TMI Tax Updates - e-Newsletter
November 13, 2013

Case Laws in this Newsletter:

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

Articles

1. INSURANCE REPOSITORY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. No Fundamental Reason for Rupee Volatility: Dr. Raghuram Rajan

2. Investor Awareness Programmes during the Current FY Cross the 800 Mark

3. All India Roll Out of Risk Management System (RMS) for Export

4. RBI Reference Rate for US $ and Euro

5. Change in Tariff Value of Gold Notified

6. Pre-Ponement of Auction Date of Sale (Re-Issue) of Government Stocks

Notifications

Customs

1. 29/2013 - dated 12-11-2013 - ADD

Seeks to extend the validity of notification No 10/2013-Customs (ADD) dated 3rd May, 2013 for a period of one year i.e. upto and inclusive of 30th October, 2014.

2. 28/2013 - dated 12-11-2013 - ADD

Seeks to extend the validity of notification No 56/2012-Customs (ADD) dated 14th December, 2012 for a period of one year i.e. upto and inclusive of 30th October, 2014.

3. 110/2013 - dated 12-11-2013 - Cus (NT)

Amendment Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Circulars / Instructions / Orders

Income Tax

1. PRESS RELEASE - dated 7-11-2013

DECLARATION AS A NOTIFIED JURISDICTIONAL AREA UNDER SECTION 94A OF THE INCOME TAX ACT, 1961 – CLARIFICATION PROVIDED BY MINISTRY OF FINANCE, GOVERNMENT OF CYPRUS.

2. PRESS RELEASE - dated 1-11-2013

CLARIFICATIONS ON DELCARATION OF CYPRUS AS A NOTIFED JURISDICTIONAL AREA - SPECIAL MEASURES IN RESPECT OF TRANSACTIONS WITH PERSONS LOCATED IN NOTIFIED JURISDICTIONAL AREA UNDER SECTION 94A OF THE INCOME TAX ACT, 1961.

Highlights / Catch Notes

Income Tax

• Assessing Officer Must Show Evidence Before Disallowing Expenses u/s 40(a)(ia) of the Income Tax Act.

  Case-Laws - AT : Before making disallowance u/s 40(a)(ia), the pre-requisite conditions are that the AO should bring material on record to show that the assessee was liable to deduct tax in respect of the expenditure specified in that section - AT
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• High Court Permits Deduction for Interest on State Government Loans u/s 36(1)(iii) of Income Tax Act.

  Case-Laws - HC : Allowability of deduction u/s 36 (1) (iii) - Interest liability on loans received from the State Government - assessee is maintaining the books of accounts on mercantile system of accounting - claim allowed - HC
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• Court Denies Assessee's Request for Tax Credit Refund Adjustment and Stay on Recovery u/ss 115JA, 226(3.

  Case-Laws - HC : Refund of tax credit u/s 115JA – Recovery proceedings u/s 226(3) - attachment of bank account - assessee sought adjustment of refund u/s 115JA with tax dues and stay of recovery - Decided against the assessee - HC
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• Limitation Period for Block Assessment Orders Starts from Date of Last Authorization in Income Tax Cases.

  Case-Laws - HC : Block assessment - Period of Limitation of passing of the order - In cases where there is more than one authorisation, the starting point of limitation is to be computed from the last of the authorisation - HC
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• High Court Affirms Section 54EC Exemption for Short-Term Gains from Depreciable Assets u/s 50 of Income Tax Act.

  Case-Laws - HC : Exemption u/s 54EC - eligibility of capital gain from sale of depreciable assets being taxable as short term capital gain u/s 50 – overriding provision - benefit of exemption allowed - HC
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• Property's Annual Letting Value Excludes Notional Rent from Interest-Free Deposits for Tax Purposes.

  Case-Laws - AT : Annual letting value of the property by taking into consideration the notional interest on interest free deposit - notional rent on the amount of security deposit cannot be included in the annual letting value of the property. - AT
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• DRP Supports Adjustment to Arm's Length Price; No Interference Needed, Penalty Proceedings Justification Available for Taxpayer.

  Case-Laws - AT : Addition at the direction of DRP as against the total adjustment to ALP made in the draft assessment order –No any reason to interfere with the finding of the learned DRP as the assessee can very well make out a case for dropping the proceedings for imposition of penalty when the Assessing Officer actually takes up such proceedings - AT
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• Royalty Payments Disallowed Without Sales; Classified as Revenue Expense in Tax Context.

  Case-Laws - AT : Capital or revenue expenses - Disallowance of royalty - if there is no sales, no royalty is payable by the assessee - held as revenue in nature - AT
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• Employee Stock Option Plan (ESOP) Sale Taxed as Long Term Capital Gain After Three Years.

  Case-Laws - AT : Sale of ESOP – Period of holding - the assesse acquired a valuable right on the date of grant and this valuable right, which is capital asset, when sold after 3 years, was liable to be taxed under the head Long term capital Gain - AT
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• ESOP Sales Confirmed as Long-Term Capital Gains; Holding Period Validates LTCG Status Despite Deferred Purchase Price.

  Case-Laws - AT : Period of holding - Whether sale of ESOP constitutes long term (LTCG) or short term capital gains (STCG) - The benefit of deferment of purchase price cannot lead to an inference that no right accrued to assessee - Held as LTCG - AT
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• Business Loss Disallowed for Membership Card Converted to Equity Shares; No Provision for WDV-Based Loss Adjustment.

  Case-Laws - AT : Disallowance of business loss - membership card was converted to equity shares - There are no provisions either for adjusting the depreciation already allowed or allowing the loss so arrived at on the basis of WDV - AT
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• Appellant Found to Have Permanent Establishment in India Under Article 5 of India-U.S. DTAA Agreement.

  Case-Laws - AT : Permanent Establishment under Article 5 of the DTAA between India and U.S.A - Whether Appellant has a Permanent Establishment ('PE') in India under Article 5 of the DTAA between India and U.S.A - held yes - AT
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• Trading Qualifies as 'Services' for SEZ Tax Deductions u/s 10AA of the Income Tax Act.

  Case-Laws - AT : Deduction u/s 10AA - Services under SEZ rules - Whether 'trading' is covered by the term 'services' - Held yes - AT
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Customs

• Court Analyzes Eligibility for Customs Duty Benefits Under Notification No. 21/2002-Cus: Classification vs. Eligibility Debate.

  Case-Laws - AT : Benefit of Notification No. 21/2002-Cus. - Chapter Note is relevant only to classification of the goods. With regard to the examined notification, what is required to be examined is whether the goods imported by the appellant satisfies the parameters specified in the description of the goods given in the notification - AT
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• Anti-dumping duties on stainless steel coils don't apply to appellant; product exceeds 1250 MM width. Notifications 14/2010 & 86/2011 irrelevant.

  Case-Laws - AT : Anti dumping duty - Notification NO. 86/2011 - Stainless Steel Cold Rolled coils having width of 1256 MM to 1259 MM - admittedly the width of the product in question is more than 1250 MM. Therefore Notification 14/2010 amended to Notification 86/2011 is not applicable to the appellant. - AT
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• Coal Conversion Tech Supports Customs Duty Exemption for Coking Coal, Even Without Coke Production.

  Case-Laws - AT : Custom duty on coking coal – adoption of a new technology enabling use of coal, which could be converted into coke in admixture with other coal, without conversion of such coal into coke cannot be a reason to deny the exemption - AT
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• Tribunal Rules Against Additional Penalties for Partners Beyond Firm's Penalty in Partnership Case.

  Case-Laws - AT : Tribunal was justified in holding that no separate penalties were warranted on the partners in addition to the penalty on the partnership firm - AT
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Service Tax

• Sections 77 & 78 Penalties Not Applicable: Appellant Paid Full Service Tax and Interest u/s 80.

  Case-Laws - AT : Penalty - as per Sec. 80 and looking to the fact that appellant has paid the entire service tax along with interest, penalties under Sec. 77 & 78 are not imposable upon the appellant - AT
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• Gardening Services Qualify for Cenvat Credit as Eligible Input Service for Green Belt Maintenance.

  Case-Laws - AT : Service Eligible as Input Service - Cenvat credit on the gardening services required to maintain such a green belt is admissible - AT
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• Services Under Agreement with IRCTC Not Classified as Catering; Stay Granted in Dispute Over Service Classification.

  Case-Laws - AT : Classification of service - catering service or credit card operations - Agreement with IRCTC for rendering services - Such association did not prima facie transform the services received by the petitioner from IRCTC into catering service - Stay granted - AT
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• Stay Granted on Import of Services for Foreign Currency Loan Administration Fee Paid to Foreign Banks Outside India.

  Case-Laws - AT : Import of services - Appellant had paid an amount to the Banks situated abroad as an administration fee for raising loan in foreign currency outside India - stay granted. - Tri
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• No Service Tax on Market Fee for Facilities Assisting Farmers with Agricultural Produce Marketing.

  Case-Laws - AT : Business Support Service (BSS) – appellant constructed infrastructural facilities for marketing of agricultural produce and given to the farmers for marketing their produce - no serivce tax on market fee - AT
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Central Excise

• Stay Order Expired: Section 35-C (2A) Six-Month Limit Reached; No Longer Effective for Assessee.

  Case-Laws - HC : Vacation of stay order 35-C (2A) – The unconditional stay would have operated only w.e.f. 8.4.2013 for a period of six months, which has expired, the order of unconditional stay would not be operative in favour of the assessee - HC
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• Court Finds No Revenue Loss as Respondents Use Cenvat Credit to Discharge Duty Liabilities Under Compounded Levy Scheme.

  Case-Laws - HC : Utilisation of Cenvat credit - Compounded Levy Scheme – Cenvat account of the respondents had sufficient credit and they discharged their duty liability through the same instead of making payment through PLA - there is neither loss to the revenue nor there is evasion of duty - HC
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• High Court Allows Interest on Delayed Refunds u/s 11BB of Central Excise Act for Area-Based Exemptions.

  Case-Laws - HC : Entitlement of Interest u/s 11BB of the Central Excise Act 1944 – Delayed Refund Duty – area based exemption - Section 11B does not exclude claim of refund made in terms of the notification dated 8-7-1999 - claim of interest allowed - HC
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• Central Excise Valuation: Rule 10A Inapplicable Without Job Work; Stay Granted in Case Decision.

  Case-Laws - AT : Determination of Value of Goods – Applicability of Rule 9,10A and 11 of Valuation Rules - when there is no job work, the price cannot be determined on the basis of Rule 10A of Valuation Rules - stay granted - AT
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VAT

• Uttar Pradesh Entry Tax Upheld: Does Not Violate Constitutional Trade Freedom Under Article 301, Court Confirms Legitimacy.

  Case-Laws - HC : Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007 - The levy of entry tax under the Act does not violate the freedom of trade, commerce and intercourse guaranteed under Art.301 of the Constitution of India. - HC
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Case Laws:

• Income Tax

• 2013 (11) TMI 582
  Disallowance under section 40(a)(ia) of the IT Act - Certain payments without making TDS were made by the assessee during the assessment years 2007-2008 to 2010-2011, and disallowance under section 40(a)(ia) were made in those years – Held that:- No material could be brought on record by the learned DR to show that there was any actual expenditure of freight claimed by the assessee, on which, though the assessee was liable to deduct tax, the assessee made default in deducting the required TDS during the years under consideration - Disallowance was made not on the basis of the any actual material found for the years under consideration, but was made by extrapolating the findings of the subsequent years, which is nothing but a mere guess work on the basis of suspicion and thereby the AO acted without satisfying the pre-requisite conditions. Before making disallowance under section 40(a)(ia) of the Act, the pre-requisite conditions are that the AO should bring material on record to show that the assessee was liable to deduct tax in respect of the expenditure specified in that section, the assessee actually defaulted in deducting TDS or defaulted in making payment of TDS after deduction, and the assessee claimed deduction in respect of such expenditure - In the instant case, the AO failed to discharge the burden which was on him under the law – Decided against the Revenue.

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• 2013 (11) TMI 581
  Re-opening of assessment u/s 147 by issuing the notice u/s 148 of the Income Tax Act – Held that:- Reliance has been placed on the judgment in the case of Adani Exports Vs. Dy. CIT [1998 (12) TMI 51 - GUJARAT High Court], wherein it was held that it is wellsettled that it is only the AO whose opinion with respect to the income escaping assessment would be relevant for the purpose of reopening of closed assessment. Mere opinion of the audit party cannot form the basis for the AO to reopen the closed assessment that too beyond four years from the end of relevant assessment year – Following the above, it has been held in the present case that it was a colourable exercise of jurisdiction by the Assessing Officer by recording the reasons for which he obviously had no conviction, had initiated the reassessment proceedings solely at the instance of the audit party which cannot be sustained –Decided against the Revenue.

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• 2013 (11) TMI 580
  Validity of block assessment u/s 158BC pursuant to search conducted u/s 132 of the Income Tax Act – Appellant is a firm running Bar attached Hotel and Restaurant. A search was conducted under Section 132 of the Income Tax Act at the business premises of the appellant on 12.12.1996. Thereafter, the assessment proceedings were initiated under Section 158BC of the Income Tax Act for the block period from 1.4.1986 to 12.12.1996. The assessment was completed for the said period as per order dated 26.08.1998 fixing the undisclosed income for the assessment years 1993-'94 to 1997- 98 as Rs.1,06,62,370/- - Held that:- The jurisdiction of the Assessing Officer to make block assessment for the undisclosed income cannot be found fault with. The assessments were made based on the materials seized during search and seizure - Entire matter had been fairly considered on the basis of evidence on record and the Tribunal has reconsidered the entire issue and confirmed the view expressed by the Assessing Officer – Decided against the Assessee.

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• 2013 (11) TMI 579
  Allowability of deduction u/s 36 (1) (iii) of the Income Tax Act - Interest liability on loans received from the State Government - Assessee - opposite party is a company of the State Government. The State Government has advanced interest bearing loan to the assessee company. But the assessee has not paid any interest to the Government but claimed the deduction pertaining to the interest under section 36(1)(iii) of the Act. The A.O. has disallowed the same by observing that the interest has not been actually paid – Held that:- After discussing number of case laws observed that the assessee is entitled for the deduction under section 36 (1)(iii) of the Act, as the assessee is maintaining the books of accounts on mercantile system of accounting – Decided against the Revenue.

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• 2013 (11) TMI 578
  Refund of tax credit u/s 115JA – Recovery proceedings u/s 226(3) - attachment of bank account - assessee sought adjustment of refund u/s 115JA with tax dues and stay of recovery - Held that:- Petitioner has not made out a case for refund of tax or for quashing / reading down the provisions of Section 115 JAA and Section 115 JB of the Act - Amount paid by the petitioner as a MAT Company can be adjusted during the period under Section 115 JA. There is no provision under the Act to refund the amount which has been admitted and which has been paid by the petitioner as MAT Company- Decided against the Assessee.

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• 2013 (11) TMI 577
  Block assessment - Limitation of passing of the order by the department in case of search u/s 132 of the Income tax Act - Whether the order of assessment dated 30.06.2005 is well within the jurisdiction on the ground that it is passed beyond the period of limitation - First search was concluded as on 28-3-2003 - another authorisation was issued on 27.08.2003 under Section 132 of the Act to search the Bank, in which the assessee held his account and lockers. Pursuant to such authorisation, a panchanama was drawn on 28.08.2003, wherein, search was commenced on 28.08.2003 at 11.15 a.m., and concluded on 29.08.2003 at 12.05 p.m. In terms of the panchanama, the search concluded on 29.08.2003. Held that:- In cases where there is more than one authorisation, the starting point of limitation is to be computed from the last of the authorisation which as per Explanation 2 to Sub Section 2 of Section 158 BE of the Act is deemed to have been executed on the conclusion of the search as recorded in the last panchanama drawn. Thus going by Explanation 2 with retrospective effect from 1.07.1995, the contention of the assessee cannot be accepted. Thus, with every panchanama drawn, the search team leaving the premises, the search conducted on 28.03.2003 came to an end as far as that authorisation was concerned. However the second search was admittedly on a fresh authorisation. Thus, in respect of search conducted on 27.03.2003 and 28.03.2003, panchanama was drawn with observation "search continues", thus, considering the fact that the second search was to be carried on the different premises and materials to be seized, in fitness of things, fresh authorisation was issued by the Department on 27.08.2003 and as such under Section 158BE of the Act, limitation has to be worked out from that date, i.e., the end of the month of 28.08.2003 and not with reference to the first search i.e., 27.03.2003 and 28.03.2003 – Decided in favor of Revenue.

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• 2013 (11) TMI 576
  Exemption u/s 54EC - eligibility of capital gain from sale of depreciable assets being taxable as short term capital gain u/s 50 – overriding provisions – Held that:- Reliance has been placed on the judgment of Hon’ble Gauhati High Court in the case of CIT v. Assam Petroleum Industries (P.) Ltd. Reported in [2003 (6) TMI 23 - GAUHATI High Court] and Bombay High Court in the case of CIT v. ACE Builders (P.) Ltd. reported in [2005 (3) TMI 36 - BOMBAY High Court]. In the above judgments it was hold that capital gain arising of long term capital asset, if invested in specified asset, the assessee is not to be charged capital gains and exemption provided under Section 54EC of the Act cannot be denied to the assessee only on account of the fact that deeming fiction is created under Section 50 of the Act. In other words, legal fiction created under Section 50 of the Act is though restricted to computation of capital gains, such deeming fiction cannot restrict application of Section 54EC which allows exemption of capital gains, if assessee makes investment in the specified assets. Thus, the assessee cannot be charged to capital gains when short term gains of long terms capital assets get invested in the areas specified under the law – Decided against the Revenue.

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• 2013 (11) TMI 575
  Computation of deduction u/s 80HHC of the Income tax act - The assessee company is engaged in the business of providing consultancy services for railway projects. Assessee has claimed u/s. 80HHC deduction of Rs. 2,51,07,351/- – Held that:- Where an assessee runs and manages two separate units, one of which is engaged fully or partially in earning income through exports then, in the calculation of proportionate deductible profits for the purpose of deduction under S. 80HHC the 'total turnover of the business' would include only the turnover of the export business and not that of the domestic business - Same issue has been decided in favour of the assessee by the Tribunal in assessee's own case for asstt. Year 1995-96 and 1996-97 – Decided against the Revenue.

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• 2013 (11) TMI 574
  Disallowance under Section 35E / 37(1) of the Income Tax Act - Disallowance of depreciation of sale and lease back - Exclusion of the principal sum of lease rent – Held that:- Remanded the matter to the Income Tax Appellate Tribunal to consider the aforesaid appeals afresh with respect to the aforesaid issues in accordance with law and on its own merits and after giving an opportunity to the assessee as well as the revenue - This Court has not expressed anything on merits with respect to the aforesaid issues and the question whether the decision of the Special Bench of the tribunal rendered in the case of IndusInd Bank Ltd. v. Addl. CIT [2012 (3) TMI 212 - ITAT MUMBAI] would be applicable with respect to the aforesaid issues or not, is kept open.

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• 2013 (11) TMI 573
  Annual letting value of the property by taking into consideration the notional interest on interest free deposit of Rs.75 lakhs – Non-consideration of fair market value determined by Municipal Corporation of Delhi – Held that:- Relying upon the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. JK Investors (Bombay) Ltd. [2000 (6) TMI 9 - BOMBAY High Court], it was held that held that the notional rent on the amount of security deposit cannot be included in the annual letting value of the property. Further, income from house property should be computed on the basis of municipal ratable value and the Tribunal directed the Assessing Officer that the ratable value of the property be considered for determining the annual letting value of the property – Also, contention of the assessee that deduction should be allowed towards municipal taxes is not acceptable in view of the reason that such taxes were paid by the tenant and not by the assessee – Decided in favor of Assessee.

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• 2013 (11) TMI 572
  Addition at the direction of DRP as against the total adjustment to ALP made in the draft assessment order – purchase of LPG (propane, Butane and LPG Mix) from its Associated Enterprise (AE in short). - Held that:- TPO and DRP have examined all the factual aspects in respect of each of the shipments and has accepted 33 out of total 35 shipments to be within the Arm's length price - In respect of two shipments from Saudi Arabia to Porbandar in May, 2007 and October, 2007, assessee could not produce any evidence or comparable data with regard to the price paid - Assessee himself had proposed the calculation or methodology being conscious of fact that calculating the prices on the basis of various factors would be cumbersome process, hence price can be computed on the basis of distance between Port of origin and Port of destination which was also accepted by the DRP. The price in respect of two shipments in May, 2007 and October, 2007 from the port of origin from Saudi Arabia were found to be in excess than the ALP at US$ 34.74 and 44.96 per M.T. Excepting these two all other shipments were found to be within the arm's length. Admittedly, assessee has not produced any comparable data in so far as the price is concerned in respect of May, 2007 and October, 2007 to indicate that the price paid by it in respect of two shipments were within the arm's length – Decided against the Assessee. Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- No any reason to interfere with the finding of the learned DRP as the assessee can very well make out a case for dropping the proceedings for imposition of penalty when the Assessing Officer actually takes up such proceedings – Decided against the Assessee.

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• 2013 (11) TMI 571
  Genuineness of expenditure – Allowability of expenditure - Whether expenditure claimed by the assessee is exclusively for the business purposes and is reasonable - Held that:- AO has not doubted that said amount of Rs. 75,99,364/- was paid to Asipac but has denied the said payment on the ground that it was not incurred for the purpose of business of the assessee - Facts on record, prima facie establishes that said payment has been made by the assessee for the purpose of business interest of the assessee as the said amount of FDI was received by the assessee as security deposit as per Development Agreement dated 25-03-2008 entered into among the assessee, UAHPL and RIL. Reliance has been placed upon the judgment in the case of CIT v. Dhanrajgirji Raja Narasingirji [1973 (3) TMI 6 - SUPREME Court], wherein it has been held that department cannot dictate circumstances in which the expenditure is to be incurred - Payment made by the assessee to Asipac which is admittedly not a related party of the assessee, is expenditure wholly and exclusively for the purpose of business of the assessee. Disallowance on the basis of cash payments of amount of Rs. 1,84,60,000/- AO has made addition of Rs.1,84,60,000/- on the basis of entries of the cash deposits in the bank accounts of Shri Kalyan Sahai and Shri Kalicharan Yadav and their family members - Two persons in their retracted statements stated that cash deposits in their bank accounts as also in the bank accounts of their family members was consisted of agricultural income, gifts from other family members and sale of land to Shri Babu Lal and others – Held that:- Reliance has been placed on the judgment of Hon'ble Gujarat High Court in the case of Laxmanbhai S Patel vs. CIT,[ 2008 (7) TMI 544 - GUJRAT HIGH COURT], wherein it has been held that legal effect of the statement behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross examination and the additions if made, the same is required to be deleted on the ground of violation of principles of natural justice. In view of the facts, AO is not justified to make the said addition of Rs. 1,84,60,000/- merely on the basis of the statements of Shri Kalyan Sahai and Shri Kalicharan Yadav dated 28-01- 2009 wherein they stated that they received Rs. 20-25 lacs in cash as token money for sale of their land, without giving copies of the statements to the assessee and without giving an opportunity to confront those persons on whose statements, an addition was made. Therefore, there is a violation of principles of natural justice - Decided in favor of Assessee. Amount received as security deposit not to be considered as consideration for sale - Held that:- Provision of Section 53A of the Transfer of Property Act cannot be made applicable to the land under consideration as undisputedly the said land is stock in trade of the assessee and not a capital asset - Permission has been given to the developer for the limited purpose of development of the project and not with the intention to transfer of land - The above facts are fortified in the light of clause of the development agreement which gives an option to the developer to purchase the land if they want @ Rs. 3.50 crores per acre. It is a fact that assessee received a security deposit of an amount of Rs. 39,55,95,900/- and not the proportionate amount of Rs. 41,94,75,000/- - Security deposit received by the assessee cannot be considered as sale consideration for transfer of land in the assessment year under consideration – Hence, confirmed the order of the ld. CIT(A) in deleting the sum of Rs. 52.74 crores - Also delete the balance addition of Rs. 29.95 crores sustained by ld. CIT(A). Reimbursement of amount paid for the expenses of employees of Asipac company - whether TDS u/s 194J is liable to be deducted as professional charge – Held that:- Provision of Section 194J of the Act for deduction of TDS are not applicable on such payments. Therefore, the assessee was not required to deduct TDS – Hence, disallowance made by the AO as per Section 40(a)(ia) of the Act is not justifiable.

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• 2013 (11) TMI 570
  Capital or revenue expenses - Disallowance of royalty - Whether the assessee has acquired a right to use the 'technology and licence' during the assessment years - Held that:- From the perusal of the agreement it is found that KMC granted the assessee an exclusive right to manufacture and sell the products in India using the licenced technology provided. An exclusive right has been conferred on the assessee for manufacturing and selling the products in India - it is a case where royalty was paid initially and also running expenses towards royalty are being paid year after year. As per this agreement for transfer of know-how as technical aid, initial royalty of 9 lakhs US Dollar has to be paid, and thereafter running royalty at the rate of 3.5% of the net sales is required to be paid by the assessee - The assessee-company has entered into a technical licence agreement with KMC, which had a 50% shareholding in the assessee-company, to manufacture and sell the contract products in India using licenced technology. The assessee-company paid a lump sum amount of 9 lakhs US Dollars to KMC to get this technology. This amount was paid in three instalments of 3 lakhs US Dollars from financial year 1996-97 to 1998-99. Apart from this, the assessee-company has been paying royalty @ 3.5% for products manufactured by using licenced technology supplied by KMC This royalty is paid @ 3.5% of net sales less imported components. As per this agreement, if there is no sales, no royalty is payable by the assessee. - Decided in favour of assessee.

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• 2013 (11) TMI 569
  Penalty u/s 271(1)(c) of the Income tax act – Held that:- When the Assessing Officer decided to initiate penalty proceedings, he had no material to conclude that the assessee had concealed income or provided inaccurate particulars. The assessee did provide particulars, but could not back up its claim with confirmation - Only on the basis of the assessee's offer to be taxed at 8% on gross receipts, have concluded that it had provided inaccurate particulars in its returns - The imposition of penalty was not justified – Decided in favor of Assessee.

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• 2013 (11) TMI 568
  Transfer u/s 2(47)(v)/(vi) of the Income tax act - Taxability in the hands of member or Society - Assessee is a member of the Punjabi Co-op Housing Building Society Ltd. The assessee is owner of a plot measuring 500 sqyd and was entitled to monetary consideration of Rs. 80 lakhs and one furnished flat measuring 2250 sqft which has been valued by the Assessing Officer @ Rs. 4500 sqft - Land was transferred to Tata Housing Development Company Ltd. the Assessing Officer applied to capital gain tax which has been confirmed by the ld. CIT(A) – Held that:- following the decision in the cae of Shri Charanjit Singh Atwal and others [2013 (8) TMI 364 - ITAT CHANDIGARH], wherein it was held that assessee is liable to be taxed - Decided against the assessee.

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• 2013 (11) TMI 567
  Sale of ESOP – Determination of Period of holding - Date of acquisition – Whether sale of ESOP constitutes long term (LTCG) or short term capital gains (STCG) – Held that:- Date of acquisition of ESOP is to be taken as the date when the option was given to the assesse, relying upon the decision in the case of ACIT vs. Sh. Param Paul Uberoi [2013 (11) TMI 566 - ITAT DELHI] and Abhiram Seth vs. JCIT [2011 (9) TMI 186 - ITAT, New Delhi]- Date of acquisition of ESOP is to be taken as the date when the option was given to the assesse. In other words the Tribunal in these decisions has held that the assesse acquired a valuable right on the date of grant and this valuable right, which is capital asset, when sold after 3 years, was liable to be taxed under the head "Long term capital Gain'". The valuable right which is a capital asset is held for more than 36 months by the assessee making it a long term capital asset – In the present case, directed the AO to tax the gain in question under the head "long term capital gain" – Decided in favor of Assessee.

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• 2013 (11) TMI 566
  Capital gain – Shares of ESOP - Period of holding from date of grant of option or date of exercise of option - Whether sale of ESOP constitutes long term (LTCG) or short term capital gains (STCG) – Held that:- Following ACIT vs. Dr. Dhurjati Gupta [2009 (1) TMI 315 - ITAT HYDERABAD-B] - The benefit of deferment of purchase price cannot lead to an inference that no right accrued to assessee - The sales of such valuable rights after lock in period are liable to be taxed under the head “long term capital gains” and not ‘short term capital gains’ – The right of shares constitute capital assets and the gains should be taxed as “Long Term Capital Gains” as the holding period is more than 4 years - Decided against Revenue.

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• 2013 (11) TMI 565
  Disallowance u/s 36(1)(iii) - A.O. initiated proceedings u/s 14A - However, Rule 8D was not applicable - Nexus between the interest bearing funds taken and interest free advances given - Held that:- The interest received on fixed deposits to an extent of Rs.28,54,383/- has a direct nexus with the interest paid to Bank on over draft, therefore the contention that only net amount can be considered has validity. However since interest payment arose in regular business transactions, in our view, no further amount is required to be disallowed under section 36(1)(iii) as the interest paid has a direct nexus with the business activity of the assessee - However, advance was given for the business purpose, this aspect was not established, therefore disallowance of interest at 13% i.e. Rs.26 Lacs on the amount paid to Mr. C U Shah has to be disallowed under section 36(1)(iii). To that extent the disallowance made by the CIT(A) gets sustained - Decided partly in favour of Assessee. Disallowance of business loss - Held that:- BSE membership Card which was eligible for depreciation has been converted into 10,000 shares AY 2006-07 as per the evidence on record and para 5.17 CIT(A). Therefore once the membership card was converted to equity shares, if any loss arise on conversion can only be considered in AY 2006-07 not on AY 2008-09. The cause of action arose in that year and so claim for loss should have been made in the year 2006-07, when the membership card was converted to shares, if at all, a claim can be made. During the year, assessee sold 2737 shares out of 10,000 shares it received from the BSE. Therefore, the entire loss if at all also cannot be allowed as there are still shares held by the Assessee. Another reason in not allowing the claim is that under the provisions of the Act, the cost of acquisition is always taken at the original cost of membership. There are no provisions either for adjusting the depreciation already allowed or allowing the loss so arrived at on the basis of WDV. Since assessee get higher benefit in taking the cost of acquisition at the original value, the loss can only be considered as Capital loss, which can not be adjusted or allowed - Decided against assessee. Disallowance under section 14A read with rule 8D - Held that:- invoking Rule 8D does not arise as there was no satisfaction recorded by the AO under section 14A(2). More over, the assessee stock in trade cannot be considered as investment for disallowance under Rule 8D following the Principles laid down by the Hon’ble Karnataka High Court in the case of CCI Ltd. (supra). Stock in Trade cannot be considered as investment for the purpose of working out disallowance at half percent also under Rule 8D(iii). There is only an investment of Rs.10,500/- as per the balance sheet which can only be considered for this purpose. Therefore, since the dividend earned is incidental to the business activity of the assessee, we restrict the disallowance to 5% on the amount earned as dividend under section 14A which should meet the ends of justice on the facts of the case. AO is directed to work out the disallowance under section 14A - Decided in favour of assessee. Disallowance u/s 36 - Held that:- there is only one direct nexus of borrowed fund being advanced to sister concern, i.e. borrowed fund of Rs.2.00 Crores from Mr. C.U. Shah. Therefore, consistent with the finding in AY 2007-08, the interest paid to Mr. C.U.Shah on the borrowed Rs.2.00 Crores made during the year has to be disallowed and to that extent disallowance under section 36(1)(iii) gets confirmed. Now coming to the balance of the amounts, first of all there is a direct nexus with the interest and fixed deposits. In view of large increase in assessee’s turn over and business activity, interest paid to the Banks has increased substantially. Therefore it cannot be stated that the interest paid does not pertain to the business activity of the assessee. It is also very difficult to establish a direct nexus of borrowed funds with advancing of funds interest free. Therefore, we are of the opinion that AO is correct in restricting the disallowance to 20% of the amount. Since a direct advance of Rs. 2 crores was made from the advance paid to Mr. C.U. Shah was already disallowed, We direct the Assessing Officer to restrict the disallowance under section 36(1)(iii) out of the balance interest paid on unsecured loans to an extent of 20%. This excludes the Bank interest and bank charges. Thus, the order of the CIT(A) stands modified and the disallowance under section 36(1)(iii) with restricted to interest paid to Mr. C.U. Shah at 100% and 20% of the balance of the interest paid on unsecured loans - Decided partly in favour of assessee. Deemed dividend - Held that:- section 2(22)(e) merely decides whether a payment is deemed to be dividend or not, it does not decide in whose hands the said sum is chargeable. For that purpose one will have to rely on section 8. As the appellant company is not the registered holder of shares of the lender concern, the loan/advance obtained by the appellant from the sister concerns cannot be treated as deemed dividend in the hands of the appellant company. At the most the amount of advance can be assessed in the hands of shareholder (Shri Kamal Bakliwal) who is the beneficial owner of such shares. - Decided against the revenue.

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• 2013 (11) TMI 564
  Permanent Establishment under Article 5 of the DTAA between India and U.S.A - Whether Appellant has a Permanent Establishment ( PE ) in India under Article 5 of the DTAA between India and U.S.A - CIT(A) held that assessee has a fixed place PE in India - Held that:- The employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed place of business at their disposal. CIS was practically the projection of assessee s business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS - CIS did not constitute a dependent agent PE of the assessee in India as the conditions provided in paragraph 4 of Article 5 of the DTAA are not satisfied - Thus, the findings of the CIT(A) that assessee has a fixed place PE in India under Article 5(1) of the DTAA is upheld - Decided against assessee. Attribution of profits to the PE - Held that:- The revenue of the assessee company cannot be considered as the revenue of the PE by any stretch of imagination. Furthermore the expenses incurred outside India are linked with the business activities of the assessee undertaken outside India for the functions performed outside India and are not linked to the PE of the assessee in India. - The attribution of profits to the PE should be made by the transfer pricing principles supported by the CBDT Circular No. 5 of 2004 as well as the judgment of the Supreme Court in Morgan Stanley [2007 (7) TMI 201 - SUPREME Court]. - the charge for the employees seconded to CIS and employees visiting India to provide the technical services is subsumed in the transfer pricing analysis of CIS. Therefore, attribution can only be made on account of free of cost assets and software s provided by the assessee to CIS. - The assessee has submitted that it does not prepare India specific accounts, therefore the attribution of profits on the basis as disclosed in the transfer pricing study for assets and software cannot be accepted. Further, in the facts and circumstances of the case Profit Split method is not the correct method for attribution of profits to the PE of the assessee in India. Taxability of PeopleSoft license cost and maintenance charges - Held that:- purchase of software would fall within the category of copyrighted article and not towards acquisition of any copyright in the software and hence the consideration should. not qualify as Royalty. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee - Decided in favour of assessee. Taxability of link charges as Equipment Royalty - Held that:- there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held. that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty - Decided in favour of assessee. Interest u/s 234B - Held that:- The charging of interest is automatic under the Act if the assessee has defaulted in payment of advance tax. The income of the assessee was not liable for withholding tax under section 195 of the Act - assessee is liable to interest u/s 234B, as the income being assessed now cannot be held. to be income liable to TDS under Indian provisions. The same is being assessed in the hands of PEs who had not filed their return on the ground that this income was not attributed to Indian Business Connection. Provisions of section 234B are mechanical in nature - Decided against Assessee.

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• 2013 (11) TMI 563
  Deduction u/s 10AA/10A - Netting of interest income and expenditure - Nexus of interest income and expenditure - Held that:- it is settled position in law that interest income is to be assessed as income from other sources and not under the head business income for the purpose of deduction under Section 10AA/10A. However, this issue in respect of netting i.e. interest income and expenditure income has to be netted of, if there is a nexus. There is no dispute in respect of nexus as the interest income earned by the assessee is earned on FDs kept with the bank as margin money against credit facility - If after netting of interest it is found that interest income is more than then the surplus income has to be treated as income from other sources and if interest expenditure is more than the interest income, then no deduction is to be made while calculating deduction under Section 10AA/10A. Disallowance u/s 36(1)(iii) - Interest attributed to capital borrowed for purchase/acquisition of assets - Held that:- Under the provisions of section 36(1)(iii), any interest on borrowings made for acquisition of assets for extension of existing business is required to be capitalized till the asset is first put to use - Authorities below have proceeded with the presumption that the assets had been acquired from borrowed funds. However, no basis for such finding has been given. The assessee has pointed out that most of the payments had been made in earlier years in which year there was no disallowance of interest. Therefore, in the earlier years, the payments were made from own funds - source of current payment is easily explained from own funds. Therefore, when the payment for acquisition of assets have been made from own funds, there cannot be any case of disallowance of interest - Decided in favour of assessee. Deduction u/s 10AA - Services under SEZ rules - Whether 'trading' is covered by the term 'services' - Held that:- assessee is engaged in trading of re-export of imported goods and, therefore, the assessee is entitled for deduction under Section 10AA - SEZ Act under Section 51, it has been clearly provided that the provision of SEZ Act will override the provision of any other Act, meaning thereby the provision provided under the SEZ Act has to override on the provision of Section 10AA of the Income Tax Act. Under the rules, it is not provided but under Section 51 of the SEZ Act - Following decision of CIT Vs. Vasisth Chay Vyapar Ltd. [2010 (11) TMI 88 - Delhi High Court] and Deputy Commissioner of Income-tax, Circle-2 Versus Goenka Diamond & Jewellers Ltd. [2012 (3) TMI 258 - ITAT JAIPUR] - Decided in favour of assessee.

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• Customs

• 2013 (11) TMI 601
  Benefit of Notification No. 21/2002-Cus. - Demand of differential duty - Import of light-weight coated paper - Held that:- Chapter Note is relevant only to classification of the goods. With regard to the examined notification, what is required to be examined is whether the goods imported by the appellant satisfies the parameters specified in the description of the goods given in the notification. Denial of benefit of the notification is in order and, consequently, the demand of differential duty has to be sustained - Decided against assessee.

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• 2013 (11) TMI 600
  Anti dumping duty - Notification NO. 86/2011 - Whether Stainless Steel Cold Rolled coils having width of 1256 MM to 1259 MM are covered under Notification 86/2011 for imposing anti-dumping duty or not - Held that:- scope of the examination was not for enhancement of the product scope i.e. width exceeding 1250 Mm and product is defined as cold rolled flat products of stainless steel of weight of 600 MM up to 1250 MM. From the said scope, the intent of the levy of anti-dumping duty by the Designated Authority is very much clear that the product up to 1250 MM is liable for anti-dumping duty; that the Notification 86/2011 was issued in the background that in the absence of tolerance in the recommendation of corresponding Notification the products of width 1250 MM or lower are being declared as having width of 1251 MM to 1300 MM and thereby the anti-dumping duty is circumvented. It is further found that larger number of consignments where the width has been declared as 1251 MM or marginally above the 1250 MM limit specified in the final finding, thereby escaping anti-dumping duty. Therefore, this Notification came to levy for tolerance of (+) 30MM in the width - any product having width more than 1250 MM are not leviable for anti-dumping duty. Admittedly, in this case the width of the product on physical examination was found between 1256 MM to 1259 MM. Therefore admittedly the width of the product in question is more than 1250 MM. Therefore Notification 14/2010 amended to Notification 86/2011 is not applicable to the appellant. As Notification is not applicable to the appellant, therefore question of levy of anti-dumping duty of the goods imported by the appellant does not arise. Accordingly, demand in the impugned order is not sustainable - Decided in favour of assessee.

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• 2013 (11) TMI 599
  Penalty u/s 114 - Export attempt of restricted item - Held that:- CFS received the goods without the shipping bills. It is noted that there is clear admission on the part of CFS and his employee. Section 114(i) of Customs Act, 1962 prescribes imposition of penalty for attempt to export goods illegally, on any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 113 of the Customs Act, 1962 - there is no dispute about the fact that goods are liable for confiscation. It is also noticed that there is clear violation of the rules and therefore penalty is imposable - Asseessee directed to make pre deposit - Stay granted partly.

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• 2013 (11) TMI 598
  Stay of refund of excess duty paid - Valuation of goods - Mis declaration of goods - Enhancement in valuation of goods due to comparable goods - Held that:- goods like textile fabrics cannot be compared without samples from both consignments being seen together or in cases where the supplier of the goods and his description and all relevant parameters for determining value are same and period of import is contemporaneous. Comparison with one of entry in a database without adequate specification of parameters can lead to unjustifiable results - Therefore there is no need to stay the operation of the order - Stay of refund denied.

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• 2013 (11) TMI 597
  Composition of goods imported - Appellant contends that goods imported were not hazardous but can be used for rubber industry - Revenue denied the same on the ground that the goods does not meet the requirement of petroleum based processed oil for rubber industry - Whether goods imported meets specification for use in rubber industry - Held that:- Prima facie chemical composition of imported goods as well as legal pleading of the appellant failed to satisfy the requirement of law - Appellant directed to make pre deposit - Stay granted partly.

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• 2013 (11) TMI 596
  Penalty u/s 114 - Confiscation of red sanders wood logs - Held that:- Appellant has failed to make out a strong case against the penalty. At the same time, we have not found sufficient grounds for a hefty penalty of Rs. 8,00,000/- on the appellant. From the statements given by the appellant, it would appear that he was aware of the fact that some contravention of the provisions of the Customs Act was involved in the exportation - Prima facie case not in favour of assessee - Stay granted partly.

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• 2013 (11) TMI 595
  Custom duty on coking coal – Assessee imported coal and filed 19 Bills for clearing what was declared in some of the bills of entry as coking coal and in some others as semi-soft coking coal - Claimed exemption from customs duty under Notification No. 21/2002-Cus., dated 1-3-2002 – Serial.No.68 & 68A - “coking coal” was fully exempted from customs duty - Customs department demanded duty with view that the goods imported were not coking coal - Held that:- The description that the supplier adopts for his goods in contract by itself cannot be conclusive in deciding applicability of a customs exemption especially when the scope of the description of the goods used in Customs Notification in India is not clear and gives room for an argument that the goods fits into the description. In the absence of a clear definition, we should go by natural meaning. The explanations in the notification prior to the period of import and later to the period of import provide certain technical characteristics and do not provide for monitoring that coal is to be used actually for conversion into coke before using it in metal extraction. During the period of import there was no explanation at all - We feel that adoption of a new technology enabling use of coal, which could be converted into coke in admixture with other coal, without conversion of such coal into coke cannot be a reason to deny the exemption - The Chemical Examiner does not state the criteria based on which he opined that the goods were not “coking coal”. In the absence of such details the Chemical Examiner’s report is only an opinion and not a report of chemical analysis. An opinion formed by chemical examiner has very limited value because such opinion is formed without hearing the party - Following decision of COMMISSIONER OF CUSTOMS, TRICHY Versus JSW STEEL LTD. [2013 (1) TMI 301 - CESTAT, CHENNAI] - Decided in favour of assessee.

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• 2013 (11) TMI 594
  Penalty under Section 114 - export of rice - Held that:- separate penalty on partner when also imposed on partnership firm - no such corresponding provision in relation to imposition of penalties under the Act - Tribunal was justified in holding that no separate penalties were warranted on the partners in addition to the penalty on the partnership firm – no separate penalty - Decided in favour of assessee.

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• Corporate Laws

• 2013 (11) TMI 593
  Restoration of Trademark – Held that:- There was nothing on record to either establish or indicate that the requisite notice was sent to the petitioner - There were no circumstances that warrant an inference to that effect - Considering the consequences of the order we are not inclined to speculate in this regard in the respondents' favour - In any event the failure to comply with the mandatory provisions of Section 25(3) was a jurisdictional issue which raises a pure question of law - We are therefore, inclined to entertain this petition in exercise of our extra ordinary jurisdiction under Article 226 of the Constitution of India. Analysis of Section 25 of the aforesaid Act shows that a trade mark registered may be renewed from time to time for periods of seven years each on making of an application and payment of the requisite fee - The application for renewal of the trade mark may be made, not earlier than six months before the expiration of the last registration of the trade mark - If such an application was made, the registration of the trade mark would be renewed, provided the conditions laid down under the Act and the Rules were satisfied - However, if no application was made for renewal of the registration of the trade mark and only two months were left before its expiration, then the Registrar was obliged to give a notice within one month to the registered proprietor or if there were more than one, to each of the registered proprietors, in writing in form O-3, of the approaching expiration of the registered trade mark - Upon receipt of said notice, the application for renewal of the registration may be made, in which case, the same would be renewed - If, however, after the expiration of the last registration of a trade mark, the renewal fee had not been paid despite issuance of a notice by the Registrar in form O-3, the Registrar may remove the trade mark from the register and advertise the fact forthwith in the journal. The question should not be approached from any penal point of view - If restoration was just, it is bound to be made - That was the effect of the scheme of the Act and the Rules - It was true there had been an inordinate delay - If that delay had led to registration of the trade mark in favour of someone else, it may be a different matter depending upon the facts of the case - No one else had applied for or claimed any right of registration in the said trade mark in the meantime - the respondents were directed to grant restoration and renewal of the trade mark registration CIPLA no.114794 dated 6th November 1945, of the petitioner paying the requisite charges and complying with the requisite formalities - Decided in favour of Petitioner.

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• Service Tax

• 2013 (11) TMI 611
  Ineligible Cenvat credit on various services – Waiver of Pre-deposit – Held that:- Relying upon Navaratna S.G. Highway Prop. Pvt. Limited vs. Commissioner of Service Tax, Ahmedabad [2012 (7) TMI 316 - CESTAT, AHMEDABAD] - The definition of input service on which the credit can be availed is found at Rule 2 (l) of the Cenvat Credit Rules, 2004 - the definition specifically states, as to input services which are used by a manufacturer whether directly or indirectly, in or in relation to manufacturing of final products and includes services used in relation to setting up - the appellant has made out a prima facie strong case for the waiver of pre-deposit of the amounts involved - the waiver of pre-deposit of the amounts allowed till the disposal – Stay granted.

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• 2013 (11) TMI 610
  Stay application - Demand in respect of commission from the company providing computer reservation system - appellants contended that CRS is being used by them for their own conducting business and cannot be held to be a service to others – Held that:- Travel Agents are promoting the business of CCRS who is providing service to the Airlines and the payment received by the Travel Agent from CRRS is in consideration for such service - service provided by CRRS is to the Airlines and the Air Travel agent is promoting the service provided to Airlines - Prima facie case not in favour of assessee - Stay granted partially.

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• 2013 (11) TMI 609
  Penalty - Chargeability of service tax on Security Agency Services - Demand of duty dropped for the period November-2008 to March-2009 but confirmed and appropriated the duty payment made by the appellant for the period April-2009 to May-2009 - Penalty and interest also confirmed against assessee - Held that:- deliberations were going on between the MHA and the Finance Ministry about the duty liability on Security Agency Services provided by the appellant and an ad-hoc exemption order No. 1/1/2011 dt. 01/07/2011 was issued by the Finance Ministry for the period 16/10/1988 to 31/03/2009. Further appellant has also paid the duty and interest pertaining to the period April 2009 to May 2009. As the CISF is working under the MHA, therefore, there cannot be a situation of non-payment of the service tax with intention to evade the duty. Accordingly it is held that penalty under Sec. 78 of the Finance Act 1944 is not imposable upon the appellant. Further as per Sec. 80 of the Finance Act, 1944, as claimed by the appellant and looking to the fact that appellant has paid the entire service tax along with interest, penalties under Sec. 77 & 78 are also not imposable upon the appellant - Decided in favour of assessee.

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• 2013 (11) TMI 608
  Service Eligible as Input Service - Whether the services availed by the appellants for maintenance of the garden in and around the factory are admissible as input services or not as per the definition of Input Services contained in Rule-2 (l) of the Cenvat Credit Rules 2004 – Held that:- Appellant is required to maintain a green belt all around their plants - thus the services utilized for maintaining of the green belt around their plant is a obligatory requirement - Cenvat credit on the gardening services required to maintain such a green belt is admissible – Decided in favour of Assessee.

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• 2013 (11) TMI 607
  Video Tape Production Service u/s 65(120) of the Finance Act, 1994 – Waiver of Pre-deposit – Held that:- Apparently, the applicants are not providing "the process of any recording of any programme" - But, they are using computer and specialized software in relation to upgradation of post-production activity - this dispute would be looked into at the time of appeal hearing at length - Prima facie, in the applicant's own case, the Tribunal directed pre-deposit of about 25% of the demand of tax – Thus, the applicant directed to submit Rupees Forty Lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – partial stay granted.

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• 2013 (11) TMI 606
  Stay application - Classification of service - catering service or credit card operations - Agreement with IRCTC for rendering services - Availment of CENVAT Credit - Held that:- In regard to Cenvat credit availed in respect of the petitioner's operations with IRCTC, the agreement between the petitioner and the IRCTC clearly reveals that petitioner and IRCTC had entered into a co-branding agreement in respect of the credit card agency service provided by the petitioner, for use in catering service and other operations of the IRCTC. Such association did not prima facie transform the services received by the petitioner from IRCTC into catering service - Case prima facie in favour of assessee - Stay granted.

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• 2013 (11) TMI 605
  Stay application - Goods Transport Agency service - Held that:- During the relevant period amounts was paid by the petitioner towards goods transport agency services in respect of goods transported to Vishakhapatnam port for eventual export. In respect of such transactions the statutory provision operative at the relevant period enjoined that the recipient of the goods transport agency service should remit the service tax and thereafter could claim refund of the service tax remitted, since the service was in relation to export of goods. However, the petitioner failed to remit the service tax and thus had contravened the obligations under the provisions of the Act and for no stated reasons - Prima facie case not in favour of assessee - Stay not granted.

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• 2013 (11) TMI 604
  Stay application - Renting of immovable property - Held that:- facility of utilization of the stadium for any purpose would clearly show that the stadium can be used for business or commerce also. Therefore, providing hospitality boxes are not merely for watching international matches but also utilizing the stadium free of cost for other purposes. Prima facie, in our opinion, it comes under the purview of the definition of ‘renting of immovable property’ - Prima facie case not in favour of assessee - Stay partly granted. Event management service - Tripartite agreement with BCCI-IPL and Franchisee - Facility provided by the appellant is the utilization of stadium, for which the appellant receives consideration - Held that:- Prima facie case in favour of assessee - Stay granted.

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• 2013 (11) TMI 603
  Import of services - Appellant had paid an amount to the Banks situated abroad as an administration fee for raising loan in foreign currency outside India - Held that:- there is no dispute as to the fact that the Bonds were floated by the appellant abroad and they were subscribed by the individuals or the institutions abroad. In order to receive and deploy the amounts floated under the Bonds, appellants had directed by the bankers over there to open an account and receive the amount and deploy the same. We find prima-facie strong force in the contentions raised by the learned representative that the amounts which were raised abroad, were deployed outside India and also the clients whose accounts were maintained and service charges debited to the appellant, were the persons who are situated abroad and hence, the provider and recipient of the service being in abroad, the service tax liability, in our view, may not arise on the appellant. Appellant has made out a case for the waiver of pre-deposit of the amounts involved. - stay granted.

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• 2013 (11) TMI 602
  Business Support Service (BSS) – appellant constructed infrastructural facilities for marketing of agricultural produce and given to the farmers for marketing their produce - department contented that market fee collected is liable to service tax under the category of ‘Business Support Service' - rent received is liable under the category of 'Renting of Immovable Property' – Held that:- The appellant is not liable to pay service tax on the market fee collected by them - Following the decision in earlier cae [2013 (7) TMI 207 - CESTAT MUMBAI], the services rendered is covered under Business Auxiliary Services and are exempted from service tax under Notification NO. 14/2004-ST with reference to the constitution and functions, the services provided were out of the 'market fee' collected from the licensees and not in the nature of ‘outsourced services’– which did not appropriately fall under the category of Business Support Services - Development and maintenance of agricultural market infrastructure, is for the benefit of all users, rather than an activity solely in the interest of licensees.

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• Central Excise

• 2013 (11) TMI 615
  Restoration of appeal dismissed earlier for no Clearance from Committee of Disputes – Clearance from Committee of Disputes is necessary for appeals filed prior to 18/2/2011 or it should be shown that the application for permission was pending before Committee of Disputes as on that date - The impact of the above decisions would be that Committee of Disputes permission would not be required in respect of cases pending with COD as on 17.2.2011, and cases arising thereafter - the appeal was filed prior to 17.02.2011 and this case was not pending with COD as on 17.02.2011 – there was no merit in the present Application – there was no reason to interfere with our Order dated 11.09.2008 – Decided against Assessee.

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• 2013 (11) TMI 614
  Truck Input or capital goods - Waiver of Pre-deposit – Cenvat credit disallowed on JO truck for transportation of raw materials - Whether JO truck covered either under the definition of ‘capital goods’ under Rule 2(d) of the Cenvat Credit Rules or the inputs as defined under Rule 2(k) of the Rules, 2004 – Held that:- The JO truck used for transportation of raw materials within the premises of manufacturing unit falls within the definition of inputs used in relation to the manufacture of final product – Rule 3 of the Cenvat Credit Rules provides that a manufacturer can avail of Cenvat credit in respect of excise duty paid in relation to the capital goods or inputs - Use of word “or” in Rule 3 disjoins capital goods from inputs, as such prima facie, if the manufacturer/assessee has paid excise duty while procuring either the “capital goods” or the “inputs” he shall be entitled to avail Cenvat credit in respect of the same – Prima facie, the appellant has been able to make out a strong case for waiver of the condition of pre-deposit of duty demand, interest and penalty till the disposal – Stay granted.

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• 2013 (11) TMI 592
  Recovery of dues after expiry of waiver order according to Section 35-C (2A) – Unconditional Stay granted – Held that:- The unconditional stay would have operated only w.e.f. 8.4.2013 for a period of six months, which has expired, the order of unconditional stay would not be operative in favour of the assessee – Decided in favour of revenue - The respondent may persuade the Tribunal to decide the appeal expeditiously.

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• 2013 (11) TMI 591
  Utilisation of Cenvat credit - Compounded Levy Scheme – Assessee opted to pay fix duty in terms of capacity of their induction furnaces – hot steel re-roller units - Held that:- The case put against the assessee in the show cause notice clearly indicates that the demand, penalty and interest on the demand is only on the ground of discharge of duty liability on the final products covered under compounded levy scheme after 1.4.2000 through Cenvat Credit account - Such a debit through Cenvat credit account cannot be faulted with and there is no need for imposition of penalty and interest as Cenvat Credit Rules specifically indicate utilization of legit credit availed for discharge of duty liability – There was no fault with the mode of payment of excise duty by the respondents - Cenvat account of the respondents had sufficient credit and they discharged their duty liability through the same instead of making payment through PLA - there is neither loss to the revenue nor there is evasion of duty – Decided against the revenue.

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• 2013 (11) TMI 590
  Direction of Pre-deposit of Balance Amount – Burden to prove - Whether the Appellate Tribunal was justified in directing pre-deposit of the balance amount of tax, as confirmed in the order and 25% of the penalty u/s 35F of the Central Excise Act, 1944 r.w. Section 83 of the Finance Act, 1994 – Held that:- The onus is upon the Appellant, to produce sufficient material before the Commissioner of Central Excise, either in the form of tax paid challans or otherwise through cogent documentary material for the purposes of establishing that the entire amount which is the subject matter of the demand has been paid - The Tribunal has not gone into this aspect, since it felt disabled from doing so on the ground that it would amount to a review of the earlier order - an opportunity to the Appellant given to establish through cogent material, to the satisfaction of the Commissioner, Central Excise what part of the demand has been paid - Order set aside and the matter restored for fresh consideration – Decided in favour of Appellant.

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• 2013 (11) TMI 589
  Entitlement of Interest u/s 11BB of the Central Excise Act 1944 – Delayed Refund Duty – area based exemption - North Eastern Region - Held that:- Once it is held that a manufacturer is entitled to exemption of excise duty in terms of the notification dated 8-7-1999, the excise duty paid shall be refunded to the manufacturer as per the schedule mentioned in the notification - Even in case of likely delay, refund has to be made on provisional basis - there cannot be any manner of doubt that the admissible excise duty refund cannot be withheld by the central excise authority - From a conjoint reading of Sections 11B and 11BB of the Central Excise Act, 1944, it is apparent that if any refund of excise duty is ordered under Section 11B(2), the same has to be refunded within three months from the date of receipt of application under sub-section (1) of that section, failing which interest will have to be paid. Language of Section 11B is very clear and unambiguous. Liability of the Revenue to pay interest under Section 11BB commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) and not on the expiry of the said period from the date on which the order of refund is made – Relying upon Hindustan Coca-Cola Beverages Pvt. Ltd. v. Union of India [2004 (1) TMI 92 - HIGH COURT OF GAUHATI] - while directing refund of excise duty paid in terms of notification dated 8-7-1999, had also directed payment of interest for delayed payment as per provision of Section 11 of the Central Excise Act, 1944 - Section 11B of the Central Excise Act, 1944 does not exclude claim of refund made in terms of the notification dated 8-7-1999 - Petitioners would thus be entitled to interest under Section 11BB of the Central Excise Act, 1944 on the excise duty refunded to them - The jurisdictional excise officers shall now determine the interest amount payable to the petitioners for the relevant periods – Decided in favour of Petitioner.

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• 2013 (11) TMI 588
  Validity of Invoices - Waiver of Pre-deposit – Whether invoices should be properly printed, serially numbered and should contain all the details as required under Central Excise Rule, 1944 - Held that:- From the reading of the Rule 11(2), it is noticed that the requirement of printed, serially numbered is not mentioned in the rule – Following PEPSICO INDIA HOLDING P LTD Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II [2012 (7) TMI 53 - CESTAT, MUMBAI] - there is no requirement under rule 11 of Central Excise Rule, 1944 that invoice number should be printed on the invoices - the appellant has a strong case for waiver of pre-deposit - Pre deposit of the excise duty and penalty waived till the disposal – stay granted.

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• 2013 (11) TMI 587
  Waiver of Penalty under Rule 173Q of CE Rules – Recovery of MODVAT Credit - Held that:- Penalty on the appellants has been imposed by the original authority under sub-rule 1(a) and (b) of Rule 173Q the Commissioner (Appeals) has also confirmed the same under the same set of rules - Ongoing through the Rule 173Q of the Central Excise Rule, 1944, it is noticed that sub-rule 1(a) and (b) pertain to imposition of penalty in respect of removal of excisable goods and not in respect of inputs on which the credit has been taken - Prima facie, the appellant has a strong case for waiver of credit – the Pre deposit waived of penalty till the disposal of the appeal – stay granted.

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• 2013 (11) TMI 586
  Duty Liability - Waiver of Pre-deposit – Held that:- The Central Excise duty is leviable on the goods manufactured by a manufacturer and can be confirmed only against the person who actually manufactured the goods - as per the appellant, they have produced the invoices showing receipt of the said goods but without going into the factual aspect, Central Excise duty cannot be confirmed against recipient of the goods manufactured by other manufacturer - the appellant have made out a case for waiver of pre-deposit of duty. Penalty under Rule 27 - M/s Prakash Switchgear was not having RG-I register in their factory and evidence for the same could not be produced by them, for which penalty under Rule 27, which provides for maximum penalty of Rs. Five thousand imposable - the appellant directed to deposit Rs. 5,000 – upon such Submission rest of the dues to be stayed till the disposal – Partial stay granted.

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• 2013 (11) TMI 585
  Determination of Value of Goods – Applicability of Rule 9,10A and 11 of Valuation Rules - Waiver of Pre-deposit – Held that:- Following CCE, Hyderabad vs. Innocorp Ltd. [2013 (9) TMI 382 - CESTAT BANGALORE] - when there is no job work, the price cannot be determined on the basis of Rule 10A of Valuation Rules - the Commissioner has travelled beyond the show-cause notice while passing the order - The matter requires a detailed consideration of the agreement between the parties, the nature of transactions and the applicability of Rule 9 and Rule 10A of Valuation Rules, besides applicability of Rule 11 of Valuation Rules, which has been invoked in the show-cause notice - This can be done only at the time of final hearing - the appellant had approached the department and had sought clarification - The department had clarified that there is no need to adopt the price at which the goods are sold by International Flavours and Fragrances - appellant have made out a prima facie case - there shall be waiver of pre-deposit and stay against recovery of the duty and penalties and interest from both the appellants till the disposal – Stay granted.

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• 2013 (11) TMI 584
  Undervaluation of Goods – Free supply of materials –Held that:- The valuation of the final product, if any should be done only at the place of clearance of the goods and not at the recipient’s end - Prima facie, the price for the raw material as has been supplied to the appellant seems to be depressed, and the correct price during the relevant period of the said raw material has to be ascertained - the appellant had supplied back the Pivaloyl Chloride manufactured out of the crude Pivalic Acid received from M/s. Aurobindo Pharma Limited only to M/s. Aurobindo Pharma Limited and there is nothing on record to show that the appellant had cleared the Pivaloyl Chloride to other customers also, which is manufactured by using the Pivalic Acid received from M/s. Aurobindo Pharma Limited. Waiver of Pre-deposit – The issue needs to be gone into details which can be done only at the time of final hearing of the appeal - the appellant has not made out a prima facie case for complete waiver of pre-deposit of amount of duty - the appellant directed to deposit an amount of Rupees three lakh seventy five thousand as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2013 (11) TMI 583
  Confirmation of Differential Duty – Supply to SEZ - Waiver of Pre-deposit – Penalty u/s 11AC of CE Act – Held that:- Relying upon BARODA ELECTRIC METERS LTD. Versus COLLECTOR OF CENTRAL EXCISE [1997 (7) TMI 126 - SUPREME COURT OF INDIA] - All the issues are debatable and needs to be considered from various angles before coming to any conclusion - the amount deposited by the appellant is enough to hear and dispose the appeals as the issues needs deeper consideration - the applications for the waiver of pre-deposit of the balance amounts involved allowed and recovery stayed till the disposal – Stay granted.

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• CST, VAT & Sales Tax

• 2013 (11) TMI 613
  Discrepancy in books of accounts - Non recording of inter state sales - Held that:- in absence of inter-State sale transaction in the books of accounts, no bills were found, no such transactions were found in the books of accounts and yet, they have been found to be carried out in fact. It also further appears that there was a remarkable difference in the stock actually found and the one recorded in the books of accounts. It was further noted that the sale transactions were not tallying with the lorry receipts, sales' bills and delivery challans collected by the Department at the time of visit to the residential and business premises of the appellant-assessee, where the numbers were handwritten and were not printed serially. No satisfactory reasons and explanation had come forth when the inquiry was made and that eventually led the authority to conclude that with a view to avoid the payment of tax, there was a suppression all around - when the Commissioner had reason to believe that whole or any part of the taxable turnover of the dealer in respect of the period in question had escaped assessment or had been under assessed, by exercise of powers given under the statute, he determined the amount of tax to the best of his judgment and added 100% of such turnover, within a statutory period of five years as prescribed under the law and, therefore, we find neither any error on facts nor in law giving rise to any substantial question of law for us to indulge in any of these Tax Appeals - Decided against assessee.

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• 2013 (11) TMI 612
  Constitutional validity of the Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007 - Collection of entry tax - Held that:- State of U.P. did not lack legislative competence in enacting U.P. Tax on Entry of Goods into Local Areas Act, 2007, imposing entry tax on the entry of scheduled goods into the local areas for consumption, use or sale thereunder. The provisions of the Act patently and facially indicate and that there are sufficient guidelines and guarantees under the Act for ensuring that the entire amount of entry tax collected and credited to the U.P. State Development Fund is utilised only for the purposes of its reimbursement to facilitate the trade, commerce and industry. The State Government has also established that the entire amount of entry tax is by way of reimbursement / recompense to the trade, commerce and industry, in the local areas of the State of U.P. provides quantifiable/ measurable benefits to its payers. The levy under the Act, 2007 is also not discriminatory, unreasonable or against public interest. The levy of entry tax under the Act, therefore, does not violate the freedom of trade, commerce and intercourse guaranteed under Art.301 of the Constitution of India. Section 7 of the Act validating the amount of entry tax levied, assessed, realized and collected under the U.P. Tax on Entry of Goods Act, 2000, is also valid and authorises the State to keep the entire amount, for the purposes of its utilisation for facilitating trade, commerce and intercourse in the local areas of the State - Decided against assessee.

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