Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 5, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
Wealth tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Doctor receiving regular fixed receipt from Hospital – assessee cannot be said to be an employee and his income can only be taxed under the head income from business and profession - AT
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Addition on account of surplus from sale of ULIP – As major portion is invested in mutual funds therefore, surplus on maturity of the policy should be treated as capital gain. - AT
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Revenue vs. capital expenditure - hire-purchase v/s agreement of lease - right to purchase to be exercised after expiry of certain period - held as lease transaction / revenue in nature - HC
Customs
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Rate of exchange of conversion of each of the foreign currency with effect from 05th October, 2012 - Notification
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Denial of drawback - Exporters of goods purchased from the market were to be treated as having availed Modvat facility. - Thus the exports had been finalized and duty drawback paid as long back as in 2006-2007, the attempt to reopening the entire issue by the petitioner was clearly unwarranted - HC
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Tribunal has the jurisdiction to reduce the redemption fine if he thinks it is just and proper - HC
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Amendment in Notification No. 96/2008-Customs dated 13th August 2008, so as to provide deeper concessions under DFTP scheme for Least Developed Countries (LDCs). - Notification
DGFT
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Exemption of Assam Comilla Cotton [ITC(HS) Code 5201 00 12] from export restriction on cotton - Limit of 5,000 Bales was exempted from the cap on export of cotton during the previous cotton seasons 2010-11 and 2011-12. - Notification
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Procedure and conditions for registration of contracts for export of cotton (Tariff Codes 5201 and 5203) w.ef 1st October 2012. - Notification
FEMA
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Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR - Circular
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Setting up of step down (operating) subsidiaries by NBFCs having foreign investment above 75% and below 100% and with a minimum capitalisation of US$ 50 million - amendment of paragraph 6.2.24.2 (1) (iv) of 'Circular 1 of 2012- Consolidated FDI Policy' - FDI GUIDELINES
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Interest on the seized foreign currency - It is not as if payment of interest under Rule 8 (ii) was mandatory and which could be enforced by way of a writ petition - HC
Corporate Law
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Scheme of amalgamation /arrangement sanctioned by the High Court - transfer from A to B would definitely a “transfer” to attract the provisions of Indian Stamp Act, 1899 - HC
Wealth-tax
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Valuation of shares under Wealth Tax – depreciated value of a promoters' quota shares suffering restriction on free transferability - Rule 11 could only be a plausible method - HC
Service Tax
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Cenvat credit - duty paying documents - input services - whether the document certificate issued by the bank is the valid document for availment of Cenvat credit - Held yes - AT
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Any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver - NO ST - AT
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Condonation of delay – appellant submitted that order was kept in an irrelevant file without any note as to the date of receipt of the order - delay condoned - AT
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Renting - SSP exeption upto Rs. 10 Lacs - co-owners - if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. - AT
Central Excise
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Rebate claim – refund claim was time barred - rebate claim was rightly rejected as time barred but the re-credit of duty paid in Cenvat account is not admissible - CGOVT
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Payment of differential excise duty on 'decorative laminated sheets' - such goods fall under sub heading 3920.31. - appellant was required to pay the differential duty. - HC
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If the benefits to which assessee is legally entitled to and is conferred on them by the policies of the Government as well as the statutory provisions is not settled expeditiously, the very object of granting these benefits would be defeated and the enthusiasm on part of these exporters to carry on the business is seriously hampered. - HC
Case Laws:
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Income Tax
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2012 (10) TMI 100
Reopening assessment u/s 147 - addition to income - Held that:- A.O. while reopening the assessment dated 16.08.2010, which is under appeal, considered only two items of income. First one is Rs.42,03,882/- as per original assessment under section 143(3) dated 29.12.2006 which has been deleted by CIT(A) in the appeal filed by the assessee against the AO’s order dated 29.12.2006. Therefore, this part of the income does not survive and liable to be deleted. The second item of income is Rs.17,18,669/- which has been made by the A.O. on the basis of direction by the CIT(A) which was while passing the order in A.Y. 2004-05 has quashed by I.T.A.T. Thus, when the direction itself has been quashed, there is no question of taking action under section 147 in A.Y. 2005-06. Therefore, this addition also does not survive. Since the amount of total income including addition made by the A.O. of Rs.17,18,669/- does not survive in the light of the order of CIT(A) dated 29.10.2010 for A.Y. 2005-06 and the order of I.T.A.T. for A.Y. 2004-05 therefore, there is no question of computing the assessee’s total income at Rs.59,22,551 (42,03,882 + 17,18,669). Thus, both the amounts of income are hereby deleted.
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2012 (10) TMI 99
Rejection of books of account - Held that:- As the A.O. noticed that the assessee has failed to furnish basis of valuation of work in progress particularly under the circumstances where the assessee followed cash method in respect of project/builder activities. Raw material in the form of gittis etc. are supported by self-made vouchers as noted by the CIT(A). Apart from the non-maintenance of the stock register, various mistakes noted by the A.O. coupled with law G.P. in the year under consideration. Thus the A.O. has correctly rejected the books of account invoking section 145(3) and the CIT(A) has rightly confirmed the order of the A.O - against assessee. Reduction of G.P. rate from 10.7%d to 8% by the CIT(A) - Held that:- CIT(A) noticed that the A.O. has erred in applying trading result of the A.Y. 2005 - 06 to trading result for A.Y. 2006-07 without considering the facts and submissions that the results were not comparable in both the years. However, the CIT(A) followed the judgement of Hon’ble Madras High Court in the case of CIT vs. A. Vajjiram & Bros. [2008 (8) TMI 528 - MADRAS HIGH COURT] in respect of applying the profit rate of 8% as supported by the statutory rate provided u/s.44AD of the Act. There are good reasons for estimating the profit by this 8% rate of profit even in case of big contractors having turnover more than Rs.40 lacs. The assessee as well as the Revenue both have failed to point out how this rate of 8% applied by the CIT(A) was unreasonable. There are no material on record based on which a different rate can be applied at this stage for estimation of the profit. Thus considering comparative position of profit declared by the assessee in F.Ys. 2003-04, 2004-05 & 2005-06, 8% rate estimated by the CIT(A) is most reasonable. No infirmity in the order of CIT(A) - against revenue.
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2012 (10) TMI 98
Order u/s. 263 by CIT(A) - Held that:- No interference is called for in the matter as it is well settled law that if the AO did not make enquiries on the issues involved in the assessment, it would amount to assessment order passed erroneously and prejudicial to the interest of Revenue. Since the AO failed to make proper enquiries on the matter in issue raised in the show cause notice by the Commissioner, therefore, the Commissioner rightly set aside the assessment order with the direction to make fresh assessment in this case after properly investigating the referred issues. In the absence of any material on record to challenge the findings of the Commissioner, no infirmity in the impugned order - against assessee.
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2012 (10) TMI 97
Undisclosed investments - Investment in Vatsal Shiksha Samiti, Gwalior - search - CIT(A) deleted the addition - Held that:- AO made the additions on merits on account of investment made by the assessee in Vatsal Shiksha Samiti, Gwalior but is a fact that no search was conducted in the case of the assessee. Whatever seized material was found was recovered from the business cum residential premises of Shri Sunil Jain and Seema Jain. Nothing was brought on record if both these persons made any adverse statement against the interest of the assessee. No material has been brought on record by the AO to show that the assessee, in fact, made any investment in this Samiti. Whatever investment the assessee has made in the Samiti was duly declared and source of the same was also found explained. The amount declared by the assessee was taken back on his resignation from the Samiti. Thus, there was no evidence that the assessee made investment of any amount in the Samiti. Since the seized material was not recovered from the possession of the assessee, therefore, the assessee was not bound to explain the same. More so, when the details of seized material clearly show that it did not implicate the assessee of any investment made in the Samiti. As decided in CIT vs. Girsh Chaudhary [2007 (5) TMI 176 - DELHI HIGH COURT] that the seized paper would not indicate anything that the assessee made any undisclosed investment in Samiti and in absence of any specific material to link the assessee with any investment, no infirmity in the order of the CIT(A) - in favour of assessee.
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2012 (10) TMI 96
Undisclosed income - Held that:- Whether particular transaction involves the investment or not is the question of fact and the CIT(Appeal), recorded the finding that A.O. had no reason at all to treat entire purchases as unexplained investment and it was a purely imagination of the A.O. So far as the estimation of the income is concerned, for that also, cogent reason has been given by the CIT(Appeal) as well as considered by the Tribunal. The considered opinion that the question of facts have been decided by the CIT(Appeal) as well as by the Tribunal after appreciation of the evidences which have not been vitiated because of non-consideration of the material evidence, nor because of consideration of irrelevant evidence, nor the findings recorded by these two authorities can be said to be perverse - no substantial question of law.
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2012 (10) TMI 95
Unexplained investment - CIT(A) deleted the addition - Held that:- Because of the mention of the name of one Mithlesh Singh found on document seized during search it was presumed that there must be some contract for the purchase of property from Mithlesh Singh and against that the said amount of Rs.36,00,000/- has been paid by the assessee. The very foundation of this assumption is the name of Mithlesh Singh on the paper seized, but apart from this there is no fact on record nor any inquiry was held by the AO to find out any transaction that in fact there was any transaction with Mithlesh Singh, relating to the immovable property for a consideration of Rs. 52,00,000/- as has been presumed by the AO in its order as well as in the questionnaire given to the assessee. This presumption cannot be held to be proper in any manner without there being any further inquiry or material on record - in favour of assessee.
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2012 (10) TMI 94
Penalty u/s 271(1)(C) - re-opening of the assessment - concealment and upward revision of income - ITAT deleted the addition - Held that:- It appears from re-computation of the income that the total income of the assessee has been accepted as per the order passed under Section 143(3)/251 and the income assessed is Rs. 2,51,13,270/-. Out of this income, the addition has been disallowed in view of the explanation furnished by the assessee and which has been accepted by the AO and thus, deletion of Rs. 54,21,878/- resulted into net income at Rs. 1,96,91,390/-. Also the assessee's revised return showing profit to the tune of 27.5% was initially not accepted by the AO and he declared the profit to be 31% and that finding has been set aside in appeal and the assessee's profit has been accepted to be 27.5% as shown in the revised return meaning thereby, the assessee's income to the tune of 27.5% includes the relevant entry of Rs. 50 lakhs which is the amount deposited in the Bank of Tokyo, New Delhi Branch. As in the assessment order there is no finding of the AO that the assessee was guilty of concealing the income which AO could have recorded as provided under Section 271(1), initiation of proceeding under Section 271(1)(C) was not justified - in favour of assessee.
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2012 (10) TMI 93
Gift of India Millennium Deposit (IMD) - whether gift of IMDs can be equated with gift of money and thus brought within the purview of s. 56(2)(v)? - Held that:- The AO has equated the IMDs with bank fixed deposits and concluded that the same is money. On perusuing the terms and conditions of the IMDs and the various restrictions placed upon the free transferability of the IMDs. It is true that no restrictions apply to the transferability of money, which is currently accepted as a medium of exchange. Thus, IMDs, which have these restrictions, cannot be treated as money. At the best they can be treated as anything convertible into money. For that matter, any property whether movable or immovable can be converted into money but the same is not treated or akin to money. This is precisely the reason that an amendment has been brought by the Finance Act 2009 for bringing within the purview of tax, the gifts in kind. However, the amendment is prospective in nature and applies to transactions on or after 1.10.2009 - assessment year in this appeal is 2006-07 - decided against revenue.
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2012 (10) TMI 92
Annulling the order u/s 158BD/143(3)/158BG by ITAT - Held that:- The search had been conducted and completed on 08.09.1999 is not disputed. The assessment order dated 31.12.2003 does not disclose, inter alia, that the assessment proceedings initially drawn on the basis of the search held on 08.09.1999 had, in fact, been dropped. To the contrary, the text thereof demonstrates that the same was pursuant to, amongst others, the notice dated 07.06.2000 issued under section 158BC - As the last of the notices dated 07.06.2000, 17.11.2000 and 07.12.2000 had been received by assessee on 28.12.2000 in this view of the matter, in terms of section 158BE (2), the assessment ought to have been completed latest by 31.12.2002. Thus in respectful agreement to the finding recorded by the Tribunal of annulling the order as it was dated 31.12.2003 - in favour of assessee.
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2012 (10) TMI 91
Salary income vs Business Income – assessee, being Doctor receiving regular fixed receipt from Hospital – Revenue contended that fixed amount p.m. amounts to salary only and various clauses of agreement establish that there is master – servant relationship, particularly placing reliance on clauses of agreement relating to reimbursement of traveling expenses – Held that:- It is observed from agreement of retainership and nature and extent of duties performed by the assessee that there is a very thin difference between holding assessee as employee or as professional All requirements for holding the assessee an employee does not exist as per the agreement for retainership. Generally and practically employments are always for a long period than one year which is not in the present case which is only for one year. Secondly, employment contracts generally carries various other benefits like bonus, gratuity, HRA, Medical allowance etc. whereas in the present case only lump sum payment per month was fixed for the period of retainership. Moreover, the benefit of consistency cannot be denied to the assessee. The assessee had worked as Honorary consultant at various other Hospitals in earlier years and his income was taxed as professional income. Therefore, assessee cannot be said to be an employee and his income can only be taxed under the head income from business and profession – Decided in favor of assessee.
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2012 (10) TMI 90
Income from sale and purchase of shares - business income or capital gains - assessee filed the return of income showing income from speculation profit, short term capital Gains (STCG) and long term capital gains (LTCG) and income from other sources - Held that:- There are various factors such as frequency, volume, entry in the books of account, nature of funds used, holding period etc, which are relevant in deciding the true nature of transactions and no single factor is conclusive. Treatment in the books of an assessee will not be conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive then it becomes business profit and not capital gains. In present case, on perusal of records, we observe that there are repeated transactions of purchase and sales on a regular basis. Considering all these facts, it shows that assessee is a trader in shares and not an investor as the frequency and volume are not only quite high, but the period of holding also varies from a few days to a few months. The above factors clearly establish that the intention of the assessee that she was a trader in shares. In view of above, the order of ld CIT(A) accepting the claim of the assessee in respect of STCG cannot be sustained. However, on the basis of the facts and principles, as discussed herein-above, LTCG on sale of shares is accepted - Decided partly in favor of assessee
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2012 (10) TMI 89
Addition on the basis of suppression of production – AO made addition based on certain norms prevalent in the industry - Nature of machinery utilized - Aging factor of the machinery - Assessee was following undisputedly the same method of accounting for the last no. of years – Held that:- Revenue has not pinpointed any discrepancy on the physical quantitative recording of facts in the books of accounts. Therefore reason for rejection & suppression of production not justified. Decide in favour of assessee. Disallowance of interest expenses – Assessee has given advance to borrower at interest rate which is lower than rate of interest paid on borrowed fund – Held that:- As the assessee has suffered interest @15% from its borrowing and the same fund is advanced charging lesser interest @12%. There should not have had any difficulty in receiving such interest from open market. Assessee failed to submit any cash flow or fund management statements to substantiate its claim that interim surplus of cash is advanced to earn interest to minimize expenditure on account of interest. Decides in favour of revenue. Disallowance on account of deferred revenue expenditure – AO made addition of 4/5th cable charges paid to electricity department by assessee – Held that:- As onetime payment made was neither resulted in creation of an asset nor the amount is refundable. Non-payment lead to disconnection of electricity supply and disrupt the business of the assessee. Therefore amount spent by the assessee towards cable amount to be revenue expenditure in nature and is allowable for deduction for the year in which it is incurred. Decide in favour of assessee.
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2012 (10) TMI 88
Loss due to cancellation of forward contract - dis-allowance on ground of it being speculative transaction - Held that:- Loss due to cancellation of forward contract is revenue expenditure and thus allowable expenditure - Decided against Revenue Addition on account of late payment of employees contribution to PF - Held that:- PF contribution of employer and employee was deposited within grace period, though and well before filing of due date of income tax return. No ground for disallowing the same -Decided against Revenue Addition on account of excise duty not included in the valuation of closing stock of finished goods - Held that:- Closing stock has to be valued, at the option of the assessee, at cost or market price, whichever is lower. Duty of Central excise is levied on the goods manufactured, i.e. excisable goods manufactured by an assessee. It is not a part of manufacturing cost. It can be termed a post-manufacturing cost. Therefore, unless and until it is entered on one side, as an item of cost, it cannot be taken as a component of the value of the closing stock on the other side. Hence, excise duty is to be excluded at the time of valuation of closing stock of finished goods at the end of account period - Decided against Revenue Addition of expenditure incurred on repairs and maintenance treated as capital expenditure - Held that:- CIT(A) has given a finding of fact that the expenditure were incurred on account of maintenance of the existing plant and machinery. Revenue has not placed anything contrary on record suggesting that such expenditure was made for bringing into existence of a new asset on for the enduring benefit to the existing asset. Hence allowable as revenue expenditure - Decided against Revenue Addition U/s 40(a)(ia) on account of commission paid to foreign agents in foreign currency without deduction of tax at source - assessee did not deducted tax at source in compliance with Board Circular No.786 - Held that:- It is not disputed that in respect of AY 2005-06 the claim of the assessee was accepted by the Revenue and there is no change in the circumstance except the contention that the Circular No.786 dated 7.2.2000 has been withdrawn vide Circular No.7 of 2009. Since the claim of the assessee was based upon the circular existing at the time of assessment year, no infirmity found in order of CIT(A) deleting the addition - Decided against Revenue Dis-allowance of excess payment of interest u/s 40A(2)(b) - rate of interest work out to be 21% whereas assessee claims to have paid 12% - Held that:- Matter restored back to the file of AO to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 and also working out of rate of interest. Additional depreciation - Revenue submitted that the claim of additional depreciation was made in revised return and the revised return submitted when the limitation of filing of such return was expired whereas assessee submitted that CIT(A) has allowed additional depreciation having called for remand report of the AO - Held that:- It is evident from the finding of CIT(A) that for the additional depreciation has been allowed after receiving remand report. No infirmity found in order passed by CIT(A) Dis-allowance of various administrative expenditures - Held that:- It is found that order of CIT(A) is cryptic and no reasoning is given as to why the disallowances are confirmed. Therefore all the issues are restored back to the file of CIT(A) to decide these issues afresh. Expenses incurred on purchase of gift articles and contribution to one Samiti - dis-allowance - Held that:- Expenditure incurred on the occasion of diwali towards purchase of gift vouchers is allowable since the same is incurred to encourage of working ability to its workers. Further, contribution was paid to said Samiti on humanitarian ground hence allowable - Decided against Revenue Dis-allowance of advance written off claimed u/s. 37(1) - business expediency for giving the advance - Held that:- Nothing is brought on record to establish business expendiency or giving the advance in question. Thus, it is not a business advance. Hence, the same is neither allowable u/s. 37 nor u/s. 28/29 as business loss - Decided against assessee.
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2012 (10) TMI 87
Addition on account of unaccounted sales – During survey u/s 133A - Out of books sales was detected - Assessee admit during survey unaccounted income - Held that:- Undisclosed sales represented the gross sales & gross sales cannot be subjected to tax. As the statement recorded u/s. 133A has no evidentiary value and same cannot be sole basis of addition. Therefore sales after deducting profit element are subject to addition. Appeal decide in favour of assessee Addition on account of suppression of stock – During survey u/s 133A – AO found difference in stock as per the books of account and in the trading accounts - Assessee claims that the some quantity of gold out of stock was received on jangad (delivery for sale on approval) basis for sale - Held that:- As the statement accepted the fact that certain gold ornaments were sent to the assessee firm on Jangad basis for sale was submit by the authorized signatory. Therefore to the extent of gold ornaments received by the assessee on Jangad basis is deleted from addition. Appeal partly allowed. Disallowance of unexplained expenditure u/s 69C – Assessee is in jewelry business – AO made addition because assessee failed to explain labour expense - Assessee has submitted the wage register in which laborers put their signature – Held that:- Merely production of the wage register is not sufficient. Assessee failed to corroborate from other evidences as what kind of work was got done and also it was not acceptable that nobody would in for precious metal as gold to any person whose permanent address is not known. Therefore appeal decides in favour of revenue.
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2012 (10) TMI 86
Disallowance u/s 68 - Can the amount of share money be regarded as undisclosed income u/s 68 – AO made addition of unexplained share application money u/s 68 - Held that:- As there is no dispute about the fact that names and addresses of the persons from whom share application money was received by the assessee company are on record, thus, the identity of the subscribers is not in dispute. Addition is to be restricted to the extent of only those applicants of shares who have denied to have made any investment in the share of the company following the decision of SC in case of Lovely Export Pvt. Ltd. (2008 (1) TMI 575). Revenue appeal partly allowed. Penalty u/s 271(1)(c) on account of unexplained share application money - Held that:- As the addition on account of unexplained share application money has been confirmed by ITAT. The explanation-1 to section 271(1)(c) of the Act is attracted. Therefore AO is directed to recalculate the penalty accordingly. Appeal partly allowed.
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2012 (10) TMI 85
Addition on account of surplus from sale of ULIP – Assessee purchased policy that was a unit linked insurance policy – In these kind of policy small portion of the investment goes towards providing the life cover and the residual portion is invested in a stocks or bonds - Assessee claims that surplus amount receive on maturity is exempt u/s 10(10D) - AO treat the entire receipts as income under head income from other sources – Held that:- As major portion is invested in mutual funds therefore, surplus on maturity of the policy should be treated as capital gain. AO has directed to take the sale consideration of units as the amount received on account of maturity of the policy and the cost of investment as the amount invested by assessee during the span of years and accordingly work out the long term capital gain & tax. Therefore, appeal partly allowed.
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2012 (10) TMI 84
Addition on account of long term capital gain on sale of house property - alleged underestimation of value of the sale consideration by adopting lower rate - reference to DVO for estimating the fmv on date of sale as on 14-07-2005 as well as 1- 4-81 - CIT(A) deleted the addition on ground of holding the actions of A.O. in substituting the admitted sale consideration by the FMV arrived at by the DVO and substituting the admitted FMV as on 01- 04-1981 by the FMV arrived at by the DVO to be not in confirmity with the provisions of the Act -Held that:- In Section 48, the A.O. can compute the capital gain on the basis of full value of consideration received or accruing as result of the transfer of capital assets. as held by Apex Court, expression ‘full value consideration’ cannot be construed to the market value of the assets transferred but only means the full value of the things received by the transferor. The A.O. referred the case u/s 55A for fair market value of the capital assets transfer and substituted the value of the DVO in computing the capital gain tax but the full value of consideration as discussed above cannot be construed to the fair market value. The A.O. has also taken the value as on 1.4.81 at Rs.94 lacs in place of Rs.1.03 crore value declared by the assessee on the basis of registered approved valuer report. As per Section 55A, the A.O. can made the reference if estimated value made by the registered valuer is less than fair market value. In this case, the value estimated by the registered valuer was Rs.1.03 crore whereas the DVO had given fair market value at Rs.94 lacs. Therefore, clause (a) of section 55A of the Act could not be made applicable. Clause (b) of section 55A can be invoked only in any other case when value of the asset claimed by the assessee was not supported by an estimate made by a registered valuer. Value estimated by the DVO is less than valued estimated by the Government approved valuer. Further, the difference between value estimated by the DVO and adopted on the basis of registered valuer’s report, the difference is less than 15%. The A.O. has not brought on record any material to prove that the assessee had received much more whatever disclosed in the sale deed. Therefore, CIT(A) has rightly deleted the addition – Decided against Revenue
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2012 (10) TMI 83
Rejection of books of accounts - fall in G.P. rate - improper maintenance of wage register - assessee contended that revenue authorities has not considered the fact that due to increase in material cost and payment of service tax there was fall in GP and, and mere defect in maintenance of wage register alone cannot be the ground for invoking provisions of section 145 without pointing out any specific defects in the audited books of account of the assessee - Held that:- From the facts of this case it is found that AO had examined the books of accounts and statement of affaires maintained by the assessee thread bear and rightly rejected the same for the cogent reasons recorded in the assessment order. CIT(A) had also endorsed to the view of the AO. On examination of these facts, view of the revenue with regard to rejection of books of accounts is upheld. However, taking a lenient view considering the nature of business GP at 9% is taken instead of 6.88% declared by the assessee - Decided partly in favor of assessee
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2012 (10) TMI 82
Dis-allowance of bad debts, namely project deficits generated in three projects - assessee contended that it had offered incomes on yearly basis without actually working out as to whether the project is generating profits or losses. It was the policy of the assessee to offer all surplus in the projects upto completion for taxation and claim the deficits as loss. This has been the consistent accounting policy of assessee and the same has been accepted by Department in the past - Held that:- In the present case, the A.O. in the assessment order has given a finding that the facts in the present assessment years are similar to the facts of A.Y. 1999-2000, wherein appeal has been allowed by Tribunal. In view of these facts and following the decision of co-ordinate Bench for A.Y. 1999-2000, we allow this ground of the assessee. Addition in respect of Sun City Project on ground that assessee had not offered any income in respect of Sun-City project despite substantial expenditure incurred on it - explanation offered by the assessee was that it was of the view that the project would be completed with deficit due to heavy charge of interest on the borrowings and due to non-availability of adequate buyers and therefore no income from it was offered - Held that:- Assessee has not brought out any tangible evidence in its support to justify its stand. Hence addition sustained. Dis-allowance of expenses pertaining to A.Y. 2001-02 but accounted for in the books relevant to AY 2002-03 - Held that:- Since details were not produced by the assessee before the AO or CIT(A). Issue be remitted to the file of A.O. for verification. Addition in respect of Shilalekh project - assessee has not offered any income on ground that project was consistently in deficit and therefore the assessee was not entitled to receive any remuneration or organising fee - Held that:- Since Tribunal in earlier year allowed claim of assessee on observation that assessee had no occasions to make any profit or earn any income from the project for the year under consideration. Thus this ground of the assessee is allowed. Addition made u/s 41(1) - Held that:- The undisputed fact is that the assessee has shown the amount as sundry creditors in its balance sheet and accordingly it acknowledges its liability to pay. The assessee has not written back the liability in its books. The liabilities in question have not ceased to exist. The A.O. has not doubted the existence of the parties. The Revenue does not have any material or evidence to substantiate that the parties have given up their claim against the assessee. Therefore, CIT(A) rightly deleted the addition. Addition of amount written off being the amount recoverable from Rajiv Traders (a company under the same management) - land owned by Rajiv Traders - assessee for developing the said land acquired the entire share capital of Rajiv Traders - Held that:- Said project was abandoned and disposed off by transferring the entire share holding of Rajeev traders. The total construction expenses together with remuneration added was offered as WIP and credited to P/L A/c and was thus offered to tax. Against this amount, only Rs 60,00,000/- was realised and the balance amount of Rs 53,85,475/- was written off. The Coordinate Bench of tribunal has also allowed the loss on sale of shares as business loss while deciding the appeal for AY 1998-99. These facts have not been controverted by the Revenue nor have they brought any material on record to rebut it. In view of these circumstances, CIT(A) rightly deleted the addition. Claim of bad debts and business loss - dis-allowance on ground that assessee did not adduce necessary evidence to prove that the amount that was being written was in the past offered to tax - Held that:- Matter be remitted to the file of A.O. for verification Loss on account of non recovery of amounts advanced to lease holders of granite mines - dis-allowance on ground that loss was of capital in nature and therefore not allowable - Held that:- Amount of write offs were of the advances given in the normal course of business. The assessee had also made purchases from these parties in the past. These facts have not been disputed by the Revenue nor have they brought any material to the contrary on record. Hence, CIT(A) rightly deleted the addition made. Accordingly the ground of the Revenue is dismissed.
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2012 (10) TMI 81
Tax on Long Term Capital Gain - sale of shares - The overall consideration was Rs. 86.25 lakh. - in this year a sum of Rs. 60.00 lakh only was received. The balance was to be received in three succeeding years - the whole of the cost has been claimed by the assessee while computing capital gains by taking the sale consideration at Rs. 60.00 lakh. The question is - whether, the whole of the sale proceeds of Rs. 86.25 lakh or only a sum of Rs. 60.00 lakh is liable to be considered for the purpose of levy of capital gains? Held that:- Tax on Long Term Capital gain is chargeable to tax in the year in which income accrues, arises or received and is deemed to accrue, arise or received - As decided in case of CIT VS . Bharat Petroleum Corporation [1990 (11) TMI 23 - CALCUTTA HIGH COURT ] Calcutta High Court income accruing in different years or received in different years is chargeable in the year in which transfer takes place. Further in the case of Ashokbhai Chimanbahi [1964 (10) TMI 11 - SUPREME COURT] income is taxable when it accrues, arises or is received and full value of consideration received or accruing in any year as a result of transfer of the capital asset shall be taxed in the year in which transfer takes place – in favour of Revenue.
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2012 (10) TMI 80
Depreciation on assets – alleged that same was already allowed as application of income with the grant of registration u/s 12AA(1) of I.T. Act, 1961 – Held that:- Depreciation as debited in the books will be allowable - amount of depreciation debited to accounts of a charitable institution is to be deducted to arrive at the income available for application to charitable and religious purposes – in favor of assessee
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2012 (10) TMI 64
Speculation loss - whether the speculation loss declared from the sale of shares can be set off against the profit available ? - Held that:- Considering the AO's submission that the fact remains that there was no delivery of the shares and on both occasions i.e. at the time of purchase as well as at the time of sale, it was only the sister concern M/s A. Nitin Capital Services which was involved in the transaction, but how M/s A. Nitin Capital Services’ books and other particulars were made available, especially, having regard to the fact that its representative sought repeated adjournments and since he did not furnish the necessary particulars after receiving summons under Section 131. Having regard to these circumstances, the fact that M/s A. Nitin Capital Services’ assessments were completed, could not have been decisive as far as the assessee’s claims in the present case are concerned That dividends in the shares concerned had not been enjoyed by the assessee even for the period it claimed to have held the shares - there was no evidence of any delivery being effected or any consideration actually having passed between the parties. The assessee relied almost entirely on book entries made in that regard - thus as that amount was not brought to tax and the assessee’s claim of loss was not allowed to be set of against its business profits - in favour of revenue.
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2012 (10) TMI 63
Penalty u/s 273(2)(c) - ITAT deleted the levy - Held that:- After finding that there is order of assessment of the income including the addition of Rs. 20 lakhs in the income of the assessee, the assessee deposited the advance tax. There was no illegality in the order passed by the ITAT and in view of the order passed by this Court in Tax Case No. 10 of 1999(R) wherein penalty on account of undisclosed income has been set aside after taking note of the assessee that one of the partners of the assessee declared undisclosed income because of the pressure of the searching officer and in fact there was no undisclosed income, thus the Tribunal had not committed any error - in favour of assessee.
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2012 (10) TMI 62
Reopening of assessment - ITAT cancelled the order passed by the AO u/s 143(3)/147/251 - Held that:- As decided in Hemraj Munshi Ram Versus Union Of India And Others [1998 (9) TMI 17 - PATNA HIGH COURT] issuance of notice under Section 148 itself is found to be without any reason and basis as the relevant material was already seized and were in possession of the revenue itself and in that fact circumstances, particulars furnished could be generally verifiable by the revenue and there was no reason to hold that assessee had failed to disclose fully and truly material facts to the A.O. As in the present case in consequence of search and seizure operation, the assessment was completed by making the assessment orders on 30.11.1978, 30.11.1979, 30.11.1980 and 30.11.1981. Therefore, the matters which were pending before the A.O. before making the assessment orders and against the above assessment orders, the appeals were preferred and assessment orders were set aside by CIT(A) vide order dated 15.3.1988 and matters were remanded to the A.O. These proceedings could have been completed by or before 31.3.1990. The A.O. had two years time with it. The relevant materials were already lying with the officers as they were seized during the course of the search and seizure. The A.O. could have completed the assessment but it appears that in the present cases, a pretext has been taken by the A.O. and thereafter, only for the extension of period of limitation, the A.O. issued notice under Section 148. Thus after remand order, if A.O. proceeds for assessment and there was no limitation, then there was no necessity of taking help of Section 148 and Section 147 - in favour of assessee.
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2012 (10) TMI 61
Deduction u/s 80IA as well as u/s 80HHC - whether an assessee is entitled to full deduction or has to be proportionately reduced - Held that:- While calculating the deduction the provisions of the deducting sections have to be followed. There is nothing in Section 801A(9) which lays down that the assessee would not be entitled to claim deduction under Section 80HHC on that portion of the profits of the unit of which benefit has been taken under Sections 801A or 801B. The object of Section 801A(9) is not to curtail the deduction but to avoid double benefits - The total benefits cannot be higher than the gross income and cannot exceed the profits of the priority undertaking. The assessee would be entitled to the benefit of Sections 801A or 801B separately and to that of Section 80 HHC independently and while computing the deduction under Section 80 HHC the profits or deductions which have been granted under Sections 801A or 801B cannot be taken into consideration. Thus in agreement with the Bombay and Karnataka High Courts that in case the contention of the revenue that the profits and gains, permitted to be deducted under Section 80IA or 80IB, should be deducted out of the profits of the business and thereafter the profits and gains of the export business are to be reckoned for the purpose of calculating the benefit under Section 80HHC is contrary to the statutory provisions and the letter and spirit of the Act. The deductions are independent of each other and therefore, full deduction under each Section can be claimed though the overall benefit has to be restricted to the total profits and gains of such eligible business - in favour of assessee.
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2012 (10) TMI 60
Interest under Sections 234A and 234B - whether interest can be charged in an order of rectification under Section 154 for the first time - Held that:- If the return is not filed within time or if advance tax is not paid within time then the assessee is liable to pay interest and the payment of interest is mandatory. However, if the AO or the appellate authority does not order the payment of interest, the assessee cannot be directed to pay interest by the demand notice. AO virtually acts like a judicial officer but if he passes a wrong order not to levy the interest then the revenue must challenge the said order get the same set-aside and an order must be passed directing interest should be paid. If no such order is there, the revenue cannot claim interest. However, in case the assessment order is silent with regard to the payment of interest then without challenging the assessment order the revenue cannot, while issuing notice of demand, claim interest under the aforesaid sections - in favour of assessee.
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2012 (10) TMI 59
Revenue expenditure versus capital expenditure - hire-purchase v/s agreement of lease - Held that:- There is a lot of difference between the purchase, hire-purchase and lease agreement. In this case the terms indicate that the provider of the machines was required to maintain the machines and, therefore, he was entitled to take the rent also as per the terms of the agreement, and the petitioner, in the any relevant year could not have exercised his right to purchase the Air Conditioner, his right to purchase the Air Conditioner could have been exercised after expiry of certain period of time. Therefore, in that situation, there was an agreement for lease only - in favour of assessee. Revenue expenditure v/s capital capital expenditure - Held that:- the fee paid to the Architect, some expenses incurred on old capital work in progress which was abandoned and cost of damaged cabinets it is not in dispute that the project could not be accomplished because of the reason that the place where it was to be undertaken had a poor quality of soil and all the construction already damaged. - The other articles bought by the assessee also got damaged and, therefore, in that fact situation, the Tribunal was fully justified in holding that such expenditure which may be pre-operational expenditure for a project can be treated to be a revenue expenditure actually and not a capital expenditure - in favour of assessee.
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2012 (10) TMI 58
Unverifiable transactions - Disallowance under Section 40(a)(ia) - ITAT deleted the addition - Held that:- The Tribunal come to the conclusion that when the assessee paying more tax under Section 115 JB and even observed that it is no body's case that the regular assessment under the provisions of Section 143(3) would have fetched more tax to the Revenue. No reason for any such observation when Tribunal was of the view that neither the A.O. nor the C.I.T. (Appeal) had appreciated the facts. The Tribunal also ignored this fact that the A.O. and C.I.T.(Appeal), both considered each and every fact, which is required to be considered under Section 143(3) and then in that situation, merely because of the one line in the operative part of the order contrary to the specific facts mentioned in the first para that the case is duly processed under Section 143(1)(a), the Tribunal should not have directed the A.O. to rectify the demand notice under Section 115JB and the Tribunal held in this way. Thus ITAT has erred by holding that the AO has not made the impugned additions under the regular provisions of the Act, obviously, under Section 143(3) & also committed error of law in upholding the deletion of addition of Rs.7,49,672/- and Rs.34,44,754/-. A.O. should have considered the plea of the assessee also before holding that he is proceeding under Section 143(1)(ia), and in pursuance of notice under Section 143(2) and 142(1), but he should have considered the asseess's claim under Section 115JB, which has not been and as such, rejected the plea of the assessee in spite of taking note of the fact that assessee has shown the book profit of Rs.2,05,86,930/- under Section 115JB - The matter is remanded to the A.O. for fresh consideration to decide whether the assessment is required to be made under Section 115JB or under Section 143(3) - in favour of assessee by way of remand.
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2012 (10) TMI 57
Charitable Trust - Depreciation - dis-allowance under order passed u/s 154 - Revenue contended double deduction i.e. capital expenditure as application of income and depreciation on the same assets which have already been claimed as application of income - Held that:- High Court in the case of CIT v Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992 (2) TMI 51 - GUJARAT HIGH COURT) held that depreciation should be allowed u/s 11(1)(a) for the charitable institutions and societies since income of the Trust is to be computed on commercial basis i.e. as per normal principles of accounting which provides that to arrive at net income, depreciation should be deducted. Therefore, allowance of depreciation by CIT(A) upheld - Decided against Revenue
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2012 (10) TMI 56
Survey - addition u/s 69 on account of undisclosed investment in stock – difference between quantity of stock as per stock register maintained on the Computer against quantity of stock mentioned in stock Register submitted to the Excise department – Held that:- It is observed that Assessing Officer has not rejected books of account of the assessee. Obviously the opening stock as on 1-4-2008 would be the closing stock as on 31-3-2008, which a per stock register is 25,555 kg. and accepted by the department for A.Y. 2008-09. There is no purchase of supari as on 1-4-2008, as the first purchase bill of supari is through bill no. 51 dated 2-4-08 from Nidhi Sales, which is verifiable from the purchase a/c submitted to the AO during assessment proceedings. There being no corroborative evidence in support of the entry found in the loose seized document, addition made u/s 69 is directed to be deleted – Decided in favor of assessee.
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2012 (10) TMI 55
DTAA between India and Korea - computation of the income attributable to the Indian (PE) of the Korean company – applicability of provisions of Transfer Pricing or Rule 10 read with Rules 10A to 10E – Held that:- Supreme Court in the case of Hyundai Heavy Industries (2007 (5) TMI 196 - SUPREME COURT ) has observed that conjoint reading of sections 4 and 5 states that taxable unit is a foreign company and not its branch or PE in India. A non-resident assessee may have several incomes accruing or arising to it in India or outside India but so far as taxability under sec. 5(2) is concerned, it is restricted to incomes which accrue or arise or which deemed to accrue or arise in India. Plain reading of Rule 10 suggests that it can be applied in the cases where income accruing or arising to any non-resident from any business connection is such which cannot be definitely ascertained. In the present case, assessee has submitted the transfer pricing report and buttressed its contention with the material that income shown at cost+9% is at arm’s length. Assessing Officer nowhere pointed out that income cannot be definitely ascertained on the basis of the material placed on record by the assessee and, therefore, he is computing the income under Rule 10. Further, department itself has accepted the method of assessee in a number of years and sub Article 5 of Article 7 of the DTAA between India and South Korea also provides that profits attributable to PE shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. Since no reasons are assigned by the AO for adopting different method from same source of income, in different years, it is held that income of the assessee be computed at cost+9% as declared by it, and accepted in subsequent year from the same contract – Decided in favor of assesse. Interest u/s 234B – Held that:- In case of a non-resident where entire income is subject to withholding tax u/s 195, then assessee could not be held to have committed default in payment of advance-tax and consequently it was not liable to pay interest u/s 234B.
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2012 (10) TMI 54
Membership fees to National Multi Commodity Exchange of India - revenue or capital expenditure - assessee engaged in trading of grains and commission agents - Held that:- Membership fees of National Commodity Exchange of India cannot be considered to be of enduring nature and therefore the action of the A.O. in disallowing the amount holding it to be of capital nature was uncalled for - Decided in favor of assessee Addition to the extent of 10% of vehicle, telephone, insurance and depreciation on account of personal usage of the vehicle - capitalization of interest paid on loan taken for purchase of vehicle, before the use of vehicle - Held that:- Since the assessee has not been able to controvert the finding of the A.O. nor placed any material either before lower authorities or before us, addition made is upheld - Decided against assessee
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2012 (10) TMI 53
Deduction u/s 80HHC in relation to Foreign exchange fluctuation – AO made reduction of entire fluctuation gain for the purpose of calculating deduction u/s 80HHC - AO considered such income as income from ‘Other Sources’ and not derived from export business – Held that:- Following the decision of ITAT in case of Sujata Grover (2001 (11) TMI 232) and in the case of Priyanka Gems (2004 (12) TMI 288) have held that gains due to fluctuation in the foreign exchange rate emanating from export is its integral part and cannot be differentiated from the export proceeds and it is the part of profits of business. Therefore, foreign exchange fluctuation/gains arose only from export invoice value and are directly relatable to export business of the assessee and the same cannot be excluded from the export turnover. Appeal decide in favour of assessee Deduction u/s 80HHC in relation to service rendered – AO made reduction of 90% amount was liable to be deducted from the profits of business in terms of explanation u/s 80HHC, as it was in the nature of ‘income from other sources’ - CIT (A) reducing 100% of ‘income from the services rendered’ – Held that:- There is no discussion by the Assessing Officer and the CIT(A) with regard to the nature of transaction and the same has not been elaborately discussed either in the orders of the Assessing Officer or of the CIT(A). Case remand back to AO. Addition on account of provision for warranty – Held that:- Estimation should be on a reasonable basis as well as on a scientific basis and on the basis of past history of assessee, so that on the basis of certain information gathered in due course of time, so as to arrive at the correct percentage of the claim. Case remand back to the AO. Addition on account of Voluntary retirement scheme – Assessee has taken over the another company - The attached liabilities have also been agreed to be taken over which resulted into absorption of 184 employees of the said erstwhile company – AO treat it as capital expenditure – CIT(A) delete the same – Held that:- It was held that when the payment is made for the purpose of retrenchment of workers, it was for the purpose of reducing the staff and bring about a reduction in wage bill as well. So, the expenditure incurred was for the purpose of business and also with a view to maintain good relationship with the labourer. Decision in favour of assessee. Depreciation on Plant and Machinery – Held that:- As the amount pertains to the difference of the gratuity fund transferred to the balance-sheet and the assessee wants to claim depreciation on this amount, then definitely, it is out of the purview of section 32 of I T Act, so no depreciation deserves to be allowed. AO has to examine the value of the asset in terms of the said agreement vis-à-vis the value of the plant and machinery shown in the books of accounts for the year under consideration. Therefore case remand back to AO
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2012 (10) TMI 52
Validity of reopening of assessment u/s 147 - buy back of shares at low price in AY 05-06, originally issued on premium - addition made u/s 68 - AY 04-05 - Held that:- There was sufficient reason for reopening of assessment, in sofar as original assessment completed u/s 143(3) was reopened within a period of three years. From the record, we found that statement of Director of assessee company was recorded, wherein it was stated that shares of Rs. 10/- which was issued at a premium of Rs. 90/- were purchased back by the Directors at a face value of Rs. 10/- only. This statement is valid information for the purpose of reason to believe that there is escapement of income, accordingly, we uphold the action of the Assessing Officer for reopening the assessment. So far as merit of addition is concerned, it is observed that AO should have brought on record positive material to substantiate the transaction of issue and repurchase of shares as bogus, having been done by paper company. However, no effort was made by the Assessing Officer or CIT(A) to establish identity of the share applicants. Matter is restored back to the file of Assessing Officer for deciding afresh as per law - Appeal of assessee allowed in part for statistical purposes.
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2012 (10) TMI 51
Addition on account of shortage in closing stock – AO made addition on basis of transfer of stock from godown & plant - Held that:- As concluding from the fact of the case the final discrepancies remaining are too negligible, considering the huge volume of purchases of soyabean as well wheat seeds. Therefore issue decides in favour of assessee Disallowance of claim of depreciation on purchase of car on last day of FY – Held that:- As no fuel at all was purchased for running of such vehicle nor any other expenses for running of the vehicle were incurred before 31.03.YY. No evidences to establish the user of such vehicle for the purpose of business. Mere payment for purchase & register with RTO alone cannot be sufficient to establish the fact that vehicle was actually used for the purposes of business. Appeal decides in favour of revenue Rejection of books of accounts – AO applying GP rate @ 15% - Assessee was trading in foodgrains - Assessee had shown GP of 6.95% as compared to gross profit of 1.95 % and 6.47 % shown in the earlier AYs – Seeds are purchased at price which is above the market prices in form of bonus to farmers – Held that:- As the components of bonus paid was not clearly bifurcated and defects in the books of accounts with regards to cash credit, creditors, shortage etc. such GP ration is justified.
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2012 (10) TMI 50
Withdrawal of registration u/s 12A - twice alteration of objects - engagement in commercial activities - Revenue contended that when the said objects, which formed the basis of the grant of registration, stand altered, the very foundation of the registration stands removed, so that it could not survive - assessee contesting power of the CIT as the competent authority in invoking section 12AA(3) - Held that:- CIT as the competent authority, is empowered by law to examine if the activities being actually pursued are genuine or carried out in agreement or in accordance with those objects. Change in the object clause (s) is violative of an implied and fundamental condition for continuation of registration, cognizance of which can be taken of by the income tax authorities even de hors section 12AA(3) as well as u/s 293C. Commercial activities - Held that:- Unless the functioning of the assessee, which is stated to be on commercial lines, so as to disqualify it as a charitable entity, is shown to be so with reference to its revised/ amended objects, we are unable to see as to how the same (the changes or the revision of its objects and the rules/regulations) has a bearing on its registration or entitles the Revenue to revisit the same, i.e., considering that it has accepted the assessee's functioning as a charitable entity up to the AY 2007-08. Neither the continuation of registration nor its withdrawal is automatic, and there is or can be no presumption with regard to either. The assessee was bound, notwithstanding the genuineness of the reasons motivating or leading to the changes, i.e., assuming so, to have reported them to the Revenue, in absence of which its claim for continuation of registration cannot hold. The said changes having come to the notice of the Revenue now, i.e., during the course of the assessment proceedings for the AY 2008-09, it is obliged and empowered under law to take cognizance of the same. It shall follow the same procedure, as it would have, had the assessee voluntarily reported those changes in time. And, again, there can be no presumption for consequential cancellation/withdrawal of registration. If on basis of examination of facts, explanations and objections, CIT comes to the conclusion that registration as granted cannot be continued, he shall withdraw the same per a speaking order. The withdrawal could have, even as directed per the impugned order, a retrospective effect, i.e., from the date from which the impugned object(s), i.e., which the Revenue finds as objectionable from the standpoint of the assessee's registration or its continuation as a public charitable institution u/s. 12A of the Act, comes into effect. Matter remanded back for fresh consideration. CIT shall adjudicate per a speaking order; his order being appealable - Decided in favor of assessee for statistical purposes
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2012 (10) TMI 49
Computation of depreciation u/s 32 – Whether depreciation can be claim from the date of actual commencement of business or from the date of setting up of the business – Assessee contended that place of business was ready by 30.09.2003 - First sale bill of the raised on date 01.01.2004 – AO apply of 50% of the depreciation rate for half year – Held that:- Once business has been set up and ready to commence business, expenses have to be allowed irrespective of the fact that actual commencement of the business was much later. Therefore, the building was fully ready prior to 30.9.2003 and depreciation should be allowed at normal rate. We are however unable to accept the arguments that merely because the building was ready, the business had been set up. The assessee was setting up entertainment centre and, therefore, unless assessee was ready to provide any of the entertainment services, it cannot be said that place of business had been set up and the building was used for the purpose of business. It has not been examined whether these fitness machines were ready for use before 30.9.2003. No specific opportunity had been given to the assessee to prove whether any of the services in the entertainment centre were were ready before 30.9.2003. Case remand back to AO
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2012 (10) TMI 48
Rejection of books of accounts u/s 145 – Calculation of profit by applying Net Profit ratio – Whether AO in making best judgment assessment u/s 144 has possess absolute arbitrary authority to assess any figure he likes - Assessee engage in construction business – Labour expense constitute 37% of total expense – Vouchers do not contain details like labour rate, working days etc. – Cash payment of labour expense amounting Rs. 1.39 cr. out of total exp. of labour of Rs. 7.47 cr. - Cash payment were made of only 20% of total labour exp. – Held that:- Assessee working at 21 sites during the year and most of the labour was unskilled and illiterate, don’t have permanent address, not have bank account. Net Profit rate shown by assessee was on higher side in comparison to earlier years. On the basis of decided case of Brij Bhushan Lal Parduman Kumar(1978 (10) TMI 2 - SUPREME COURT) that even in the case of best judgment assessment u/s 144, the same has to be done on reasonable basis and it should not be vindictively or capriciously. Therefore, AO is not justifying in rejection of books and applying NP rate. Treating Foreign expenses as bogus – AO contended that it does not have any relation with the business need – Held that:- As the assessee furnished break-up details of local and foreign traveling of the partners. No family members accompanied the partners and that by itself is sufficient to show that the expenditures are for business purpose. Visits to foreign country were made to know for its high standard urban infrastructure like Hong Kong, Malaysia which led to increase of knowledge of recent technology in construction business. Further, the machinery was purchased from abroad in the later years. Therefore, same cannot be treated as bogus. Appeal decides in favour of assessee
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2012 (10) TMI 47
Disallownace of expenses - depreciation, administrative expenses & donation - AY 2000-2001 - Held that:- In the absence of any documentary evidence on record, that the assessee used plant and machinery during the course of its trading activities no depreciation can be allowed - against assessee. Disallownace of expenses - AY 2001-02 - Held that:- Restore the issue to the file of CIT(A) to decide the claim of the assessee in respect of Rs.1,60,000 as the assessee furnished copy of FIR before the AO for theft on merits by a speaking order. However, in respect of balance amount of Rs.50,000 as sundry debtor the assessee failed to produce any documents at the time of remand proceedings and, accordingly, the AO could not verify the claim of the assessee. Hence, the claim of Rs.50,000 made by the assessee is rejected - partly in favour of assesseby way of remand. Claim of depreciation - Held that:- As there is no dispute to the fact that there was no claim of the assessee for depreciation before the authorities below and the said claim is raised by the assessee before the Tribunal for the first time. Considering the facts of the case and the fact that no details were filed before the authorities below to consider the claim of the assessee for depreciation, thus additional ground for claiming depreciation is not maintainable as claim of the assessee for depreciation depends on the factual details which the assessee failed to furnish not only in the return filed but also during the course of assessment proceedings - against assessee. Addition on account of cash in hand - AY 2003-04 - Held that:- Considering the fact that the said amount is appearing in the balance sheet which is duly audited, no justification to treat the said amount as undisclosed income of the assessee. Hence, the addition of Rs.5,09,555 is deleted by reversing the orders of authorities below - in favour of assessee. Disallowance of 50% of administrative expenses - Held that:- The claim can be disallowed if the assessee has not established that amount in question has been wholly and exclusively laid out for the purpose of business. Since in the present case assessee has not been able to furnish the requisite proof to establish that the expenses aggregating to Rs.13,28,150 which has been disallowed by authorities below, was incurred wholly and exclusively for the business purposes of the assessee - against assessee. Disallowance of commission expenses - Held that:- Assessee has not been able to establish whether any service was received to the assessee for the alleged payment of commission of Rs.20,02,250 to M/s. Gurudev Chemox Industries, Bangalore. Merely filing of said certificate at page 130 of PB does not establish that any service was received to the assessee - against assessee.
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2012 (10) TMI 46
Disallowance u/s 37(3A) - revised return filed by assessee - Held that:- there are mistakes in the amounts of disallowance made by the A.O. - Submission of assessee requires clarification. - in favour of assessee for statistical purposes. Guest house expenses - expenses incurred on salaries & wages to staff & repairs and renovation expenses are in the nature of guest house expenses - held that: these are not allowable in view of the decision of the Hon’ble Supreme Court in the case of Britannia Industries Ltd. vs. CIT (2005 (10) TMI 30 - SUPREME COURT) and accordingly the disallowance made by the A.O. upheld - With regard to the food expenses, matter remanded back. Incentive bonus - Held that:- this amount is allowable u/s 37(1) since it is remuneration to workers for extra work done which partakes the character of salary and it is not bonus as provided under the Payment of Bonus Act, 1965 - in favour of assessee. Deduction u/s 80VV - expenses incurred in connection with certain proceedings - payments for consultations, conferences and appearances relating to proceedings - Held that:- As decided in CIT Versus Hayward Waldia Refinery Limited [1992 (7) TMI 5 - CALCUTTA HIGH COURT] section 80VV seeks to restrict the allowance in respect of expenditure incurred by an assessee in respect of a specific proceeding under the Income-tax Act having no application in relation to remuneration or fees paid by an assessee to a tax consultant or other adviser for giving general advice in relation to taxation matters - Thus in the present case the disallowance made is deleted - in favour of assessee. Disallowance of Bhanwad Prospecting Survey expenses - Held that:- As the disallowance of Bhanwad Prospecting Survey expenses, it has been consistently held by the Tribunal in earlier assessment years that the assessee is entitled to the deduction u/s 35E, thus following the same the A.O. is directed to follow the orders of the Tribunal - in favour of assessee. Disallowance of repairs to building and machinery - Held that:- All these renovation and repairs were carried out by the assessee in its facilities available at the salt pans of the assessee are all essential repair and maintenance expenditure. Nothing is procured and embedded as new. The assessee has not extended its operational facilities area or plant. Therefore, these expenditures are to be treated as revenue in nature - in favour of assessee. Disallowance of Depreciation - Held that:- Since the foreign travel expenses has been treated as capital expenditure, therefore, on the said amount the assessee is entitled to the depreciation. As in the absence of any contrary material placed on record by the Revenue, we direct the A.O. to allow depreciation on foreign travel expenses treated as capital expenditure - in favour of assessee. Disallowance u/s 40A(3) - Held that:- The issue has not been properly examined as disallowance has been made on the basis of Tax Audit Report. The payments to employees cannot be said that the assessee has failed to establish the identity of the payees. It has also not been examined by the A.O. as to whether there is any single payment not exceeding Rs. 2,500/- in view of the decision of CIT vs. Aloo Supply Co. (1979 (12) TMI 60 - ORISSA HIGH COURT) - restore this issue back to the file of the A.O. to decide the same afresh - in favour of assessee for statistical purposes. Disallowance of expenses on fish and prawn culture - Held that:- The issue is covered in favour of the assessee by the order of the Tribunal in assessee’s own case for the assessment years 1981-82 and 1982-83 wherein it is held that the maintenance of fish ponds does not constitute any separate business but it is an essential part of the business carried on by the assessee in the normal course - in favour of assessee. Disallowance of interest on outstanding electricity duty, Central Sales Tax and Gujarat Sales Tax - Held that:- As the Tribunal in assessee’s own case for A.Y. 1984-85 observing that the interest on electricity deposit is neither duty nor tax, therefore, it is out of the scope of the section 43B, thus directed the A.O. to delete the addition - and with regard to the disallowance of Central Sales Tax and Gujarat Sales Tax, the Tribunal restored the issue back to the file of the A.O. to verify the payment - thus following same order appeal decided - partly in favour of assessee. Disallowance of payment made to Tata Services Ltd. - Held that:- Observing the order passed in assessee' own case for A.Y. 1984-85 that the A.O. was not justified in making adhoc disallowance of Rs. 2 lacs and accordingly directions to delete the disallowance - in favour of assessee. Disallowance of payment of Tata Sons, Cess charges and various items individually costing - Held that:- As assessee before the CIT(A) has filed detail note who without considering the same has decided the issue against the assessee, thus the issue should be restored back to the file of the A.O. - in favour of assessee for statistical purposes. Disallowance of interest paid on borrowings - Held that:- The assessee company was having its own funds aggregating to Rs. 160.73 crores as on 31-3-1985 and out of it, the assessee has advanced Rs. 3.58 crores, was not controverted. Thus as per decision in Munjal Sales Corporation Versus CIT [2008 (2) TMI 19 - SUPREME COURT] the Appellate Tribunal ought to have held that the loan given was from the assessee’s own funds - in favour of assessee. Disallowance of forfeiture of security deposits/performance guarantee deposit - Held that:- There is no dispute that the assessee has received Rs. 1,41,51,010/- towards full value of sale of 5000 MTs. of Soda Ash. However, there is no material on record to show the date of entry of consideration of the sale price recorded i.e. at the time of delivery of goods or receipt of sale value of Rs. 1,41,51,010/- or at a later stage i.e. on or before 31-3-1985. There is no material on record to show as to whether the HLL has received the imported consignment of Soda Ash on or before 31-3-1985 or whether any effort was made by the HLL to return the supply to the assessee by 31-3-1985 or has refused to return the goods or has sought extension of time to return the goods to the assessee - In the absence of all these relevant material on record the matter should go back to the file of the A.O. for fresh reconsideration - in favour of assessee for statistical purposes. Disallowance of expenditure on scientific research u/s 35(1)(ii) - Held that:- The assessee has made payment of Rs. 5 lacs to the Indian Institute of Chemical Engineers, Calcutta & in the absence of any material to show that the expression u/s 35(1)(ii) that “any sum paid to a scientific research association” does not include the payment made by the assessee or such payment is not allowable the view of CIT(A) was fully justified in deleting the disallowance - in favour of assessee. Levy of interest u/s 139(8) - Held that:- As this ground is consequential which was not objected to by the D.R the A.O. is directed to allow consequential relief to the assessee in respect of levy interest u/s 139(8) - in favour of assessee.
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2012 (10) TMI 45
Revenue or capital receipt - Refund of the sales tax - amount was refunded to the assessee by the supplier on the ground that only sales tax was chargeable @ 2% and not @ 4% - Held that:- Though assessee received the amount towards payment of sales tax at 2% but assessee retained the said sum to themselves - this amount, will have to be treated as a revenue receipt (trading receipt) and accordingly will have to be taxed in their hands during the assessment year in question - in favour of the Revenue
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Customs
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2012 (10) TMI 79
Denial of drawback - whether the demand is to be sustained in view of para(iv) of Circular 17/97-Cus and para (vi) of Circular 64/98 though these are not relied upon in SCN ? - Held that:- The only relevant information was that the Appellant was a merchant exporter, which was always known to the department. As may be seen from para 1(iv) of Circular 17/97-Cus and para1(vi) of Circular 64/98-Cus there was no question of taking any declaration from merchant exporters who buy goods from the open market as in the case of this Appellant but the drawback was supposed to be restricted to the customs portion only. That merchant exporters who did not get the garments manufactured or stitched through a job workers, but who procured goods from the open market were treated differently and an entirely different set of procedures always existed by virtue of Circulars of 1997 and 1998. The rationale for this was that goods were sourced from diverse suppliers and the authorities were alive to difficulty in securing certificates about duty credit. All these changed in 2003 with the issuance of Circular No.8/2003 it has been decided that instead these manufacturer exporters and merchant exporters with a supporting manufacturer shall be required to give a self-declaration that such manufacturer-exporters or the supporting manufacturers are not registered with Central Excise and that they do not avail / have not availed Cenvat facility. The form of self-declaration is enclosed. The assessee is not a manufacturer but only procures or sources goods from the Indian market and exports them. Therefore, it availed the benefit of All India rates of duty drawback, a notional concept applicable to such class of exporters. None of the circulars cited by the department required the assessee to follow the procedure which is now mandated, in 2009. The previous circulars of 1997 and 1998 as well as the circular of 2003 clearly visualized that duty drawback was restricted, excluding duty credit availed, in the case of manufacturers who also got their job work done. Exporters of goods purchased from the market were to be treated as having availed Modvat facility. Thus the exports had been finalized and duty drawback paid as long back as in 2006-2007, the attempt to reopening the entire issue by the petitioner was clearly unwarranted - in favour of assessee.
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2012 (10) TMI 78
Reduction of penalty equal to 25% – clandestine removal - appellant is not disputing the fact that there is clandestine removal – contention of assessee is that benefit of provisions of sub Section 1A and two provisos of sub-section (2) of Section 11A of the Central Excise Act, was not given to the appellant at the time of issuance of show cause notice – Held that:- Once the option is made known to the person by explicitly stating in the notice and the person still does not take advantage of the scheme, it would be entirely to his own peril. But if the option is explicitly not stated in the notice with proper quantification of particular amount of duty and interest, the failure on the part of person to pay duty, interest and penalty amount equivalent to 25% of duty, within 30 days of the notice, under Section 11A of the Central Excise Act, 1944/Section 28 of Customs Act, 1962, it cannot be held against the person and he shall get option of the said beneficiary scheme even on payment within 30 days of subsequent communication, with proper quantification and particular amount of duty and interest - benefit of provisions of sub-Section (1A) and two provisos of sub-section (2) of Section 11A of the Central Excise Act, 1944 to extended to the assessee – in favor of assessee
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2012 (10) TMI 77
Jurisdiction – reduction of redemption fine to 50% of what was imposed by the Commissioner of Customs – Held that:- Tribunal has the jurisdiction to reduce the redemption fine if he thinks it is just and proper - order passed by the Tribunal is just and equitable
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2012 (10) TMI 43
Benefit of DEPB credit - allegation of overvaluation - Held that:- proceedings against the exporter were dropped by this Tribunal relying on orders of RAMMAPATI EXPORTS versus COMMISSIONER OF CUSTOMS (PORT), KOLKATA [2006 (8) TMI 16 - CESTAT, KOLKATA] - once the charge against the exporter itself does not survive, the question of aiding and abetting also does not survive - the so-called new material/evidence not being relatable or relevant as found to uphold the charge of over-valuation, leads to the setting aside of the impugned Order and the notice. - in favour of assessee.
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2012 (10) TMI 42
Confiscation of goods and imposition of fine - violation of Section 111(o) of the Customs Act, 1962 – Held that:- Assessee imported the capital goods but not to the extent of Rs. 1 Crore, he cannot have the benefit of waiver of duty - assessee paid the duty and for delayed payment, he paid interest and thus, he did not avail the benefit of that notification - assessee conducting himself contrary to the notification thus exposing himself to the order of confiscation, do not arise - when once the assessee pay the duty and interest, goods will be out of the ambit of the said notification and they cannot be held liable for confiscation under Section 111(o) of the Act - in favour of the assessee
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2012 (10) TMI 41
Demand – 100% E.O.U - alleged that dispatching of finished goods, unfinished goods and duty free raw-materials by the 100% E.O.U. to their group companies in DTA with the intention and for the purpose of (claimed) illegal/inadmissible Drawback – Held that:- Activities were done without obtaining proper permission from the jurisdictional (Customs) authorities with the help of other DTA Units - there were indeed specific checkings and investigations by the departmental officers under proper authority of law - contravention of simple (footnote) declaration can result in denial of consequential benefit - Revision Applications are thus rejected Time bar - DBK amounts claimed and sanctioned in 1996-1997 the original Show Cause Notice was issued on 18-7-2001 - applicants herein are contesting that the addendums/corrigendum letters issued thereafter in connection with the above Show Cause Notice should be taken as a fresh Show Cause Notice and if computed from last addendum dated 2-5-2002 the issued Show Cause Notice is “Time barred” – Held that:- Government, therefore takes up the very initial Show Cause Notice or issued date as the relevant date and rest of addendums/corrigendum letter as precise details clearly pointing out the relevant data/limits/scopes of this case proceedings which have already stood commenced - Show Cause Notice dated 18-7-2001 was issued within extended time of 5 years and as such Show Cause Notice can not be treated as time barred
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Corporate Laws
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2012 (10) TMI 76
Scheme of Arrangement - what would be an effective date of conversion? - Held that:- Considering the reports of the surveyor Ernst and Young appearing at the supplementary paper book where it is found that the effective date of conversion should be the date of merger meaning thereby, it would be a post-merger issue and not pre-merger as suggested in the scheme. As no reasonable plea was placed to ignore the opinion of the expert on that count the opinion of the surveyor, having the competent expertise, must prevail, particularly, when the company relied on the same at the meeting of the shareholders as contended by Mr. Deb, learned senior counsel appearing for the respondent and not confronted by Mr. Sarkar, learned senior counsel appearing for the appellant. Unfair dealings at the meeting - It would have been proper if such unpleasant things did not happen at the meeting. The learned Judge rightly held, it did not tilt the balance as the overwhelming majority of the shareholders approved the same. In the process, if the balance is tilted in favour of the promoter that would be a consequence for which the respondent would have to suffer without a redressal. We are helpless on that count. Discounted value must be the best possible one, beneficial to the minority shareholders including Chandak and Fofalia and such date must be fixed by the company accordingly from the chart handed over in Court by Mr. Sarkar. To make it clear for removal of doubts, the conversion must take effect after the merger and not anterior to it. Thus with these modifications the scheme is sanctioned.
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2012 (10) TMI 40
Scheme of amalgamation /arrangement sanctioned by the High Court - whether it would attract the mischief of Indian Stamp Act, 1899 in the State of West Bengal - Held that:- “Transfer of property” being “inter vivos”. Section 5 of the Transfer of Property Act would squarely be applicable in a scheme of amalgamation or demerger. It was a transfer between two “juristic persons”. Hence, it was nothing but one of the methods of transfer in corporate field that would certainly be inter vivos. An inter vivos transfer would definitely attract Stamp Duty as per the said Act of 1899 and/or the State amendments applicable therefor. On the question of “holding subsidiary” corporate entities are having distinctive features. Shareholders do not own the corporate entity. Lifting of the corporate veil might suggest otherwise. In the eye of law, corporate entities are distinct. Hence, transfer from A to B would definitely a “transfer” to come within the scope of paragraph 45 of Hindusthan Lever (2003 (11) TMI 335 - SUPREME COURT OF INDIA), attracting appropriate duty - As per the proposed law scheme of amalgamation and/or arrangement would involve two per cent Stamp Duty whereas the “conveyance” as of date would require payment of duty at the rate of seven per cent. It is for the State to fix the rate. So long the new law does not come in force the existing law would prevail. The parties would have to adhere to the same.
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FEMA
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2012 (10) TMI 44
Interest on the seized foreign currency - applicability of Rule 8 – Held that:- Interest at the rate of 6% per annum under Rule 8 could have been awarded to the respondent on the seized Indian currency only - writ petition in the nature of enforcement of a civil liability that is claim for interest in the nature of compensation for wrongful retention of money is not maintainable. It is not as if payment of interest under Rule 8 (ii) was mandatory (as under Rule 8(i)) and which could be enforced by way of a writ petition - judgment awarding interest under Rule 8(i) qua Indian currency also can thus not be sustained
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Service Tax
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2012 (10) TMI 104
Applicability of exemption notification - Assessee is engaged in transmission and distribution of electricity - Whether services provided in respect of erection, commissioning and installation as also technical testing and analyses and installation of meters at the premises of electricity consumers would be covered under the exemption Notification No. 45/2010-ST dated 20.07.2010 - Held that:- Assessee is selling electricity to the consumer, so that for billing the consumer for electricity consumed, it is essential to install the electricity meter. Thus, any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver. Therefore appeal decides in favour of assessee.
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2012 (10) TMI 103
Natural justice – Held that:- Original authority had denied natural justice to the party - copies of certain documents had not been supplied to the party in spite of their specific request. It appears, the party was driven from pillar to post whenever they requested for supply of the said documents. Certainly, the original authority was unfair to the party - It was incumbent on that authority to collect the documents from wherever they were and supply the same to the party to enable them to file an effective reply to the show-cause notice. We further note that no reasonable opportunity of being personally heard was given to the party either. Thus, the findings recorded by the Commissioner (Appeals) as regards natural justice are tenable - appeal allowed by way of remand
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2012 (10) TMI 102
Condonation of delay – appellant submitted that order was kept in an irrelevant file without any note as to the date of receipt of the order - escaped notice of appellant. Inward register maintained by appellant indicated that appeal papers were received on 4-3-2010 and appeal was filed on 20-5-2010 – Held that:- Condonation of delay filed by the appellant. In view of the above, the delay is condoned and the appeal is admitted Service tax demand with interest and penalty – alleged that appellant was ‘programme producer’ - According to the appellant, it had sold soft items which were recorded in respect of various topics including Siddha medicines, agricultural tips, religious and spiritual speeches and used the same in their TV channel during 2001 to 2004 – Held that:- Programmes were recorded by the appellant and was used. Such an event resulted in providing of taxable service as a programme producer when those were meant for telecasting or disseminated by transmission through electronic device and were received by general public - appellant is directed to make deposit
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2012 (10) TMI 72
Cenvat credit - duty paying documents - input services - whether the document certificate issued by the bank is the valid document for availment of Cenvat credit – Held that:- Since this certificate has been issued to the appellant and it contains the information regarding the nature of the service, gross amount charged for the service and service tax paid - it is valid document - requirement of pre-deposit of Cenvat credit demand, interest and penalty is waived
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2012 (10) TMI 68
Consultancy Engineering Service - service tax demand, interest thereon & penalty - period in question 19.04.2006 to 31.03.2007 - Held that:- Admittedly, the Appellant did not contest payment of Service Tax nor it is their case that there is no delay in payment of Service Tax. Therefore, the Appellant are required to pay interest on delay in payment of Service Tax in terms of Section 75, irrespective of the fact that the Applicant have paid the Service Tax before issue of show cause notice. As prior to 18.04.2006, i.e. before insertion of Section 66 of the Finance Act, 1994, the service recipient was not required to pay the Service Tax and the service recipient became liable to pay Service Tax after insertion of Section 66 w.e.f. 18.04.2006. Thus the learned Commissioner has not imposed any penalty under Section 76 or Sections 77 and the Department has not challenged the non-imposition of penalty under Sections 76 and 77. In these circumstances, there was a reasonable cause and therefore, the penalty is not imposable as per the provisions of Section 80.
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2012 (10) TMI 67
Waiver of pre-deposit – Assessee individuals are co-owner of a particular building and have rented out the premises - Tenant issues different cheques to all the above individuals as they are co-owners - Amount received by the individuals would be within the threshold limit of SSI exemption N/No. 08/2008 – Held that:- As the cheques for rent are received individually by all the appellants, it was indicated in the agreement between the individuals for the purpose of renting out of premises to another person so as to make it specific that individually they are renting out the property to a person. As the said notification talks about the aggregate value of the taxable services rendered, should be considered for the purpose of exemption and in this case if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. - Stay granted.
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2012 (10) TMI 66
Waiver of pre-deposit – demand is under the head Maintenance or Repair Service - repairs undertaken by the appellant were in relation to the sale of machines – Held that:- explanation which was introduced with effect from 16-6-2005 is clarificatory and retrospective so as to cover the period of dispute - appellant’s services squarely fall within the ambit of the definition of ‘Business Auxiliary Service’ - during the period of dispute, they were entitled to exemption - demand under a different head is not sustainable - waiver of pre-deposit allowed
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Central Excise
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2012 (10) TMI 75
Mini cement plant - Whether the entry at Serial No. 28 of the exemption Notification No. 14/2008-CE (NT) was wrongly interpreted by the Adjudicating Officer - Held that:- Application for waiver of the excise duty and interest rejected - Held that:- The Tribunal has found that the entry at Serial No.28 relates to white cement and not grey cement manufactured by the appellant-company. No other type of cement has been granted abatement by any notification - as mentioned in SCN notification dated 1.3.2006, as amended, prescribes the effective rate of duty for excisable goods falling under Tariff item 2523 29 in which different rates of excise duty has been prescribed for units manufacturing cement on the basis of the type of manufacturing plant, and on the basis of form, in which the clearances are affected by the unit concerned. The appellant's factory does not qualify as mini cement plant as defined in the notification. Thus the Tribunal rightly found that the appellant does not have a prima facie case for waiver of the excise duty and the interest. Since the appellant-company has not ceased production, and is making payments to the bank and financial institutions no substance in the plea of undue hardship or financial hardship in depositing the amount - the period of deposit is extended by six weeks from today - against assessee.
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2012 (10) TMI 74
CENVAT Credit of duty paid by an EOU - restricting the Credit to the amount actually paid by applying the effective rate of duty - Held that:- As the adjudicating authority has not considered the submissions made by the appellant in its correct perspective remand the matter back to the adjudicating authority to reconsider the issue afresh - in favour of assessee by way of remand.
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2012 (10) TMI 73
Whether activity is amount to manufacture - making combo-pack of two toothpastes of different weight and one tooth brush. Tooth pastes were provided by Colgate Palmolive (India) Ltd. and brush was supplied by manufacturer at Daman – Held that:- Appellant was claiming to be no manufacturer under Central Excise Law and claiming to be a service provider, now it claims to be a “manufacturer” to get area based exemption benefit - when benefit of area based exemption is claimed the conditions of exemption prescribed by the Notification need to be fulfilled - when the appellant raises invoices on Colgate-Palmolive as a provider of service of packing, he is able to pass on the credit of duty and taxes paid on input and input services used by him, which would not be the case if he is considered as a manufacturer whose products are exempt - appellant when failed to claim the exemption fulfill conditions of the exemption notification, that was deniable - appellant appears to have not come out with clean hands - adjudication is not barred by limitation - While on one hand there is claim of no manufacturer, on the other there is claim of manufacture - appellant directed to make pre-deposit
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2012 (10) TMI 71
Rebate claim – refund claim was time barred as it was filed after the time limit specified under Section 11B of Central Excise Act, 1944 – Held that:- Rebate claim was rightly rejected as time barred. Once the claim is rejected as time barred the allowing of re-credit in Cenvat account of duty paid on exported goods, is legally incorrect as it would amount to allowing rebate - rebate claim was rightly rejected as time barred but the re-credit of duty paid in Cenvat account is not admissible - revision application succeeds
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2012 (10) TMI 70
Interest - leviability of interest on the assessable value appearing in supplementary invoices - period of limitation – Held that:- Interest being consequence of levy and no limitation being prescribed by Section 11AB of Central Excise Act, 1944 - periodicity of default that was well known to appellant and the appellant willfully defaulted to make payment of interest - demand of duty being paid for the default period, interest became payable for no time bar proceeding - appeal is dismissed
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2012 (10) TMI 39
Payment of differential excise duty on 'decorative laminated sheets' - treating the goods to be classified under sub heading 4823.90 OR 3920.31 - Held that:- As decided in COLLECTOR OF CENTRAL EXCISE, HYDERABAD Versus BAKELITE HYLAM [1997 (7) TMI 154 - SUPREME COURT OF INDIA] that such goods fall under sub heading 3920.31. Thus as the dispute with regard to payment of excise duty under sub heading 3920.31 is resolved the appellant was required to pay the differential duty. Waiver of Pre deposits - undue hardship - Held that:- For a hardship to be "undue" it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. Thus while safeguarding the interest of the revenue it has directed the appellant to deposit the entire amount of balance duty, except interest.
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2012 (10) TMI 38
Non discharge of duty liability by the appellant under the provisions of Rule 8 of the Central Excise Rules, 2002 during the period April 2007 to April 2008 whereas assessee submits that it had discharged the duty liability as per the law but had failed to file the returns in time and there was some arithmetical error while calculating the duty paid - Held that:- Calculations needs to be done by the adjudicating authority or by the jurisdictional authorities, hence matter needs to be considered by the adjudicating authority appreciating the claim of the appellant on the factual matrix. Matter remanded back to adjudicating authority without expressing any opinion of the merits of the case
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2012 (10) TMI 37
Demand of duty and penalty - assessee get raw material under job-work challan from other Central Excise Assessee manufacture finished products and clear the goods under exemption Notification 214/86-C.E. – alleged that Respondent had an agreement with suppliers of raw material to give back finished goods with weight equal to 90% of the weight of raw material supplied. The 10% is taken as burning loss or process loss – Held that:- Inputs used by the job-worker is identical to the goods supplied by the Principal manufacturer. But that fact cannot bring in any additional levy - This is only for the purpose of meeting his contractual obligation of restricting burning loss to 90%. Further the goods cleared by the Respondent is accounted by the recipient of the material as required under Central Excise Rules - demand on account of Component B is not maintainable - intention to evade payment of duty has not been clearly broughtout in the order-in-original - it was a bona fide mistake and there is no case to increase the penalty - Appeal filed by Revenue rejected.
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2012 (10) TMI 36
Denial of cenvat credit – Held that:- There is no dispute regarding receipt of goods, use thereof in the manufacture by the assessees and the duty paid nature of the goods - even if the assessees have not been able to establish that the goods were directly purchased from the manufacturer through M/s. S.S.S. Products, the substantive right to credit cannot be denied for contravention of M/s. S.S.S. Products in not getting themselves registered, particularly when the violation cannot be attributed to the assessees who have no control over the dealer - substantive right cannot be denied in such a situation - assessees are eligible to credit
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2012 (10) TMI 35
Request for issuance of a single Central Excise Registration Certificate – Held that:- Two sheds for which separate Central Excise Registration have been given are located in a single Industrial Estate, which are not far off from each other. The instructions does not speak of the distance between the two manufacturing units. Moreover, these are divided by the Industrial roads and not public road - Department directed to grant single Registration in respect of 2 units i.e. Unit I and Unit II - Appeal allowed
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2012 (10) TMI 34
100% Export Oriented Unit - refund claim for the un-utilized Cenvat Credit of Service Tax which has been paid by them on input services. The claim was based on the ground that all their services were exported to their group companies located outside India – Held that:- There is no question of any procedural irregularity - These are in the nature of incentives given to the exporters to encourage them from getting the precious foreign exchange to the Country and also to see that the price which they keep in the international market is competitive - If these benefits to which they are legally entitled to and is conferred on them by the policies of the Government as well as the statutory provisions is not settled expeditiously, the very object of granting these benefits would be defeated and the enthusiasm on part of these exporters to carry on the business is seriously hampered. Therefore, it is of utmost importance that these refund claims are settled expeditiously - revisional authority directed to settle these refund claims
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Wealth tax
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2012 (10) TMI 69
Valuation of shares under Wealth Tax – Assessee contended that the value should be taken as nil, considering the restriction on free marketability due to lock in period under promoter quota - AO pointed that shares of the company were quoted shares and arrived at the market value of Rs. 210/- as on the valuation date – Following the decision in case of R. Rathinasabapathy Chettiar (1973 (5) TMI 8 - MADRAS HIGH COURT) lock-in period on the shares held out of the promoters' quota, necessarily one has to arrive at the depreciated value of these shares. Since these shares, in reality, would not fetch the same amount of price as the shares enjoying easy transferability, the shares could not be treated on par more or less with the shares which can be dealt with easily or saleable readily. What could be the depreciated value of a promoters' quota shares suffering restriction on free transferability Rule 11 or Rule 21 – Held that:- In absence of any such guideline, the depreciation may range from 0 to 100 and it is always a question of debate. By adopting the principle as given under Rule 11, we are neither treating the shares as unquoted shares, nor are we ignoring the fact that the company's shares are quoted shares. Though the assessee is not in a position to show what could be the depreciated value of the restriction on the transfer, even invoking Rule 21, as had been done by the Revenue, we find that Rule 11 could only be a plausible method to arrive at the depreciated value of a quoted share, which suffers a lock-in period, by reason of it being allotted as a promoters' quota. Appeal decides in favour of revenue & case remand back to AO
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Indian Laws
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2012 (10) TMI 101
RTI - Writ petition - vacancies in the posts, in the office of Chief Information Commissioner, as well as the subordinate staff – petition points out that under the Right to Information Act, information is required to be furnished within 30 days of filing of the application - prayer made in this writ petition is that suitable directions be given to respondents to fill up the vacancies of Information Commissioners as well as the supporting staff – Held that:- Status Report reveals that it has been decided in consultation with CIC that CIC should be granted autonomy in recruitment of staff. Keeping in view, Recruitment Rules are being framed for selection and appointment of suitable staff in consultation with the UPSC - CIC is to be given autonomy and it is left to CIC to recruit the staff, the framing of Rules should not take time as most of the posts are similar to which are in any government establishment and those Recruitment Rules of the Government can always be adopted specifying the eligibility conditions as well as mode of recruitment etc. - direct that this exercise of framing of Recruitment Rules be completed within a period of one month to enable the CIC to start the process of recruitment.
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2012 (10) TMI 65
Alleged wrong placement in the seniority list - Challenge the final seniority list of Assistant Engineers (Civil) in CPWD as on 01.01.2011 - accord the applicant his due seniority and place him below Sl. No.557 and above Sl. No.558 in the seniority list circulated vide O.M. dated 01.08.2011 - ITAT rejected the appeal on delay and / or laches - Held that:- The petitioner was a silent sufferer. He had made representations and was even driven to approach the Central Information Commission in order to obtain information with regard to his seniority. The petitioner’s case is better inasmuch as the final seniority list came to be published on 01.08.2011 and immediately thereafter, the petitioner approached the Tribunal by way of the said O.A. 4154/2011. Therefore the petitioner’s plea that he had approached the Tribunal within time is acceptable. Thus, the provisional seniority list of 01.04.2002 got substituted by the final seniority list of 01.08.2011. In these circumstances, it would be incongruous to hold that the petitioner could not challenge the final seniority list. Non-joinder of the 233 persons who would have been adversely affected by any order passed in favour of the petitioner - Held that:- As all the affected persons need not be added as respondents as some of them could be impleaded in a representative capacity if the number of such persons is too large. Secondly, when such a situation arises before a court and, for that matter before the Tribunal, an opportunity should be given to the petitioner to implead the necessary parties or at least some of them in a representative capacity. If the petitioner still refuses to do so, then the petition could be dismissed for non-joinder of necessary parties and not otherwise. In the present case, no such opportunity was offered by the Tribunal to the petitioner and, therefore the Tribunal erred in dismissing the original application at the admission stage itself. As the petitioner had, in fact, impleaded one such person, namely, the respondent No.3 Shree Pal Singh, who was the person, according to the petitioner, immediately below him in seniority. Although, it is true that the petitioner has not stated in the original application that the respondent No.3 was impleaded in a representative capacity, but it is also clear that the respondent No.3 would, while defending his case, also be espousing the case of all the 233 persons, who were similarly situated to him - as the Tribunal has erred on both counts on the point of limitation as well as on the point of non-joinder of parties the impugned order is set aside and is restored back to Tribunal to dispose of the same on merits - in favour of petitioner.
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