Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 8, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Articles
News
Notifications
Companies Law
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F.No. 17/160/2012/CL-V - dated
5-10-2012
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Co. Law
Amendment of the Companies (Central Governments) General Rules and Forms (6th Amendment Rules, 2012) for Form 23AC and 23ACA
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G.S.R.736(E) - dated
1-10-2012
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Co. Law
Companies (Issue of Indian Depository Receipts) Amendment Rules, 2012 - In Rule 10 - Procedure for transfer and redemption regarding.
Customs
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46/2012 - dated
4-10-2012
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ADD
Regarding Anti-dumping duty on Cold Rolled Flat Products of Stainless Steel (400 Series) having width below 600 mm originating in, or exported from, European Union, Korea RP, and USA
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92/2012 - dated
4-10-2012
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Cus (NT)
Determines the rates of drawback in supersession of the Notification No. 68/2011-Customs (N.T.), dated 22nd September, 2011
DGFT
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19 (RE-2012)/2009-2014 - dated
5-10-2012
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FTP
Amendment in the Import Policy Conditions (3) of Chapter 12, Schedule – I Imports of Poppy Seeds - Import permitted only from Australia, Austria, France, China, Hungry, the Netherlands, Poland, Slovenia, Spain, Turkey and Czech Republic
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non-deduction of TDS u/s 194A - There is no discretion with the CIT(A) to extend the time of filing of form No. 15G/15H beyond the last date of accounting year. - AT
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Whether deduction under sec. 80C is claimed for renovation of house - held no - AT
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The value of closing stock written off cannot be treated as unascertained liability. - AT
Customs
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All Industry Rates of Duty Drawback 2012-13 - Reg. - Circular
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Regarding Anti-dumping duty on Cold Rolled Flat Products of Stainless Steel (400 Series) having width below 600 mm originating in, or exported from, European Union, Korea RP, and USA - Notification
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Determines the rates of drawback in supersession of the Notification No. 68/2011-Customs (N.T.), dated 22nd September, 2011 - Notification
Corporate Law
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Companies (Issue of Indian Depository Receipts) Amendment Rules, 2012 - In Rule 10 - Procedure for transfer and redemption regarding. - Notification
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Strike off the name of the company from the register of ROC - a company can only be defunct, if it does not reply to the notice or says in reply that it does not carry on any business or is not in operation. If it asserts to the contrary, it cannot be struck off at all. - HC
Case Laws:
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Income Tax
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2012 (10) TMI 158
Unexplained investment in rent yielding property - ITAT deleted the addition - Held that:- Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of Article 265 of the Constitution of India and Entry 82 in List I of the seventh schedule thereto which deals with "Taxes on income other than agricultural income". The error committed by the income-tax authorities in the present case is to jump the first step in the process of applying section 69B - that of proving understatement of the investment - and apply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorize the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the AO even to show the exact extent of understatement of the investment, it does not even give the AO the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears that the AO is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement - Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, it is unable to approve of the decision of the income-tax authorities. Section 69B was wrongly invoked. The order of the Tribunal is approved & the substantial question of law is answered in favour of the assessee
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2012 (10) TMI 157
India Japan DTAA - Reopening of assessment - books of accounts did not reflect any specific amount of Japanese yen said to have been received in the previous year - Held that:- A letter received from a governmental agency can constitute valid material on the basis of which the Assessing Officer can assume jurisdiction to reopen the assessment. The only caveat is that the material or information coming to the possession of the AO should not be a mere suspicion, gossip or rumour - As decided in Sheo nath Singh vs. Appellate Assistant Commissioner of Income Tax (Central) Calcutta, and Ors. [1971 (8) TMI 6 - SUPREME COURT] “ reason to believe” should be a honest belief which a reasonable person based upon reasonable grounds would have come to and that the assessing authority “may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour" If these tests are applied to the present case, it is difficult to appreciate the petitioner’s objection that the information received from DAO-45, New Delhi, acting under Article 26 of the Indo-Japanese treaty for the Avoidance of Double Taxation, cannot constitute valid material on the basis of which the AO can form even a tentative or prima facie belief that income to the extent of Rs.11, 28,644/- had escaped assessment - The contention of the assessee that the Japanese authorities have no power to examine the books of accounts of the petitioner and, therefore, to the extent that the information supplied by the DAO-45, New Delhi says that the amount of Rs.11,28,644/- has not been declared by the petitioner, it cannot be taken note of by the AO has no force. As the columnar chart set out in the reasons recorded stated as “gross income paid amount: major unit of currency”. Even assuming that the expression “gross income” has been loosely employed, the very fact that this information was received from a governmental agency under Article 26 of the DTAA constitutes the live link or nexus between the material and the formation of the belief that income to that extent has escaped assessment - writ dismissed - against assessee.
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2012 (10) TMI 156
Undisclosed income - Held that:- The High Court in own assessee's case CIT Central-III, Madras Versus M.K. Shanmugam [2011 (9) TMI 172 - MADRAS HIGH COURT] has over-ruled the decisions of the ITAT and CIT(A) that cash flow statements submitted by the assessee were not supported by documents as if so the High Court should have remitted the case to CIT(A) giving opportunity to the assessee to produce relevant documents rather than making addition to income. Thus set aside the impugned judgement of the High Court and remit the case to CIT(A) to decide matter afresh - in favour of assessee by way of remand.
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2012 (10) TMI 155
Disallowance of expenses - CIT(A) deleted the addition - Held that:- The AO in the assessment order has not given any head of expenses out of which the addition had been made by the AO. Therefore, there was no question of finding that the expenses were not verifiable. It, therefore, appears that whatever additions were made in the original assessment order have been repeated by the AO without verifying the facts. It was, therefore, merely an adhoc addition, which has been rightly deleted by the CIT(A) - in favour of assessee. Unexplained capital introduced by the partners - CIT(A) deleted the addition - Held that:- Considering the copy of resolution of the partners dated 05.04.2003 stating the reimbursing the amount in question to three partners & also bank charges have been mentioned of the same amount. Thus it would, therefore, support the case of the assessee that whatever bank commission was paid by the partners on behalf of the firm were credited in their capital account by debiting the same in the books of the firm. Therefore, there is no introduction of the capital in the accounts of the partners. The CIT(A) on proper appreciation of facts and material on record rightly deleted the addition - in favour of assessee. Addition on account of bid money as payable - CIT(A) deleted the addition - Held that:- The assessee has filed copy of bank guarantee which support that the bank guarantee was given by the banker on behalf of the assessee through its partner & as per letter of District Excise Officer, bank guarantee of the relevant amount has been recovered. Therefore, it is clear that at the end of the assessment year, the amount was payable which was rightly shown in the books of account of the assessee. The figures of bid money and the amount paid by the assessee towards bid and forfeiture of bank guarantee of equal amount have not been doubted by the AO - in favour of assessee. Addition on account of expenses payable - CIT(A) deleted the addition - Held that:- The AO noted that Rs.20,000/- represents audit fee payable and the remaining expenses of Rs.12,80,531/- are the routine business expenditures. And the assessee has furnished details to show that the amounts were payable at the end of the assessment year which were paid in April, 2004. Therefore, the same were rightly treated as amounts payable and as such, no addition was justified on the matter in issue - in favour of assessee.
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2012 (10) TMI 154
Claim u/s. 43B - disallowance as paid after the due date of filing of return of income - Held that:- Copy of debit note is filed of the paper book to support the claim of assessee that the amount in question was paid during the accounting period and such amount was paid before the due date of filing of the return - It is well settled law for deduction u/s. 43B that the deduction is allowable on actual payment and when PF contributions are made before filing of the return, the same is allowable deduction & following decision in case of CIT versus Vinay Cement Ltd. [2007 (3) TMI 346 - SUPREME COURT OF INDIA] - in favour of assessee. Disallowance of depreciation - Held that:- The assessee has filed details of aggregate assets and liabilities which were received on 31.03.2003 and the net fixed assets received on transfer scheme was ₹ 834.01 crores and the assessee claimed depreciation at the lowest rate and whatever addition in the assets was made, the CIT(A) has allowed 50% of the claim of the assessee. Therefore, do not find any infirmity in the order of the ld. CIT(A) in granting relief to the assessee on this issue - in favour of assessee
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2012 (10) TMI 153
Unexplained money u/s. 69A - amount deposited in the bank account - CIT(A) deleted the addition - Held that:- As applying the test as decided in CIT Vs Shri Durga Prasad More (2004 (3) TMI 59 - PUNJAB AND HARYANA HIGH COURT) that the Courts and Tribunals have to judge the evidences before them by applying the test of human probabilities after considering the surrounding circumstances to the facts and circumstances of the case, it is clearly established that the assessee has failed to explain the source of cash deposited by her in her bank account with Bank of Rajasthan Ltd. at Dehradun. It may also be noted that power of attorney holder has no better title than the title held by the owner of the property. The Attorney acts on behalf of the owner. Since no possession was given to the Attorney in this case, therefore, the findings of the CIT(A) for transfer of property is wholly irrelevant and are not sustainable in law. The showing of capital gains, in AY 2004-05 has, thus, no relevance for deciding the matter in issue. The ld. CIT(A) on wholly irrelevant consideration and without having any evidence to explain the source of cash deposited by assessee wrongly deleted the additions. Thus there is no question of reducing the addition as per alternate contention of the assessee - in favour of Revenue. Unexplained gift - CIT(A) deleted the addition - Held that:- The assessee failed to prove creditworthiness of the donor and genuine gift in the matter - Despite the donor was maintaining the bank account, no amount was withdrawn from the bank account for giving gift to the assessee - The assessee in the case of the donor also explained that Smt. Sita Devi, Attorney holder sold the land for a consideration of Rs.4,62,000/- in assessment year 2004-05 out of which the donor realized amount of Rs.1,00,000/- and gave it to the assessee as gift, but why the cash was kept for a long period without depositing in the bank account of the donor, was not explained, would also a point to the effect that it was not a genuine gift in the matter. The CIT(A) wrongly deleted the addition of Rs.1,00,000/- - in favour of Revenue.
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2012 (10) TMI 152
Unexplained investment in closing stock - CIT(A) deleted the addition by treating it as covered in the surrender of Rs.20 lakh made in the account of investment in property - Held that:- The assessee himself admitted before the CIT(A) that there was a mistake on the part of the assessee for not incorporating the declared amount of Rs.20,00,000/-. Even otherwise also, the CIT(A) noted the details that the assessee has failed to furnish evidence in support of the reduction of the disclosure made at the time of survey. The assessee himself incorporated and declared the full amount in building construction/investments. The assessee did not furnish convincing reasons for not declaring the amount of Rs.20,00,000/- surrendered at the time of survey. There is no material on record against the order of the CIT(A) therefore no infirmity in the order of the CIT(A) on the issue - against Revenue. Bogus purchases and creditors - CIT(A) deleted the addition - Held that:- Wherever the assessee furnished details of evidences and got reconciled with the accounts in assessee’s books of account and creditors’ books of account, the CIT(A) deleted the addition. However, where the CIT(A) found that the assessee has failed to reconcile the difference amount in between the books of account of assessee and the books of account of the two creditors, to that extent the addition has been confirmed. Since it is a matter of reconciliation and the CIT(A) after detailed examination of each and every party’s account, the addition has been sustained and accordingly balance addition has been deleted. The Revenue and assessee both have failed to point out any contrary material to the finding of the CIT(A), nor any such material is available on record.
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2012 (10) TMI 151
Rejection of Books of Accounts - Addition on account of interest received on pawning - Held that:- As regards rejection of books of accounts, the CIT(A) held that application of Section 145(3) is unwarranted observing that the separate method of accounting and separate sets of books of accounts of two business has been maintained by the assessee. Purchases and sales are fully supported by vouchers giving names and address of villagers of the sellers and purchasers whereas the A.O. in his order has clearly stated that the assessee maintained mix system of accounting. Almost all purchases have been made through cash below Rs.20,000/- except two purchases of which accounts have been produced by the assessee. The purchases have been made by the assessee without bills of the party concerned. The assessee did not furnish year wise details of advance money in respect of pawning business. In absence of such details, the A.O. is bound to estimate the interest income received on account of pawning business. The CIT(A) has deleted the addition of Rs.13,685/- made by the A.O. on account of interest after rejecting the books of account. The CIT(A) observed that the assessee maintained a proper pawning register. The CIT(A) did not agree with the A.O. that it is necessary to carry forward each of these pawn account at the end of the year. The CIT(A) deleted the addition without appreciating the case made out by the A.O. Addition on account of Jaydad Brindawan - Held that:- The assessee told a different story before the A.O. and the CIT(A) simply accepted the assessee’s submission and deleted the addition. The CIT(A) noted that fresh deposit in this account is duly covered by debit entries made for investment in U.T.I. and leaves no scope for addition, whereas, before the A.O. it was submitted by the assessee that this is very old account left by the Grand father in his name for miscellaneous purchase. The assessee did not furnish any reply in respect of credit entry of Rs.1,39,565/- even though specific query was made by the A.O. Addition on account of “Narottam Das Sharma Amanat khata I & II” - Held that:- The assessee has taken different stands before the A.O. and before the CIT(A). Before the A.O. it was submitted that the Narottam Das Sharma was assessee’s father who expired so many years ago and that the Amanat Khata No.2 was created. Similarly, in respect of Amanat Khata No.1, the A.O. specifically asked about the status of these accounts that in whose hands the tax liability of this interest account is assessed when father of the assessee has expired long back. The CIT(A) while deleting the addition accepted the assessee’s contention that both these loan accounts are identical, coming from past 20 years and the A.O. has accepted the same in A.Y. 2006-07 while making the assessment under section 143(3). The CIT(A) further noted that both these accounts are supported with complete evidence of investment made in U.T.I. in earlier years. The CIT(A) did not give any finding regarding persons who were the owners of these Amanat Khata Nos.1 & 2. The A.O. has rightly asked question that who will be subjected to tax this payment of interest on these accounts. Addition in the name of Collector Babu Gupta - Held that:- The A.O. noted that the assessee has neither filed confirmation nor Collector Babu Gupta was produced before the A.O. Before the A.O., on a specific query, the assessee submitted that Collector Babu Gupta was expired so many years ago and the successor of Collector Babu Gupta are not known to the assessee, even the addresses are not known. Addition on difference between salary certificates and the salary account - Held that:- Addition which has been deleted by the CIT(A) observing that the A.O. failed to point out the name of any staff whose salary he intends to disallow. Contrary to that finding of CIT(A), the A.O. compared the salary account debited to Profit & Loss account and salary certificate submitted for verification. The A.O. after examining the employee wise annual salary and found that as per the salary certificate submitted by the assessee the total payment of salary comes to Rs.1,65,600/- to 5 staff members. The assessee failed to explain difference of Rs.30,000/-, debit of Rs.1,95,500/- in salary account and the difference noted of Rs.1,65,600/- in the certificate furnished by the assessee. Addition on account of Marriage Exp. & House Hold Exp - Held that:- The assessee is HUF and the A.O. made the addition on account of marriage expenses Rs.1,00,000/- on account of marriage of daughter of Shri Brij Mohan Sharma, the assessee, and the house hold expenses. In respect of these two additions, in principle we do not agree with the A.O. that such addition is warranted in the hands of the HUF as these items are pertaining and related to the personal account of members of HUF - the additions deleted by the CIT(A) are confirmed not on those grounds on which the CIT(A) has deleted but on the ground of reasons as discussed above - in favour of assessee. Addition on Gold Nirman Khata & Silver Nirman Khata - Held that:- As A.O. before making the addition made some quantity calculation which is evident from the facts from the Assessing Officer’s calculation. The CIT(A) simply accepted the assessee’s contention that without examining the facts that how the quantity details given by the A.O. is incorrect. In absence of complete finding of facts, these issues cannot be decided at this stage. The order of CIT(A) is in contravention to rule 46A as is considered in various explanations and discussions above without providing opportunity of hearing to the A.O. Therefore, find it appropriate to send back this matter to the file of CIT(A) with the direction to decide the issues afresh in accordance with law after verifying and recording complete facts by a speaking order - in favour of revenue by way of remand. Addition u/s 40A(3) - assessee contested to be covered under rule 6DD - Held that:- The A.O. noted that when the payment was made in cash there was no day of Diwali festival, it was Thursday and a Bank working day. The CIT(A) confirmed the order of the A.O. on the ground that the assessee has failed to establish that the payment is covered by Rule 6DDJ - assessee changed the stand at each level before the A.O. and CIT(A) with some different reasons. The assessee has failed to point out how the payment made was covered by cottage industries - against assessee. Addition on Wages on Silver A/c & Gold A/c - Held that:- As issue relating to invocation of section 145(3) and others have been sent back to the file of CIT(A) and since both these items of additions are related to trading result, therefore, it is appropriate to send the issue back to the file of CIT(A) with identical directions as given in the case of Revenue’s appeal above.
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2012 (10) TMI 150
Net method of valuation of closing stock - Held that:- MODVAT Credit is excise duty paid and as excise duty payable estimated on finished goods held in factory are neither included in expenditure nor valued in such stocks but are accounted for on clearance of goods from factory this accounting treatment however has no impact on the profit for the year as decided in CIT Versus Indo Nippon Chemicals Co. Ltd.[2003 (1) TMI 8 - SUPREME COURT] - in favour of assessee.
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2012 (10) TMI 149
Maintainability of the appeal before the High Court - whether instructions of 2011 would govern maintainability of all pending appeals of the Revenue? - Held that:- With respect the question of interpretation of instructions which are other-wise not ambiguous on the basis of litigation policy, in our view, would not arise. Secondly, the view that prospective application of the instructions would not lead to any absurdity. If by applying the instructions prospectively, certain appeals would be decided on merits, because the appeals were filed prior to issuance of the new instructions, the same cannot be stated to be absurd. A counter situation also may arise if such instructions are applied with retrospective effect to all pending appeals whereby an appeal would be dismissed without examination on merits simply because the same survived for a longer period than the cognate appeals. It can be seen that the various High Courts have taken a view that the instructions of 2011 cannot be applied to all pending appeals, particularly, having regard to the language used in paragraph 11 thereof that this instructions will apply to appeals filed on or after 9th February 2011. Thus the view adopted by this Court in case of Sureshchandra Durgaprasad Khatod (HUF) (2012 (9) TMI 20 - GUJARAT HIGH COURT) requires reconsideration as the instructions of 2011 provide revised monetary limits permitting the Revenue to file appeals before the Tribunal, High Court and Supreme Court. Paragraph 11 thereof clearly provides that such instructions will apply to appeals filed on or after 9th February 2011. It is further made clear that cases where appeals have been filed before 9th February 2011 will be governed by the instructions on the subject operative at the time when such appeal was filed. Any other interpretation to make the instructions of 2011 applicable to all pending appeals would not be permissible and would be doing violation to the plain language used in the instructions. These provisions contained in the instructions of 2011 have not been given due weightage in Sureshchandra Durgaprasad Khatod case above. Thus case is to be placed before Hon'ble Chief Justice for constituting a Bench for answering the reference.
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2012 (10) TMI 148
Deduction of interest on a proportionate basis - Term loan from SICOM - one time settlement (OTS) - appellant was granted a deduction in respect of interest in the sum of Rs.19 lacs only as aginst Rs.1,46,63,160 - Held that:- The assessee has not produced any evidence to indicate the apportionment of the OTS amount of Rs.91 lacs towards principal and interest. It is obvious that a part of above amount was towards interest for the OTS amount was admittedly more than Rs.72 lacs (principal amount) - working of the proportionate amount by the assessee is not based on what infact transpired between SICOM and itself. The basis is merely hypothetical. It is not inconceivable that the interest was waived and/or reduced - against assessee.
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2012 (10) TMI 147
Depreciation on goodwill - whether depreciation is not allowable u/s 32(1)(ii) on various "intangible assets" classified as "goodwill" on consolidated basis - Held that:- As decided recently in CIT vs. Smifs Securities Limited [2012 (8) TMI 713 - SUPREME COURT] goodwill would fall under the expression "any other business or commercial rights of similar nature" in section 32(1) Explanation 3 (b). As the Tribunal in AY 2003-2004 in assessee's own case admitted the additional evidence which threw light on the valuation of each of the intangible assets and remit the matter back to the file of the AO for fresh adjudication this could possibly lead to contradictory assessments for the different assessment years as the Tribunal refused to follow the earlier order of the Tribunal dated 28.5.2009. It is necessary to ensure consistency in respect of the same question for the different assessment orders. Thus it would be better to follow the same course that has been adopted in respect of the AY 2003-2004.
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2012 (10) TMI 146
Telecasting rights of a T.V. Serial - whether entitled to the benefit of Section 80HHC - Held that:- Yes, Telecasting rights of a T.V. Serial are entitled to the benefit of Section 80HHC as decided in CIT v. B. Suresh [2009 (3) TMI 4 - SUPREME COURT] - in favour of assessee.
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2012 (10) TMI 145
Exemption u/s 54F - flat purchased in the name of his minor daughter - Held that:- A bare reading of section 54F(1) makes it clear that there is no requirement that the house has to be purchased in the name of the assessee only. The only requirement of the provision is the assessee must have purchased the house. In the present appeal, the fact remains that the minor daughter has no ostensible source to make such investment in purchase of flat. It is the assessee who had actually made the investment out of the consideration received towards sale of shares. The assessee has also explained the reason behind registration of the house in the name of his minor daughter. As decided in Late Mir Gulam Ali Khan (by Legal Representative Mrs. Noor Begum Versus Commissioner Of Income-Tax [1984 (12) TMI 9 - ANDHRA PRADESH HIGH COURT] the word 'assessee' also includes the legal heir - Also CIT v. Ravinder Kumar Arora [2011 (9) TMI 343 - DELHI HIGH COURT] states that Section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Thus considering the well settled principle of law that when there are divergent views, to give effect to a beneficial provision the view favourable to the assessee has to be adopted - decided in favour of assessee.
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2012 (10) TMI 134
India Mauritius DTAA - disallowance of bonus expense u/s 43B - Held that:- Disallowance u/s 43B can be made in respect of the bonus unpaid before the due date of filing of return u/s 139(1) because Article 7(3) expressly provides for the deduction of all expenses incurred for the purpose of the business of permanent establishment. Further Article 3(2) and Article 23(1) do not impliedly sanction the invoking of section 43B in Article 7(3) of the DTA. When there is a specific provision as per Article 7(3) of the DTA providing for the deductibility of all expenses incurred for the purpose of permanent establishment, we fail to comprehend as to how Article 23(1) can be applied to invoke disallowance u/s 43B. This contention of the DR, being devoid of any merit - in favour of assessee. Disallowance u/s 14A - CIT(A) deleted the addition - Held that:- DTAA can only cure the rigor of the Act and not convert an exempt income under the Act into a taxable one. If a particular amount of income is exempt under the Act, it will cease to form part of 'Business profits' of the enterprise under Article 7. Once a particular item of income does not itself constitute business profit as per Article 7 because of its exemption under the Act, there can be no question of allowing any deduction for an expenditure incurred in relation to such income against the other taxable business income - This factual scenario brings to a stage where the assessee did borrow interest bearing funds for making investment in tax free bonds and repaid such loan out of its own interest free funds on the next day. There is obviously a direct nexus between the borrowing of interest bearing funds and making of investment in tax free bonds. There can be no dispute on the fact that only such part of interest can be disallowed which has been incurred in relation to the income not forming part of the 'business profits' of the assessee as per Article 7 of the DTA. The disallowance of interest is definitely called for but it cannot exceed the actual amount of interest paid in respect of borrowed funds used for the purposes of making investment in tax free bonds, which in the present case is only one day. The AO is directed to calculate disallowance on Rs. 10 crore for one day at the rate which was charged by the RBI on the loan advanced to the assessee on 12.11.1998. This will be the amount of interest paid by the assessee in relation to tax free interest income which is not included in the business profits as per Article 7 of the DTA, warranting disallowance in the computation of 'business profits' - partly in favour of revenue.
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2012 (10) TMI 133
India UAE DTAA - interest income - at the rate of 12.5% under DTAA OR 40% as per ITA - Held that:- Assessee in this case is a UAE resident. The DTAA with the UAE mandates that interest income be taxed @ 12.5% under Article 11(2)(b) of the said DTAA. Also Board Circular No. 728 F.No. 500/12/95-FTD) dated 30.10.1995 which states that any remittance to a country with which a DTAA is in force, tax should be deducted at the rates provided in the Finance Act of the relevant year or at the rates provided in the DTAA, whichever is more beneficial to the assessee - in favour of the assessee. Short term capital gains - Held that:- As the benefit of Indo-UAE Treaty is available with the assessee and short term capital gains derived by him from sale of shares/securities in India were not taxable in India terms of Article 13(3) of the Indo-UAE Tax Treaty - in favour of the assessee. Annual Letting Value(ALV) of the property - claim of deduction of amount paid to cooperative society - Held that:- Assessee has claimed a sum of Rs. 22,888/- was paid by it towards common maintenance of the building including the provision of lift, cleaning of common areas etc. provided by the assessee to the occupants of the flat. Thus, it is the assessee's argument that while determining the rent receipt by it from the tenant, the amount of Rs. 22,888/- should have been excluded from the gross amount of the rent received by the assessee since it was only reimbursement of the utility charges paid by the assessee to the society on behalf of the tenant for the services enjoyed by the tenant. Thus the view adopted by the CIT (A) is cogent one to allow the deduction of Rs. 22,888/- while computing the netted ALV of the house - in favour of the assessee.
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2012 (10) TMI 132
Disallowance of advertisement and promotion expenses - Held that:- I.T.A.T has already held that Section 37(2A) which was omitted by Finance Act, 1992 with effect from 1st April, 1993, has no effect and the Assessee was entitled to the benefit under Section 37(2A) of the I.T.Act. no error was committed by the I.T.A.T. in the impugned order - in favour of assessee. Disallowance of gifts and articles - Held that:- There was Company's official rubber stamp on gift articles, therefore, the gift articles were for the purpose of incentive for promotion of the business. There was element of advertisement in distribution of these gift articles, therefore, the Assessee was entitled to the benefit - in favour of assessee.
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2012 (10) TMI 131
Disallowance of overseas travel and educational expenditure - Held that:- The principal business of the company was manufacturing and supplying of packets/pouches to oil manufactures for filling and packaging their products. It was only in the assessment year 1992-93 the company made necessary amendments in its memorandum to enable it to enter the business of computer operation and data processing while the decision to send the trainee abroad for computer education was in 04.06.1990. Therefore, it cannot be said that the sponsoring of the trainee for overseas computer education was for the business of the company at the time when such decision was taken on 04.06.1990. Furthermore, the trainee had already secured admission for such course in the foreign University and applied for release of foreign exchange with regard thereto five weeks prior to his appointment. Hence, the finding of the tribunal that the sponsorship of the trainee was colourable in nature and not for the purpose of business of the company is wholly justified and borne out from the materials on record - against assessee. Disallowance of commission paid to M/s. Telecom Ancillaries Pvt. Ltd. - Held that:- The tribunal held that the nature of such expertise in preparation of tender documents and follow up action for obtaining such tender has not been clearly spelt out. When the commission payments had been made in for purposes which are prima facie impermissible in law the question of permitting such expenses on the anvil of commercial expediency does not arise at all. The issue of payment of 12 lakh for ensuring non-participation of M/s. Telecom Ancillaries Pvt. Ltd. in the tender and also for follow up action to procure such tender in favour of the opposite party also smacks of creating a cartel in the matter of public tender which equally impermissible in law. Also that such agreement does not shut out other companies from contesting the tender also a justifiable ground for such disallowance - against assessee. Disallowance of short term capital loss - Held that:- The condition precedent for attracting provision of Section 73 is that a part of the business of the company must relate to purchase and sale of shares. Merely indulging in purchase and sale of shares for investment is not business activity in sale and purchase of share of other companies for the purpose of this section. Thus precondition necessary for attracting the explanation to Section 73 is absent in the instant case and the disallowance of this loss treating the same being speculation one is wholly unwarranted. The conduct of the company in selling the shares in questions soon after taking delivery of the shares when it is found that the value of such shares were rapidly decreasing cannot be said to be unjustified or imprudent - in favour of assessee.
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2012 (10) TMI 130
Applicability of Sub-section(2) to section 14A and Rule 8D - Held that:- Rule 8D cannot be applied keeping in view the decision in the case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) as disallowance u/s 14A r.w.r. 8D are not retrospective. Rule 8D applicable from Assessment Year 2008-09. sub-section (2) of section 14A says that the AO shall determine the amount of expenditure incurred and in relation to such income which does not form part of the total income under this Act. Thus, the onus is on the AO to "determine" the amount of expenditure. The Legislature has used word "shall" before the word "determine", which goes to mean the AO has to take into account all relevant facts and surrounding circumstances to determine expenditure incurred in relation to income not forming part of total income. As in the present case the AO has not made any attempt to "determine" the amount of expenditure incurred in relation to the income not forming part of total income - thus set aside the order of the CIT(A) on the issue of 14A and direct the AO to determine reasonable expenses, attributable to exempt income, taking into account all surrounding circumstances - in favour of assessee for statistical purposes.
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2012 (10) TMI 129
Indo-UK DTAA - Taxation on marketing contributions and value added service - at 15% on gross basis as per Article 13 of DTAA OR 10% u/s 115A(1)- Held that:- Considering a copy of the order u/s 154 for assessment year 2006-2007 the receipts from marketing contributions and value added service has been held to be taxable at the rate of 10% along with surcharge and education cess. It is observed that this order u/s 154 was passed on 24.03.2009 and the Tribunal order for assessment year 2007-2008 was passed on 18.11.2011 i.e. after the passing of the rectification order u/s 154. Thus the ends of justice will meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of A.O. for deciding it in consonance with the directions contained in Tribunal order. Royalty income - applying tax rate of 15% or 10% as per section 115A - Held that:- The Tribunal has decided this issue in assessee's favour for assessment year 2007-2008 which has been concluded that the concessional rate of 10% should be applied - in favour of assessee. Charging of interest u/s 234B - Held that:- As decided in DIT (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]interest u/s 234B cannot be charged where tax is deductible at source in relation to royalty and FTS. Thus direct AO to compute interest u/s 234B to follow as above stated.
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2012 (10) TMI 128
Liaison Office - CIT(A) hold it not to be considered as a Permanent Establishment in India & no profit accrues or arises in India - Held that:- Circular No. 163 convey the impression that a non-resident is liable to be taxed on a portion of the profits attributable to the purchase of raw materials required for the purposes of manufacture and sale abroad, if the purchases are made in India through a regular agency established in India for this purpose. By virtue of clause (b) of the Explanation to section 9(1)(i), the correct legal position is that in the case of a non-resident, no income shall be deemed to accrue or arise in India through or from operations which are confined to purchase of goods in India for the purpose of export. Tribunal in assessee’s own case for the assessment years 2004-05 and 2005-06 held that the L.O. of the assessee was performing the activities of assorting of diamonds, checking of the right quality of diamonds and price negotiation as per the instructions and specification of the assessee. These activities of the LO is only part of the purchasing process of the diamonds and did not bring any physical or qualitative change in the goods purchased. Even otherwise, the function of the LO are prior to purchase of the diamonds and not subsequent to the purchases. Therefore, no quality change is brought by the L0 while doing the operation of purchasing in India for export purposes - in favour of assessee.
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2012 (10) TMI 127
Unutilized Modvat credit in respect of closing stock - addition to income - Held that:- As decided in assessee's own case for AY 2001-02 he same was restored by the Tribunal to the file of the AO with a direction to decide the same afresh after verifying the recast accounts to be prepared and furnished by the assessee in terms of sec.145A of the Act after including tax, duty, cess or fees as provided in the said section - thus following the precedent this appeal decided in favour of assessee for statistical purposes. Deduction u/s.80HHC - foreign exchange gain in the profits of business - Held that:- What is liable to be excluded from the profits of business for the purpose of computing the deduction u/s.80HHC is the income which is unrelated to the export activity of the assessee. Since the foreign exchange gain earned by the assessee for the year under consideration in respect of realization of export proceeds is directly relatable to its export activity, the same cannot be excluded from the profits of business for the purpose of computing the deduction u/s.80HHC keeping in view the ratio of Hon’ble Bombay High Court in assessee’s own case for the AY 2002-03 - in favour of assessee. Repairs and maintenance expenses - Held that:- It is not clear from the documents filed by the assessee as to whether the expenditure in question incurred by the assessee on repairs and maintenance is of revenue nature inasmuch as it is very difficult to come to a conclusion that the expenses incurred by the assessee on repairs and maintenance were on purchase of spare parts of plant and machinery and miscellaneous work done to the building and there was no new capital asset acquired by the assessee as a result of incurring of the said expenses. Thus the expenses in question incurred by the assessee were rightly treated by the AO as capital expenditure - against assessee. TP adjustments - CIT (A) deleted the addition made by AO - Held that:- As decided in assessee's own case in AY 2006-07 that when assessee is dealing with an AE, at least there are no commercial risks, no marketing costs and there could be several other factors as well justifying a normal discount as the assessee could indeed go to many important customers. It hardly needs to be emphasized that even in independent business situations granting discount is a normal occurrence, and unless the Assessing Officer demonstrates that the discount so allowed would not have been allowed in an arm’s length situation, ALP adjustment cannot be made in respect of the same - against revenue. Non deduction of TDS - Disallowance of development expenses - CIT (A) deleted the addition made by AO - Held that:- The amount in question paid by the assessee to Dresser Rand Company, USA toward development expenses is not chargeable to tax in India in the hands of the said non-resident, & the assessee has deducted the tax at source from development charges paid to Dresser Rand Company, USA in the next financial year and the tax so deducted having been paid before the due date of filing return, the disallowance u/s.40(a)(i) is not sustainable on this ground also as per the amendment made in the relevant provisions which has been held to be retrospective - against revenue.
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2012 (10) TMI 126
Deemed dividend u/s 2(22)(e) - CIT(A) deleted the addition - Held that:- As decided in CIT versus Universal Medicare Private Limited [2010 (3) TMI 323 - BOMBAY HIGH COURT] the effect of clause (e) of section 2(22) is to broaden the ambit of the expression ‘dividend’ by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. Consequently in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder Thus the addition made by the AO on account of deemed dividend u/s 2(22)(e) is to be deleted on the ground that the assessee not being shareholder of M/s Max Print System (Bom) Pvt. Ltd., the loan amount received by it from the said company could not be treated as deemed dividend in its hands - in favour of assessee.
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2012 (10) TMI 125
Order u/s 263 by CIT(A) - Non application of mind by AO - brand building expenditure not inquired by AO - Held that:- It is seen that the A.O. has not only raised the query regarding the details of brand building expenses, but has also sought clarification on two occasions and had examined them also. Further on examination of these details he has reached to a conclusion that sum of Rs..17,98,482/- is a capital expenditure. It is further noticed that the assessee has deferred these expenses and claimed it as revenue expenditure in equal amount in the A.Y’s 2006-07, 2007-08 and 2008-09. Thus there was a complete application of mind by the A.O. while examining the expenditure under brand promotion and brand building. The expenditure incurred by the assessee is not creating any enduring benefit of an asset but is rather helping the assessee in augmenting its sales and resultantly its profit. Even if it is presumed that the building of brand image of “Nirvana” is giving advantage of enduring benefit to the assessee, still it would be on revenue account as there is no creation of a tangible or intangible asset of enduring nature to the assessee. Thus from the facts of the case it can be concluded that these expenses incurred by the assessee has not resulted in any kind of addition or augmentation of any profit making asset. Thus the view taken by the A.O. is prima facie correct view and, therefore, no reason to held that such a order is erroneous or it is prejudicial to the interest of the Revenue - in favour of assessee.
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2012 (10) TMI 124
Addition on account of cash credit u/s 68 – AO issue notice u/s 133(6) – Held that:- As the assessee failed to file confirmation, identity and creditworthiness of lender. Therefore assessee unable to explaining the source of loan. ITAT is justified in confirming the addition - In favor of revenue Addition on account of source of loan not explained u/s 68 – Assessee receive advance from lender – AO issue notice u/s 133(6) – Assessee explained the source of deposit as gift - Held that:- As no documentary evidence was filed, assessee could not prove the identity and creditworthiness of the lender. Therefore it revealed that the assessee has been shifting the stand. Decision in favor of revenue. Addition on account of higher GP rate – Assessee has two trading firms in two states – Assessee failed to furnish quantitative details of stock - AO apply higher GP rate of one firm on other firm to compute its income - Assessee also filed GP rates & details of other comparable cases to CIT(A)- During remand report done by AO, assessee could not submit complete books of accounts, bills/vouchers – CIT(A) apply GP rate of another firm of same city to assessee – Held that:- As assessee not submitted the full bills/vouchers. In that opinion of CIT(A) is justified. Appeal decided against assessee.
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2012 (10) TMI 123
Addition on account of interest expenses – Assessee is a partnership firm – As per AO amount in partners’ capital account were advanced by firm and was paid out of borrowed fund – AO treat it as it was not related to the business activity – Held that:- Firm has suffered loss in the previous years. Therefore outstanding debit balance in the names of the partners was on account of losses suffered by the firm and not because of withdrawal of borrowed funds. The AO had also not shown any nexus between the funds borrowed and the debit balance which in fact is the outcome of losses suffered by the assessee. Therefore, interest cannot be disallowed. Decision in favour of Assessee. Non-deduction of TDS u/s 194A - Assessee had not deducted tax at source in lieu of form No.15G/15H - Form No.15G/15H were not filed by the date with CIT – Held that:- The provisions of sec. 40(a)(ia) are mandatory in nature and where the assessee had not deducted tax at source, the deduction will not be allowable. There is no discretion with the CIT(A) to extend the time of filing of form No. 15G/15H beyond the last date of accounting year. Therefore, it was not right to direct the AO to allow the deduction on the ground that no loss of revenue has occurred and delay in filing was technical in nature. Case remand back to AO. Addition on account of unexplained cash credit u/s 68 - The AO did not consider the evidences filed by the assessee at all in the remand report in respect of additional evidence. Therefore the issue required to be examined by the AO afresh with reference to identity, creditworthiness of the creditors and genuineness of the transaction. Case remand back to the file of AO.
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2012 (10) TMI 122
Addition on account of unexplained investment u/s 69 – On basis of bank statement – Assessee replied that some money is received on account of retirement - Loan from friends & relatives - AO stated that no. of person withdrawn money from assessee’s bank account - Assessee made frequent deposits/withdrawals in the bank to show a rosy picture for obtaining visa – Held that:- AO failed to examine these person as to why the amount was withdrawn by them. Since,Therefore issue has not been examined properly. Decision case remand back to AO. Disallowance of deduction u/s 80C – Whether deduction under sec. 80C is claimed for renovation of house – Held that:- As the provisions of sec.80C are not applicable in respect of amount spent on renovation. Appeal decide in favour of revenue
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2012 (10) TMI 121
Disallowance of excessive handling loss – The assessee is engaged in the business of manufacturing and sale of ghee and milk powder - The assessee has been maintaining regular books of account and production records - In certain months handling loss was more than standard - AO analyzed the loss in the respective months and considered excessive handling loss – Held that:- As the books of accounts are verified by Excise Department. AO has also not pointed out any mistake in the books of account. Handling loss in certain months was totally dependent upon the quality of milk. The handling loss shown by the assessee was well below the standard norms of the loss. Case decided in favour of assessee. Addition on account of inflation of milk price – Held that:- As same issue in assessee’s case for another assessment year decided by ITAT in favour of assessee. Therefore decided in favour of assessee Addition on account of freight and loading & uploading expenses – The assessee is engaged in the business of manufacturing and sale of ghee and milk powder - The sale is organized through agents appointed all over India and as a part of business understanding, actual expenditure on account of outward freight, loading and unloading expenses are reimbursed to the agents through debit notes - Held that:- The assessee produced copy of debit note of the party along with copy of account in order to support the claim. Assessee maintains running account with the party in the books of account and there were regular transactions of credit and debit in such account and the entire amount on the basis of debit note was credited in the account. No discrepancy has been pointed out by AO. The assessee also filed the letter in respect of the amount which gives the details of freight, loading and unloading charges and draft making charges. Decision in favour of assessee
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2012 (10) TMI 119
Disallowance u/s 68 - Assessee has taken loan from company for house property – Deduction of interest claim u/s 24 out of rental income – Assessee has taken another fresh loan from same company & also paid sum amount out of rental income – Loan amount and its balance confirmed by the lender – Held that:- As assessee has filed copy of agreement for sub-lease of property which was acquired out of loan. The AO has examined the director of lender company u/s 131 who has affirmed the loan also show interest received in his ITR. Assessing Officer had not brought any material on record to prove that it was assessee’s own income. Decision in favor of assessee. Contravention of Rule 46A – Assessee withdrawn household expense as drawing – AO made addition on the basis of minimum household expense - Assessee submit additional evidence with CIT(A) – Held that:- CIT(A) has accepted the contention of the assessee without providing an opportunity of being heard to the AO. Therefore CIT(A) violate the provision of Rule 46A. Decision is in favor of revenue.
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2012 (10) TMI 118
Disallowance of written off of employee advance – Assessee has given advance to an employee director – No ostensible purpose has been stated for the instant advance - Held that:- As the company used to give money for incurring expenditure on behalf of the company without narrating any change in facts, it could not have been held that this money was not the advance made in the course business. Therefore, it represented that money advanced to an employee as advance for the purpose of business of the assessee, which could not be recovered and written off. This is a loss incurred in the course of business. Decision in favour of assessee Disallowance of WDV of asset u/s 28 – Assessee has given asset to employee for office use – Assessee claim that since asset could not be recovered from the ex- employee – Held that:- As per sec. 43(6), In case of a depreciable asset falling within a block up assets, any loss occurring on account of loss of the asset has to be reduced from the opening WDV of the block up assets. It does not represent any expenditure incurred wholly and exclusively for the purpose of business. Therefore same cannot be treated as a business loss u/s 28. Decision in favour of revenue Disallowance of advance written-off u/s 28 – Assessee has given only a general explanation that the amount was advanced to party for doing some business, which did not fructify – Held that:- As neither the year of advance nor the purpose of advance is known. The burden of adducing requisite evidence in claiming an expenditure or loss to the deductible is on the assessee. This burden has not been discharged merely by general explanation. Therefore assessee has not proved the admissibility of this amount. Appeal decide in favour of revenue Disallowance of speculative loss from derivatives u/s 28 – Whether deeming provision of Sec. 43(5)(d) can be carried forward to section 73 regarding “loss in speculation business" – Held that:- As per provision of Sec 43(5)(d) deems transactions in derivatives at recognized stock exchanges not to be speculative transactions. It is applicable only in respect of such trading in derivatives and not in respect of any other goods, articles or things. Such transactions in the derivatives were taken out of the definition of a “speculative transactions”. Therefore, the loss is to be taken as the business loss, which can be set off against other business profit of the assessee. Decided in favour of assessee.
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2012 (10) TMI 117
Disallowance of exemption u/s 10A - Held that:- The assessee is not entitled to claim deduction on the sales which were based upon the contract received by the old unit or the customers of the old unit. However, he can claim deduction of Profits and gains arising from Turnover on goods/works executed by the new unit - in favour of the assessee. Interest income - earning interest is not the business of the assessee, hence interest earned on the deposits cannot be held as income earned from the export business of the undertaking.
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2012 (10) TMI 116
Registration u/s 12AA and Approval u/s 80 G - the purpose of promotion of family business and with profit motive - Held that:- As decided by in case of [Commissioner of Income-tax Versus Red Rose School 2007 (2) TMI 575 - ALLAHABAD HIGH COURT ] registration can be granted only if the Trust is created for Charitable and religious purpose in public interest.The assessee spent considerable amount on advertisement of the institution which never existed and further, prospectus of the assessee trust has devoted substantially on carrying out the business activities of group concern showing logo of milk product. These factors were sufficient to hold that the ld. CIT rightly rejected both the applications of the assessee, particularly when no educational or charitable activities have been actually carried out and the assessee in initial stage, assessee trust itself has tried to promote the business of group concern. assessee failed to establish that it has carried out genuine activities towards the objects of the assessee trust. Whatever other activities were carried out were found for promoting commercial activities of the group concern. Therefore, the assessee has failed to satisfy the requirements u/s. 12AA of the Act and as such, the ld. Commissioner was justified in refusing to grant registration and approval under the above provisions of the IT Act. Assessee has to make fresh application for registration as Trust and for grant of approval when it would actually start educational and charitable activities
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2012 (10) TMI 115
Condonation Of Delay of 286 days - Held that:- The High Court was empowered to condone the delay in filing the appeal beyond the time prescribed in sub-section (2A) of section 260A, if it was satisfied that there was sufficient cause. As earlier decided in case of [CIT v. Williamson Tea (Assam) Ltd 2012 (9) TMI 465 - GAUHATI HIGH COURT] delay in filing the appeal can be condoned on reasonable basis beyond the prescribed time - in favour of assessee.
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Customs
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2012 (10) TMI 144
Short payment of Custom duty - provisional assessments made in the Bills of Entry and related ex-bond Bills of Entry - application for waiver of pre-deposit - Held that:- It appears from the records that the appellant had filed a total number of 37 bills of entry which were provisionally assessed and accordingly the consignments were allowed to be cleared on payment of duty on provisional basis. Subsequently, in respect of 31 out of 37 consignments, show-cause notices were issued for recovery of differential duty on the basis of differential quantity of crude oil between bill of lading and shore tank measurement. These show-cause notices are said to be pending. Thus a valid point in the submissions made by the assessee with reference to the pending show-cause notices. The pendency of those show-cause notices was duly notified to the adjudicating authority in the present case but the same appears to have been ignored. The Commissioner (Appeals) also appears to have ignored this aspect while asking for pre-deposit of Rs. 75 lakhs. Thus after considering all the aspects a pre-deposit of an amount of Rs. 25 lakhs would suffice the purpose of Section 129E of the Customs Act and that, upon such pre-deposit, the learned Commissioner (Appeals) should dispose of the assessee s appeal on merits without insisting on further deposit, of course, after giving the appellant a reasonable opportunity of being heard - in favour of assessee by way of remand.
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2012 (10) TMI 143
Penalty - non-payment of the cost recovery charges – Held that:- In the show cause notice no specific provisions has been quoted for imposition of penalty and under Section 117 of the Customs Act, the penalty is imposable for violating any provision of the Customs Act, only in those cases where no specific provisions has been made for imposition of penalty. Non mention of the Section 117 of the Customs Act in show cause notice will not vitiate the imposition of penalty, since Section 117 is a general provisions for imposition of penalty. Hence penalty was rightly imposed by the Commissioner of Customs under Section 117 of the Customs Act - most of the violations were prior to 10-5-2008, penalty is reduced
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2012 (10) TMI 142
Whether when consignment had reached the bonded warehouse of the consignee, there was no liability to pay duty on the part of the consignor – Held that:- Question for consideration is merely because the consignee did not issue the certificate as contemplated under the law showing that the goods are received from the assessee and is stored in their warehouse and hence, Sub-Rule (4) of Rule 20 of the Rules is attracted - they were satisfied that the assessee has transported the consigned goods to the consignee and it reached the bonded warehouse of the consignee - Tribunal proceeds on the assumption that the material on record do not disclose that the consignment reached its destination. It also do not disclose that the consignment came to the consignee and therefore it is to be held that there is violation of provisions and Sub-Rule (4) of Rule 20 attracts the provisions - order passed by the Tribunal set-aside
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2012 (10) TMI 114
Public charitable trust in process of establishing Hospital - rejection of request of the petitioner to categorise it under Category-1 of the Customs Notification No.64/1988 and for issuance of installation certificate - seizure without intimation of equipment imported in accordance with the exemption granted under Customs Notification No.64/1988 dated 1st March, 1988 - Held that:- Petitioner was granted exemption under Category-4 which is in respect of a hospital which is in the process of being established and which upon starting functioning would fall under any of the three categories viz. 1, 2 or 3. Application filed for placement in Category-1 under Notification No.64/1988, was rejected by second respondent on the ground that in the undertaking submitted by the petitioner it had chosen Category-2 and hence, the conditions applicable to Category-2 were applicable to the petitioner, which were not satisfied and had, accordingly, rejected the application. In the writ petition filed by the petitioner challenging the said order, this court had set aside the said order and directed the second respondent to consider the matter afresh, while holding that that if hospitals fall in Category-1, the conditions which are attached to the hospitals falling in Category-2 are not attracted. This is not a case where the petitioner was granted exemption under Category-2 and upon withdrawal of the same is claiming benefit under Category-1. Even after exemption is granted under one of the three categories, it is permissible to change the category, it would certainly be open to the petitioner at a stage prior thereto, to claim the benefit of category-1 instead of Category-2. A perusal of the impugned order makes it amply clear that the second respondent has decided the matter with a closed mind. The very basis of the impugned order, that is, the show-cause notice itself is contrary to the order passed by this court in the above referred writ petition inasmuch as the same calls upon the petitioner to show cause as to why it should not be considered only under Category-2 of Customs Notification No.64/1988 despite the fact that this court had categorically held that the respondent was required to consider the case and decide as to under which category the petitioner would fall. The impugned order passed by the second respondent is hereby quashed and set aside. The matter is restored to the file of the second respondent who shall decide the application afresh without taking into consideration the fact that in the undertaking given by the petitioner it had chosen Category-2. The second respondent shall examine as to whether or not the petitioner satisfies the requirements of Category-1 so as to be entitled to the benefit thereof.
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2012 (10) TMI 113
Interest on interest - whether this Tribunal has power to award interest on delayed payment of interest to the assessee – Held that:- Tribunal has no such power for want of specific provision in the Central Excise Act/Rules for payment of interest on delayed payment of interest - appeals are dismissed
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2012 (10) TMI 112
Benefit of Notification - certificate of origin - benefit of Notification No. 85/2004-Cus., dated 31-8-2004 was not claimed by the respondents in the Bill of Entry filed by them – benefit claimed before the Commissioner (Appeals) - Held that:- merely because certificate was not produced before the Deputy Commissioner cannot be made a ground for denial of exemption benefit, if the same is otherwise available to the importer.
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Corporate Laws
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2012 (10) TMI 111
Strike off the name of the company from the register of ROC - Held that:- For the application of this provision of Section 560 the satisfaction of the Registrar of Companies is necessary. The satisfaction is to the effect that a particular company is not doing any business or is not in operation. Thereafter he issues two notices to the company to controvert this satisfaction. The Company may reply by saying that it is not doing business or may not reply at all. In either of these two cases, the Registrar may strike off the name of the Company, after publishing the proposal in the Official Gazette. This procedure was not followed here in the present case. There are serious conflicting claims regarding paid up capital. Mr. Nirendra Nath Kar says it is more than rupees one lakh whereas, Mr. Dave and the two Merchants say it is Rs.7,000/-. In such a situation there is no question of treating the company as defunct, as its paid up capital is in dispute - on reading sub sections (1), (2), (3) and (5) of Section 560, it does seem that a company can only be defunct, if it does not reply to the notice or says in reply that it does not carry on any business or is not in operation. If it asserts to the contrary, it cannot be struck off at all. Hence striking off is on the admission by the Company that it is defunct. It necessarily follows that if there is any dispute regarding the paid up capital or whether the Company does business, it cannot be declared defunct. Moreover, the petitioner, claiming to be a shareholder and director had sufficient locus to file this application - thus the order of the ROC is set aside & Company be put back in the Register of Companies immediately, by the Registrar of Companies, West Bengal.
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Service Tax
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2012 (10) TMI 161
Clearing and Forwarding Agent - assessee contested to fall under the category of Cargo Handling Service - service tax demand, penalty u/s 78, 76, 75A & personal penalty u/s 81 - period 2001-02 to 2003-04 - Held that:- Under the agreement dt.30.03.2001, M/s. SAIL had appointed the Appellant as their Consignment Agent and authorized them to receive the stocks from railway yard on their behalf, stack it in the stock yard, maintain the stock in the stock yard properly and load in the trucks of consignees of Nepal after preparation of necessary documents for and on behalf of M/s. SAIL. The activities were not limited to just loading and unloading of the cargo but also involves stacking which included marking/painting, loading into customers vehicle for delivery with weighment and necessary documentation. Also, the Appellant were required to carryout the stock verification during storage of the said goods at the said stockyard. A comparison between activities carried out by the Appellant and the ones listed in the Circular dt. 11.07.1997 was issued by the CBEC , it is clear that the Appellant's services rendered to M/s SAIL fall under the scope of clearing and forwarding service. Besides, under the said agreement the Appellant represent M/s SAIL before all concerned relating to the movement of said goods, as their agent. As decided in COMMISSIONER OF C. EX., BANGALORE-I Versus MAHAVEER GENERICS [2009 (11) TMI 104 - KARNATAKA HIGH COURT] the activities which the consignment agents were required to discharge had been narrated in the said agreement namely, the principal to supply the product from any of its depots in loan licence to the agent on a consignment basis through a stock-transfer note for sale by him, as the agent of the principal. Thus the relationship between M/s SAIL and the Appellant is admittedly that of a principal and agent, which is also amply clear from various terms and conditions of the agreement. The service of consignment agent has been specifically included in the scope of Clearing and Forwarding Agent service. Admittedly, the Appellant carry out all these activities as an agent of M/s SAIL for movement of the goods and hence the Appellant render the service of a clearing and forwarding agent - against assessee. Invoking extended period of limitation - Held that:- The longer period of limitation is invokable as the Appellant had not discharged their service tax liability inspite of being made liable to discharge all statutory liability of a consignment agent as stipulated at clause 9.4 of the Consignment Agency agreement with M/s SAIL besides they suppressed the taxable value & intentionally evaded payment of service tax stating the service rendered by them as cargo handling service - there is an element of mis-declaration by the Appellant all along claiming that their services a export services and the amounts of sale proceeds were received in convertible foreign currency and not in the Indian Rupees and also suppression of the taxable value received from M/s SAIL inspite of repeated reminders from the Range Officer, thus the demands issued to them are not barred by limitation and extended period of limitation is rightly invoked - against assessee. Only personal penalty imposed on the Director, Shri Atul Kumar Jain u/s 81 is not maintainable as oth the authorities below have not recorded specific involvement of Shri Atul Jain in the short/non payment of the service tax warranting a personal penalty against him except holding that he was overall incharge of the affairs of the Appellant Company.
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2012 (10) TMI 160
Availment of Cenvat Credit- Amount involved in question is Rs. 6,58,95,919/. - taxable and exempted services - Held that:- Advice Transfer Debit can be considered as prescribed document under Rule 9 of Cenvat Credit Rules, 2004 and hence the credit can be allowed as it gives all the required details like name and address and registration number of the supplier as also the duty paid on each equipment. As decided in case of Idea Cellular Ltd. v. CCE [2009] 2009 (2) TMI 91 - CESTAT NEW DELHI] where credit is taken on input and input services used in providing the output services- credit in respect of capital goods if they have not exceeded the ceiling of 20% of credit taken on inputs and input services and therefore the demand is not maintainable. Service tax on Leased Circuit Services – Demand is not maintainable as per sec 65(l09a) service has to be chargeable at the time when the service was provided - Demand for Pre-deposit waived in favour of assessee.
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2012 (10) TMI 159
Levy of service tax on the Chini Mills – alleged that goods transport agency service was availed by the chini mill - when the sugar cane is transported from the collection centre to the factory, service of truck operators, Bullock Carts, Tractors are availed - When the payment of sugar cane is made to farmers, deduction is made from their bills towards transport cost etc. and farmer who bears the transport cost, the appellant does not bear such cost in respect of their supplies – Held that:- Transport cost incurred by farmers to bring the collected sugar cane to factory does not exceed ₹ 1500/- for which there shall be no levy following the spirit to Notification No.34/04 - sugar cane transported through goods carriage from sugar cane centre to the factory either may be in different consignments or may be in one consignment. The assessees are required to explain their proper defence because legislature did not intend the small transporter to be brought under the fold of law - notifications being beneficial in nature and touches poor farmers, it cannot be said that there was mala fide to suppress the facts and figures because the mode of transport of sugar cane in sugar industry is well known to the society – matter remanded back to Adjudicating Authority
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2012 (10) TMI 137
Period of limitation - purchase and sale of SIM cards of Telecommunication company - Revenue imposed demand for the period January 2004 to March 2005 on ground of it being falling under head 'Business Auxillary Service' - SCN dated 18.03.09 - Held that:- It is found from Assistant Commissioner's letter dated 9.8.2005 that he arrived at a decision that such activity does not amount to service and the said decision was intimated the Revenue to the assessee under the said letter. Thereafter Revenue kept quiet for a period of four years and issued SCN on 18.3.2009. It is found that there was no change of circumstances and no new facts came on record. The appellant's activity remained the same even relevant period during the period under correspondence and subsequently also. As such it seems to be a case of change of opinion on the part of the Revenue. When the entire facts were put before the Revenue it cannot be said that the appellant had any mala fide on their part to suppress the activity undertaken by them. Further, during the relevant period, some of the decisions of the Tribunal were holding that such activity of purchase and sale of SIM cards would not amount to providing business auxiliary services. If that be so, no mala fide intention can be attributed to the appellant so as to attribute any suppression or misstatement to them with intent to evade payment of duty. Entire demand is barred by limitation - Decided in favor of assessee
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2012 (10) TMI 136
Setting Aside of Penalty - Agreement with financial companies for arranging finances for their customers thereby rendering business auxiliary services to finance companies, Service Tax along with interest is paid. - Held that:- No penalty can be imposed on the, duty on which liability to pay arises later as there is no malafide intention and suppression of facts to pay duty – in favour of assessee.
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2012 (10) TMI 135
Demand of service tax - appellants are clearing the solar system through dealers also and the dealers further sell it to the customers and charge certain amount for installation – Held that:- Appellant are not charging installation charges separately, but for installation activity, they are liable to pay service tax - activity of installation of solar system falls under the category of 'Erection, Installation and Commissioning Service'. Quantification of service component – Held that:- Appellants has provided the data for computation of service component from the sales effected during the impugned period and the same has not been considered by the adjudicating authority - matters remanded back to the original adjudicating
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2012 (10) TMI 106
Cenvat credit - demand on account of denial of abatement of 40% from gross receipt for assessee providing both Mandap Keeper Service and Catering Service - Revenue’s case is that the appellants have availed Cenvat credit and hence they are not eligible for such abatement –Held that:- Credit of inputs used in relation to exempted output service is not allowed to be taken - Appellant has already paid substantial part of the demand on the first count and interest - it is sufficient for the purpose of Section 35F of Central Excise Act for hearing the Appeal – pre-deposit waived
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Central Excise
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2012 (10) TMI 141
CENVAT Credit on capital goods used in energy saving project - denial as the capital goods were used in the manufacture of exempted product (Ammonia) exclusively - Held that:- To produce the desired end-product ammonia, the hydrogen is then catalytically reacted with nitrogen (derived from process air) to form anhydrous liquid ammonia. This step is known as the ammonia synthesis loop, thus, it can be seen that CO2 has been produced prior to, during and after the installation of energy saving device which was used for such production. A part of the production has been cleared on payment of Excise duty and therefore it cannot be said that the energy saving device installed in the factory was producing only the exempted goods - the demand for CENVAT Credit availed on the capital goods cannot be sustained - in favour of assessee. Taken credit twice on the basis of same document - Held that:- As the appellants have not disputed this issue & in fact, have found much more double entries and have reversed them voluntarily. Under these circumstances, the penalty for availment of credit twice also cannot be justified - in favour of assessee.
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2012 (10) TMI 140
ROA - Cenvat credit demand and penalty – Held that:- Respondent was unable to appear before it for no fault of his own, the ends of justice would clearly require that the ex parte order against him should be set aside. Not to do so on the ground of lack of power would be manifest injustice - power to set aside an order passed ex parte against the respondent before it if it is found that the respondent had, for sufficient cause, been unable to appear - ROA is allowed.
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2012 (10) TMI 139
Maintainability of appeal - Held that:- Board issued circular/instruction bearing F.No. 390/Misc./163/2010-JC, dated 20-10-2010 to the effect that no appeal shall be filed to the High Court where the duty involved or total revenue including find or penalty is Rs. 2,00,000/- and below - value of the subject matter of this appeal is Rs. 4,246 - appeal is devoid of merit - appeal is dismissed.
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2012 (10) TMI 138
Demand of Excise duty on value/price of the by-product namely Spent Acid cleared - while availing benefit of exemption under Notification No. 6/2002-C.E. – Held that:- Assessee in the process of manufacturing soap uses acid slurry and in the process Spent sulphuric acid gets generated as a bye product – demand set aside – in favor of assessee
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2012 (10) TMI 110
CENVAT Credit of M.S. angles, plates, beams etc - Stay Petition for waiver of duty - Held that:- The lower authorities have not addressed the issue from the point of certificate of the Chartered Engineer produced by the appellant which indicates the some consumption of the material on which the credit was availed, for manufacturing/fabrication of the capital goods which are further used in the factory premises - also that the first appellate authority has not addressed the issue of limitation while the adjudicating authority has considered the issue of limitation, but did not give any reason for as to why the claim of the appellant as regards limitation should not be accepted. Thus remit the matter back to the adjudicating authority for fresh consideration - in favour of assessee by way of remand.
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2012 (10) TMI 109
Challenge the jurisdiction of the Commissioner (Adjudication) Central Excise, Delhi - Held that:- The petitioner had received the notices of transfer of the cases by the Central Board of Excise & Customs under Rule 3 (1) of the Central Excise Rules, 2002 read with Notification No. 39/2001 - Central Excise (N.T.) dated 26.6.2001, from the Commissioner, Central Excise Meerut in November, 2011. It is admitted that the petitioner had put in appearance before the Commissioner (Adjudication), Central Excise, Delhi, to which the case and other 138 similar cases have been transferred. Thus the petitioner has sufficiently explained the delay in approaching the Court after having received the notice in November, 2011. It also acquiesced to jurisdiction of the Adjudicating Authority, by putting appearance before him. No merit in the grounds of hardships in inter-State transfer as the State of UP adjoins the State of Delhi. The distance is not so big that the ground of travel may be considered to challenge jurisdiction of common Adjudicating Authority - against assessee.
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2012 (10) TMI 108
Extended period of limitation - SSI Exemption - Appellants are having two units - Appellants were availing two exemptions simultaneously for two units - Condition No. 2(iv) of the Notification No. 8/2002 clearly stipulates that where a manufacturer clears the specified goods from one or more factories, the exemption in that case shall apply to the aggregate value of the clearances mentioned against each of serial numbers in the said table and not separately against each factory – Held that:- Appellants had nowhere brought in the knowledge of the Department at any point of time that the two Units of the Appellant Firm were under the same proprietorship of and were availing exemption under either Notification No. 8/2002 or 9/2002 - facts came to the knowledge of the Department on scrutinizing their records. Therefore, the lower authorities have rightly invoked the extended period of limitation - demands are confirmed
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2012 (10) TMI 107
Demand of duty - benefit of said Notification No. 34/2001-C.E. – required procedures not followed by assessee – Held that:- Assistant Commissioner or Deputy Commissioner can allow the benefit of the Notification, even if the procedure is not followed - appellant was not paying any duty on the aluminium circles under the bona fide belief that such circles, emerging at intermediatory stage, were not leviable to duty. On being pointed out, they paid the duty as per the directions of the Superintendent in terms of Notification No. 34/2001-C.E.. - it is fit case where the Assistant Commissioner or Deputy Commissioner should have ordered for payment of duty in terms of the said notification, even if detailed procedure was not followed by the appellant – stay allowed
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2012 (10) TMI 105
Waiver of pre-deposit – final products were manufactured and cleared without discharging the obligation prescribed under Rule 6 of Cenvat Credit Rules, 2001, the department was of the view that the benefit under the captive consumption notification was not available – Held that:- Assessees prima facie were not required to discharge the obligation prescribed under Rule 6 of Cenvat Credit Rules, 2001 as they were covered by clause (vii) of Rule 6(6), which stipulates that the provisions relating to payment of 10% or 5% as the case may be were not required to be followed as the goods were supplied against I.C.B. in terms of Notification No. 6/02 or 6/06 and therefore, exempted from levy of duty of customs and additional duty as per clause (vii) of Rule 6(6) of the Cenvat Credit Rules - pre-deposit of duty, interest and penalty waived
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Wealth tax
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2012 (10) TMI 162
Whether cash seized and was deposited in PD account with CIT, liable to includible in Wealth of assessee – Assessee argued that this amount was declared as income in subsequent year and the assessee had paid the tax, therefore, the same cannot be included on the valuation date under Wealth Tax – Held that:- As the money which was seized by the Police and transferred to the P.D. account of the CIT. Therefore, although the money was lying in the P.D. account of the CIT, still the assessee is the owner of the money which shall be returned to him after appropriation of due taxes as per the provisions u/s. 132B. The money so retained by the department in the P.D. Account of the CIT was not confiscated and was only a mere seizure. Therefore, the assessee in our opinion continues to be the legal owner of the cash and therefore it belongs to the assessee and is includable in his Net Wealth. Appeal decides in favour of revenue
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