI 86 - PUNJAB AND HARYANA HIGH COURT] the necessity of assigning reason in support of an order adjudicating the controversy between the parties is considered. Thus order reveals that DRP has not applied its mind. The assessee has filed objections running into more than 400 pages not a single objection has been considered by the DRP. Therefore, the order of Ld DRP is set aside and remit the issue back to the file of Ld DRP for re-adjudication - in favour of assessee by way of remand.

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• 2012 (10) TMI 803
  Deduction u/s.80-IB(10) of the Act - Held that:- In the present case, the facts are peculiar. The assessee had not only completed the construction two years before the final date and had applied for BU permission. Such BU permission was not rejected on the ground that construction was not completed, but the some other technical ground. In that view of the matter, granting benefit of deduction cannot be held to be illegal - In favor of assessee. Not every condition of the statute can be seen as mandatory. - If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available.

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• 2012 (10) TMI 802
  Whether the Department is entitled to charge interest under Section 234B of the Income Tax Act, 1961, on the assessee bringing forward the tax credit balance into the year of account relevant to Assessment Year 2001-2002 Following the judgement of court in case of [ CIT v. Tulsyan NEC Ltd 2010 (12) TMI 23 - SUPREME COURT OF INDIA] Held that:- It is immaterial that the relevant form prescribed under Income Tax Rules, at the relevant time (i.e. before 1.4.2007), provided for set off of MAT credit balance against the amount of tax plus interest i.e. after the computation of interest under Section 234B. This was directly contrary to a plain reading of Section 115JAA(4). Further, a form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute. Mat credit allowed to be set off from advance tax before calculating interest - in favour of assessee - civil appeals filed by the Department are dismissed with no order as to costs.

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• 2012 (10) TMI 801
  Penalty under section 271(1)(c) of the Income Tax Act, 1961 - Whether penalty can be levied if Part of sale consideration has been applied for purchase of another residential house and assessee is allowed proportionate amount of deduction under section 54F when income declared was not correct - Held that:- Mere addition in Income is not sufficient there must be concealment of Income to attract penalty. - Revised return can be filed by an assessee where there is omission or wrong statement or any inadvertent mistake. [Udayan Mukherjee v. CIT 2005 (11) TMI 62 - CALCUTTA HIGH COURT ] - In the Present case under consideration a bonafide mistake has happened in the matter of deduction under section 54F or under section 54 of the Act. This is a case of bona fide misconception and belief, therefore, penalty under section 271(1)(c) is not leviable. - Further when the assessee has disclosed the transaction which is the basis for capital gains tax and though wrongly claimed exemption from the capital gains tax, that cannot be a case of Penalty.Thus, the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable - A.O. is not justified in levying penalty of Rs. 2,78,660/- under section 271(1)(c) of the Act. Therefore, the same is cancelled. - decided in favor of assessee.

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• 2012 (10) TMI 800
  Waiver of interest charged u/s234A, 234B, 234C - Delay in filing Returns - Held that:- During search operation in premises of assessee delay of about 18 months in respect of assessment year 1994-95 and 12 months in respect of assessment year 1995-96 in filing the returns ,this issue is remitted back to the Chief Commissioner of Income Tax, Kochi for re-consideration after giving an opportunity of hearing to the petitioner. In order to avoid delay, the petitioner shall appear before the Chief Commissioner on a day fixed by him after receipt of notice from the Chief Commissioner and the Chief Commissioner shall dispose of the case of the petitioner within three months from the date of receipt of the notice to him. Till the disposal of the application of the petitioner,the impugned demand shall not be executed - writ petition is disposed off.

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• 2012 (10) TMI 799
  Restraining of illegal business running by respondents which was wrong and without sanction of law - Held that:- Writ of prohibition can be issued only when inferior court or Tribunal acts in excess of jurisdiction, in violation of the principles of natural justice etc. The remedy of the petitioner is to approach appropriate forums to get a proper adjudication. Writ Petition is not a proper remedy in respect of the matters highlighted by the petitioner - Leaving open the right of the petitioner to prosecute such remedies, this writ petition is dismissed.

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• 2012 (10) TMI 798
  Reopening of assessment - Held that:- As decided in CIT Versus M. Chellappan And Another [2004 (11) TMI 17 - MADRAS HIGH COURT] completion of the assessment proceedings under Section 143(3) read with 147 without issue of notice under Section 143(2) was bad in law. When there was failure on the part of the Revenue from complying with the procedure laid down under Section 143(2), the assessment had to fail. The facts of this case are no different from the case already discussed above as there was no notice issued under Section 143(2) no hesitation in confirming the order of the Tribunal cancelling the assessment - in favour of assessee.

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• 2012 (10) TMI 797
  Non deduction of TDS - CIT(A) deleted the demand raised - Held that:- Undisputedly, payment of Rs. 15 lacs had been made by the assessee company to M/s Nesco Ltd. on 01.04.2002 also clear from the copy of account of M/s Nesco Ltd. for the period from 01.04.2002 to 31.03.2003. On a query as to why the assessee had failed to deduct tax at source on such payment @ 22.44%, the assessee had submitted that the certificate u/s 197 stood already applied for by M/s Nesco Ltd. even before the date of payment, i.e., 01.04.2002. Undisputedly, the certificate u/s 197 was granted only on 23.04.2002, authorizing the assessee to deduct tax at source @ 2% plus surcharge u/s 194 from the licence and maintenance fee/rent compensation payable by the assessee to M/s Nesco Ltd. upto 31.03.2003, thus it is quite clear that it was to remain in force till 31.03.2003, unless cancelled by the ITO prior to the said date Thus, the assessee has not been shown to have committed any default in deducting the tax and depositing it. It was only because the assessee did not have the TDS certificate for low deduction @ 2% on 01.04.2002 while paying the advance rent, that the Assessing Officer treated the assessee as an assessee in default for not deducting 20% tax on 01.04.2002, on the advance rent paid to M/s Nesco Ltd - the tax having been deducted @ 2% and having been deposited before the prescribed date, by no stretch of imagination can the assessee be deemed to be an assessee in default - in favour of assessee.

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• 2012 (10) TMI 796
  FMV of capital asset on 01-04-1981 – Land & building held on partition of HUF – Assessee had taken FMV as on 01-04-1981 calculated by register valuer - AO found difference in the FMV as on 01-04-1981 in comparison with as comparable sales instances in the same area – AO compute cost of acquisition as FMV on 01-04-1981 on the basis of comparable sales of same area – Held that:- The matter of valuation of FMV as on 01-04-1981 there is always an element of estimation and guess work as the data available cannot be comparable with the property in question in all aspects. In the matter of valuation FMV as on 01-04-1981, the revenue always takes a stand that the same is less than what is adopted by the assessee, because doing so, will increase the quantum of capital gains. The assessee on the other hand, will content with the FMV as on 01-04-1981 is higher, because that will result in capital gains being computed at a lower figure. Keeping in mind that valuation can never be exact, we would be much more magnanimous than the AO and fix the value of FMV of the property as on 01-04-1981 at Rs.5,000/- per cent for the first and second property. In relation to Property sold on 10-07-1981 - There is evidence available that the value of the land was adopted as on 10-07-1981 at Rs.14,000/- per cent. The assessee has also adopted the same value while computing the capital gains. The reasons assigned by the AO for rejecting the comparable sale instances are not justified. The valuation as declared by the assessee for this property is directed to be accepted. Thus, the appeals are partly allowed.

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• Customs

• 2012 (10) TMI 874
  Doctrine of Merger – Commssioner (Appeals) has rejected the review application - Commissioner (Appeals) has not decided the issue on its merit - held that:- Commissioner (Appeals) has erred in dismissing the Review Application filed by the Department on the doctrine of merger. - Decision of Apex Court in Commissioner of Central Excise, Delhi Vs. Pearl Drinks Ltd. [2010 (7) TMI 10 - SUPREME COURT OF INDIA] followed.

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• 2012 (10) TMI 873
  Whether central excise and customs duty arrears have priority and precedence over the claims made by public sector Banks - either under the decree/recovery certificate granted by the Debts Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or while enforcing the security interest under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - interim measure restrained the first respondent from confirming the sale in favour of the highest bidder but allowed the auction sale – Held that:- For the first time the Parliament created first charge on the property of the assessee in relation to duty, penalty and interest payable under the Central Excise Act or Customs Act as the case may be. But these provisions themselves exclude from their operational field, the recovery or withholding of monies under Section 529 A of the Companies Act, DRT Act and the SARFAESI Act - two provisions would do not support the Dept. - When they were about to conduct auction or about to confirm auction sale, the Assistant Commissioner intervened objecting Bank sale. So also the auction initiated under the SARFAESI Act in all these matters, is not yet completed. These are, therefore, saved by Section 11E of the Central Excise Act and Section 142A of the Customs Act, and the Dept., cannot claim first charge or priority in recovery

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• 2012 (10) TMI 872
  Penalty - abetting illegal import – alleged that appellant was aware that the consignments were imported in the name of M/s. Kalinga Trading Co. showing one Shri Prakash Surendra Tiwari as the proprietor, even though Shri Jainarayan I. Rajbhar was the actual proprietor – Held that:- In spite of coming to know this fact, he did not inform the Customs authorities and got the bills of entry assessed as ABC dry chemical powder for fire extinguishers - he knew that one Shri Ajay R. Bhan was attempting to arrange certain manipulations with reference to the chemical test report of the goods under importation, but he remained silent and did not inform the Customs of the same - acts of omission and commission which rendered the goods liable to confiscation under Section 111(d) & (m) of the Customs Act, 1962, Shri Brajesh Tiwari is liable to penalty under Section 112 of the Customs Act Penalty against Shri Kishun Ram, Assistant Chemical Examiner - There is no evidence on record to show that Shri Kishun Ram undertook any activity, the commission or omission of which rendered the goods liable to confiscation. In the absence of such a positive evidence, the benefit of doubt has to be given to him and therefore, a penalty under the Customs Act, 1962 cannot be imposed on him. We should hasten to mention here that this finding of the Tribunal does not in any way affect the departmental disciplinary proceedings initiated against Shri Kishun Ram for dereliction of duty and that should be decided on the basis of the evidence available on record independently of the findings given herein. Penalty against Shri Shailendra Bahadur, Assistant Chemical Examiner. - There is no allegation that Shri Shailendra Bahadur was in touch with the importer or his agents nor did he take any money from the importer for testing the sample. In the absence of any evidence directly inculpating Shri Shailendra Bahadur in the commission of the offence, we are of the view that imposition of penalty on Shri Shailendra Bahadur cannot sustain in law. - penalty set aside

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• 2012 (10) TMI 834
  Food Safety and Standards Act, 2006 - imported consignment of Crude Palm Oil (Edible Grade) - Interim order to allow the petitioner to clear the imported consignment – petitioner submitted that goods are conform to the standards laid down under the Food Safety and Standards Act, 2006 and the applicable regulations – Held that:- Petitioner is also entitled to an order of injunction restraining the respondent and each of them, their officers and subordinates from causing any delay or further delay in allowing the petitioner to process the imported consignment – interim order passed

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• 2012 (10) TMI 833
  Validity of show cause notice - Held that:- It is not a mere formality, but a statutory right to oppose the decision for extension of time. Issuance of a notice of three day has defeated the right of the petitioner to effectively defend its case. The petitioner had not only submitted reply, but also requested for more time, so as to represent the case before the department. The department in hurry to pass the order before six months, passed an exparte order, by considering the objection filed by the petitioner, without giving an opportunity of personal hearing. The impugned order therefore on the face of it is in violation of principles of natural justice - alternative remedy of statutory appeal cannot be a bar to maintain this writ petition - Writ petition is allowed. Impugned order is set aside. The petitioner shall be entitled to release of goods subject to payment of admitted duties and right of department to hold enquiry and impose duties & penalties under Section 124 of the Act -Connected Miscellaneous Petition is closed - No costs.

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• 2012 (10) TMI 832
  Definition of the term Domestic Industry - anti dumping duty on Soda Ash - held that:- between 1999 and 2010 in respect of the producers who are related to the exporters or importers of the dumped articles, or who are themselves importers, the term “domestic industry” was liberally construed by giving discretion to the Designated Authority treating such persons as forming part of the domestic industry. In the amendment which was brought in with effect from 27-2-2010, on a reading, it is clear that the first portion of the definition of the domestic industry, which relates to the domestic producers as a whole whose collective output constitutes the major portion of the total domestic production, remains intact. Insofar as it relates to the producers who are related to the exporters or importers of the dumped article or who are themselves importers of the dumped articles, the law-makers made it very clear that while construing them as domestic industry, the Designated Authority “may be construed as referring to the rest of the producers only”. The term “may be construed as referring to the rest of the producers only” on a bare and literal interpretation, in our view, should be construed only in respect of the producers who are related to exporters or importers, or producers who are themselves importers, and simply because the term “only” is construed, it cannot be taken to the first portion of the definition. The word “only” under Rule 2(b) of the Rules need not be concentrated much and in our view it has no significance as such. While it is true that the international agreements like WTO and GATT may not be the absolute and only source for interpreting the Indian Law, so long as there is no contradiction between the definition of the agreement in the international law and the terms of the Indian Law, there is absolutely no prohibition for this Court to take note of the terms of the international agreements for the purpose of better appreciation of the term. The term “domestic industry”, as it was amended on 27-2-2010, has not taken away the discretionary power of the Designated Authority and the Designated Authority is entitled to proceed further. As elicited above, under Rule 5(3)(a) proviso, there is a prohibition against the Designated Authority not to investigate when the domestic producers expressly supporting the application account for less than 25% of the total production of the like article by the domestic industry. But under the first portion of the term “domestic industry” defined under Rule 2(b) of the Rules, elicited above, it is very clear that the collective output of the entire manufacture put together totally must constitute the major proportion of the total domestic production. While so, on the admitted fact that M/s. DCW Limited is the only producer of Soda Ash in the country, even though it has produced only 4%, by a combined reading of Rule 2(b) and Rule 5(3) proviso, M/s. DCW Limited must be considered as a domestic industry. The writ petition against the preliminary finding published by the Designated Authority is maintainable

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• 2012 (10) TMI 831
  Offence under Section 135A of the Customs Act – confession of the co-accused – Petitioner contends that the statement of the Petitioner recorded under Section 108 of the Customs Act is exculpatory in nature and the statement of Virender Singh Batra, recorded under Section 108 of the Customs Act, 1962 cannot be relied upon for the purpose of framing charges as he was not examined as a witness in terms of Section 244 Cr.P.C in the complaint case – Held that:- Confession of the co-accused is admissible only under Section 30 of the Evidence Act. One of the essential requirements of the said provision is that the two accused should be tried jointly. Since the confession of the co-accused is not admissible as he is not being jointly tried with the Petitioner and besides this piece of evidence there is no other evidence, no charge can be framed against the Petitioner for offence under Section 135A of the Customs Act - order directing framing charge and the consequent order framing charge against the Petitioner for offence under Section 135A Customs Act are set aside

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• 2012 (10) TMI 830
  Refund claim – benefit of Notification No. 21/2002-Cus. – Held that:- There is no ‘contest’ or ‘lis’ between the appellant and the department at the time of clearance of the goods - payment of higher rate of duty by the appellant is by way of inadvertent mistake without taking the benefit of notification - benefit of said notification, was available to the importer - it is clear case of payment of higher duty due to ignorance - appellants are entitled to refund of excess duty paid by them

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• Corporate Laws

• 2012 (10) TMI 876
  Scheme of Amalgamation - Held that:- In view of the written consent / NOC given, the requirement of convening meetings of Shareholders of the Applicant Company / Transferor Company no. 1 is dispensed with. Separate meeting of Un-Secured Creditors of the Applicant Company / Transferor Company no. 1 is proposed to be held under the supervision of this court on 22.12.2012 ( Saturday ) at 10.30 a.m. at D-26, Medico House, Janakpuri Institutional Area, Janakpuri New Delhi - 110058 - appointment of Chairperson & Alternate Chairperson for the meeting has been done - Transferor Company no. 1 is also directed to publish advance notice of the aforesaid proposed meeting in ‘Business Standards’ ( English, Delhi Edition ) and ‘Jansatta’ (Hindi, Delhi Edition ) minimum 21 days in advance before the scheduled date of meeting & Individual notices sent by ordinary post minimum 21 days in advance - if the quorum is not present the meeting would be adjourned for 30 minutes and the persons present in the meeting would be treated as proper quorum with Voting and proxy permitted - Chairman/Alternate Chairman shall file their reports within 2 weeks of the conclusion of the meeting.

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• 2012 (10) TMI 875
  Application seeking rectification of the members register - Held that:- Neither in the order and nor in the statement of the counsel is there anything to show that the decree was set aside for the reason that the petitioner was not pressing his claim against the courier service, in fact this order shows that there appears to have been an out of Court settlement between the petitioner and the courier company, vehement submission of the petitioner that this decree had been set aside entitling him now to rectification in the share register for the reason that he had not received any money qua the loss of these shares is not borne out from the record. Claim of the petitioner stands satisfied.

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• 2012 (10) TMI 829
  Reduction of Equity Share Capital of Company – Held that:- As Petitioner has followed the required procedure as contemplated under Sections 100 and 101 of the Act for the proposed reduction of capital. The Court also finds that Article 8 of the Articles of Association of the petitioner-Company permits reduction of capital. It also appears that as there was no outlay of funds, the interest of the creditors is not adversely affected, therefore, the procedure as contemplated under Section 101(2) of the Act is not required to be followed that the petitioner has effectively met with the observations made on behalf of the Registrar of Companies in its affidavit-in-rejoinder and further affidavit. No adverse material has been pointed out by the Registrar of Companies against sanction of the reduction of share capital - Reduction of the paid up share capital proposed by the petitioner is hereby sanctioned. No further publication in the Government Gazette is required - Accordingly, the petition is allowed, in the above terms - Petitioner Company is directed to pay Rs.7500/- to Mr. Y.V. Vaghela, learned Central Government Standing Counsel, appearing on behalf of the Regional Director.

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• 2012 (10) TMI 828
  Scheme of Amalgamation - contravening the Provisions of Section 295 as the company has granted a loan to Ms. Manju Goel, relative of director - Held that:- Mr. Anuj Goyal, Director of Transferor Company No.1 filed an affidavit in response to the affidavit filed by Regional Director stating that that the above non-compliance has occurred inadvertently and due to oversight; without any mala-fide intention on the part of the Board of Directors of the Transferor Company No. 1. also whole amount of Rs. 15,80,000/- has been repaid on 09.11.2011 by Ms. Manju Goel to the Transferor Company No. 1 and the Transferor Company No. 1 has filed a compounding application under section 621A r.w.s. 295 in respect of the loan given by the Transferor Company No. 1 to Ms. Manju Goel. In view of the submissions made at the bar and the settled law on the subject, the objection raised by the Regional Director is rejected and the Scheme is sanctioned subject to and without prejudice to the liability, if any, in the civil and criminal proceedings in respect of past transactions. It is further clarified that the proceedings pending before the ACMM, Tis Hazari, Delhi against the transferor company and/or its Board, Directors and management etc. shall continue and the liability, if any, of the Board, Directors, Management etc., in the said proceedings would continue as if the Scheme has not been made - No objection has been received to the Scheme of Amalgamation from any other party by either of the Petitioner Company or the counsel neither the Petitioner Companies nor the counsel has received any objection pursuant to citations published in the newspapers, Consequently, sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956.

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• Service Tax

• 2012 (10) TMI 879
  CENVAT Credit of Service Tax - canteen services - Held that:- As decided in CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] CENVAT Credit would be admissible to the full extent only if the full expenditure of canteen services is borne by the assessee. If any amount has been recovered for providing the food/canteen facilities from the employees, CENVAT Credit of Service Tax paid proportionate to the amount will have to be deducted for availment of credit. Remit the matter for the limited purpose of verification as to whether the canteen services were provided free of cost or any amount was recovered - in favour of assessee as directed.

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• 2012 (10) TMI 878
  Input service - input services used for obtaining export incentives - Professional and Liaison fees – Held that:- Obtaining export incentives is directly relatable to manufacture. Manufacturer while manufacturing goods for export and for working out the cost takes into account the export incentives - service tax incurred in respect of services for obtaining export incentives can be definitely related to manufacturing activity - respondent is eligible for cenvat credit - in favor of assessee.

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• 2012 (10) TMI 877
  Demand and penalty - Whether non-obtaining of Registration by the respondent amounts to suppression – limitation - Outdoor catering services - respondents contested the notice on merits as also on limitation - Commissioner (Appeals) held in favour of the respondents on the ground that for the period June, 2005 to March, 2006, benefit of Notification No. 21/04, dtd. 10.09.04 is available to the respondents – Held that:- Difference of opinion between members regarding following issues - Whether the Revenue's appeal is required to be allowed in respect of service tax only and part of the order vide which penalty stand set aside by Commissioner(Appeals) is required to be upheld - referred to third member.

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• 2012 (10) TMI 837
  Business Auxiliary Services - appellants engaged in the activities of visa facilitation and providing customer care services to the Diplomatic Mission Embassies/Consulates and the Visa applicants - Revenue contended the same to fall under the category of business auxiliary service - Held that:- Since issue involved is being clarified by the Circular No. 137/6/2011-ST dated 20/04/2011, therefore requirement of pre-deposit of the impugned demands is waived. On perusal of the said Circular, it is found that appellants are providing exactly the same services, which are discussed in para 3 of the said circular and as clarified by the CBE C the activity undertaken by the appellants are not taxable under Section 65 (105) of the Finance Act, 1994 - Decided in favor of assessee

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• 2012 (10) TMI 836
  Whether department can file appeal with HC u/s 35 with regard to applicability of rate of service tax – Held that:- As per Sec.35G, an appeal shall lie to the High Court from every order not being an order, relating to among other things, to the determination of any question having a relation to the rate of duty on excise or to the value of goods for the purpose of assessment. Following the decision of Karnataka HC in the case of Prakash Air Freight (P.) Ltd. (2011 (4) TMI 581). This case, falls squarely within the phrase "determination of any question relating to rate of service tax" and it is the Apex Court alone which has exclusive jurisdiction to decide the said question u/s 35-L.

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• 2012 (10) TMI 835
  Limitation u/s 11B - rejection of refund claim of demand of service tax paid - demand raised on ground of short duty paid without adjusting excess duty paid in other quarters - Held that:- It is observed that petitioner deposited the duty on billing basis without actual collection, but within the time limit provided for depositing the duty on actual collection. In such case, u/s 68(3), the time available to a service provider such as the petitioner for depositing with the Government service tax though not collected from the service recipient was 75 days from the end of the month when such service was provided. Section 68(3) never provided that the same cannot be paid by the 15th of the month following the end of the month when such service was provided. Thus, if the petitioner deposited such duty with the Government during a particular quarter on the basis of billing without actual collection, he had discharged his liability under sub-section (3) of section 68. Thereafter, on an artificial basis, the Assessing Officer could not have held that he ought to have deposited same amount once all over again in the following quarter. This is fundamentally flawed logic on the part of the Assessing Officer. Further, to accept such formula adopted by the Assessing Officer would amount to collecting the tax from the petitioner twice. Before raising demand under the head of duty short paid, the Assessing Officer should have granted adjustment of the duty already paid by the petitioner towards the same liability.Under the circumstances, question of applying limitation under section 11B of the Act would not arise since we hold that retention of such service tax would be without any authority of law. Issuance of unjust enrichment - held that:- A question of unjust enrichment is wholly irrelevant. It is not refund of a duty which is found upon completion of assessment excess paid that the petitioner is asking for. It is a duty which the petitioner has already paid separately and second time under insistence of the department which he is asking for being refunded. Under the circumstances, the question of unjust enrichment cannot be applied. - Decided in favor of assessee

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• 2012 (10) TMI 826
  In-eligible CENVAT Credit of the Service Tax paid on courier/telephone services - the appellant having accepted that they are not eligible for availing CENVAT Credit, the interest liability arises and they are liable to pay interest on the CENVAT Credit availed. Regarding penalty - held that:- the appellant has reversed the CENVAT Credit which has been pointed out as erroneously taken in August and September 2008 itself. It is also to be noted that the credit which has been availed on courier/telephone/security services, if would have been contested on merit they may have succeeded, as these services are eligible for availing CENVAT credit of Service Tax paid. - penalty set aside.

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• Central Excise

• 2012 (10) TMI 871
  Excess quantity sugar as compared with the daily stock account - sold to the shareholders at concessional rate - confiscation of sugar allowed to be released on payment of fine and penalty equal to duty involved - Held that:- There was a clearance of 2500 quintals of sugar under one invoice and unfortunately the invoice is illegible and it could not be made out in whose name the invoice has been made. However, entire quantity of 2500 quintals of sugar has been cleared on payment of duty - the appellants have been very consistent in submitting that quantity of 2500 quintals of sugar was meant for sale to the share holders at concessional rate and 1500 quintals has been sold as such and 1000 quintals remained, the benefit of doubt in the absence of proper investigation has to go to the assessee. As the offence has to be treated as one of procedural irregularity and penalty equal to duty was not warranted - thus in the facts and circumstances of the case, the payment of duty on the goods and non-claiming of refund of the same, penalty under Rule 25 for procedural irregularity will be sufficient and since excess sugar was lying and subsequently cleared on payment of duty, redemption fine also is not warranted. The penalty of Rs.5,000/- u/r 25 would meet the ends of justice, while upholding the demand for duty on 1000 quintals of sugar found excess during the visit of the officers and accepting the submissions made by the assessee that no refund of duty will be claimed - partly in favour of assessee.

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• 2012 (10) TMI 870
  CENVAT Credit on education and higher education cess - non eligibility to claim credit on payment made by 100% EOU on duty of Excise equal to aggregate duties of Customs - demand along with interest and equivalent penalty - Held that:- Even before the amendment to rules was introduced, the Tribunal had already taken a view that education cess paid in full has to be allowed as CENVAT Credit. It has nothing to do with the amendment. There is neither a request from the assessee nor is the issue as to whether the benefit of amendment made w.e.f. 07.09.2009, can be extended for the earlier period. The decision in the case of EMCURE PHARMACEUTICALS LTD. Versus COMMISSINOR OF C. EX., PUNE [2008 (1) TMI 147 - CESTAT, MUMBAI] had considered the statutory provisions in detail and had come to a conclusion and it cannot be said that there were decisions of a higher judicial forum or a provision of law or relevant facts which have been ignored or not considered, despite having been submitted. In such a situation, the decision cannot be said to be per incurium especially when the statute was amended subsequently - against revenue.

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• 2012 (10) TMI 869
  Manufacture - classification - “Mayuri Henna Natural Black 50 gms”, “Mayuri Henna Natural Black 30 gms”, “Mayuri Henna Natural Brown 50 gms”, “Mayuri Henna Natural Brown 30 gms”, “Mayuri Henna Burgundy 50 gms”, “Mayuri Henna Burgundy 30 gms”, “Mayuri Henna Natural Henna 100 gms” – The assessee contended that Mere mixing of various powder products with the final good does not amount to manufacture - Held that:- As a different product has emerged as decided in case of Heena Export Corporation versus C.C.E. [1993 (2) TMI 185 - CEGAT, NEW DELHI] – Duty has to be deposited by the assessee - classifiable under Heading 33.05. - pre-deposit ordered

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• 2012 (10) TMI 868
  Deduction on equalized basis – Held That:- As the Tribunal following the decision made earlier in respect of some other unit of assessee had allowed the same exclusively for excisable good. The matter was remanded back only for quantification of demand and segregation of expenses but the Com.(A) again going into question of admissibility of deduction was not admissible. The assessing officer cannot ignore and comment upon the correctness of the decision made earlier by the Tribunal and to decide it afresh – case remanded back to the original adjucating authority to segregate the expenses exclusively in respect of excisable goods as directed by the Tribunal in the earlier remand matter – in favour of assessee by way of remand.

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• 2012 (10) TMI 867
  Eligibility of cenvat credit in respect of steel items – Held that:- Steel items have not been used in the construction of the captive power plant, but in the manufacture of capital goods namely electrolysis cell which in turn is used for producing Potassium Chlorate - respondents are eligible for cenvat credit

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• 2012 (10) TMI 866
  Rebate claim - period of limitation– claim is with regard to the rebate of the excise duty already paid by the manufacturer under Rule 18 – Held that:- Notification issued under Rule 18 of the Central Excise Rules which prescribes no time limit alone is applicable and Section 11B of Central Excise Act which prescribes 6 months time for claiming rebate would not be applicable to deny the rebate claim of the petitioner - respondent is directed to pay the rebate amount claimed by the petitioner

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• 2012 (10) TMI 865
  Waiver of duty demanded - applicant manufactured paper and paper products - applicant clears the paper in reel form and send the said paper in reel form to job workers for conversion into sheets and the converted sheets are sent directly from the job worker’s premises to the customers - applicant raises bills without the ‘reel discount’ and the said amount is treated as conversion charges - department has included the said amount referred to as reel discount in the assessable value and demanded the differential duty – Held that:- Goods cleared to the job workers are in reel form. The duty requires to be paid at the time of clearance in the form in which the goods are removed - substantial supplies are being effected in reel form at the same price, and, therefore, the enhancement of assessable value is not, prima facie, sustainable in respect of the paper in reel form cleared for conversion - pre-deposit waived

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• 2012 (10) TMI 864
  SSI Exemption - Clubbing of clearance - clearances made in the name of all the seven units - Notification no. 83/83 - whether limited company is a separate entity and clearances of the said company could not have been clubbed with the clearance of other entities – Held that:- There is no ruling by the court that clearances of a limited company cannot be clubbed with clearances of any other entity under any circumstances for the purpose of deciding the exemption limit under Notification 175/86-C.E. - clubbing of clearance of the seven units in the hands of Heemanshu Traders is warranted. Application for rectification of mistake - held that:- while considering the ROM applications in the context of the directions of the High Court of Gujarat there is no scope to negate the clubbing of the clearances of the six partnership firms.

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• 2012 (10) TMI 863
  Export - claims of rebate - alleged that the applicants exported their finished goods before permission of input-out ratio was granted by the competent authority – Held that:- Fundamental requirement for claiming rebate of duty paid on inputs is that the use of duty paid inputs in the manufacture of export goods is proved beyond doubt. Applicant has failed to submit any records proving use of said duty paid inputs in the manufacture of export goods. The said lapse can not be treated as a procedural lapse, as it is the substantial requirement of use of duty paid inputs in the manufacture of export goods is not complied with - rebate claims rejected as the same were not admissible under Rule 18 of the Central Excise Rules, 2002

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• 2012 (10) TMI 862
  Rebate claims - export - 100% EOU, exported the goods and filed rebate claims w.r.t. duty paid on exported goods. - The original authority sanctioned the rebate claim. - Respondent being 100% EOU were not required to export the goods on payment of duty in terms of absolute exemption provided in the Notification No. 24/2003-C.E. – Held that:- Notification No. 24/2003-C.E., dated 31-3-2003 was issued under Section 5A(1) of Central Excise Act, 1944, exempts goods manufactured by 100% EOU and cleared for export from whole of duty unconditionally. Therefore in view of provisions of sub-section (1A) of Section 5A, the applicant manufacturer cannot pay duty. - There is no condition in the notification for availing exemption to goods manufactured by 100% EOU and cleared for export, the provisions of subsection (1A) of section 5A are applicable and no duty was required to be paid on such exported goods. As such rebate claim is not admissible in terms of rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.) - decided against the assessee.

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• 2012 (10) TMI 827
  Waiver of pre-deposit of amount of penalty - in-eligible CENVAT Credit- Held that:- Appellant is not disputing the in-eligible CENVAT Credit availed by them and has reversed the same along with interest - to that extent order of first appellate authority is upheld and appeal of the appellant is rejected on merit. Penalty - Held that:- appellant had a CENVAT Credit of more than Rs.Two Crores from the time the audit party pointed out the in-eligible CENVAT Credit of Rs.4,49,426/-. If that be so, visiting the appellant with the penalty under the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944, seems to be unwarranted as the appellant would not have any reason to utilize the amount as he has enough balance in CENVAT - penalty imposed on the appellant is unwarranted and needs to be set aside and appeal is allowed.

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• 2012 (10) TMI 825
  Rejection of appeal as time bar - Held that:- The order was first issued under speed post and was received back to the Revenue with postal remarks that there is no firm at the given address. As such, even if the order would have been issued under registered post, the same would have came back with the same postal ground. It stands admitted by the appellant that they have closed their factory in the year 1999 and the proceedings against the appellant were initiated by way of issuance of show cause notice in April, 2006. The appellants never bothered to give complete new address for communication purpose. Thus finding favour with Revenue action having pasted the order on the factory gate on 5.12.07 for fulfilling the legal obligation placed upon them in terms of section 37C. The appellant had not made any averment to show that only first page of the order was pasted. Also it is seen that appellant having addressed a letter in December, 2007, for supply of copy of impugned order never further made any efforts to procure a copy immediately. He having came to know that order stand served upon them in December, 2007 and the appellant being aware that an appeal has to be filed within a period of 60 days from the date of receipt of order, made no further efforts for procurement of the order - as the Commissioner (Appeals) has no power to condone the delay beyond the period of 30 days he has rightly rejected it - against assessee.

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• 2012 (10) TMI 824
  Manufacture - movable versus immovable - marketability of goods - erection at the site – manufacturing of trusses, purlins, bracings, crane girders – Works contract - Held that:- When a part of structure is prepared and disassembled, the members thereof will be angles, rods etc., prepared for use in such structure. These are not angles, or plates merely cut or drilled without reference to a particular structure. The later part of Heading 73.08 would apply to the members such as plates, rods, angles, etc., that are prepared for use in structures or their parts in their pre-assembled or disassembled state of an identifiable article of the types of the parts of structures covered under Heading 73.08. The goods manufactured by the assessee it is excisable and duty is leviable. Since this circular is issued in exercise of powers under Section 37B of the Act is binding and the legality and clarity is visible. there was a manufacture of excisable goods by M/s. Richardson & Cruddas Ltd. out of the raw materials supplied by the M/s. Ahmedabad Electricity Company Limited. The Board’s circular clearly clarifies the excisability and marketability and removes the doubt regarding the excisability or dutiability of immovable properties in terms of Rule 2(a) of Rules of Interpretation of Central Excise Tariff. It also makes a clear distinction though the inputs, parts or components which are specified excisable products will remain dutiable and identifiable at the time of their clearance from the factory or place of manufacture. If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be.

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• 2012 (10) TMI 823
  Demand of duty and penalty – confiscation - materials outside the premises – Held that:- Since construction activities were going on, the materials could not be accommodated in the premises - assessee has paid duty on the goods along with interest. Since duties and interest has been paid without any ingredient of intention to evade, present confiscation was unwarranted - Act of confiscation is penal in nature. Provision relating to that cannot be loosely invoked without motive being tested by evidence - interest not being disputed by the assessee, the confiscation is held to be bad. Penalty - certain procedural irregularities having been noticed. The appellant need not be penalised to the fullest extent of the duty leviable. Keeping in view that there is no cogent reason brought by Revenue to deny concession in penalty, the appellant is directed to pay penalty to the extent of 25% of the duty demand

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• 2012 (10) TMI 822
  Benefit of export - Manufacturing of Bulk Drugs – The applicant while accepting statutory applicability of all the relevant Rule/Notification/Circular is basically impressing upon whatever act of omission and commission, whichever occurred in this case is only of a nature of procedural error which is liable to be condoned and such substantial benefit of exemption from duty should not be denied in this case of exports. Held that:- whatever may be the internal/personal agreement between different parties/agents etc. the act of duty free clearance in this case was statutorily required to be done in the manner of provision of applicable Rules/Regulations and all legal documentations should be done accordingly. Once a specific category has been chosen then the individuals becomes liable and bound by respective regulatory procedure which (admittedly) stands violated in this case - Benefit of export not available to the assessee.

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• 2012 (10) TMI 821
  Rebate claims - applicant had filed the copies of the AREs-1 which were not certified by the concerned Customs Authorities regarding export of the goods - Held that:- Non-submission of statutory document of ARE-1 and not following the basic procedure of export goods as discussed above, cannot be treated as just a minor/technical procedural lapse for the purpose of granting rebate of duty - rebate claim is not be sanctioned in the absence of original and duplicate ARE-1 as the same is not admissible under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.) - rebate claim rejected

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• 2012 (10) TMI 820
  Rebate claim filed after one year – time limit – Held that:- In the case of Kirloskar Pneumatics Company (1996 (5) TMI 87 - SUPREME COURT OF INDIA ) Writ jurisdiction cannot direct the custom authorities to ignore time limit prescribed under Section 27 of Customs Act, 1962 even though High Court itself may not be bound by the time limit of the said Section - Custom authorities, who are the creatures of the Customs Act, cannot be directed to ignore or cut contrary to Section 27 of Customs Act - Section 11B of the Central Excise Act, 1944 provides for the time limit and there is no provision to extend this time limit - rebate claims are clearly time barred as they were filed after the time limit of one year as specified under Section 11B of Central Excise Act, 1944 - time barred rebate claim rejected

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• 2012 (10) TMI 819
  Condonation of delay of 405 days - rejection of the assessees’ refund claims - submission of the assessee that against the impugned orders challenged in the present appeals, the assessee preferred Writ Petition which stood dismissed on the ground of availability of alternative remedy before the Tribunal, they submit that the delay was not deliberate but only due to above reasons – Held that:- Assessee has not put forth bona fide reasons for condonation of delay and further the delay could easily be avoided by the assessee acting with normal care and caution - sufficient cause has not been made out for condoning the delay - COD applications dismissed

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• 2012 (10) TMI 818
  Duty liability – alleged that though the Government of India has issued a letter converting Levy Sugar Sale into Free Sale Sugar on 29-11-1999, the respondents discharged the duty liability almost one year and nine months after the order was issued by the Government of India – Held that:- Order of the Government of India issued in October, 1997 for supply of the sugar on loan basis under levy quota and the order dated 29-11-1999 converting the said supply into free sale sugar quota was known to the department inasmuch as copies of these orders have been endorsed to the department. Therefore, the department cannot allege suppression on the part of the respondent assessee Penalty – Held that:- Department was in the knowledge of the whole transaction inasmuch as the Government of India’s orders have been communicated to the department - question of imposition of penalty under Section 11AC does not arise - reduction of penalty cannot be faulted

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• CST, VAT & Sales Tax

• 2012 (10) TMI 880
  Writ petition for payment of dues in installments and remission/waiver of interest - Held that:- Amount of Rs.5,169/- crores towards principal amount of the dues be paid by the appellant with interest at the rate of 10% p.a. effective from 17th January, 2012 (the date of the judgment of this Court) in eight equal quarterly installments, the first of such quarterly installment being payable on 2nd January, 2013, and the remaining installments being payable every quarter on the 2nd day of the concerned month (i.e. after expiry of the quarter or three months) and interest of 10% p.a. would be calculated on the reducing balance remaining payable by the appellants to the State Government - appeal is allowed with no order as to costs.

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• Indian Laws

• 2012 (10) TMI 881
  Review petition as Union of India was not duly served with the notice of the proceedings in any of the petition for special leave to appeal which were subsequently converted into civil appeals - Held that:- Union of India was not given an opportunity to represent its case due to mistake on the part of the Registry. Applying the well settled principles governing a review petition and giving anxious and careful consideration to the facts and circumstances of this case the review petition filed by the Union of India should be admitted - review petitions filed by JSW Steel Ltd, M/s Kalyani Steels Ltd, M/s Kalyani Steel Mills Ltd. and the State of Karnataka are concerned, no order has been passed until the review petition of the Union of India is heard.

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• 2012 (10) TMI 805
  Interest on accumulated amount of arrears - promotion of assessee employee - period from August 1987 to March 2006 - Held that:- Since the amount, paid to the plaintiff was not a charity, but it was his right to claim the same as a consequence of his promotion in service from time to time, therefore, he is entitled to get interest on the delayed payment, as awarded by the first Appellate Court. Since the arrears of salary were not given to the employee within time, therefore, he was entitled to interest at the rate of 12% per annum.

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