TMI Tax Updates - e-Newsletter
October 9, 2012

Case Laws in this Newsletter:

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

Articles

1. EXEMPTION ON INPUT SERVICES TO EXPORTERS

   By: Dr. Sanjiv Agarwal

2. Goodwill is intangible asset, eligible for depreciation allowance.

   By: DEVKUMAR KOTHARI

3. Photography service covered under works contract?

   By: Vijay Chitte

News

1. SPMCIL Presents Dividend Cheque of Rs. 116.49 Crore for 2011-12 to the Finance Minister

2. I&B Ministry Clarifies on Power Consumption by Cable STB Cable STBs consume less power than a CFL light

3. Text of the Inaugural Address by the Union Finance Minister Shri P Chidambaram at the Economic Editors’ Conference 2012 today

4. 14 Proposals Amounting to Rs 113.35 Crore of Foreign Direct Investment Approved by FIPB

5. Lord Mayor of London Calls on Anand Sharma Anand Sharma Raises Visa issues, Fate on Indian Students at LMU

6. India and France sign Administrative Agreement in the field of Sustainable Urban Development

Notifications

Customs

1. 04/2012 - dated 5-10-2012 - Safeguard

Imports of Carbon Black (for rubber application) into India from the People's Republic of China

VAT - Delhi

2. F. 5(54)/Policy-II/VAT/ 2011-12/726-738 - dated 4-10-2012 - DVAT

Amendment in Sixth Schedule of the Act for grant of facility to the Embassy of Republic of Gabon.

Highlights / Catch Notes

Income Tax

• Foreign Car Depreciation in Iraq Allowed u/s 32(1)(ii) of Income Tax Act for Business Use Abroad.

  Case-Laws - HC : Depreciation on motor cars purchased and used in Iraq - the second proviso to Section 32(1)(ii) was not to deny depreciation on foreign cars used in foreign countries for business abroad - HC
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• High Court Orders Probe into Audit Fee Delay; Costs to Be Deducted from Responsible Officials' Salaries.

  Case-Laws - HC : Delay in fixation of special audit fee - CIT directed to conduct an inquiry and fix responsibility of the person or persons who was/were responsible for the delay and the said costs shall be deducted from the salary of the concerned person or persons. - HC
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• High Court Rules Non-Compete Fee as Revenue Expenditure, Not Capital, in Business Activity Case.

  Case-Laws - HC : Non-compete fee paid to Sri.U.Mohan Rao - revenue expenditure v/s capital expenditure - the payment was in respect of the performing of the business of the assessee - held as revenue in nature - HC
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Customs

• Conversion of Shipping Bill Allowed After Duty Drawback Refund Proof Submitted, Initially Denied Under Different Scheme.

  Case-Laws - AT : Conversion of shipping bill from duty drawback scheme to advance licence scheme denied -conversion allowed on submission of proof of refund of duty drawback - AT
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• Amendment in Bills of Entry allowed with documentary proof existing at time of goods clearance.

  Case-Laws - AT : Requested for amendment in the Bills of Entry - Amendment has to be allowed when a request is based on documentary evidence, which was in existence at the time of clearance of the goods - AT
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• India Updates Import Rules for Carbon Black from China, Affecting Rubber Industry Stakeholders.

  Notifications : Imports of Carbon Black (for rubber application) into India from the People's Republic of China - Notification
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Corporate Law

• Court Orders Separate Meetings for Creditors in Amalgamation Scheme; Aligns with Company Law Procedures for Creditor Approval.

  Case-Laws - HC : Scheme of Amalgamation - directed to hold separate meetings of the Un-Secured Creditors of the Transferor Company and Secured Creditors and Un-Secured Creditors of the Transferee Company - HC
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Service Tax

• No Registration Needed for Unused Premises; No Time Limit on Claiming Cenvat Credit.

  Case-Laws - AT : Cenvat Credit - there is no requirement to apply for the registration when premises was under construction and when no service was being provided - There is no time-limit for taking credit - AT
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• Court Rules Textbooks, Mock Tests, and Coaching as Unified Activities for Service Tax Liability on Coaching Centers.

  Case-Laws - AT : Service Tax Liability on coaching centers- sale of text books,conducting of mock test series and coaching classes was not an independent activity - prima facie against assessee - AT
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Central Excise

• Inventory Shortages Alone Don't Prove Guilt for Alleged Clandestine Removal Under Central Excise Laws.

  Case-Laws - AT : Clandestine removal - admission of shortages without there being any admission of clandestine removal, cannot be considered to be conclusive evidence to establish the guilt of the assessee - AT
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• Distributing Chemicals in Original Packaging Not Considered Manufacturing Under Chapter Note 11, Chapter 29, Tariff Rules.

  Case-Laws - AT : Deemed manufacture - Appellants are clearing chemicals in the same packing without disturbing the original packing - same does not amount to manufacture as per the Chapter Note 11 of Chapter 29 of the Tariff - AT
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• High Court Rules Cenvat Credit Unavailable for Non-Manufacturing Processes u/r 4 of Cenvat Credit Rules.

  Case-Laws - HC : Claim of Cenvat credit on capital goods - Rule 4 of the Cenvat Credit Rules cannot come to the rescue of the petitioner, as the process in question itself does not amount to process of manufacture - HC
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VAT

• Court Rules on Interstate vs. Intrastate Sales Under Central Sales Tax Act; Impacts VAT and Sales Tax Assessments.

  Case-Laws - HC : Inter state sale or Intra state sale - Central Sales Tax Act, 1956? - requirement of agreement versus movement of goods - Sale in the court of import - An important decision - HC
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• Sixth Schedule Amendment: New Tax Regulations for Gabon Embassy on VAT and Sales Tax Compliance.

  Notifications : Amendment in Sixth Schedule of the Act for grant of facility to the Embassy of Republic of Gabon. - Notification
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Case Laws:

• Income Tax

• 2012 (10) TMI 181
  Maintenance of accommodation provided to employees and Executives in Iraq - ITAT allowed the claim - Held that:- the intention of the assessee was not to provide “guest house” accommodation for those who visited the project site on “tour” or “visit”. - Even though the accommodation provided in this case was for the entire duration of the project, what is sought by Section 37(4) and 37(5) is the type of accommodation provided to the employee who merely used them on transitory or temporary basis – having regard to the controlling expression of “tour” and “visit” but also undermine the object of the provision appeal decided in favour of the assessee. Depreciation on motor cars purchased and used in Iraq - ITAT allowed the claim - Held that:- As decided in CIT (Central), Patiala Versus Punjab Chemi.Plants Ltd. [2010 (7) TMI 782 - PUNJAB AND HARYANA HIGH COURT] the second proviso to Section 32(1)(ii) was not to deny depreciation on foreign cars used in foreign countries for business abroad - No dispute that the expenses incurred for the upkeep of the vehicles, were otherwise business expenses, the depreciation, therefore, was directly relatable to business rather than the use of foreign or luxury cars by executives of the assessee - in favour of the assessee. Rental income from the flats - assessable as "income from other sources" OR ' house property ' - Held that:- As the assessee-company was not the "legal owner" of the property in the flats & relying on judgment of the Supreme Court in CIT Versus Podar Cement Pvt. Ltd. [1997 (5) TMI 2 - SUPREME COURT] " owner " is a person who is entitled to receive income from the property in his own right, the rental income from the flats was assessable as "income from other sources" u/s 56 - in favour of assessee. Provisions for completed expenses and expenses incurred on completed project - ITAT allowed the claim - Held that:- As decided in CIT Vs. Triveni Engineering and Industries Limited [2010 (11) TMI 90 - DELHI HIGH COURT] Tribunal has allowed the provision made by the assessee for losses on the ground that the assessee was following completed contract method and provision had been made on account of losses and on the precedent judgement - in favour of assessee.

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• 2012 (10) TMI 180
  Delay in fixation of special audit fee - Held that:- The petitioner’s services were availed more than 6 years ago and the final report of its special audit received on 22.09.2006. The facts would also show that the assessment proceedings in respect of the special audit too have been completed. In any event there is no reason why the department dragged its feet and chose not to release the fee of the petitioner after fully availing its services. Thus for the inordinate delay in fixation of the fee, which cannot be countenanced, the petitioner should be appropriately restituted. The concerned superior authority i.e. Chief Commissioner or any officer designated in this regard shall consider the appeal or representation against the order of the fixation and take consequential action, if any, within six weeks provided the writ petitioner prefers the appeal or representation within a week - The respondent shall pay interest @ 8% per annum on the sum of Rs.12,96,541/- for the period 01.01.2007 till 24.09.2012 when the amount was actually paid. The writ petitioner’s rights to claim any further amount either by way of balance fee or interest thereon are expressly reserved. Having regard to these circumstances the Court directs payment of Rs.50,000/- as costs to the writ petitioner. The costs shall be paid within two weeks - in favour of auditor.

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• 2012 (10) TMI 179
  Delay in filing appeal - petitioner has challenged three orders - writ petition - Held that:- The last date for filing an appeal before the ITAT was 5.1.2008. It is of vital importance to note that the petitioner had by its letter dated 14.12.2007 i.e. before the time for filing an appeal had expired, instructed its CA in writing to file an appeal before the Tribunal. On 14.1.2008, the petitioner's Manager resigned. On 25.1.2008 the petitioner received through its CA the papers and proceedings in respect of the appeal to be filed. The appeal fees were paid on 31.1.2008. On 10.2.2008 the appeal papers were signed by the office bearers of the society. On 21.2.2008 the appeal was received by the Tribunal by post. There was thus a delay of about forty five days in filing the appeal. Neither the extent, nor the nature of the delay warrants the drastic consequences of denying the petitioner an opportunity of defending its case on merits. It is not as if there was no explanation for this delay. The appellant has indeed filed an appeal challenging the order dated 23.7.2009 along with a notice of motion for condonation of delay. It was contended that in view thereof, this writ petition is not maintainable is not agreeable. This writ petition is comprehensive and challenges all the impugned orders. In order to obtain complete relief the petitioner cannot be faulted for having filed this writ petition. The petitioner has been put to considerable expenses and effort merely to obtain a hearing on merits. The petitioner can, by no stretch of imagination be said to have waived its rights. This is clear from the fact that the petitioner has duly and diligently prosecuted the appeals in respect of the three other assessment years. But for the unfortunate circumstances fourth appeal would also have been heard on merits in the normal course. The petitioner is not entirely at fault for the delay and negligence in prosecuting the fourth appeal - The Tribunal is directed to hear the petitioner's appeal on merits - in favour of assessee.

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• 2012 (10) TMI 178
  Scrap sales - whether included in the total turnover while computing deduction u/s 80HHC - Held that:- As decided in COMMISSIONER OF INCOME-TAX Versus SHIVA DISTILLERIES LTD. [2007 (2) TMI 103 - HIGH COURT, MADRAS] scrap sales could not be taken as a part of turnover & should be excluded on the computation of the total turnover for the purpose of Section 80 HHC - in favour of assessee. Computation of deduction u/s 80HHC - whether 90% of gross interest without deducting expenses incurred in earning the interest income has to be excluded from the business profits - Held that:- As decided in ACG Associates Capsules Pvt. Ltd. vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business - in favor of assessee. Disallowance of depreciation - assessee claimed deduction u/s 35AB - Held that:- The expenditure incurred by the assessee was for the purpose of getting the technical knowhow by the assessee on manufacturing and processing of goods. Going by the provisions of Section 35AB and the Explanation on technical knowhow no hesitation in holding that the assessee is entitled to the relief under Section 35AB only, and not to the claim of depreciation under Section 32 relying on decision in case Godrej Soaps Limited, Escorts And Another Versus Union of India And Others [1992 (10) TMI 1 - SUPREME COURT] - against assessee. Non-compete fee paid to Sri.U.Mohan Rao - revenue expenditure v/s capital expenditure - Held that:- It is not denied by the Revenue that U.Mohanrao was the Chairman and Managing Director of some of the companies which got merged with the assessee company. The said U.Mohanrao had access to all information starting from manufacturing process, knowhow to the clientele and the products, including the pricing of the products. By a process of amalgamation, the assessee had acquired the business of the amalgamating companies. However, for the fruitful exercise of its business as a business proposition, the assessee thought it fit to enter into a non-compete agreement with a person who had the knowledge of the entire operations, so as to get the full yield of the amalgamated company's business. In that context the assessee took a commercial decision to pay non-compete fee to U.Mohanrao and going by decision reported in CIT vs. Coal Shipments P. Ltd (1971 (10) TMI 6 - SUPREME COURT) that the payment was in respect of the performing of the business of the assessee, hence no hesitation in holding that the expenditure is only on revenue account and not on capital account - in favour of assessee.

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• 2012 (10) TMI 177
  Arms Lenth Price - Allocation of 80% of unbilled hours to the Associated Enterprise - assessee submission that he suffered losses in the aftermath of bomb attack on World Trade Centre on 9/11 in US - Held that:- CIT (A) even though accepts the fact that the difference in man hours paid to the AE and billed to the clients is due to recession and slump in software industry after the 9/11 incident, he nevertheless making his own interpretation of the agreement came to a conclusion that assessee can be allowed benefit at 20% out of the loss arising from payment made for extra 3500 man hours as the AE had four times risk in the transactions.The aforesaid conclusion of the CIT (A) is without a reasonable basis. When the assessee has paid to the AE for a minimum of 25 persons as per the terms of the agreement whereas it could bill its client for 10 persons the CIT (A) was not justified in coming to the conclusion that the assessee could be given benefit of 20% out of the loss arising on account of excess payment made for 3500 man hours. It is a fact that assessee's business suffered due to recession as result of 9/11 incident and assessee ultimately had to close down its operations. The CIT (A) also does not dispute this fact. Thus finding force in assessee's contention that assessee's income being exempt there was no need on its part to transfer its income to its AE whose profit was taxable. The assessee has demonstrated before us the ALP at Rs.12,99,42,172/- after deducting cost of 1370 man hours @61.39USD and the payment made by it to the AE to be within +/-5% of the ALP range which are inclined to accept. Thus the order of CIT (A)is set aside and AO is directed to verify the invoices raised by the assessee on its clients and invoices raised by the AE on the assessee to find out the actual unbilled hours lost in November, 2001. If the assessee's claim will be found to be correct, then no addition can be made under the Transfer Pricing Regulations - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 176
  Unaccounted excess stock - CIT(A) deleted the addition - Held that:- As borne out from the record that the stock of gold mentioned in the approval memos were found at the premises of the assessee and at the time of survey the entire stock was inventorised. Whatever the excess stock was found the same was surrendered by the assessee. Thus no reason for further addition of Rs..4,64,139/- was called for. Thus, the finding given by the CIT(A) is based on correct appreciation of facts and we do not find any reason to deviate from the same - aginst revenue. Addition on account of estimated profit on basis of seized documents from search/survey operation from office of Anoopchand group - Held that:- CIT(A) has given the benefit of estimated income to be set off against unaccounted investment in stock-in-trade which cannot be disturbed as no other unaccounted investment was found in the course of survey and the undisclosed income can be set off against unaccounted stock found which has been surrendered by the assessee at the time of survey following the decision reported in Anantram Veerasinghaiah & Co. Vs. CIT, [1980 (4) TMI 2 - SUPREME COURT] - in favour of assessee.

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• 2012 (10) TMI 175
  Depreciation on leased assets - Finance lease vs Operating lease - Held that:- As decided in IndusInd Bank Limited Versus ACIT (2012 (3) TMI 212 - ITAT MUMBAI) it is a simple case of advancing of loan by the assessee to the lessee and the so called lease agreement, in the facts and circumstances of the present case, has been attempted to be used as a device to reduce tax liability of the assessee - the sole purpose of enabling the assessee to artificially fulfill the twin requirements of ownership and user of the asset so as to claim depreciation, to which it was not otherwise entitled as per law and thereby reduce its income in a mala fide manner - against assessee. Depreciation on UPS - as electrical installation OR an integral part of computer - depreciation @ 25% OR 60% - Held that:- It cannot be said that UPS are only for computers whereas printers do not have any other use other than with the computer. However it is for the assessee to establish that the UPS have been purchased as part of the computer systems. Therefore , in the interest of justice this issue is restored back to the files of the AO. Treatment of software license - as intangible assets OR an integral part of computer - Held that:- the AO has not gone into details of the software purchased by the assessee. The assessee has exhibited the copy of invoice for the purchase of software with each and every item mentioned in the invoice vis-a-vis the business of the assessee which was ignored by AO - this issue is restored back to the files of the AO - in favour of assessee for statistical purposes. Treatment of creditors outstanding more than 3 years as income - Held that:- as the assessee has taken the benefit of claiming these expenses in F.Y. 1999-2000 and now that the liability has been found not to be discharged. No reason to interfere with the findings of the CIT(A) and addition of Rs. 3,47,081/- is confirmed - against assessee. Disallowance of bad debts written off - Held that:- Sec. 36(1)(vii) has to be r.w.s 36(2). Section 36(2)(i) provides that “ no such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money lending which is carried on by the assessee”. Reading both these sections together, we find that the assessee has not brought any material evidence on record to substantiate its claim in the light of the provisions of Sec. 36(2)(i). In the interest of justice it is fit to restore this issue back to the file of AO - in favour of assessee for statistical purposes. Disallowance of expenses incurred on commission and brokerage - Held that:- the assessee was not even given an opportunity to reconcile the difference in the amount of confirmation received from the parties which has resulted into an addition of Rs. 38,88,596/-. Also that the CIT(A) has simply disallowed in respect of parties from whom confirmations have not been received and Rs. 65,93,011/- in respect of parties whose PA Nos were not available. As this issue needs further verification restore this issue back to the files of AO - in favour of assessee for statistical purposes. Disallowance u/s. 14A - Held that:- It is not disputed that the investments are made in earlier years. The assessee has also not claimed any income exempt from tax as the investments pertains to earlier year, thus no reason for making any disallowance during the year under consideration - in favour of assessee. Renovation expenditure & Architect fees - Revenue expenditure OR capital expenditure - Held that:- all the items of expenses give a benefits which are of enduring in nature - expenses cannot be termed as “current repairs”. - against assessee. Deduction u/s. 80G - ineligible donation given to M/s. K.C.Mahindra Trust - Held that:- It appears that the AO has not considered the certificate issued by DIT (Exem) Mumbai & rejected the claim because the receipt issued to donor does not bear the number and date of the order of the DIT (Exemption), thus restore this issue back to the file of AO to reconsider certificates submitted by assessee - in favour of assessee for statistical purposes. Penalty u/s 271(1)(c)- Held that:- The penalty has been levied on quantum additions made in the assessment proceedings for assessment year 2003-04 and also to the enhancement made by the Ld. CIT(A) during the course of appellate proceedings and as the quantum appeal has been restored back to the file of AO, accordingly this issue is also to be restored back to the file of AO - in favour of assessee for statistical purposes.

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• 2012 (10) TMI 174
  Disallowance u/s. 40(a)(ia) - violation of provisions of Sec. 194 - Held that:- Perusal of the assessment order show that the AO has made the additions on presumption that all the payments are made to sub-contractors without seeking any information/explanation/verification from the assessee and also the CIT(A) fell into the same error while disposing of the grievance of the assessee. This issue needs further verification at the assessment stage therefore deem it fit to restore this issue to the file of the AO - in favour of assessee by way of remand. Disallowance of labour charges - Held that:- On perusal of the assessment order of CIT(A) it is noted that the assessee has not substantiated claim of payment of labour charges - against assessee. Disallowance of expenses - expenses incurred in cash with self made vouchers - Held that:- The AO has made additions on adhoc basis under the account, thus find no reason to interfere with the findings of the CIT(A) who has restricted the total disallowance of 5% of the expenses. Disallowance of depreciation - Held that:- Disallowance of depreciation on vehicle is claimed on block of assets and with effect from 1.4.1989, the depreciation is claimed/allowed on block of assets and not on individual assets. Therefore, while confirming the findings of CIT(A) finding so far as depreciation on vehicle claimed is concerned, the AO is directed to delete the addition of Rs. 92,000/- from the total income - in favour of assessee. Liability of sundry creditors ceased to exist - addition u/s. 41(1) - Held that:- The assessee herself has admitted that the bills of KLB Fabricators and S.D.S Fabricators are over invoiced which itself prove that the assessee is not going to pay this amount. So far as liability of P&R Industries and PMB Engineering are concerned, the assessee has categorically stated that the companies have closed. Just because the assessee has given an assurance that these liabilities will be written back in A.Y. 2009-2010 will not exonerate the assessee as if liability has ceased to exist in the year under consideration, then it has to be added back in the year under consideration and not as per the assurance given by the assessee that it will be written back in A.Y. 2009-2010. No merit and logic in the submission of the assessee - against assessee. Rectification order u/s 154 of CIT(A) - additions made u/s. 41(1) allowed - Held that:- CIT(A) while adjudicating on the application made u/s. 154 was carried away by the submissions of the assessee without appreciating the fact that what assessee has stated during the course of the appellate proceedings was only a promise to consider the write back of liabilities in A.Y. 2009-2010 - the future promise made cannot become a reason for rectification of error apparent from record. The CIT(A) has grossly erred in rectifying the appellate order dt. 18.2.2010 - in favour of revenue.

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• 2012 (10) TMI 173
  Applicability of Accounting Standards - revised AS-7 prescribing percentage completion method OR AS-9 which provides for project completion method - assessee is a real estate developer - Held that:- As decided in Awadhesh Builders Versus Income-tax Officer, Ward 15(2)(4), Mumbai [2009 (12) TMI 665 - ITAT MUMBAI] in terms of revised guidelines described in AS-7, the income could be accounted only on completion of the project when the flats were sold. It was observed that since the assessee had followed one of the prescribed methods and the same method had been accepted in the earlier years, the method could not be changed by the AO in the subsequent year - as in the present case the undisputed facts in the case remain that project is completed only upto 16% & also the assessee has option to adopt work completion method( as decided in case supra) the income could not be assessed even with reference to AS-7. Moreover, the other undisputed fact is also not controverted that assessee did not sell any portion of the impugned project and has started earning lease rental from the said project on long term basis. Therefore, keeping in view all these facts, CIT(A) has rightly deleted the addition - against revenue. Interest received on FDR - Held that:- CIT(A) has rightly decided that since the assessee has capitalized all the cost of the project, the interest earned by it from FDR cannot be set off against interest paid - against assessee

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• 2012 (10) TMI 172
  Loss on exchange - sale of shares - capital or revenue - - Held that:- considering the order passed in Reliance Energy Limited. Versus DCIT, Special Range - 30, Mumbai [2005 (12) TMI 211 - ITAT BOMBAY-H ] the loss on foreign currency cannot said to have connection whatsoever with capital loss - loss suffered by the assessee on account of exchange difference as on the date of balance sheet is an item of expenditure allowable under section 37(1) of the Act. It is not notional and as per AS-11, if the accounts are maintained on mercantile basis the loss is allowable. - in favour of assessee. Income u/s 115JB - increased by being loss on exchange - Held that:- As the loss claimed by the assessee on diminution of foreign exchange is not notional loss and cannot be termed to be a provision, therefore, this ground of the assessee is also allowed. Excess dividend recovered by the assessee during the year which was not refunded to rightful owners - Income u/s 115JB increased by such amount - Held that:- it is only when there is a right to receive income, income can be said to have accrued. Without legally enforceable right there can be no accrual of income, thus as assessee has no lawful right to the receipt in question nor has it claimed such a right in such circumstances, the receipt will not assume the character of income in the hands of the assessee - decided in favour of assessee.

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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 Rs. 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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• Customs

• 2012 (10) TMI 170
  Requested for amendment in the Bills of Entry - According to the appellant, due to clerical/arithmetical error, all the Bills of Entry were assessed to duty @ 15% while Notification No.11/2005, prescribed the rate of duty as 10% ad valorem for import of Low Density Polyethylene – Held that:- Amendment has to be allowed when a request is based on documentary evidence, which was in existence at the time of clearance of the goods - Petitioner has paid the duty under mistake of law and or in the instant case by oversight, cannot result in being assessed to duty which was otherwise not payable – assessing officer has a duty to assess according to the law and refusal to amend the document would result in an irregular assessment - in terms of provisions of Section 149 of Customs Act, 1962, the Bill of Entry allowed to be amended Refund – Held that:- Relief of refund claimed is not maintainable before the order of assessment is amended or modified - he has not passed on the duties and as such the question of unjust enrichment would not arise in the matter

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• 2012 (10) TMI 169
  Reduction of fine and penalty - goods have been imported unauthorizedly without valid import licenses – Held that:- Lower appellate authority reduced the fines and penalties was unjustified - original authority has imposed fines ranging from 20% to 30% only and penalties ranging from 5% to 25% which are not arbitrary or unreasonable - respondents are repeatedly importing the same goods and they are not deterred by lower fines and penalties imposed in the past - fines and penalties imposed in these cases cannot be said to be excessive considering the repeated nature of offences - orders passed by the lower appellate authority reducing the fines and penalties are set aside and the impugned Orders-in-Original are restored in regard to imposition of fines and penalties.

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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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• Corporate Laws

• 2012 (10) TMI 168
  Scheme of Amalgamation - prayer seeking directions for convening separate meetings of Un-Secured Creditors of the Transferee Company and Secured Creditors and Un-Secured Creditors of the Transferee Company - Held that:- This Court directs that separate meetings of the Un-Secured Creditors of the Transferor Company and Secured Creditors and Un-Secured Creditors of the Transferee Company shall be held on 30th October, 2012 at 13th Floor, Modi Towers, New Delhi 110019 at 11.00 a.m., 2.00 p.m. and 3.30 p.m. respectively. Appointment of Chairperson and the Alternate Chairperson for the meeting and the Transferor and the Transferee Company are directed to publish notice of the aforesaid proposed meetings in ‘Financial Express’ (English, Delhi edition) and ‘Jan Satta’ (Hindi, Delhi Edition) minimum twenty-one days in advance before the scheduled date of meetings - Voting by proxy is permitted & if the Quorum is not present in the meetings, the meetings would be adjourned for thirty minutes and the persons present in the meetings would be treated as proper Quorum. Chairpersons/ Alternate Chairpersons shall file their reports within two weeks of the conclusion of the meetings.

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• Service Tax

• 2012 (10) TMI 183
  Cenvat Credit - Amount in question is Rs. 1,10,33,614/- Appellants are engaged in providing logistic services - Constructed an Internal Container Depot (ICD) at Pithampur in M.P.- During the period from October 2007 to July 2008 the Bills for the construction activity were raised by the constructing company to their head office at Mumbai - The appellant is taking Cenvat credit at their Pithampur ICD against the bills for construction activity for setting up the ICD and raised by the service provider addressed to the Mumbai office. The appellant contended there is no requirement to apply for the registration when premises was under construction and when no service was being provided from Pithampur - There is no time-limit for taking credit based on invoice issued by service provider. Held that:- pre-deposit of dues arising from the impugned order for admission of appeal is waived - in favour of appellant.

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• 2012 (10) TMI 182
  Condonation of delay of 16 days - Granted as main appeal filed in time. - Delay condoned. Service Tax Liability on coaching centers- Pre- schooling coaching- sale of text books- conducting of mock test series- Held that:- sale of text books,conducting of mock test series and coaching classes was not an independent activity, Service Tax paid has to be treated as as cum duty price and rate of duty has to be determined. The appellants has to make further deposit of Rs. 20,00,000/- (Rupees Twenty lakhs only) within a period of 8 weeks from today, subject to which pre-deposit of balance amount of duty and entire amount of penalty shall stand waived.

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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 Rs. 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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• Central Excise

• 2012 (10) TMI 167
  Stay for waiver of pre-deposit of penalty - Held that:- The appellant had discharged duty liability on clearances made during the period January 2008 to March 2008, through RG23A Part II i.e. CENVAT account. Also that the appellant had enough balance in RG23A Part II to discharge duty liability. And that debiting RG23A Part II was no good as discharge of duty, but there is no default of payment of duty, which is found in this case as the appellant had not paid duty liability for the month of November 2007. The appellant has rectified the error by debiting the amount through PLA towards discharge of duty liability. The error of debiting the CENVAT account during the period January 2008 to March 2008 as mere technical lapse and reduce the penalty imposed by the adjudicating authority to Rs.5,000/- under Rule 25 of Central Excise Rules, 2002. Thus the penalty of Rs.60,000/- under Rule 25 of Central Excise Rules, 2002, needs to be restored as the findings reached are correct and there is no appeal filed by the assessee against such an order.

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• 2012 (10) TMI 166
  Clandestine removal - denial of CENVAT Credit - Held that:- As regards the statement of Managing Director, the appellant have taken a categorical stand that Managing Director was around 75 years old and was not keeping good health, the proceedings lasted till 11 hours in the evening and on being told that there was shortages of raw materials, he simplicitor agreed to debit the duty. Learned advocate submits that such statement cannot be held to be of any evidentiary value, in the absence of any evidence to reflect upon the clandestine clearance of raw materials. As no evidence on record indicating any removal of raw materials by the appellant, or their use in the manufacture of final product which does not stand reflected in the statutory records, thus admission of shortages without there being any admission of clandestine removal, cannot be considered to be conclusive evidence to establish the guilt of the assessee - in favour of assessee.

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• 2012 (10) TMI 165
  Demand of duty, interest and penalty – limitation - manufacture of Ice-Cream - Cenvat credit of duty paid on prefabricated (construction) building (cold room) consisting of wall, roof, door, flashing window, on an assumption that they are required to manufacture final products – alleged that wrong availment of credit – Held that:- Initiation of proceedings is barred by time - In the returns it is clearly mentioned that they availed credit under the aforesaid rules. The audit partly accepted the same. It is only in the second audit that they noticed the mistake and initiated proceedings - in the light of the aforesaid facts none of the other conditions prescribed in the Proviso exists in this case to extend the period of limitation of 5 years - Tribunal was justified in setting aside the order passed by the appellate authority and in restoring the order passed by the original authority – in favor of assessee

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• 2012 (10) TMI 164
  Deemed manufacture - chemicals - contention of Revenue is that from the financial year 1997-98 Chapter note 11 was introduced to Chapter 29 of the Tariff whereby labelling or re-labelling of containers and re-packing from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture – Held that:- Appellants are clearing chemicals in the same packing without disturbing the original packing - same does not amount to manufacture as per the Chapter Note 11 of Chapter 29 of the Tariff - allegation of suppression with intent to evade payment of duty is not sustainable - appeal is dismissed.

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• 2012 (10) TMI 163
  Claim of Cenvat credit on capital goods with respect to marble and granite - Petitioner has claimed that the process of cutting and polishing the granite and marble amount to manufacturing process falling within Chapter 25 of the Central Excise Tariff Act, 1985 - sawing of marble blocks into slabs and tiles for sale in both indigenous and foreign market – Held that:- Cutting of marble blocks into slabs does not amount to manufacture - Rule 4 of the Cenvat Credit Rules cannot come to the rescue of the petitioner, as the process in question itself does not amount to process of manufacture within the purview of Excise Law and Cenvat Credit Rules, 2004, the Rule 4 is inapplicable - reliance upon Rule 4 of the Rules of 2004 is of no avail - writ petitions dismissed

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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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• CST, VAT & Sales Tax

• 2012 (10) TMI 185
  Inter state sale or Intra state sale - Central Sales Tax Act, 1956? - requirement of agreement versus movement of goods - Held that:- The Tribunal fell into error in assuming that to avail exemption under Section 3(a) of the Act, the Agreement has to expressly stipulate for inter-state movement of goods, and the fact that in performance of the Contract, the appellant would have to move the goods from other States to Delhi would not suffice. - in favour of assessee. Sale in the court of import - held that- to determine whether the sale was in the course of import, the Court has to see whether the movement of goods through was integrally connected with the contract for their supply. - Questions such passing of title, or whether the end user has a privity of contract with the supplier, or where the consideration flows from, are not determinative or decisive of the issue. - Section 5 does not prescribe any condition that before a sale could be said to have occasioned import, it is necessary that the sale should have preceded the import. - in favour of assessee.

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• Wealth tax

• 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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