TMI Tax Updates - e-Newsletter
November 10, 2012

Case Laws in this Newsletter:

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

Articles

1. WHETHER HOLDER OF CHEQUE CAN INITIATE PROCEEDINGS OF PROSECUTION UNDER SECTION 138 OF NEGOTIABLE INSTRUMENT ACT, 1881 FOR THE SECOND TIME IF HE HAS NOT INITIATED ANY ACTION ON EARLIER CAUSE OF ACTION?

   By: DR.MARIAPPAN GOVINDARAJAN

2. REJECTION OF DRAFT OFFER DOCUMENTS BY SEBI

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. RFP for evaluation of Schemes under Indian Leather Development Programme (ILDP) - November, 2012

2. Protocol Amend the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains

3. Handloom and Handicraft Sector Should be given Enabling Policy Support, says President

4. ‘‘Each possesses within himself two antagonistic and foolish counsellors, whom we call by the names of pleasure and pain…besides these two, each man possesses opinions about the future, which go by the general name of ‘expectations’; and of these, that which precedes pain bears the special name of ‘fear’, and that which precedes pleasure the special name of ‘confidence’.”

5. Relaxation in External Commercial Borrowing Policy for the Upcoming 2g Spectrum Auction

6. Change in funding arrangement for the Universal Service Obligation Fund (USOF) schemes, including the funding of the scheme for creation of National Optical Fiber Network (NOFN) from Non-Plan to Plan allocation in Budget.

7. Third Phase of Small Development Projects (SDP-III) in Afghanistan

8. TRAI’s recommendations on “Spectrum Management and Licensing Framework” – Specific recommendation of EGoM on pricing of spectrum furnished as desired by the Cabinet

9. Gross Direct Tax Collections up by 6.59 Percent During April-October 2012-13 and Stood at Rs. 3,02,810 Crore as against Rs. 2,84,081 Crore in the Same Period Last Year

10. Status of compliance on scheme of Integrated Textile Parks

11. Disinvestment of 10 percent paid up equity of Hindustan Aeronautics Limited

12. Highlights on Telecom Subscription Data as on 30th September 2012

13. Clean-up of demand uploaded to CPC FAS before issue of refund in cases processing of e-returns of A.Y. 2012-13

Notifications

Income Tax

1. 48/2012 - dated 6-11-2012 - IT

Deduction u/s 80-IA - Notifies M/s. India Land and Properties Pvt. Ltd. having its registered address at Plot No. 14, 3rd Main Road, Ambattur Industrial Estate, Chennai, has developed an Industrial Park at Indian Land Tech Park Tower AB and Tower C At Survey No. 195 part, 196 part, 197 part, 198 part, 199 part and 200 part of Mannurpet Village and 6 part, 7 part, 8 part and 10 part, of Athipet Village, Village Mannurpet and Athipet, Taluka Ambattur, District Thiruvallur, Tamil Nadu

2. 47/2012 - dated 6-11-2012 - IT

Deduction u/s 80-IA - Notifies M/s. Ferani Hotels Pvt. Ltd. having its registered address at B, 2nd Floor, 623 Linking Road, Khar (W), Mumbai, has developed an Industrial Park at Bldg. Nos. 1, 4, 11, 14 & 21, 827A/4A(pt.), Malad, Mumbai Suburban District, Maharashtra

3. 46/2012 - dated 6-11-2012 - IT

During The Financial Year 2012-13 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds

Circulars / Instructions / Orders

Service Tax

1. F.No.334/6/2012-TRU - dated 6-11-2012

Suggestions from the Industry and Trade Associations for Budget 2013-14 regarding changes in direct and indirect taxes.

FEMA

2. 49 - dated 7-11-2012

Money Transfer Service Scheme - List of Sub Agents

3. 50 - dated 7-11-2012

Memorandum of Instructions governing Money Changing Activities

Companies Law

4. Order F. No. 52/26/CAB-2010 - dated 6-11-2012

Audit of cost accounts in - Product or Activity Group

Highlights / Catch Notes

Income Tax

• Shipping Income Not Taxable in India: Assessee's Non-Connected Ships to Permanent Establishment Avoid Taxation.

  Case-Laws - AT : International shipping profits - although the assessee company had a PE in India in the year under consideration, the ships i.e. the property in respect of which shipping income was paid to the assessee company being not effectively connected with that PE - income not taxable in India - AT
  Visit to Get Source

  ---

• Non-Compete Fee Not Eligible for Depreciation Under Income Tax Act Section 32(1)(ii); Classified as Personal, Not Business Expense.

  Case-Laws - HC : Non-compete fee - Revenue v/s Capital - an agreement not to compete which is purely personal. - not eligible for depreciation u/s 32(1)(ii) - HC
  Visit to Get Source

  ---

• Active Use of Property for Business Qualifies as "Own" Occupation for Tax Purposes on Unsold Flats.

  Case-Laws - HC : Annual letting value of unsold flats - The intention of the lawmakers was that occupation of one’s own property, in the course of business, and for the purpose of business, i.e. an active use of the property, (instead of mere passive possession) qualifies as “own” occupation for business purpose. - HC
  Visit to Get Source

  ---

• Tax-Free, Secured, Redeemable, Non-Convertible Bonds Issued in 2012-13 with Income Tax Benefits Highlighted in Notifications.

  Notifications : During The Financial Year 2012-13 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds - Notification
  Visit to Get Source

  ---

• Amendment to Notification SO 1605(E) Alters Tax Deductions for Infrastructure Development Enterprises, Ensuring Policy Compliance and Clarity.

  Notifications : Amendment in Notification No. SO 1605(E), Dated 2-7-2008 - Deductions - In Respect of Profits and Gains From Industrial Undertakings, Or Enterprises Engaged In Infrastructure Development - Notification
  Visit to Get Source

  ---

• Amendment to Notification SO 1605(E) clarifies income tax deductions for infrastructure businesses, affecting taxable income reporting.

  Notifications : Amendment In Notification No.SO 1605(E), Dated 2-7-2008 - Deductions - In Respect of Profits And Gains From Industrial Undertakings, Or Enterprises Engaged In Infrastructure Development - Notification
  Visit to Get Source

  ---

• Carbon credits, specifically Certified Emission Reductions, are tax-exempt for the specified assessment year u/ss 2(24), 28, 45, and 56.

  Case-Laws - AT : Carbon Credits (Certified Emission Reductions) - It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. - AT
  Visit to Get Source

  ---

• Assessment Order u/s 263 Not Erroneous Despite Missing Detailed Discussion on Specific Aspect.

  Case-Laws - AT : Revision u/s 263 - The order of assessment, no doubt does not contain a detailed discussion on this aspect, but that however would not render the order as erroneous - AT
  Visit to Get Source

  ---

• CIT's Withdrawal of Section 80G Exemption Without Notice; Renewal Cannot Be Denied for Valid Approval Holder.

  Case-Laws - AT : Exemption u/s 80G of the Income-tax Act – CIT without issuing any such notice has withdrawn approval - renewal of exemption u/s 80G(5)(vi) cannot be denied to the assessee, having valid approval - AT
  Visit to Get Source

  ---

FEMA

• Guidelines for Money Exchange Compliance Under FEMA: Record-Keeping, Reporting, and Licensing Procedures Explained.

  Circulars : Memorandum of Instructions governing Money Changing Activities - Circular
  Visit to Get Source

  ---

• Updated List of Authorized Sub-Agents for Money Transfer Service Scheme under FEMA Compliance Announced.

  Circulars : Money Transfer Service Scheme - List of Sub Agents - Circular
  Visit to Get Source

  ---

Indian Laws

• UK-India Agreement Updated: Avoiding Double Taxation & Preventing Fiscal Evasion on Income and Capital Gains.

  News : Protocol Amend the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains
  Visit to Get Source

  ---

• India's Gross Direct Tax Collections Rise 6.59% to Rs. 3,02,810 Crore from April to October 2012-13.

  News : Gross Direct Tax Collections up by 6.59 Percent During April-October 2012-13 and Stood at Rs. 3,02,810 Crore as against Rs. 2,84,081 Crore in the Same Period Last Year
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (11) TMI 326
  International shipping profits - Indo-Swiss DTAA - whether a resident of Switzerland carried on the shipping business in India through a permanent establishment - Held that:- Having held that the taxability of international shipping profits is covered by Article 22, it is necessary to ascertain whether the assessee company which received such income being a resident of Switzerland carried on the shipping business in India through a permanent establishment situated therein and whether the property in respect of which such income was paid i.e. ships is effectively connected with such permanent establishment. After having perused the relevant clauses of the agreement between assessee company and M/s MSC Agency India Pvt. Ltd. finding in agreement with the view of the AO and the CIT(Appeals) that M/s MSC Agency India Pvt. Ltd. was legally and economically dependent agent of the assessee company and since the assessee company was managing and controlling some of its business operations in India through the said dependant agent, it constituted the permanent establishment of the assessee company in India in terms of the Indo-Swiss treaty. Unable to accept the contention raised by Shri Dastur in this regard that M/s MSC Agency India Pvt. Ltd. had limited right to perform its activities and it, therefore, cannot be regarded as habitually exercising an authority to negotiate and enter into contracts for and on behalf of the assessee company which, is contrary to the relevant clauses of the agreement between the assessee company and M/s MSC Agency India Pvt. Ltd. defining the scope and authority of M/s MSC Agency India Pvt. Ltd. and its commitment to work exclusively for the assessee company and not to accept the representation of any other principle for the same services in the same region without the written consent of the assessee company. Keeping in view the relevant portion of the OECD commentary on Model Tax Convention on Income and on Capital (condensed version) published in July, 2010 and the ratio of the decision of Special Bench of this Tribunal in the case of Sumitomo Mitsui Banking Corporation & Ors. v. DDIT (2012 (4) TMI 80 - ITAT MUMBAI) the right or property in respect of which the shipping income is earned by the assessee i.e. ships cannot be said to be effectively connected with the permanent establishment in India . Such income, therefore, will not fall under Article 22(2) but will fall under Article 22(1) and accordingly shall be taxable only in the State of residence of the assessee company i.e. Switzerland and not in India. In that view of the matter, the impugned order of the learned CIT(Appeals) is upheld holding that the international shipping profits of the assessee company are covered by Article 22 of the Indo-Swiss treaty and although the assessee company had a PE in India in the year under consideration, the ships i.e. the property in respect of which shipping income was paid to the assessee company being not effectively connected with that PE, the case of the assessee will be out of paragraph No. 2 of Article 22 and will fall in paragraph 1 of the said article. Consequently, the same will be taxable in the country of residence of the assessee company i.e. Switzerland and not in India - in favour of assessee.

  ---

• 2012 (11) TMI 325
  Amortization of lease premium - Revenue v/s capital - Held that:- In the present case the lease arrangements are for a substantially long period i.e. 60-95 years. That the arrangements do not confer outright ownership rights to the lessee is besides the point as the enjoyment of the land as a lessee in such cases is substantially that of the owner itself. In other words, barring the right to alienate or outright sale of the property in unqualified manner, all rights of enjoyment in respect of leased properties are with the assessee. Furthermore, even though the stipulation in the deed – one of which (dated 25.07.1995 with MHIDC) was produced during the hearing by the assessee, clause 3(m) enjoins the lessee not to transfer either directly or indirectly, sell or encumber the lease benefits to any other party, the same stipulation enables transfer with "previous consent in writing of the Chief Executive Officer". Also that the conditions embodied in such lease deed are part of the general policies consciously adopted by the municipal and statutory authorities who manage and lease out such assets - no infirmity with the reasoning of the Tribunal no infirmity with the reasoning of the Tribunal - against assessee.

  ---

• 2012 (11) TMI 324
  Non-compete fee - Revenue v/s Capital - Held that:- The appellant is in a joint-venture between M/s. Sharp & L&T. Apparently, the agreement entered into with the L&T in view of the changed relationship ensures that the latter does not enter into the same business. Although it is contended that the advantage is only by way of facilitation of the appellant's business and ensuring greater efficiency as well as profitability, on the other side, what can be seen is that the arrangement is to endure for a substantial period, i.e. 7 years. Coupled with the fact that the L&T has its own presence in consumer goods sector and would be, if it chooses - able to put up an effective competition for business engaged in by the assessee, there is no doubt that the amount is to ensure a certain position in the market by keeping-out L&T. Applying the test indicated in the Empire Jute Company Limited Versus Commissioner of Income-Tax (1980 (5) TMI 1 - SUPREME COURT) have emphasized that a single test, i.e. whether the payment results in an enduring benefit cannot be conclusive in a decision as to whether an expenditure qualifies as one falling or in the capital field - this Court is the opinion that the deduction cannot be claimed as a revenue expenditure, it clearly falls within the capital field - in favour of the Revenue. Whether a non-compete right acquired for seven years amounts to a depreciable intangible asset - Held that:- Each of the species of rights spelt-out in Section 32(1)(ii), i.e. know-how, patent, copyright, trademark, license or franchise as or any other right of a similar kind which confers a business or commercial or any other business or commercial right of similar nature has to be "intangible asset". The nature of these rights mentioned clearly spell-out an element of exclusivity which enures to the assessee as a sequel to the ownership - the 7 years period spelt-out by the non-competing covenant brings the advantage within the public policy embedded in Section 27 of the Contract Act, which enjoins a contract in restraint of trade would otherwise be void. very species of right spelt-out expressly by the Statute - i.e. of the intellectual property right and other advantages such as know-how, franchise, license etc. and even those considered by the Courts, such as goodwill can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal. - Thus it is to concluded that the words "similar business or commercial rights" have to necessarily result in an intangible asset against the entire world asserted to qualify for depreciation under Section 32(1)(ii) - depreciation not allowed - in favour of the Revenue.

  ---

• 2012 (11) TMI 323
  Annual letting value of unsold flats - flats lying under the head "Income from house property" - inventory of stock in trade v/s let out - Held that:- ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received, it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace - While there can be no quarrel with the proposition that “occupation” can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers was that occupation of one’s own property, in the course of business, and for the purpose of business, i.e. an active use of the property, (instead of mere passive possession) qualifies as “own” occupation for business purpose. Thus, this question is answered in favour of the revenue. Deduction u/s 32 AB on interest income - Held that:- As decided in Apollo Tyres Ltd v CIT [2002 (5) TMI 5 - SUPREME COURT] if a business qualifies for the benefit granted under Section 32AB, if an assessee carries on business covered by that provision, and has utilized any amount during the previous year for the purchase of new plant or machinery then it is entitled to a set off of a sum equal to 20 per cent of the profit of such eligible business accordance with sub-section (5) of Section 32AB. As the eligibility or entitlement of the assessee to claim the benefit, was never questioned in the proceedings before the lower authorities the question is answered in favour of the assessee. Admissibility of 100% depreciation for plant - Held that:- In view of the settled position decided in JCIT Vs. Anatronics General Co. (P) Ltd. [2000 (8) TMI 38 - DELHI HIGH COURT] that each bottle constituted plant and was eligible for 100% depreciation the value of the shuttering in the present case would have been written off within a couple of years, this Court is of the view that the impugned order and finding of the ITAT do not call for any interference - in favour of the assessee

  ---

• 2012 (11) TMI 322
  Shares transferred for settlement of debt - difference between the fair market value and the cost of shares - Held that:- There was no transfer of shares but only a pledge of shares for the purposes of obtaining a loan. This short term loan of Rs. 50 crores was repaid on 24.12.2004 as is evident from audited accounts and annual reports for the assessment year 2004-05. Further the balance sheet filed for assessment year 2005-06 also shows that an amount of Rs. 50 crores shown under the head other loans as on 31/3/2004 was shown as nil as on 31/3/2005. In case it was not a loan there would have been no occasion to repay the amounts. Also the evidence in the form of transaction statement of Demat Account dated 24/12/2004 was produced at the time of hearing showing the return of 5-crores shares of Reliance Infocomm Limited to the respondent on 24/10/2012 i.e. the date when the loan was returned by the respondent to one Mukesh Ambani - in favour of assessee. Operating lease - Whether lease hold rights are acquired on periodic payments of lease rent received as advance rent - assessee has received IRC fees in one go - Held that:- The agreement dated 30/4/2003 entered into between Reliance Infocomm Ltd. and the respondent assessee concluded that Reliance Infocomm Ltd. in terms of the agreement had only a right to use the net work during the tenure of the 20 year agreement. Further that the agreement was liable to be terminated at the sole discretion of Reliance Infocomm Ltd. and consequently, the amount received as advance for 20 years lease period would have to be returned on such termination for the balance un-utilized period. Thus the respondent assessee had in terms of AS-19 & relying on J.K. Industries ltd. v. CIT [2007 (11) TMI 401 - SUPREME COURT OF INDIA] wherein theory of matching principles and application of accounting standards upheld, correctly spread the entire fee of Rs. 3037 crores over the period of 20 years and to pay tax thereon over the entire period - in favour of assessee.

  ---

• 2012 (11) TMI 321
  Guarantee commission - CIT(A) deleted the addition - Held that:- As the directors have been paid guarantee commission to compensate them from the risk assumed by them in standing as guarantor for the bank loan taken by the assessee-company. It was also the case of the assessee that the bank has necessitated on such personal guarantee and accordingly personal guarantee was needed, thus CIT(A)'s order of deleting addition is confirmed - in favour of assessee. Foreign travel expenditure - CIT(A) deleted the addition - Held that:- Finding on fact has been given by CIT(A) that the assessee has furnished the purpose of the foreign visits of the Directors and the tour report has been submitted on their return which was found to be for the purpose of the business of the assessee - Since in assessee’s own case on last two occasions the Respected Coordinate Benches have taken a consistent view in assessee’s favour, therefore in the light of the ratio laid down therein for this year the view taken by CIT(A) is to be affirmed - in favour of assessee. Disallowance of warranty obligation - Held that:- Since the Tribunal is taking a consistent view that the warrant obligation happened to be a business liability and made on scientific basis as per the recurrence of the after sales obligation the amount was debited to P&L Account, therefore in the like manner for the year under consideration, we hereby consider it proper to affirm the factual as also legal finding of CIT(A) - in favour of assessee. Claim of bad debts - Disallowance of interest on inter-corporate deposits - CIT(A) allowed the claim - Held that:- The assessee has yet to place on record that the borrowers have gone under liquidation, that even after the best efforts of the assessee the impugned amount could not be recovered from them and that the Civil Suites filed have not resulted into any gain, then only the assessee can be allowed such claim - restore this issue back to the stage of the AO, so that the assessee can place on record the fate of the Court proceedings to establish the genuineness of the failure on the part of the borrowers - in favour of Revenue for statistical purposes.

  ---

• 2012 (11) TMI 320
  Deduction u/s.80(IA)(4) - Held that:- As assessee's case is arguable & he had paid substantial tax (more than 80%) against the demand created by the A.O. the demand is stayed till the disposal of appeal which are coming up for hearing of 17.10.2012 in all the assessment years i.e. A.Y. 07-08, 08-09 & 09-10 or for the six month from the order of stay whichever is earlier. The assessee should not seek adjournment of hearing without compelling and justifiable reason and if a paper book is required to be filed by the assessee, the same should be filed well in advance & if these conditions are not fulfilled by the assessee, then, the stay will get vacated automatically - in favour of assessee as directed.

  ---

• 2012 (11) TMI 319
  Carting expenses - Non deduction of TDS - Addition u/s 40(a) (ia) - Held that:- As decided in CIT Vs Poompuhar Shipping Corporation Ltd. [2006 (1) TMI 60 - MADRAS HIGH COURT] that the payment of hire charges for taking temporary possession of the ships by the assessee-company would not fall within the provision of section 194C and hence no tax was required to be deducted.The hiring of ships for the purpose of using them in the assessee’s business did not amount to a contract for carrying out any work as contemplated in section 194C The assessee in the present case was hiring trucks for the purpose of his business of providing transportation services to his client M/s. HPCL. Section 194 C makes it clear that TDS is deductible only in the case when the recipient contractors renders the work of carriage of goods or passengers by any mode of transport other than railways. In this case it is evident that the assessee had only hired out the vehicles and rendered the services of transportation of goods i.e. LPG cylinders by itself at its own risk and reward. The contract executed between the appellant and M/s. HPCL contained specifically provides that the appellant shall not sub-let any work entrusted to him & the appellant is assigned the job of transportation and it had performed the job of transportation by itself - The Revenue has not brought out any material to establish that the owner of the vehicles have performed any work other than hiring their vehicles to the appellant - in favour of assessee.

  ---

• 2012 (11) TMI 318
  Penalty u/s 271(1)(c) - disallowance of depreciation - Held that:- The genuineness of the purchase of the machinery has been established by the assessee as sale consideration of the machinery was paid through cheques as evident from the bank statements. In the subsequent years the chart of the depreciation submitted by assessee was stated to be allowed by the Revenue Department - it was not a false claim but an inadvertence claim of depreciation for the year under consideration - as decided in Price Waterhouse Coopers Pvt.Ltd. v/s CIT Kolkata - I [2012 (9) TMI 775 - SUPREME COURT] absence of due care does not lead to assessee is guilty of furnishing inaccurate particulars or concealment of income - in favour of assessee. Addition u/s.68 - Held that:- If the impugned amount was received in advance and later on it was returned, then the said party ought to be known to the assessee and thus the assessee was under obligation to furnish the identity, creditworthiness and the genuineness of the transaction which was not fulfilled by assessee so it is difficult to hold that the transactions was genuine. Primary onus as prescribed u/s.68 has not been discharged by the assessee, thus it is not the case that merely on presumption an addition has been made and penalty proceedings were invoked - against assessee.

  ---

• 2012 (11) TMI 317
  Deduction u/s.80-IB - CIT(A) allowed the claim - Held that:- The A.O. has allowed deduction u/s 80-IB to the assessee in previous assessment years as per the order passed by him in that year u/s 143(3) & the A.O. cannot withdraw relief to a new industrial undertaking which has already been granted without disturbing such relief for earlier years - CIT(A) allowed the claim as revenue could not show that such relief was not allowed by the A.O. in earlier years or to show that such relief although allowed but was subsequently withdrawn. Fact was very much available in the record of the department that the assessee has established a new unit - in favour of assessee.

  ---

• 2012 (11) TMI 316
  Unaccounted and unexplained cash - search - CIT(A) deleted the addition - Held that:- A.O. has only relied on the statement of Shri Damodarbhai Patel to make the addition in the hands of the assessee. The A.O. has not brought any material on record to prove that cash seized belonged to assessee. Shri Damodarbhai has in the statement stated that the cash belonged to Vanita Park project & on the basis of assessment records produced it is seen that Vanita Park project is developed by Mahavir Developers whose proprietor is Shri Mohanbhai Patel. Further the income from Vanita Park project is assessed in the hands of Shri Mohanbhai Patel. The D.R. could not controvert these facts or could controvert the findings of CIT (A) by bringing any material to the contrary on record - in favour of assessee.

  ---

• 2012 (11) TMI 315
  Delay in filing of appeal - Held that:- Application of the assessee for the condonation of delay of 771 days states no reasonable cause for condonation of such a long delay of 771 days. Dismiss this appeal of the assessee following the case of CIT Versus Multiplan India (Private) Limited [1991 (5) TMI 120 - ITAT DELHI-D] wherein held that the Tribunal has not passed any order of dismissal of appeal on the basis of Rule 24 of the Tribunal Rules which presupposes admission of appeal under section 253 besides there was no question of hearing the respondent since none could be notified because of proper particulars not furnished so far - against assessee.

  ---

• 2012 (11) TMI 314
  Quantum of Deduction u/s 80-I – revision u/s 263 - computation of gross total income - Held that:- Gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. It is true that under Section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because Sub-Section 6 contemplates that only the profits shall be taken into account as if it was the only source of income. However, Section 80A(2) and Section 80B (5) are declaratory in nature. They apply to all the Sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the non-obstante clause in Section 80-I(6) cannot restrict the operation of Sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier Section 80-I(6) deals with actual computation of deduction whereas Section 80- I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and therefore while interpreting Section 80-I(1), which also refers to gross total income as defined in Section 80B(5) - loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was 'Nil' the assessee was not entitled to claim deduction under Chapter VI-A which includes Section 80-I also – Order of the first appellate authority directing the AO to set off loss from windmill business against other heads of income of the assessee is justified and no interference is called for - In the result, the assessee’s appeal is allowed by setting aside the 263 order.

  ---

• 2012 (11) TMI 313
  Unaccounted Cash – Held that:- There was no necessity for AO to invoke the presumption provided u/s 132(4A) of the Act in the hands of Shri Anup Kumar Shah. Further there is no compulsion under the Act that the AO should necessarily invoke the provisions of sec.132(4A) of the Act. Assessee has failed to furnish any credible explanation with regard to the unaccounted cash - Order of CIT(A) on this issue is set aside. Revision u/s 263 - erroneous decision - held that:- Ld CIT(A) has listed out the search materials, which have not been examined by the AO and which would have implication to the undisclosed income determined in the hands of the assessee. Thus, it is seen that the AO has failed to apply his mind on those materials and on account of that, the assessment order is rendered erroneous. Since the said issues involve huge tax effect, the assessment order is also rendered as prejudicial to the interests of the revenue. Whether CIT(A) entertain a appeal against an assessment order passed on the directions of the Administrative commissioner - held that:- it was not shown to us that the Ld CIT(A) has considered issues which have attained finality in the earlier proceeding. - the assessment order passed u/s 143(3) r.w.s. 263 can very well be appealed before the Ld CIT(A) in respect of the issues which have not already been decided by the appellate authority. - Decided in favor of revenue. Unaccounted Payments - rebuttable presumption u/s 132(4A) - Held that:- Considering the quantum of work undertaken by the company and the position of the officials, it would be reasonable, AO was justified in making the addition of Rs.30,25,850/-. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the addition made by the AO. Illegal payments - held that:- payments made to the officials of NHAI amounting to Rs.57.50 lakhs are illegal - no infirmity in the decision of CIT(A) in confirming the addition of Rs.57.50 lakhs. - it is seen that the assessee did not explain the entries found in the incriminating documents except stating that they have not made such payments. In this kind of situation the presumption provided u/s 132(4A) comes into operation and we notice that the assessee has failed to rebut the presumption. Payments not accounted in Books - Although assessee reiterated its claim that the transactions pertaining to Rs.12.50 lakhs belong to the Joint Venture concern, yet no material was produced to contradict the findings given by CIT(A) - no reason to interfere with the decision reached by CIT(A) on this issue - In the result,appeal of the revenue is allowed and Both the appeals of the assessee are dismissed.

  ---

• 2012 (11) TMI 312
  Deletion of Addition in arm's length price made by AO – Held that:- Arm's length price as determined by the TPO by applying the profit margin rate of 3.13% as compared to assessee's profit margin of 1.01%, then also admittedly it falls within the +/- range of 5% as per second proviso to section 92C(2), which provides that if the variation between the arm's length price so determined and price at which the international transaction has actually been undertaken does not exceed five per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price - department's grounds of appeal are rejected - In the result, appeal filed by the department is dismissed.

  ---

• 2012 (11) TMI 311
  Unexplained Investment u/s 68 – Share Application Money – Following the decision of court in case of [CIT vs. Oasis Hospitalities Pvt. Ltd., and Others 2011 (1) TMI 194 - DELHI HIGH COURT ] Furnishing of an affidavit by itself is not necessary proof to conclude that the transaction is genuine. It is well settled principle of law that to prove a credit entry in the books the assessee to establish three ingredients which (1) identity of investors (2) their creditworthiness and (3) genuineness of transaction - initial burden lies on the assessee to prove the genuineness of the transaction. In the present case, there is doubt regarding the identity of the share applicants and no material has been brought on record like balance-sheet or bank statements of the share applicants to show that they had capability to make investments in the shares. In the aforesaid factual background, sine the revenue authorities have not properly examined these aspects - restore the matter back to the AO who shall conduct such enquiry to find out as to whether the three companies which have invested in shares of the assessee really existed or not. If on enquiry, it is found that the companies did exist when they made investment and investment made by them are genuine,then no addition can be made u/s 68 of the Act. The AO may exercise his power to make enquiries with the concerned Registrar of companies to find out the real status of share applicants and after gathering all information, the AO shall complete the assessment after affording a reasonable opportunity of being heard to the assessee - In the result, the appeal filed by the Revenue is treated as allowed for statistical purpose.

  ---

• 2012 (11) TMI 310
  Re-opening of Assessment - Held that:- Reopening is merely change of opinion of the Assessing Officer and he should have tangible material for forming an opinion that there has been an escapement of income.`Reason to believe’ will not include mere change of opinion. Respectfully following the ratio laid down by the Hon’ble Delhi High Court in the case of [CIT vs Kelvinator India Ltd. 2002 (4) TMI 37 - DELHI HIGH COURT ], order of the CIT(A) is upheld in treating the reassessment made by the AO u/s 148 is null and void. Further,an audit opinion in regard to the application or interpretation of law cannot be treated as information for reopening the assessment u/s 147(b) of the Act, as held by the Hon’ble Supreme Court in the case of [CIT Vs. Lucas TVS Ltd., 2000(12) TMI 102 - SUPREME COURT] held that information with the meaning of section 147(b) includes information as to true and correct state of law as well which should come from a competent legislature or judicial order or judicial authority - grounds raised by the revenue in this regard are dismissed - In the result, appeal of the revenue is dismissed. Deduction u/s 80HHC – Assessee had adopted incorrect adjusted export turnover and adjusted total turnover and also the eligible profits for working out deduction u/s 80HHC. The assessee adopted eligible profits without reducing 90% of other income admitted as ‘conversion charges’ and ‘technical consultancy charges’ amounting to Rs. 21,87,459/- as required under Explanation (baa) to section 80HHC. Thus resulted in excess claim of deduction u/s 80HHC – Held that:- There is no escapement of Income - Reopening is merely change of opinion of the Ao - decided in favour of assessee.

  ---

• 2012 (11) TMI 309
  Short term capital gain vs Business Income - Held that:- Assessee had actually maintained distinct portfolios no assistance of the past results other then the results of the final accounts. Since factual aspects do indicate towards the assessee being an investor consistency aspect has also to be ascertained as well. Moreover, since the assessee is having income from day trading, speculation, derivatives, the correlation of transactions viz a viz the investments shown, has to be examined to verify the contentions - matter remitted back to the AO, who shall reexamine the modus operandi and the conduct of the assessee, in line with the preceding years and also apply the tests as prescribed by the Board, in Instruction No. 1827 dated 31-08-1989 (filed in the APB) to come to the correct conclusion – Order of the CIT(A) is set aside and direct the AO to re-examine the issue afresh, after giving reasonable and adequate opportunity to the assessee - appeal is allowed for statistical purposes. Disallowance u/s 14A - Held that:- As the issue whether Income is Business Income - Application of sec.14A has to be decided accordingly - Order of the CIT(A) is set aside and direct the AO to re-examine the issue afresh, after giving reasonable and adequate opportunity to the assessee and accordingly applicability - appeal is allowed for statistical purposes.

  ---

• 2012 (11) TMI 308
  Disallowance made u/s 14A of the Income-tax Act – alleged that assessee reflected tax free dividend income and incurred financial charges, it did not offer any disallowance u/s 14A of the Act - applicability of Rule 8D – Held that:- Assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment - whether or not borrowed funds had indeed been utilised in investment in shares for earning exempt income - appeal is allowed but partly for statistical purposes

  ---

• 2012 (11) TMI 307
  Taxability – offshore supply - foreign company was engaged in the execution of various projects in India - company has executed five contracts - For the purpose of executing the five contracts mentioned above, LGCL had set up a project office in India - It was also claimed by the assessee during the assessment proceedings that the “Power Grid Corporation of India Limited (PGCIL) imported certain materials from LGCL, Korea - PGCIL deducted tax at source while making payments to LGCL – Held that:- There were no operation qua the agreement for supply of equipment, which was carried out in India, and therefore, no income could be deemed to have accrued or arisen in India whether directly or indirectly or through any business connection in India - credit of TDS deducted allowed - in favour of the assessee

  ---

• 2012 (11) TMI 293
  Denial of registration applied for u/s 12A - DIT (Exemption) arrived at a view that the activities of the assessee trust were not in conformity with the terms of object of the trust being educational, medical, advancement of music, art, drama, dance and literatures etc - Trust formed on 19/12/2011, applied for grant of registration 25/01/2012 - Held that:- Aforesaid shows that the Trust is at infant stage and the Trust needs to be registered under the provisions of the Act in order to derive benefit under it. legal position is that activities of the trust have to be considered if such registration is sought much later than the formation of the trust or after expiry of the earlier registration granted in favour of the trust. Therefore in a case of this nature where the trust has approached the authority for registration u/s 12A within a short span of its formation, the above-mentioned criteria namely, the objects of the trust for which it was formed will have to be examined to be satisfied about its genuineness and activities of the trust cannot be the criterion, since it is yet to commence its activities. In view of aforesaid, and considering the objects of the trust, DIT(Exemption) is directed to grant registration on its application u/s 12A and 12 AA - Decided in favor of assessee

  ---

• 2012 (11) TMI 288
  Carbon Credits (Certified Emission Reductions) - deduction u/s. 80IA disallowed - Held that:- Carbon credit is in the nature of "an entitlement" received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to "world concern". The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits cannot be considered as a bi-product. It is a credit given to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who have surplus carbon credits can sell them to other assessees to have capped emission commitment not as a result or incidence of one's business, as there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income. Relying CIT v. Maheshwari Devi Jute Mills Ltd. [1965 (4) TMI 10 - SUPREME COURT] in the present case the assessee transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. As per guidance note on accounting for Self-generated Certified Emission Reductions (CERs) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 CERs are intangible assets those should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognised as inventories, the generating assessee should apply AS-9 to recognise revenue in respect of sale of CERs - thus sale of carbon credits is to be considered as capital receipt - in favour of assessee.

  ---

• 2012 (11) TMI 287
  Reassessment notice - Jurisdiction of ACIT 10(1) Mumbai to request the CIT-10, Mumbai to pass a corrigendum order - Held that:- Once the jurisdiction to assess the petitioner was transferred by the CIT-10 Mumbai from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune by order dated 22.11.2011 it was totally improper on the part of ACIT-10(1) Mumbai to request the CIT-10, Mumbai to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making such a request on the part of ACIT-10(1) Mumbai to the CIT-10 Mumbai was in gross abuse of the process of law. If there was any time barring issue, the ACIT-10(1) Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit ACIT-10(1) Mumbai to indulge in circumventing the provisions of law, thus strongly condemn the conduct of ACIT-10(1) Mumbai in that behalf. Instead of bringing to book the persons who circumvent the provisions of law, the ACIT-10(1) Mumbai has himself indulged in circumventing the provisions of law which is totally disgraceful - set aside the impugned notice dated 30.03.2012 issued by the ACIT-10(1) Mumbai based on the corrigendum order dated 27.03.2012 passed allegedly by the CIT-10 Mumbai at the behest of ACIT-10(1) Mumbai and in gross abuse of the process of law - in favour of assessee

  ---

• 2012 (11) TMI 286
  Interest on advances - disallowance - Held that:- As own funds of the assessee as on 31.03.2005 was of Rs.254.25 lacs as per the audited balance sheet submitted and hence, the entire such advance were given out of interest free own funds and, therefore, disallowance of interest in respect of these three interest free advances is not justified - in favour of assessee. Incremental salary - disallowance being 50% - Held that:- A clear finding is given by CIT(A) that the assessee has not discharged its onus as no justifiable reason could be explained on such a sharp rise of almost 75% in salary hence, 50% of increase in salary disallowed by the A.O. is justified - against assessee. Disallowance of depreciation - Held that:- Assessee has not furnished the purchase bills in respect of the assets on which depreciation is claimed by it. As the assessee could not establish both of these aspects that it owned the asset in question which was used by it for its business purpose disallowance of depreciation is warranted - against Assessee.

  ---

• 2012 (11) TMI 285
  Reopening the assessment - disallowance on account of unabsorbed depreciation - Held that:- There was no escapement of any income because unabsorbed depreciation allowance by operation of the provisions of section 32(2), as it stood prior to 1.4.1997, was deemed to be part of the allowance for the previous year relevant to A.Y. 1997-98 and for all intends and purposes the unabsorbed depreciation for A.Ys.1993-94 to 1996-97 was deemed to be the depreciation allowances for A.Y. 1997-98. Subsequently sub-section(2) of section 32 was substituted w.e.f.1.4.97, whereby the earlier years unabsorbed depreciation deemed to be the part of the depreciation of the following previous year was no longer continued and further that the unabsorbed depreciation was granted to be carried forward for the period of eight years, thus it can be said that AO had overlooked the fact that in the line of the operation of section 32(2) as it stood to prior to 1.4.1997, the unabsorbed depreciation of A.Ys.1993-94 to 1996-97 already formed part of the depreciation allowance for the previous year relevant to A.Y. 1997-98. Thus, it was concluded that the assumption of the jurisdiction by the AO u/s.147 was invalid - This although the reopening was made within four years from the end of the assessment year, but still that was nothing but simplistic change of opinion because in the first round the original assessment was made u/s.143(3) that too after duly considering the claim of depreciation as per the statement of income furnished by the assessee, hence on those very facts there did not exist any reason to believe for escapement of assessment - in favour of assessee. Claim of depreciation - Held that:- As decided in Karnataka Co-operative Milk Producers Federation Ltd. Versus Deputy Commissioner of Income-tax (Asst.), Special Range-5, Bangalore [2006 (5) TMI 423 - ITAT BANGALORE] that prior to the amendment introduced during 1996-97, it was permissible to carry forward the unabsorbed depreciation and from 1993-94 to 1996-97, the unabsorbed depreciation has been carried forward. The amendment introduced limiting the time for carrying forward for a period of eight years has to be reckoned not from 1993-94 but from 1996-97 and the same was carried forward and by the year 2006-07 since again there is an amendment introduced during 2002 making this period of eight years as unlimited, from 2002 onwards even till 2006-07, it is permissible to carry forward the unabsorbed depreciation in view of the change in position of law - thus assessee is eligible for the claim of depreciation as per law for the year under consideration - in favour of assessee. Non deduction of TDS - Held that:- The provisions of section 40(a)(ia) were wrongly invoked under the facts and circumstances of the case where it was proved that the payment was merely reimbursement of the petty expenses - in favour of assessee. Exclusion of excise duty in closing stock valuation - Held that:- As decided in CIT Versus PARRY CONFECTIONARY LTD [2007 (6) TMI 161 - MADRAS HIGH COURT] the excise duty being not depicted to Profit & Loss account, therefore not assessable in the hands of the assessee - in favour of assessee.

  ---

• 2012 (11) TMI 284
  Revisionary powers used by CIT(A) - order of the A.O. was erroneous - non inclusion of unutilized MODVAT and VAT credit in valuing closing stock of Raw material and work in progress - Held that:- Assessee had made written submissions and submitted the details before A.O. whereby it was contended that the assessee has been consistently following exclusive method of accounting for sales, purchase and closing stock. It also demonstrated through the annexure of tax audit report certified by Chartered Accountant that whichever method of accounting is adopted (inclusive or exclusive method) by the assessee, there is no impact on the profit of the year. Similarly assessee also submitted before A.O. & CIT the method of accounting employed consistently followed by it for accounting of Excise duty and CENVAT and by following either of the method there is no impact on profit and loss account. The A.O. in the instant case had examined the issue of stock. The observation of the CIT that the A.O. overlooked the provisions of 145A also does not appear to be justified for the reason that the A.O. had examined the same. The order of assessment dated 4-12-2009, no doubt does not contain a detailed discussion on this aspect, but that however would not render the order as erroneous as decided in Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY HIGH COURT]. Thus as the A.O. had made necessary inquiries and the assessee had provided an explanation in that regard.Thus, it can be said the A.O. on being satisfied did not make any addition and disallowance relying on CIT vs. Indo Nippon Chemicals Co.[2003 (1) TMI 8 - SUPREME COURT] wherein held that hat no addition on account of modvat credit can be made - Therefore the order of the A.O. cannot be considered either to be erroneous or prejudicial to the interest of the Revenue - in favour of assessee.

  ---

• 2012 (11) TMI 283
  Deduction u/s 80HHC – Revenue contesting direction of CIT(A) to A.O to re-work the deduction including the export proceeds realized up to the period 31st July, 2001 – AY 2000-01 - Rule 46A – Held that:- Nothing could be shown by the Revenue as to what was the additional evidence admitted by CIT(A) and considered by him to decide the issue in dispute. We find that this decision of CIT(A) is based on the extension granted by RBI for realization of export proceeds up to 31.07.2001, hence the same has to be considered for the purpose of computation of deduction allowable to the assessee u/s 80HHC. Therefore, there is no violation of Rule 46A - Decided against Revenue Dis-allowance of long term capital loss - sale of shares originally acquired and held by amalgamating company - appellant became owner of the shares on amalgamation of that company with the appellant – dis-allowance on ground that transactions of capital asset in amalgamation of companies are not regarded as transfer as per sec.47(vi) – Held that:- Section 47(vi) is in respect of transfer of asset by amalgamating company to amalgamated company and on such transfer, there cannot be any capital gain or capital loss because there is no transfer as per Section 47(vi). But in the present case, the loss was claimed by the assessee on subsequent sale by the amalgamated company, and shares received by it from the amalgamating company. The transaction of sale of shares is found to be genuine, therefore, the dis-allowance of long term capital loss is held to be not proper and the same is deleted. Dis-allowance of commission expenses as not genuine – Held that:- It is noted by CIT(A) that there is an agreement regarding payment of commission to this party and the sale of the assessee has increased considerably. Also, payment of commission has been approved by the Board of Directors and the agent has shown the commission income in its return of income. Commission had been paid on the basis of orders procured as per clause (3)(d) of the agreement. In view of aforesaid, CIT(A) rightly deleted the addition Addition on account of unaccounted investment – difference in purchase figure - Held that:- CIT(A) decided this issue on the basis of credit note for rate difference. Since relevant credit notes were never produced before the A.O., hence we restore the matter back to the file of the A.O. for fresh decision. Addition u/s 41(1) made on account of writing back of loan liability – Held that:- Loan has been taken by the assessee for the purpose of business but this does not mean that taking and giving loan is the business of the assessee and hence, it cannot be said that Section 41(1) can be attracted for remission in respect of loan liability when admittedly, no deduction was allowed to the assessee in respect of such loan liability in the present year or in any earlier year – Decided against Revenue Dis-allowance of interest expenses – Revenue contended diversion of interest bearing funds to sister concerns, wherefrom no interest was received – Held that:- CI(A) observed that as per balance sheet, there are no bank loans and there is a bank overdraft only which has been stated to have been invested in trading business of the appellant and it has been stated that on unsecured loans no interest has been paid . The interest expenses pertain to trading business of the appellant on account of various services rendered by the bank for realization of export proceeds. Considering the said facts the dis-allowance of interest made by the A.O. is rightly deleted by CIT(A). Addition on account of interest on Fixed Deposit – no interest income shown by assessee - Held that:- It is found that the appellant has already offered interest income of Rs.1.03 crores as interest on fixed deposit and out of the said interest income the amount of Rs.66.77 lakhs has not been received so the same has been shown as accrued interest in the Schedule-5 in the balance sheet. As the said income has been offered, no further addition is required to be made and therefore, the addition is deleted. Dis-allowance of trading loss – transaction with related party – non-maintenance of office or warehousing facilities nor paying any rent - Held that:- Merely because the assessee has incurred loss in the present year, it cannot be said that such loss is bogus merely because the transaction of purchase and sales are with related parties without bringing any adverse material on record to show that either the purchase prices are inflated or the sales prices are deflated or that the transaction is bogus. On similar transaction in the preceding year huge profit was declared by the assessee and the allegation of the A.O. and the Ld. D.R. that the assessee is not maintaining any office and warehousing facility and absence of evidence of movement of goods are not conclusive because the situations are the same in the preceding year also in which assessee has declared huge profits in similar transactions with similarly related parties. Books are not rejected by the A.O. and no defect has been pointed out by the A.O. in purchase price or sales price of the goods traded by the assessee, hence, dis-allowance stands deleted Dis-allowance u/s 14A – Held that:- A.O. has made dis-allowance in respect of interest expenditure and other expenses. Since no interest expenditure is attributable for these investments out of total interest expenditure, dis-allowance should not include any amount in respect of interest expenditure and hence, the dis-allowance can be of balance administrative expenditure

  ---

• 2012 (11) TMI 282
  Addition of Rs 25 lacs made on account of on-money paid for purchase of land on basis of seized paper - AY 2001-02 - Held that:- Addition was deleted by CIT(A) on the basis that on the basis of the seized paper, an amount of Rs.60 lacs was taxed in the A.Y.2000-2001 and on the same paper, the investment of Rs.25 lacs was mentioned. No reason found to interfere with the order of the CIT(A) on this issue, because admittedly, when the income has been taxed, no separate addition can be made in respect of application of the same income in making investment, unless some material is brought on record to show that income taxed in the earlier year was utilised somewhere else and the investment in question is not by way of utilisation of that income - Decided against Revenue Addition made on account of income from house property - assessee engaged in the business of construction activity - shops constructed in complex held as stock-in-trade - property lying vacant - Held that:- Assessee is in the business of construction, it cannot be said that the shops in question were not held by the assessee as stock-in-trade without bringing any adverse material on record. CIT(A) deleted the addition placing reliance on decision in case of Neha Builders Pvt Ltd (2006 (8) TMI 105 - GUJARAT HIGH COURT). Nothing could be brought on record by Revenue that aforesaid judgment is not applicable to the present case Addition on account of low household withdrawals - Held that:- There is no basis of estimating household expenditure of the present year of Rs.2,00,000/-. If the AO is depending on the statement of the wife of the assessee, then annual expenditure comes to only Rs.1.44 lakhs, even if it is calculated at the rate of Rs.12,000/- per month. The assessee has declared household expenses at Rs.1.54 lakhs and hence, no addition on this count is called for. Partial addition for alleged income from house property - Held that:- Annual value of this property was estimated by the AO at Rs.5,000/- per month. The claim of the assessee is that for the purpose of computing the annual value of property, which was not actually let out, the municipal valuation should be the basis of determining the annual value. AO directed to compute the municipal value of this property as annual value and then compute the income assessable under the head “income from house property”. Addition for alleged on money paid for purchase of land - assessee contended that on the basis of the seized paper, an amount of Rs.60 lacs was taxed in the A.Y.2000-2001 and investments were out of income declared by the assessee - Held that:- Claim of the assessee should be accepted in the interest of justice because three noting on the seized paper of Rs.7 lakhs, Rs.10.25 lakhs and Rs.9.7 lakhs are not in the nature of long term investment, and therefore, it appears to be acceptable that atleast Rs.15 lakhs were also received back out of this total amount of Rs.26.42 lakhs. We, therefore, delete this addition on the basis that this investment is also out of income declared by the assessee of Rs.60.20 lakhs in A.Y.2000-2001. Dis-allowance of depreciation of motor car on ground that assessee did not debit expenses on running and maintenance of vehicle in the profit and loss account - Held that:- CIT(A) deleted the addition on finding that an amount of Rs.1,779/- has been debited by the assessee as vehicle expenditure in the profit & loss account. Finding of the CIT(A) could not be controverted by the Revenue - Decided against Revenue

  ---

• 2012 (11) TMI 281
  Addition on account of 'sundry creditors' and 'advance from customers' as deemed income u/s. 41(1) - Held that:- There is no dispute on this aspect that the total amount was shown as liability in the balance sheet and there is no credit in current year. In the light of these facts, we find that the provisions of Section 41(1) are not applicable because nothing has been brought on record to show that the liability in question has ceased to exist. Addition is therefore deleted - Decided in favor of assessee Addition u/s 68 treating cash sales as unexplained cash credits - cash sale is only on three dates in the year and not on other dates - Held that:- Claim of the assessee regarding cash sales under peculiar conditions that the assessee was discontinuing its business and therefore some sales were made in cash cannot be summarily rejected. It cannot be said that in the case of cash sales, the assessee is bound to keep record of the names and addresses of the buyers. Under these facts, ground of the assessee is allowed and addition made is deleted - Decided in favor of assessee

  ---

• 2012 (11) TMI 280
  Disallowance of Purchases – Held that:- Assessee has not maintained proper books of accounts for his business and his business expenditure are not supported by proper bills and vouchers. AO has considered the purchases as supported by documents and considered the entire sales for determining the income of the assessee. - Assessee submits that his books of accounts can be rejected and income may estimated at 6 to 8% on sales. It is well established fact that every business has associated with expenditure. The percentage of net profit may very from business to business. The real estate sector may have net profit percentage between 5% to 20%. Considering the assessee nature and size of business net profit of 15% would be appropriate and accordingly AO is directed to adopt 15% net profit on sales and compute the profit from business - this ground is allowed in favour of assessee. Disallowance of Expenses – Held that:- Every business has its own ratio of expenses associated with sales. As the assessee has not substantiated business expenditure even at the time of appellate proceedings, thereby restricted the disallowances of expenses to 30%. Sale of agricultural land - Agricultural incomes chargeable as Income from other sources – Held that:- Assessee has not furnished details such as proof of agricultural operations carried out, details of purchases and expenditure incurred for agricultural operations, details of sale bills etc. just because he hold agricultural land it cannot be assumed that he is earning agricultural income as declared by the assessee - considering the facts of the case, Assessing Officer is directed to disallow only Rs. 5 lakhs out of the agricultural income claimed by the assessee instead of Rs. 10 lakhs disallowed by the Assessing Officer - assessee’s appeal is partly allowed. Disallowance of Expenses – Held that:- Rs. 7,34,654/- being 20% of Rs. 18,36,635/- which has been disallowed by the Assessing Officer on the ground that not even a single voucher in respect of this expenditure was produced before the Assessing Officer. CIT(A) Hyderabad ought to have confirmed the disallowance of Rs. 18,36,635/- grounds raised by the department is not sustainable - In the result, assessee’s appeal is partly allowed and Revenue appeal is dismissed.

  ---

• 2012 (11) TMI 279
  Re-assessment - Omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts - Deduction u/s 80HHE - Following the decision of court in case of [Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT OF INDIA ] held that:- post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open - The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then,in the garb of re-opening the assessment, review would take place - to reopen an assessment tangible material should be there. In the present case, it is a fact that that the reassessment was completed on 03/07/2006 and subsequently, another notice u/s 148 was issued 17/03/2008. The reassessment was completed on 28/11/2008 denying the deduction u/s 80HHE to the assessee for the reason that she was not engaged in the business of export of software and that she was merely a software consultant providing services to the overseas client. In earlier reassessment completed on 03/07/2006, the Assessing Officer had thoroughly examined the material available on record and the agreement was available, hence, the subsequent reassessment was merely a change of opinion - Reassessment made by the Assessing Officer u/s 147 is without jurisdiction and, therefore, the same invalid - In the result, appeal of the assessee is allowed.

  ---

• 2012 (11) TMI 278
  Expenses in relation to exempt Income u/s 14A - Assessee submits that it had not incurred any direct expenditure. Assessee had earned dividend income, therefore, provision of sec. 14A is squarely applicable - CIT (A) is not correct in by directing the AO to recalculate the disallowance by following Rule 8D - AO is directed to compute the disallowance @ 2% of the exempt income instead of 04.6% which should meet the ends of justice. Business Income vs. Capital Gain – Following the decision of court in case of [C.I.T. Versus GOPAL PUROHIT 2010 (11) TMI 222 - SUPREME COURT OF INDIA] held that:- Delivery based transactions should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short term or, as the case may be, long term capital gain,depending upon the period of the holding. – Further, the principle of res -judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee - assessee’s investments leading to earning of profit in hand could not be termed as business income - issue is decided in assessee’s favour.

  ---

• 2012 (11) TMI 277
  Transaction charges paid to the stock exchanges - fees for technical services TDS u/s 194J – Following the decision of court in case of [Commissioner of Income-tax - 4(3) Versus Kotak Securities Ltd. 2011 (10) TMI 24 - BOMBAY HIGH COURT] Held that:- Transaction charges paid by the assessee to the stock exchange constitute 'fees for technical services' covered under Section 194J of the Act and, therefore, the assessee was liable to deduct tax at source while crediting the transaction charges to the account of the stock exchange. As regard quantification of interest, matter is restored back to the Assessing Officer, who will carry out necessary verification and quantify the interest. Thus, ground of appeal raised by the department stands allowed, subject to quantification of interest - In the result, appeal for assessment years 2005-06, 2006-07, 2007-08 & 2008-09 stands allowed subject to verification and quantification of interest by the Assessing Officer.

  ---

• 2012 (11) TMI 276
  Penalty u/s 271(1) (c) - Business Loss vs. Speculation Loss – Following the decision of court in case of [COMMISSIONER OF INCOME-TAX Versus AURIC INVESTMENT AND SECURITIES LTD. 2007 (7) TMI 276 - DELHI HIGH COURT] held that :- There is no mens rea to conceal the Income - Assessee had not furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against normal income – since assessee filed full details of the sale of shares, he did not conceal any particulars of income – mere treatment of the business loss as speculation loss by the Assessing Officer does not automatically warrant inference of concealment of income – penalty not imposable - Other grounds and the issues raised by the assessee is not being decided as the same has become academic in view of the findings given above - In the result, appeal filed by the assessee is treated as allowed.

  ---

• 2012 (11) TMI 275
  Bifurcation of Income as income from house property and PGBP – Rental vs.Service receipts - Following the decision of Supreme court in case of [Sultan Brothers vs CIT 1963 (12) TMI 4 - SUPREME COURT] Held that:- If a business premises or factory is let out by the assessee for a temporary period, then let out of the factory premises become essential for letting out the machinery and plant and furniture of the factory. Only in such an exceptional case, whether the primary purpose and intention was to let out the machinery, plant or furniture and not the building - the rent received for the building is to be assessed as income from other sources. None of the parties have disputed the correctness of the ratio of 60:40 for bifurcating the receipts for rental and service charges by the Commissioner of Income Tax (Appeals). Since the income has been bifurcated under two heads as income from house property and income from business and profession and accordingly only 40% of the expenses claimed by the assessee were allowed against the income from business. As such, expenditure on temporary shed was not allowable as per the order of the Commissioner of Income Tax(Appeals). The assessee is entitled for cost of temporary shed to be treated as cost of the project carried by the assessee.

  ---

• 2012 (11) TMI 274
  Interest on REC Bonds – Held that:- REC Bonds were purchased by the assessee firm for availing the exemption on capital gain in the earlier years, it is clear that the REC bonds were purchased by the assessee for specific purpose of availing the exemption on capital gain and not as business activity of the assessee. This, being the fact, then the interest earned on the REC bonds cannot partake the character of business income - interest on REC bonds to be treated as income from other sources. Writing back of Sundry Creditors u/s 41(1) – Held that:- Sundry Creditors are related to the business of the assessee and it is not the case of the revenue that the assessee has discontinue the business or close down the business activity - then the income on account of written back of the sundry creditors falls under the head ‘business and profession’ and not as ‘income from other sources’. Electricity expenditure – Held that:- In absence of documentary evidence, expenses were disallowed. Bank charges expenses and staff welfare expenses are allowable as business expenditure against the business income. Therefore, once the amount of sundry creditors is treated as business income consequently the claim of bank charges and staff welfare are allowed. Interest on capital of partners - Once the interest @ 12% p.a on partners capital is allowable, then to the extent of the amount which could not be set off against the business income would be setting off against the income from other heads and carry forward business loss as provided u/s 71 & 72 of the I T Act - accordingly, the Assessing Officer is directed to take appropriate steps in this regard - grounds are partly allowed. Bad Debts – Following the decision of court in case of [T. R. F. LTD. v. Commissioner of Income-tax, 2010 (2) TMI 211 - SUPREME COURT] Held that:- Once the assessee has written off the debt as unrecoverable debts, the same is allowable and there is no need to prove that the debts actually gone bad - In the interest of justice, this issue is set aside to the record of the Assessing Officer for the limited purposes to examine whether the assessee has complied with the conditions as enumerated u/s 36(2) being the amount has already offered as income and then decide the issue - In the result, appeal filed by the assessee is partly allowed.

  ---

• 2012 (11) TMI 273
  Application for renewal of exemption u/s 80G(5)(vi) of Income-tax Act - Indian Plumbing Association is a society registered under the Society Registration Act - association is registered u/s 12A of the Income Tax Act - Held that- As assessee’s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn - there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn - approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn - appeal filed by the assessee is allowed

  ---

• 2012 (11) TMI 272
  Disallowance u/s 14A – alleged that assessee made investment in mutual funds, yielding dividend income exempt u/s 10 of the Act - Assessing Officer has made the disallowance u/s 14A holding it is expenditure on financial charges directly related to the earning of exempt income from dividends – Held that:- There is nothing to suggest that any fresh investment was made in mutual funds or shares, yielding exempt income; rather investment in mutual funds came down to Rs.7,66,56,044/- as against Rs.12,00,45,300/- in the preceding year - Since no fresh investment has been made in the year under consideration, the ld. CIT(A), following the basis adopted in the preceding year - Revenue have not placed any evidence, controverting these findings of facts recorded by the ld. CIT(A) nor brought to our notice any material suggesting that borrowed funds were indeed utilized in making investment in the year under consideration, yielding tax free income Ad hoc disallowance - repair and maintenance expenses on plant, machinery and building and disallowance of 5% of miscellaneous and travel expenses – alleged that assessee did not produce a majority of the vouchers – assessee submitted that these were to be called from various units located in different places – Held that:- Matter remitted to the file of the AO with the directions to allow another opportunity to the assessee to produce all the bills and vouchers in relation to the aforesaid expenses on account of repairs to building and plant & machinery as also of miscellaneous and travel expenses and thereafter, pass appropriate orders in accordance with law - appeal is partly allowed for statistical purposes.

  ---

• 2012 (11) TMI 271
  Depreciation - ownership - held that:- Merely because the property has not been registered in the name of the assessee, disallowance of depreciation cannot be made. Application of section 14A - held that:- disallowance confirmed to that extent especially when the assessee admitted in his submissions dated 2.12.2010 before the ld. CIT(A) to the fact of part of such expenses have been incurred for earning exempt income and accordingly, provided its own working of such expenses relating to Head office at Ansal Plaza, Delhi Addition on account of valuation of closing stock of sugar – undervaluation – alleged that the assessee is following the method of valuation of stock of sugar on the basis of cost or market price whichever is lower – Held that:- the method of valuation adopted by the assessee was accepted.- in favour of the assessee Taxation of interest on Income Tax refund - assessee in the original return offered interest on Income Tax refund to tax, in the revised return filed, assessee reduced the aforesaid interest on the ground that the receipt was inchoate – Held that:- assessee filed revised computation to exclude interest on refund, which was originally granted by taking the loss on export as ‘Nil’ - there is not even a whisper regarding method of accounting regularly followed by the assessee in accounting interest on refund granted by the Department - matter remanded Interest u/s 234D of the Act – Held that:- CIT(A) did not pass a speaking order on the issue and merely observed that levy of interest u/s 234D is only consequential in nature. Since subsequently refund has been granted to the assessee - matter remanded back to the file of the ld. CIT with the directions to pass a speaking order

  ---

• 2012 (11) TMI 270
  Exemption u/s 80G of the Income-tax Act – Held that:- Even if any Income-tax Authority wants to withdraw approval, he shall issue a show cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so - in the present case no such show cause notice has been issued to the assessee - CIT without issuing any such notice has withdrawn approval - renewal of exemption u/s 80G(5)(vi) cannot be denied to the assessee, having valid approval - DIT(E) was not justified in denying renewal of approval u/s 80G(5)(vi) of the Act

  ---

• 2012 (11) TMI 269
  Disallowance of Business expenses – Held that:- AO has allowed the assessee’s similar claims of expenditure and no such disallowances have been made - expenditure has been disallowed on surmises and suspicion. In preceding and subsequent years similar expenditure has been allowed by AO in assessments u/s 143(3) on same business – disallowance deleted - in favour of assessee Regarding claim of finance charges on the leased property – Held that:- Fact about incurring of finance charges was mentioned in assessee’s books of accounts - Revised return filed by the assessee was not to make a fresh claim but was correcting its claim in respect of business income and house property income - earning of lease rent is not disputed which is taxed under the head income from house property. Similarly, the interest has been paid in relation to acquisition of lease property - unless there is material change in the facts and circumstances of a case, the principle of consistency should ordinarily be followed. No extra ordinary reason has been put forth by the department to deviate from the principle of consistency – in favor of assessee

  ---

• 2012 (11) TMI 268
  Disallowance – allege that assessee has paid interest @ 9% per annum on the loan taken by it whereas it has charged interest @ 6.5% to 7% from M/s. PT Minda Asian Automotive Ltd., Indonesia. i.e. joint venture company – alleged that loan was given by the assessee without any business exigencies - explanation given by the assessee that it will get return in future – Held that:- Assessee is a 50% shareholder of the joint venture exploring the business possibility and made the investment in the joint venture - loan was given in foreign currency to an Indonesian company. Assessing Officer ought to have compared the libor rates prevalent in the international market at that point of time - assessee has demonstrated that such rate was in between 4% to 5%. It has charged the rate in between 6.5% to 7%. Thus, in such situation, even on this count also, no disallowance can be made - disallowance deleted Disallowance under sec. 14A - CIT(Appeals) has observed that Rule 8D will not be applicable in the present case in view of the decision of Hon'ble Bombay High Court in the case of Godrej Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ) wherein it was held that Rule 8D has been brought on the statute book w.e.f. 24.3.2008 and it will be applicable from assessment year 2008-09 – Held that:- Disallowance has to be worked out after taking into consideration the surrounding circumstances. From the order of Learned CIT(Appeals), it does not reveal that Learned CIT(Appeals) has considered the relevant details before restricting the disallowance to Rs.1 lacs on an estimate basis - matter reamanded back to Assessing Officer for readjudication

  ---

• Customs

• 2012 (11) TMI 306
  Demand of duty - Held that:- As the appellants are yet to receive some documents and they have not been afforded the reasonable opportunity to defend themselves against the show-cause notice wherein the impugned demands have proposed to be recovered from them, therefore, there is a violation of principles of natural justice. Set aside the impugned order and remand back to the adjudicating authority to adjudicate afresh after giving the documents mentioned to the appellants keeping all issues open.

  ---

• 2012 (11) TMI 305
  Penalty u/s 114 – Following the decision of court in case of [Nichrome India Ltd. vs CCE 2009 (7) TMI 648 - CESTAT, MUMBAI] Held that:- There is no mens rea required for imposition of penalty under Section 114. Any action or omission on the part of any person which makes the goods liable to confiscation attracts penalty. Therefore, imposition of penalty on the exporter and the CHA for the omission on their part in exporting the goods before grant of LEO was in accordance with law. Value of goods under export is only about Rs. 8 lakhs, penalty reduced from Rs.1.00 lakh to Rs.40,000/- each on the exporter, M/s Electrotherm India Ltd. and on the CHA, M/s Sahil Freight Express Pvt. Ltd - order of the lower authority is upheld.

  ---

• 2012 (11) TMI 304
  Conviction - Criminal Appeal - accused was found in possession of foreign currencies – Held that:- accused being found in possession of the foreign currency is to the knowledge of the accused - sanctioning officer has stated that he has verified and has accepted the case of the DRI of P.W.3 finding in his investigation the accused in possession of foreign currency along with Indian currencies and Travellers cheques - revision petition dismissed

  ---

• 2012 (11) TMI 267
  Waiver of Penalty - Held that:- Applicant who was Superintendent of Central Excise gave a false certificate that the goods in question were stuffed in his presence. The evidence on record to show that containers were not at the given place at the time when the applicant gave certificate in respect of the goods export. The exports were made on the basis of certificate given by the applicant, and the exporters were entitled for the export benefit of approximately Rs. 4 Crores (Rupees four crores only). Therefore, prima facie it is not a case for total waiver - taking into consideration the facts and circumstances of the case and the financial hardship as pleaded, the applicant is directed to deposit Rs.50,000/- (Rupees fifty thousand only) within eight weeks. On deposit of the above mentioned amount, pre-deposit of the remaining amount of penalty is waived and recovery of the same is stayed during the pendency of the appeal.

  ---

• 2012 (11) TMI 266
  Demand of duty - forged DEPB scrip – Held that:- Unless it is proved that the respondent in this case, who obtained the licence on transfer/purchase basis from M/s. ATM International, had knowledge about licence having been obtained by M/s. ATM by fraud, the duty cannot be demanded from them, when at the time of import, the licence was a valid licence and had not been cancelled - there is neither allegation nor any evidence to show that the appellant had knowledge about the fraudulent mis-representation of M/s. ATM International in obtaining the DEPB scrips – demand set aside

  ---

• 2012 (11) TMI 265
  Refund – Held that:- Claimant have to submit the Chartered Accountant’s certificate certifying that the burden of SAD (4%) has not been passed on by the importer to customers to fulfil the requirement of unjust enrichment - certificate from a Chartered Accountant is sufficient - appellant is eligible for refund - application for modification of stay applications are allowed, pre-deposit is waived

  ---

• Corporate Laws

• 2012 (11) TMI 303
  Stay of Winding up proceedings – additional excavation done by the respondent - Respondent claimed that the company took benefit of excavation work hence, they were obliged to make payment for the additional quantity in accordance with the provisions of Section 73 of the Indian Contract Act. Claim in the arbitration would relate to the identical amount being value of the final bill that was sought to be passed by the appellant company. It is admitted position arbitration is still pending and awaiting its disposal. Held that:- In the instant case, the subject matter of the claim was itself pending and awaiting decision of the arbitrator. Pursuant to our order the appellant already secured the entire claim through bank guarantee. Respondent is permitted to withdraw the amount through encashment of bank guarantee by giving counter guarantee for the same. The Registrar would hold the same till disposal of the arbitration proceeding and would get it renewed from time to time - This is not a fit and proper case to wind up the appellant company - Order of admission of the winding up proceeding is set aside.

  ---

• 2012 (11) TMI 264
  Scheme of Arrangement - Held that:- The Official Liquidator in his report has stated that the authorized share capital of the Transferor Companies shall be merged and added to the authorized share capital of the Transferee Company. Also that no complaint has been received against the proposed Scheme from any person/party interested in the Scheme in any manner and that the affairs of the Transferor Company No. 1 & 2 do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest as per the second proviso of Section 394(1) of the Companies Act, 1956. MCA has filed his Affidavit that all the employees of the Transferor Companies shall become the employees of the Transferee Company without any break or interruption in their services upon sanctioning of the Scheme by the Court. The Scheme provide the Accounting Treatment in detail, which is in accordance with Accounting Standard issued by the Institute of Chartered Accountants of India. As the Transferor Company is a non-banking finance company and registered with the Reserve Bank of India it needs to inform Reserve Bank of India within 1(one) month from the date of order of court about amalgamation. No objection has been received to the, Scheme from any other party,thus sanction is hereby granted to the Scheme under Sections 391 and 394 of the Act with a direction to comply with all the statutory instructions as directed - this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law.

  ---

• Service Tax

• 2012 (11) TMI 330
  Delay in filing appeal - Held that:- The appellant has justified the delay which was unintentional and has occurred on account of circumstances beyond control of the applicant. Dismissal of appeal for non compliance of the stay order passed - Held that:- As appellant has deposited an amount of Rs. 2,20,000/- towards the dues as has been confirmed by the adjudicating authority it is a fit case to set-aside the impugned order and remit the matter back to the first appellate authority who has dismissed the appeal for non-compliance with the pre-deposit which has been paid - in favour of assessee by way or remand.

  ---

• 2012 (11) TMI 329
  CENVAT credit of Service tax paid on GTA service which was availed for clearance of their final products from the place of removal to customers’ premises - denial of benefit on the ground that the service used by them for such transportation of goods was not an ‘input service’ as defined under Rule 2(l) of the CENVAT Credit Rules, 2004 – Held that:- As per the amended definition of ‘input service’, any service used by the manufacturer of final product, whether directly or indirectly, in or in relation to the manufacture of final product and clearance of final product up to the place of removal is an ‘input service’ on which CENVAT credit could be claimed for a period after 31-3-2008 - service so used is not coming within the ambit of the definition of ‘input service’ for the period after 31-3-2008 - appellant is not entitled to claim CENVAT credit on the GTA service used by them for transportation of their final product from the place of removal for any period after 31-3-2008 - appellant cannot claim CENVAT credit for the period after 31-3-2008 and therefore Appeal No. E/361/2010 can only be partly allowed - amount of CENVAT credit admissible to the appellant has to be requantified and the interest payable by them will also have to be redetermined - matter remanded to the original authority

  ---

• 2012 (11) TMI 328
  Waiver of pre-deposit of duty - Commercial or Industrial activity - Held that laying of pipeline is an infrastructure facility and a civic amenity the state provides in public interest and not an activity of commerce or industry - No liability to pay tax arises - pre-deposit of entire amount of service tax, interest and penalty waived - in favour of appellant.

  ---

• 2012 (11) TMI 302
  Delay in appeal - refund of service tax as per notification No. 41/200-S.T. dated 6-10-2007 - excise v/s service tax - Held that:- Just because the refund claim has been filed before the Assistant Commissioner of Central Excise, it does not become the matter relating to Central Excise, thus unable to agree that sub-section (3) of Section 85 is only for service tax demands. Notification No. 41/2007-S.T. has been issued in exercise of powers vested under Section 93 of Finance Act, 1994 and therefore it cannot be said that notification is Centra1 Excise Notification. The refund has been claimed as per the provisions of this notification. The refund claim is related to service tax. Under these circumstances the provisions of Section 85 of Finance Act, 1994, would be applicable. And the Original Adjudicating Authority should have issued the preamble applicable to the service tax matters. Commissioner has calculated 90 days whereas Section 85 speaks of three months. Therefore, the calculation itself is made in an incorrect manner - the appeals are required to be remanded to the Commissioner (Appeals) to consider the matters afresh treating the matters as relating to Service Tax - in favour of assessee by way of remand.

  ---

• 2012 (11) TMI 291
  Erection, commissioning and installation services - demand confirmed by invoking the extended period of limitation - Held that:- The demand for the period 2005-06 to 2009-10 is confirmed by invoking the extended period by issuing a Show Cause Notice dated 18.10.2010. The audit was conducted in the year 2009 and the audit raised issue in respect of Goods Transport Service and the applicants paid tax as per the objection raised by the audit. In view of this prima facie the applicants have a strong case on the issue of time bar - in favour of assessee. Claim of Notification No. 12/2003-ST - Demand for the period 2009-10 is within the normal period of limitation and the benefit of the Notification No. 12/2003-ST is not available to applicants as he had not produced evidence by way of invoices under which the goods were sold to the service recipient - against assessee. Claim of Notification No. 1/2006-ST - The applicants availed credit of service tax in respect of the input service to the extent of about Rs. 30 lakhs, in these circumstances, the applicants have not made out a prima facie case for total waiver of the dues, thus the applicants are directed to deposit Rs One crore within eight weeks and report compliance on 03.12.2012.

  ---

• 2012 (11) TMI 290
  Whether value of SIM cards would form value of service rendered - Appellants are engaged in the business of providing mobile telephone services – Held that:- This is not a case where the extended period of time could have been invoked for demanding service tax not paid on value of SIM cards sold - period of demand in this case is Dec. 1997 to March 2000 when the law involved in the matter was still evolving - in 2003, the GOI issued exemption Notification No. 12/2003-S.T. for value of goods sold in the course of providing service - demands time-barred

  ---

• 2012 (11) TMI 289
  Cenvat credit - CHA services - Whether by quoting the service tax registration number in the payment challan, has the appellant committed a irreparable mistake or has the department not received the amount which they demanded – Held that:- Department has received the amount due from the appellant quoting of wrong registration number in the concerned challans is only a technical error which can be rectified at the department's end itself. Such demand by the department is perverse and unsustainable in law

  ---

• Central Excise

• 2012 (11) TMI 301
  Forfeiture of monthly payment facility - Cenvat Credit account partly for payment of duties- Held that:- In the order dated 15/10/2009 passed by this Tribunal there is no reference to forfeiture of the facility under Rule 8 (3A) ordered by the Assistant Commissioner, which implies that this issue was not challenged before the Tribunal and therefore, the forfeiture of monthly payment facility and cenvat credit availment attained finality. What was decided by this Tribunal was only the rate of interest liable to be paid and the amount of penalty imposed. Therefore, the appellant cannot agitate now the forfeiture of facility of paying duty using Cenvat Account under Rule 8 (3A). As during the subsequent period, when the provisions relating forfeiture was operational, the appellant could not have utilized the Cenvat Credit account for payment of duty at all. In that view, the appellant was wrong in utilizing the Cenvat credit amount for payment of duty and this amount has to be made good by the appellant by payment in cash/PLA. In as much as the appellant has not paid this amount and there is a delay in payment, the appellant is also liable to pay interest thereon under Section 11AB and the appellant has to pay interest on the defaulted amount in PLA account. As regards the penalty of Rs.2 lakhs imposed u/r 25 can be imposed when the goods are held liable to confiscation. As neither in the show-cause notice nor in the orders passed by the lower authority any finding that the goods are liable to confiscation and consequently without giving a positive finding in this regard, penalty could not have been imposed. Further maximum penalty imposable under the said rule is equal to the duty involved or Rs.2000/- whichever is higher. Therefore, imposition of penalty of Rs.2 lakhs which is far in excess of the duty involved is bad in law and cannot be sustained. Accordingly the same is set aside.

  ---

• 2012 (11) TMI 300
  CENVAT credit - manufacture of paper and paper products - input services - denial of claim on non availment of Notification No.17/2009 dated 07/07/2009 - Held that:- This exemption is subject to certain conditions that in a case where the exporter avails Cenvat credit, he cannot avail the benefit of exemption. There is no bar stipulated in the said notification that he cannot avail Cenvat credit and the availment of Cenvat credit will be entirely governed by the terms and conditions of the Cenvat credit rules. The fact that input or input services, on which duty/tax has been paid, have been received and used in the manufacture of excisable goods which have been exported is not in dispute. The said notification being a conditional exemption notification, it is for the manufacturer to decide whether to avail the said exemption or not. Thus there is no merit in the department contention the appellant should have availed the benefit of notification No.17/2009 - in favour of assessee.

  ---

• 2012 (11) TMI 299
  Cenvat credit – alleged that capital goods, on which appellant availed modvat credit, were exclusively used for manufacture of non dutiable intermediate product – Held that:- In case where capital goods/inputs were used in the process of manufacture of intermediate exempted products, which is further used in the manufacture of dutiable final products, cannot be denied

  ---

• 2012 (11) TMI 298
  Waiver of pre-deposit - classification of coconut oil packed and sold in the packages of the quantity of 200 ml and below – whether classifiable under Chapter 33 of the Central Excise Tariff as preparation for use on hair or under Chapter 15 of the Central Excise Tariff which covers edible oil – Held that:- After 28-2-2005 coconut oil packed and sold in the packing of the capacity upto 500 ml are classifiable under Chapter 15 of the Central Excise Tariff – pre-deposit waived – Against revenue

  ---

• 2012 (11) TMI 297
  Application for recall of Final Order – Held that:- Neither the appearance was caused nor adjournment request was made, but appearance could not be caused by the Advocate on the ground of personal difficulty - reason reflects lapse on the part of the Advocate, but in the interest of justice - it is fit case for recalling of order of the dismissal - ROA application is allowed

  ---

• 2012 (11) TMI 296
  Deduction of sales tax from the assessable value - alleged that they are contesting element of sales tax before Sales Tax Authority, and therefore, the demand for differential duty was confirmed – Held that:- Explanation to Section 4(4)(d)(ii) only refers to the amount of duty of excise payable on excisable goods - test to be applied is that of the "actual value of the duty payable" and, therefore, there is no merit in the argument advanced on behalf of the Assessee that the Explanation is restricted to the duty of excise. This principle can therefore, apply also to actual value of any other tax including TOT payable. Even without the explanation, the scheme of Section 4(4)(d)(ii) shows that in computing the assessable value, one has to go by the actual value of the duty payable, and therefore, only the reduced duty was deductible from the value of the goods - Appellants could not produce any evidence that their liability was at any stage converted into tax liability so far as the sales tax is concerned - appeal dismissed

  ---

• 2012 (11) TMI 295
  Penalty for contravention of the provisions of Notification No. 42/2001-C.E. issued under Rule 19 – alleged that Appellant clearing their export consignment under self-sealing and self-certification procedure must have intimated the Jurisdictional Central Excise Officers 24 hours in advance – Held that:- There is no provision that the intimation regarding clearance under self-sealing and self-certification procedure must be sent to the Jurisdictional Central Excise officers in advance - All which is required is that the designated official of the exporter company self-certify on all the copies of the ARE-1, that the goods has been sealed in their presence and send the original and duplicate copies of the ARE-1 to the Jurisdictional Superintendent within 24 hours of the removal of the goods - order imposing penalty on the appellant for contravention of the provisions of notification issued under Rule 19 is not sustainable - appeal is allowed.

  ---

• 2012 (11) TMI 294
  Extended period of limitation - Demand of duty along with interest and equivalent amount of penalty – shortage of input - appellants are engaged in the manufacture of seats and other interiors required for vehicles of M/s Mahindra & Mahindra Ltd - M/s. Mahindra & Mahindra Ltd. had given tooling development cost, engineering and designing charges to the appellant – alleged that these costs were not amortized by the appellant in the assessable value of the seats and other parts manufactured by them - he also received certain inputs free of cost and its value was not considered by the appellant for the purpose of determining assessable value - appellant had also written off modvatable inputs totally from the stock without reversing MODVAT/CENVAT credit pertaining to such inputs. Held that:- Extended period of time has been correctly invoked to demand ineligible cenvat credit taken in respect of inputs found short and which have been written off in the books of accounts – amount of tooling advance received by the appellant from M/s Mahindra & Mahindra is includible in the assessable value of the goods supplied to them in terms of Section 4(3)(d) of the Central Excise Act itself. Merely because, the demand has been confirmed under rule 11 read with section 4 (3) (d), it does not become infructuous. Value of inputs received free of cost by the appellant from M/s Mahindra & Mahindra is required to be included in the assessable value of goods supplied to them and the extended period for demand of differential duty has been rightly invoked. Extended period of time has been correctly invoked to demand ineligible cenvat credit taken in respect of inputs found short, which have been written off in the books of accounts.

  ---

• 2012 (11) TMI 263
  Cenvat Credit - Waiver of pre-deposit, interest thereof and penalties - Held that:- the current appellant is on the same footings, as other vendors and there cannot be any proceeding against the appellant for availing CENVAT Credit only on the ground that there was suppression of facts by Manufacturer while paying the amount through supplementary invoices - application for waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

  ---

• 2012 (11) TMI 262
  Whether delay in issue of review order u/s 35E(1) can be condoned by Tribunal - Review order is being issue by the Committee of Chief Commissioners against the order of Commissioner within 3 months from the date of communication of order – Held that:- Following the decision in case of M.M. Rubber Co. (1991 (9) TMI 71 - SUPREME COURT OF INDIA) that power u/s 35E is a power of superintendence conferred on a superior authority to ensure that the subordinate officers exercise their powers under the Act correctly and properly and when a time limit is prescribed for exercise of this power, the same has be exercised within time limit and an order passed beyond the period prescribed u/s 35 E(3) would be invalid and ineffective. Therefore order passed u/s 35(1) held to be invalid then no question of Condonation of delay against invalid and ineffective order. Appeal decides in favour of assessee.

  ---

• 2012 (11) TMI 261
  Waiver of pre-deposit of duty of Rs. 36,89,995/-, interest and penalty - Held that:- The applicants are manufacturing the goods having a solar module which can charge two lanterns at a time, benefit of notification no. 6/2002-CE dated 02.03.2002 can not be denied as it does not provide any condition that the exemption is available in respect of one lantern only - waived the requirement of pre-deposit for hearing the appeal and stay recovery thereof during pendency of the appeal.

  ---

• 2012 (11) TMI 260
  Demand along with interest and penalty - Confiscation of goods – alleged that shortage of transformers were lying in the factory which was not accounted anywhere – alleged that transformers which were not accounted for in the records, were intended for clearance without payment of duty – argument of assessee is that they account these goods only when the goods are fully ready for dispatch - Held that:- Three transformers produced on 14-12-2009 may not be lead to the conclusion that there was no shortage on the date of visit - argument of assessee is that they account these goods only when the goods are fully ready for dispatch - they are not able to locate three of the 15 transformers accounted just before despatch shows that the goods have been despatched without payment of duty - time consumed in counting the 537 transformers in semi-finished stage cannot be a reason for not being able to show the 15 transformers which were accounted as finished transformers - it is justified to demand excise duty on goods found short vis-a-vis accounted stock - appeal is allowed partially by setting aside the confiscation of goods

  ---

• 2012 (11) TMI 259
  assessable value of the goods - manufacturers were selling a part of their final products at the factory gate - such goods they were collecting a percentage of the sale price of the goods as freight and insurance - whether the amounts collected as freight and insurance is to be taken to form part of the assessable value – Held that:- A simple approach of confirming the duty on the entire amount realized towards freight stating the reason that it is on equalized basis cannot prima facie succeed - Since excise duty cannot be charged on freight collected whether charged on equalized basis or otherwise - application for waiver of pre-deposit allowed

  ---

• 2012 (11) TMI 258
  Refund by way of credit – alleged that though the assessee was entitled to refund but there should have been an application in terms of Section 11-B of the Central Excise Act, 1944 – Held that:- Cash refund has been distinguished from the refund by way of credit. In the instant case, cash refund has not been ordered as contemplated under Section 11-B - refund by way of cenvat credit allowed

  ---

• 2012 (11) TMI 257
  Waiver of pre-deposit - Cenvat credit - Duty demanded on the ground that at the time of removal of old and used capital goods, the appellant is required to reverse the total Cenvat credit availed by them at the time of receipt of the said capital goods – Held that:- In the case of Raghav Alloys (P) Ltd. (2009 (4) TMI 184 - CESTAT, NEW DELHI ) it was held that words "as such" in the Rule 3(4) of Cenvat Credit Rules, 2002 means that capital goods removed without putting them to use and that when the capital goods are removed after use for a period of 7 to 8 years, they cannot be said to have been removed as such – waiver of pre-deposit allowed

  ---

• 2012 (11) TMI 256
  Whether interest on refund amount granted consequent to an order passed by Appellate Tribunal is payable to the opposite party after three months from the date of such order – Held that:- interest on delayed refunds under Section 11BB on the duty ordered to be refunded under sub-section (2) of Section 11B - on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty- refund has already been made to the assessee. The interest on refund will be made by the Assistant Commissioner accordingly - in favour of the assessee

  ---

• 2012 (11) TMI 255
  Extended period of limitation - fraud, collusion, wilful mis-statement, suppression of facts or contravention of the provisions of the Act or the Rules made thereunder with intention to evade payment of duty – Held that:- Once the assessee availed credit under Rule 2(k) of the Rules of 2004 without entitlement it amounts to contravention of the rule with the intention of evading payment and the extended period of limitation would be available to the Revenue – In favor of Revenue

  ---

• 2012 (11) TMI 254
  Demand of duty – extended period of limitation – alleged that valuation of the “physician samples” has to be done on the basis of pro-rata value of such goods sold by the assessee i.e. on pro rata basis of MRP of the said products as per the provisions of Rule 4 of Central Excise Valuation Rules – Held that:- It is not for the assessee to declare in their monthly returns whether the duty on such clearances of physician samples was being paid on prorata basis of value of MRP of the identical goods or otherwise but it was for the assessee to indicate the assessable value of the said goods - assessable value which has been worked out by him was correct. Having filed the monthly returns regularly with the authorities and the authorities having not raised any question on the issue of assessable value, appellant has not suppressed any material facts or vital information from the department - appeal filed by the assessee allowed - order set aside.

  ---

• CST, VAT & Sales Tax

• 2012 (11) TMI 331
  Penalty under Rajasthan Sales Tax Act, 1994 - Possession or movement of goods took place - breach of section 78(2)(a) - penalty on 'the person in-charge', which included the owner – Held that:- Under section 78(2) the words used are 'person in-charge of a vehicle or carrier of goods in movement' whereas the words in section 78(5) which comes after sub-section (4) refers to 'person in-charge of the goods'. The words 'in movement' do not find place in section 78(5) and therefore, the expression 'person in-charge of goods' under section 78(5) was wider than the expression 'person in-charge of goods in movement' under section 78(2)(a). Consequently, the expression 'person in-charge of the goods' under section 78(5) who is given an opportunity of being heard in the enquiry would include the 'owner of the goods' Following the decision in Assistant Commercial Taxes Officer v. Bajaj Electricals Ltd. [2008 (11) TMI 374 - SUPREME COURT OF INDIA], decided against the assessee.

  ---

• 2012 (11) TMI 292
  Reopening of Assessment under section 17D of the Kerala General Sales Tax Act – complaint of petitioner was that the assessment was completed without affording him adequate opportunity to file his objections or giving him an opportunity of hearing – Held that:- When a person complains that principles of natural justice has been violated it is also incumbent on the part of the said person to show that by such violation prejudice has been caused. Section 17D(2)(d) of the KGST Act, 1963, permits reopening of assessment completed provided fresh materials pertaining to tax have been received. Section also contemplates that such reopening shall be only with the prior permission of the Commissioner - this is a case where fresh materials were received justifying reopening as contemplated under section 17D(2)(d) of the KGST Act. In such situation the petitioner cannot complain that any prejudice has been caused to him - re-opening also should be conducted in the manner as in section 17D

  ---

• Indian Laws

• 2012 (11) TMI 327
  Occupancy rights in the land - Held that:- The phrase, ‘any person’ should be given the widest possible import, and the words may cover persons other than those mentioned in various other provisions of the statute. But, if the statutory provisions suggest, that the legislature itself has intended to give a restricted meaning to the phrase, ‘any person’, then it is not open to the court to give a wide or un-restricted meaning to the words, ‘any person’. Provisions of Section 10 of the Tenancy Act put a complete embargo on a hisedar/joint-owner to claim occupancy rights. There is no agreement between the appellants and Gram Panchyat creating any tenancy in their favour. Granting the relief to the appellants would amount to ignoring the existence of Section 10 itself and it would be against all norms of interpretation which requires that statutory provisions must be interpreted in such a manner as not to render any of its provision otiose unless there are compelling reasons for the court to resort to that extreme contingent.

  ---