TMI Tax Updates - e-Newsletter
November 19, 2012

Case Laws in this Newsletter:

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

TMI SMS

• ST -There is a total confusion in the minds of the revenue as to the nature of the tax and the measure of the tax. On this ground alone demand quashed - Tri

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• IT -Officers of the department must not take advantage of the ignorance of an assessee as to his rights -officers should freely advise them when approached -Tri

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• Works contract service - the claim that prior to 01.06.2007, the service itself was not liable to tax can not be upheld. - Tri

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• Know Your Customer (KYC) - Customer Identification Procedure Features to be verified and documents that may be obtained from customers - FEMA Circular

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• Penalty -the requirement of filing form 24Q was new one & as being the first year of filing such return, there was reasonable cause for delay -penalty cancelled

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• Reassessment - jurisdiction - It appears that the AOat Delhi were either trying to avoid or had some reasons not to assume jurisdiction over the matter - HC

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• Auction of property on non payment -right of highest bidder -revenue directed to return the amount of 25% of the bid offer deposited by him with interest -HC

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Articles

1. EMERGING ECONOMIES CORRUPTION IS ABOUT TO INCREASE.

   By: INDRANEEL SEN GUPTA

2. GENERATION OF ELECTRICITY IS A MANUFACTURING ACTIVITY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Dr. Ashwani Kumar Inaugurates International Conference on Equitable Access to Justice: Legal Aid and Legal Empowerment

2. Minutes of the 42nd meeting of the SEZ Board of Approval held on 16th September 2010 to consider proposals for setting up of Special Economic Zones

3. Minutes of the 43rd meeting of the SEZ Board of Approval held on 18th November 2010 to consider proposals for setting up of Special Economic Zones

4. Rate of Exchange of Conversion of Foreign Currency into Indian Currency or Vice Versa Relating to Imported and Export Goods Notified; to Come into Effect from 17th November, 2012

5. Index Numbers of Wholesale Prices in India (Base: 2004-05=100) Review for the month of October, 2012

6. Need to take Specific Measures to Enhance trade between India and Belarus, says Dr. D Purandeswari India Interested in Investing in Belarusian Potash Sector

7. Under-Recovery on Diesel Effective 16.11.2012 remains high at Rs 9.06 Per litre Under-recoveries for November on Domestic LPG Rs 478.50 per Cylinder and on PDS Kerosene Rs 31.30 per Litre OMCs Incurring Daily Under-Recoveries of Rs 412 Crore Daily Crude Oil Price for Indian Basket rises to US$ 107.91 per barrel on 15.11.2012

8. Government in a Statement States that Appropriate Action has been Taken on the Information Received by it from the Government of France in June 2011

9. Statement of Shri P Chidambaram

10. Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy seeds, Gold and Silver Notified

11. FM to Discuss Issues of Flow of Credit in Different Sectors, Financial Inclusion Including Opening of New Branches of RRBs and Progress of Centrally Sponsored Schemes among Others during his Meeting with the CMs of North Zone and CEOs of PSBs and FIS Tomorrow

Notifications

Customs

1. 99/2012 - dated 16-11-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 17th November, 2012

2. 98/2012 - dated 14-11-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy Seeds, Gold and Silver Notified

Income Tax

3. 50/2012 - dated 15-11-2012 - IT

Corrigendum - Notification No. 46/2012, dated 6-11-2012 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds - Regarding

VAT - Delhi

4. F.7(433)/Policy-II/VAT/2012/861-871 - dated 12-11-2012 - DVAT

Last date for submission of online information in Form Stock-1 of the available stock as on 31.03.2012 is now extended up to 30th November 2012.

Circulars / Instructions / Orders

FEMA

1. 51 - dated 15-11-2012

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 Money changing activities

DGFT

2. 30 (RE-2012)/2009-2014 - dated 16-11-2012

22 new commodities/items added Indo–Myanmar Border Trade.

3. 29(RE-2012)/2009-14 - dated 12-11-2012

Regarding for Guidance of Bank Guarantee (BG)/ Legal Agreement (LUT).

Highlights / Catch Notes

Income Tax

• Corrigendum Updates Tax-Free Bonds Notification No. 46/2012: Clarifies Income Tax Implications for Secured, Non-Convertible Bonds.

  Notifications : Corrigendum - Notification No. 46/2012, dated 6-11-2012 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds - Regarding - Notification
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• High Court Rules on Capital Gain from Tree Sale: Follow Section 48 for Accurate Cost and Indexation Calculation.

  Case-Laws - HC : Capital gain for sale of rosewood and silver oak trees - computation of cost of acquisition and indexation - capital gain has to be assessed on the basis of Section 48 - HC
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• Assessee's Shipping Business Classified as Occasional; Falls u/s 172(7) of Income Tax Act, Not 172(4).

  Case-Laws - AT : Shipping business of non-residents - occasional shipping business or regular shipping business - the case of the assessee falls u/s 172(7) and not u/s 172(4). - HC
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• Department Officers Must Guide Assessees on Rights, Including Depreciation Allowances, Without Exploiting Their Unawareness.

  Case-Laws - AT : Depreciation allowance - officers of the department must not take advantage of the ignorance of an assessee as to his rights - officers should freely advise them when approached - AT
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• Section 14A: No Expense Deduction for Non-Taxable Income; Inapplicable to Income Taxed at Lower Rates.

  Case-Laws - AT : Section 14A is the deduction of expenses incurred by the assessee in relation to income not at all chargeable to tax and not the income chargeable to tax at lower rate of tax. - AT
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• Indian Branch Head Office Expenses Must Be Allowed u/s 37(1), Separate from Shared Expenses in Section 44C.

  Case-Laws - AT : Head office expenses - Once the amount is found to be exclusive expenditure incurred by the head office towards the Indian branch, the same is required to be allowed in terms of Sec 37(1), without clubbing it with shared head office expenses as per sec. 44C. - AT
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• Tribunal's Decision on Unaccounted Money Stands Firm Despite Multiple Interpretations by Fact-Finding Authority.

  Case-Laws - HC : Unaccounted Money – fact finding authority - Even if two views were possible, it would not be possible for to overturn the findings of fact arrived at by the Tribunal particularly when Tribunal had taken into consideration all relevant evidence. - HC
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• No Penalty for Turnover Suppression: Taxes Paid with Interest Before Section 148 Notice, Avoids Section 271 Penalty.

  Case-Laws - HC : Penalty u/s 271 - suppression of turnover - The suppression of turnover is different from the suppression of income. - taxes with interest paid after survey but before notice u/s 148 - no penalty - HC
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• Entity's Educational Purpose Questioned Amid Financial Activities and Section 13(1)(c) Violations in Trustees' Salaries.

  Case-Laws - AT : Charitable purpose - purchase of a BMW car, borrowing of loans from Sindhi Financiers, non-maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. - AT
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• Penalty for Late Filing of Form 24Q Waived Due to First-Year Filing Requirement and Reasonable Cause.

  Case-Laws - AT : Penalty - the requirement of filing form 24Q was new one for the assessee and as being the first year of filing such return, there was reasonable cause for delay in filing of returns - penalty cancelled - AT
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• Assessing Officer in Delhi Hesitates to Assume Jurisdiction Amid Reassessment Proceedings, Sparking Jurisdictional Concerns.

  Case-Laws - HC : Reassessment proceedings - jurisdiction - It appears that the Assessing Officer at Delhi were either trying to avoid or had some reasons not to assume jurisdiction over the matter. - HC
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• Department Ordered to Refund 25% of Bid Amount to Petitioner in Auction of Immovable Property Case.

  Case-Laws - HC : Auction of immovable property on non payment - right of highest bidder (petitioner) - Departmental authorities are directed to return to the petitioner the amount of 25% of the bid offer deposited by him - HC
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Customs

• Software License Certificates Imported with Hardware are Integral, Not Separately Classified under Heading 4907 as IT Software Documents.

  Case-Laws - AT : Classification – Software licence certificates are part and parcel of the hardware imported by the appellants. - classification under CH 4907 as Documents of title conveying the right to use Information Technology Software cannot be accepted - AT
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• Fuel in Vessel's Bunkers Classified with Vessel Under Heading 89.08, Per Case Law Decision.

  Case-Laws - HC : Classification - once the fuel and oil contained in the bunkers, that is, engine room tanks, as a natural corollary the same would be classifiable along with the vessel under Heading No.89.08 - HC
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• ECGC and private insurance claims in Rupees not recognized as export realization in foreign exchange by IRDA.

  Case-Laws - CGOVT : Drawback benefit – The claims settled in Rupees by ECGC and private insurance companies regulated by IRDA should not be constituted as export realization in foreign exchange - CGOVT
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• Tariff Values Updated for RBD Palmolein, Brass Scrap, Poppy Seeds, Gold, and Silver in Customs Notification Amendment.

  Notifications : Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy Seeds, Gold and Silver Notified - Notification
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DGFT

• Indo-Myanmar Border Trade Boost: 22 New Commodities Approved for Trade by DGFT to Enhance Economic Cooperation.

  Circulars : 22 new commodities/items added Indo–Myanmar Border Trade. - Public Notice
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• Bank Guarantee by Surety Bank; Letter of Undertaking by Exporter/Importer Explained.

  Circulars : FTP - Bank Guarantee (B.G.) would require execution by the surety Bank (Guarantor) and LUT by Exporter/Importer.
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• New Guidance on Bank Guarantees & Legal Undertakings: Streamlining Processes for Trade Compliance & Transparency.

  Circulars : Regarding for Guidance of Bank Guarantee (BG)/ Legal Agreement (LUT). - Public Notice
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FEMA

• KYC and Customer ID Procedures: Key Document Types for Compliance Under FEMA and Tax Regulations Updates.

  Circulars : Know Your Customer - Customer Identification Procedure Features to be verified and documents that may be obtained from customers - FEMA Circular
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Corporate Law

• Secured Creditors and Workmen Share Equally in Claims Under Inter Se Pari Passu Charge in Company Law.

  Case-Laws - SC : Claim of secured creditors and the workmen to balance due - workmen's charges as well as that of the secured creditors have to be paid in preference to all others, but with inter se pari passu charge on the amounts realized from the sale of the security or otherwise - SC
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Indian Laws

• Indian Government Revises Duty Drawback Rates Effective October 10, 2012, Impacting Exporters' Financial Planning and Pricing Strategies.

  None : Rates of Duty Drawback w.e.f. 10-10-2012
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Service Tax

• Appeal Dismissal Overturned: Stay Application Not Decided on Case Merits.

  Case-Laws - AT : As the stay application has not been decided on merits of the case, therefore, the order of dismissal of the appeal is not sustainable in the eyes of law - AT
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• Service Tax Confusion Leads to Erroneous Decisions by Authorities; Contested Orders May Be Annulled.

  Case-Laws - AT : Chargeability to Service Tax - There is a total confusion in the minds of the adjudicating authorities as to the nature of the tax and the measure of the tax. On this ground alone the impugned orders deserve to be set aside. - AT
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• Works Contract Services Taxable Before June 1, 2007: Court Dismisses Claims of Non-Liability.

  Case-Laws - AT : Works contract service - the claim that prior to 01.06.2007, the service itself was not liable to tax can not be upheld. - AT
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Central Excise

• Debonding of 100% EOU: Should Depreciation Follow Notification No. 52/2003-C.E. or Notification No. 53/97-Cus?

  Case-Laws - AT : Debonding of 100% EOU – whether the depreciation is to be calculated as per the provisions of Notification No. 52/2003-C.E., or as per the provisions of Notification No. 53/97-Cus. - AT
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• Court Orders Auction Purchaser to Pay Dues Per Rule 230(2), Penalty Not Recoverable from Petitioner.

  Case-Laws - HC : Recovery of dues from the auction purchaser unit in terms of Rule 230(2) of the Central Excise Rules, 1944 - petitioner directed to pay the dues - however penalty not to be recovered - HC
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Case Laws:

• Income Tax

• 2012 (11) TMI 536
  Computation of eligible income for deduction u/s 10A – Treatment of misc. income, credit Balance written back – Held that:- Following the decision in case of EXTRUSION PROCESS PVT. LTD. (2006 (6) TMI 261 - ITAT MUMBAI), there is no decision to the contrary brought to its notice and finally decided the issue in favour of the assessee. In favour of assessee Notice period salary for the purposes of arriving at the deduction u/s 10A – Held that:- Since the said amount represents recovery of the business expenses earlier incurred by the assessee in recruiting and training of the employees concerned, the income arising on account of such recovery also represents the business income of the assessee. Included in income. In favour of assessee Eligible income u/s 10A - Foreign exchange fluctuation gain – Held that:- Following the decision in case of Renaissance Jewellery (P.) Limited. (2005 (5) TMI 246 - ITAT BOMBAY-G) held that the profit on account of foreign exchange gain is directly referable to the articles and things exported by the assessee. Such profits are, therefore, in the same nature as the sale proceeds and there is no reason while deduction u/s 10A should not be allowed in respect of such exchange gain. In favour of assessee Interest income for purposes of computing eligible income u/s. 10A – Held that:- Following the decision in case of Navbharat Explosives Co. P. Ltd. (2010 (6) TMI 588 - CHHATTISGARH HIGH COURT) wherein it was held that the income by way of interest on fixed deposits is not eligible for special deduction u/s 10A. In favour of revenue Deduction u/s 10A - Sales made to the branch office located in US – AO argued that it is merely a case of transfer – Held that:- Following the decision in case of Virage Logic International (2007 (1) TMI 299 - ITAT DELHI) held that the said exports constitutes sales. As the transfers between the HO and the Branch Office and vice versa with the approval of the STPI clubbed with satisfaction of other conditions like realization of proceeds in foreign exchange, constitutes exports for the purpose of the deduction u/s 10A. In favour of assessee Disallowance made invoking Sec 195 r.w. Sec. 40(a)(ia) - DTAA with USA – Whether remittance made by the assessee to its branch office abroad subject to TDS provision - Assessee made payment to its US Branch on account of work sub-contracted to them – Held that:- Following the decision in case of GE India Technology Centre Private Ltd. (2010 (9) TMI 7 - SUPREME COURT OF INDIA) that these payments are outside the scope of Sec 195 for the reason that the branch office abroad is part and parcel of the assessee and it is a 'resident' in status and 'not non-resident', as made out by the Revenue. The provisions of Sec 195(1) mention clearly that only the payments to non-residents attract provisions of Sec 195. Issue is decided in favour of the assessee

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• 2012 (11) TMI 515
  Refund of TDS - denial of claim on no TDS certificates were enclosed - Held that:- The return of income was filed beyond the time limit prescribed by Section 139(1) and even Section 139(4). Moreover, the petitioner has not enclosed the original TDS certificates along with the return of income and this is evident from the fact that in the column showing the enclosures to the return of income, the petitioner has not mentioned that any original TDS certificates were enclosed. Therefore, there is no acceptable evidence for the tax deducted at source. It would be contrary to law to grant refunds on the basis of the photocopies of the certificates without the originals being produced for verification or filed. The reason advanced by the petitioner for the delay in filing the return of income that one Bhai Mohan Singh, the treasurer of the petitioner, who signed the belated return of income was out of the country is not found correct as the Form No.10, which was annexed to the return of income was dated 30.10.1998 and was signed by the treasurer himself. He had also signed the audited accounts attached to the return and these accounts were signed on 21.05.1999; therefore the reasons for the delay in filing the return of income were found to be factually incorrect. As regards the reasons given by the petitioner in its application dated 21.12.2006 ere was no supporting evidence to show that because of the differences in the family the concerned files and records could not be traced - against assessee.

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• 2012 (11) TMI 514
  Non-genuine interest - CIT(A)approved the Creditworthiness and identity of cash creditors - Held that:- Circular dated 27th March, 2000 issued by the Central Board of the Direct Taxes was binding upon the Department and, therefore, the appeal preferred by revenue against the order of the CIT(A) dated 26.7.2006 wherein tax effect was less than rupees two lac ought not to have been filed. Appeal is dismissed as not maintainable.

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• 2012 (11) TMI 513
  Non deduction of TDS - transportation charges - reimbursement of expenses - security expenses, courier fees, bus hire charges, consultancy fees and accounting charges - Held that:- The said expenditure stands incurred only for and on behalf of the principal, who was obliged to reimburse the same in full, and indeed did so, so that there is no claim in respect to the same by the assessee per its return of income. As decided in ITO v. Dr. Willmar Schwabe India (P.) Ltd. [2005 (3) TMI 398 - ITAT DELHI-D] the reimbursable expenses, separately billed, would not be subject to tax deduction at source. Thus even though the assessee may be liable for tax deduction, which has not been deducted, where the same, whatever be the method of accounting or methodology employed, is not claimed as expenditure, there is no question of any disallowance in its respect - in favour of assessee. Transportation charges of Rs. 28,63,254/- Held that:- As it is not in the nature of payment to any third party, but only represents the deduction made by the principal on account of short delivery of stock and, therefore, is by way of transportation shortage, thus no question of application of sec. 40(a)(ia) - in favour of assessee. Transportation charges of Rs. 3,07,98,732/- Held that:- Even though the privity of contract may be between the assessee (whose obligation it is for the transportation of goods) and the transporter, rather, irrespective of whether the contract is between the assessee and the transporter or the principal and the transporter - the payment in either case being only in pursuance to a contract, the liability u/s 194C being on the person responsible for making the payment and not on the one who may finally bear it, so that it (the payment) could be on account of a different person, as the assessee's principal in the instant case, the disqualification and the consequential disallowance under section 40(a)(ia) would apply only where the claim for expenditure is preferred in its respect by the assessee. The matter, therefore, as in the case of other expenses forming part of the assessee's appeal, is restored back, on identical terms and scope, to the file of the Assessing Officer - in favour of revenue for statistical purposes..

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• 2012 (11) TMI 512
  Capital gain for sale of rosewood and silver oak trees - computation of cost of acquisition and indexation - Held that:- It is not in dispute that the trees are held to be the capital asset and part of the fixed structure of a coffee or tea plantation. When the trees have been cut and removed, the capital gain has to be assessed on the basis of Section 48 but in the instant case, the cost of acquisition of the assets has not been properly examined by the authorities below. Solely on the basis of some letter written by the Officer of the Government Department, the cost of acquisition of the assets cannot be assessed. Accordingly, the CIT (Appeals) while setting aside the order passed by the Assessing Authority directed the Assessing Authority to work out the market value of the assets as on 01-04-1981 after obtaining the specific notification from the office of the Conservator of Forests with regard to market value in respect of rosewood and silver oak trees as on 01-04-1981 and to work out the capital gain by working out the indexed market value. Except the letter dated 31-3-1981, no other materials has been produced before the authorities. Thus the order passed by the ITAT in setting aside the order passed by the CIT (Appeals) wherein the Commissioner has directed the Assessing Authority to reconsider the matter is contrary to law. The Appellate Tribunal has also not examined the market value of the assets as on 01-04-1981 the order passed by the Appellate Tribunal cannot be sustained. The matter has to be re-examined by the Assessing Authority by working out the indexed market value in respect of rosewood and silver oak trees - in favour of revenue by way of remand.

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• 2012 (11) TMI 511
  Registration u/s 12AA - rejection of application as the objects of the assessee - trust were for a specific community - Held that:- The fee concessions extended to the non-Anglo Indian and non-Christian students comprised were of Hindus and Muslim students for the academic years 2007-08, 2008-09 and 2009-10. Further, in the academic year 2009-2010, fifteen students of disabled category irrespective of their caste, creed and religion have been extended fee concessions. None of the students were belonged to Anglo Indian community. Moreover, the benefit derived by the Anglo Indian community did not exceed even 5% of the total expenditure incurred by the assessee trust. The above statistics furnished by the assessee has not been dispelled/controverted by the revenue, thus it unambiguously testify that the assessee trust's objects were NOT for the benefit of a particular community as alleged by the DIT (E) and as a result of which, he had invoked the provisions of s. 13(1)(b). Also while analyzing the list containing the fee concessions extended to the disabled students is that they were belonged to either Hindu or Muslim community but, none were from the Christian or Anglo Indian community. This clearly exhibits the secular character of the assessee-trust that the educational institution has been serving the masses irrespective of their caste, creed and religion - in favour of assessee.

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• 2012 (11) TMI 510
  Shipping business of non-residents - occasional shipping business or regular shipping business - CIT(A) held the order passed u/s 172(4) is null and void - income from 40 voyages - Held that:- Tax effect in a "case" means overall tax effect in respect of disputed issues in a particular assessment year in the case of the assessee himself. Tested on the aforesaid basis, tax effect in respect of disputed issues in the assessment year under appeal in the case of respondent-company is more than Rs. 3 lakhs and hence all the 40 appeals filed by the Department are held to be maintainable. Looking to the magnitude of the voyages undertaken by the freight beneficiary and the fact that the respondent-company has been, as observed by the CIT(A), regularly filing its return of income at Mumbai and being assessed to tax at Mumbai, the finding of the CIT(A) that the freight beneficiary is not engaged in occasional shipping business but in regular shipping business and hence would be outside the scope of section 172 cannot be said to be untenable on facts and in law. His finding in this behalf is therefore confirmed. Similarly, the Department has not placed any material on record to rebut the finding recorded by the CIT(A) that the respondent-company has already filed its return of income at Mumbai. That being the position, the provisions of section 172(7) would apply to the respondent-company. Besides, as rightly observed by the CIT(A), the Income-tax Act does not permit multiple assessments in the hands of the same taxable entity and that too in respect of income from the same business. On these facts, unable to disturb the finding recorded by the CIT(A) that the respondent-company is liable to be assessed on the basis of return filed u/s 139(1) for its entire income is therefore confirmed. His further order quashing the order passed by the AO u/s 172(4) is also resultantly confirmed. Perusal of the order passed by the CIT(A) shows that he has taken a view that the case of the respondent falls u/s 172(7) and not u/s 172(4). The respondent-company has also accepted the liability to be dealt with u/s 172(7). The jurisdictional AO may therefore verify the position and take such action as may be warranted in law in terms of section 172(7) to ensure that the income of the assessee from the aforesaid 40 voyages does not escape assessment as per the normal provisions of the I-T Act - in favour of assessee.

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• 2012 (11) TMI 509
  Penalty u/s 271(1)(c) - revised return admitting nil income claiming set off of losses - Held that:- As gain and loss of sale of PSL shares are concerned, there are more or less cancel each other. As far as the loss of LNG project is concerned, AO himself accepted the claim even though assessee has not originally claimed but, offered along with the capital gain on MISEZ shares. Out of two major amounts of disallowance, one was expenses of Rs. 30/- lakhs disallowed on adhoc basis. This amount cannot be a basis for levy of penalty as it was adhoc disallowance. The other amount is disallowance under section 14A and the disallowances under section 14A was considered by the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein furnishing of 'inaccurate particulars' was examined and cancellation of penalty was upheld. Therefore, disallowance under section 14A also does not call for penalty. Capital gain on the sale of MISEZ shares - there is a bonafide belief on the part of assessee that the capital gains arising on sale of MISEZ shares are exempt from taxation as the application under section 10(23G) was pending with CBDT. The argument of the learned DR that the provision itself was withdrawn from 1/4/2007 cannot be accepted as relevant provisions was applicable for the year under consideration and assessee did make an application in time which was pending by the time the return was filed. In fact the application is still pending as no decision has been taken as yet by CBDT. Since the entire amount of capital gain ultimately brought to tax was arising out of sale of shares in MISEZ alone, there is a bona fide belief on the part of assessee in not offering capital gains. Therefore, section 271(1)(c) cannot be attracted and accordingly allowing the grounds of assessee. The order of AO does not indicate whether this loss was set off in earlier years or still available for set off. There is no mention about the carry forward losses. However, after setting off to the capital gain, as net computation under the head business was a loss, the total income determined at Rs. 4,43,14,513/- was only arising out of the long term capital gain, out of which if the amounts of disallowances were excluded the net amount of Rs. 2,98,97,272/- comprises only of long term capital gain - in favour of assessee.

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• 2012 (11) TMI 508
  Deduction u/s 80IB - disallowance as built up area of the project did not have the approval of the local authority - CIT(A) allowed the claim - Held that:- Refering to the clarification of the CBDT in a letter vide F.No.205/3/2001/ITA-II dt.4.5.2001 addressed to the Maharashtra Chamber of Housing Industry in which it has been stated that approval of any project as a housing project by the local authority would be adequate for the purposes of section 80IB of the Act. Although, the learned Departmental Representative has contended that aforesaid clarifications were given in the context of the commercial areas being constructed along with the housing project, it is viewed that the scope cannot be considered to be restricted to that circumstance alone. This is due to the fact that the definition of a housing project is not given under the Act and therefore the view of the CBDT that a housing project is one which is approved by a local authority requires to be given full effect to. Therefore, it cannot be construed that what the assessee has constructed is not a housing project. CIT(A) has rightly placed reliance on the decisions of Petron Engineering Construction Private Limited And Another Versus CBDT And Others [1988 (12) TMI 1 - SUPREME COURT] to arrive at the view that the tax incentive by way of deduction 80IB is predominantly for the purpose of augmenting affordable dwelling and ought to be interpreted in that light. The fact that the assessee has obtained approval for the housing project cannot be lost sight of. As for the excess area constructed it is for the BBMP to look into the violations if any in the construction of the housing project. That however does not authorize the AO to hold that the assessee has not got approval for the housing project OR that the conditions laid down in section 80IB (10) stated violated - in favour of assessee.

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• 2012 (11) TMI 507
  Deduction u/s 80IA - denial of claim - assessee also claimed deduction u/s.80HHC - Held that:- The gross total income of the assessee is at Rs. 8,03,26,598 lakhs after adjusting the losses suffered by it in the eligible as well as profits of the non-eligible units. There are no brought forward losses or unabsorbed depreciation. The claim of deduction under section 80-IA was in respect of eligible unit 4.14 MW wind energy division at Rs. 4,72,28,143 and the deduction u/s.80HHC was claimed in respect of other units at Rs. 15,51,440. Even if both the deductions are added the sum total is obviously less than the gross total income. Thus CIT(A) erred in interpreting the relevant provision when he held that the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA - The assessee is allowed deduction under section 80-IA on the profit derived by it from eligible unit 4.14 MW wind energy unit at Rs. 4,72,28,143. In the case of Meera Cotton & Synthetic Mills (P.) Ltd. Versus Assistant Commissioner of Income-tax, Ward 9(2), Mumbai [2009 (2) TMI 506 - ITAT MUMBAI] after considering the decision of the Hon'ble Supreme Court in the case of M/s Synco Industries Ltd Versus Assessing Officer [2008 (3) TMI 13 - SUPREME COURT ] clearly held that the stage at which set off has to be done is only after aggregation of income under all heads. The CIT(A) did not agree with this reasoning of the ITAT which is held to be bad as the CIT(A) being an authority lower in the tier of authorities under the Act to that of the ITAT, is bound to follow the decision of the ITAT and cannot refuse it without any valid reasons - in favour of assessee.

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• 2012 (11) TMI 506
  Reassessment proceedings - period extending four years - assessee contested against notice as without obtaining prior sanction as required u/s 151 - Held that:- No substance in the submission of DR because section 124 primarily deals with the territorial jurisdiction of AO. Section 151 deals with sanction for issue of notice u/s 148 and it nowhere refers to section 124. The sanction by competent authority, as mentioned in section 151 only, can assign proper jurisdiction to the AO and if such sanction was not obtained, the AO lacked the jurisdiction to complete the reassessment proceedings. When the legislature has specifically assigned jurisdiction to a particular authority under the Act to grant sanction then, if all other conditions are fulfilled, the sanction has to be granted by that very authority. This function cannot be delegated to any other authority. It is the legal duty cost upon that authority to perform the said function. If that authority fails in performing his legal functions and the same is performed by the other authority then it goes to the very root of proper assumption of jurisdiction by the authority which was required to take that sanction. This is purely legal issue and can be raised at any stage of proceeding - Hon'ble Delhi High Court in the case of CIT VERSUS SPL S SIDDHARTHA LTD (2011 (9) TMI 640 - DELHI HIGH COURT) has quashed the reassessment proceedings for want of sanction of Joint Commissioner of Income tax when it was so required as per section 151(2) - appeal decided in favour of assessee.

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• 2012 (11) TMI 505
  Provision for bad and doubtful debts - disallowance - Held that:- Allowance under Section 36(1)(viia) is not a standard allowance which is given but the allowance is subject to the actual provision made by the assessee, which in no case shall exceed 7.5% of the gross total income. Therefore, the argument of the assessee that whatever the provision it had actually made in its books, a provision of 7.5% of the gross total income had to be allowed, is not in accordance with law - against assessee. Provision for standard assets also has to be considered for applying the condition set out under Section 36(1)(viia) - Held that:- Admittedly a provision on standard assets is not against any debts which had become doubtful. Standard assets are always considered recoverable, in the sense, bank has no doubt of recoverability. When the bank itself has treated such assets as good and recoverable, any provision made on such assets cannot be considered as a provision for bad and doubtful debts. The debt itself being good, a provision made on good debt cannot be considered as a provision for bad and doubtful debts. May be, the RBI has made a regulation for 10% provision for standard assets also a prudential norm but this can however be considered as a measure prescribed in abundant caution, to deal with a situation where banks are not to suffer shock of sudden delinquency that could happen in future. Nevertheless, possibility of happening of such a contingency cannot be a sufficient reason to consider a provision made on standard assets also as a provision for bad and doubtful debts. Therefore, claim of the assessee that provision for standard assets also has to be considered for applying the condition set out under Section 36(1)(viia) is not in accordance with law - against assessee. As here there was no enquiry made during the course of assessment proceedings. Therefore, the order which was silent on the claim made by the assessee, and allowing such claim, without any discussion, will definitely render it erroneous and prejudicial to the interests of Revenue as confirmed by CIT.

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• 2012 (11) TMI 504
  Income from Undisclosed Sources - Validity of Gifts - In the present case gift was made by unrelated donor to the assessee. There was no relationship between the assessee and the donor and no occasion was also specified for making the gifts. Furthermore, the Assessing Officer has noted that no evidence has been furnished with the original return of income proving the identity, creditworthiness and genuineness of the alleged gift.. Under the circumstances, the inference made by the authorities below that gifts were bogus is quite cogent enough. Burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. As decided in case of [Rajiv Tondon v. Asstt. CIT 2007 (7) TMI 40 - HIGH COURT , DELHI] held that:- The taxing authorities were entitled to look into the surrounding circumstances, which they did, and come to the conclusion that the gifts could not be said to be genuine. The reason offered by the assessee did not appear to be reasonable, much less acceptable. Therefore, there was no error in the view taken by the Tribunal.The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature." There is no infirmity in the order of the lower authorities on this issue and accordingly, addition is sustained - In the result, Appeal filed by the Assessee stand dismissed. Penalty u/s 271(1)(c) – Held that:- Following the decision of court in case of [ Hindustan Steel v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT] held that :- "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute." – levy of penalty is dismissed – in favour of assessee.

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• 2012 (11) TMI 503
  Depreciation allowance - additional legal submissions before the appellate authorities - revised return filled by assessee - Held that:- The depreciation allowance under Explanation 5 of section 32 is mandatory allowable if the said asset is used for the purpose of business of the assessee. Whether the assessee makes a claim of depreciation or not in his return of income, AO is duty bound to grant depreciation allowance by virtue of Explanation 5 to section 32(1) of the Act (Inserted by Finance Act, 2001 w.e.f. 1/4/2002). Circular No.14 (XI-35) of 1955, dated April 11, 1955 provides that the officers of the department must not take advantage of the ignorance of an assessee as to his rights and that although the responsibility for claiming refunds and reliefs rests with the assessee on whom it is imposed by law, yet the officers should draw the attention of the assessees to any refund or relief to which they are entitled to but which they have omitted to claim for some reason or other, and freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. As decided in CIT v Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME COURT] the declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the ITO, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the ITO. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. Thus CIT (A) has not examined the issue in correct perspective taking into consideration the Explanation 5 to section 32(1) and the Board's Circular mentioned supra. The CIT (A) is empowered to consider additional claim made before him, though not made in the return filed. Therefore, in the interest of justice and equity, the case is restored to the file of the CIT (A) to consider the issues afresh and to take appropriate action in accordance with the provisions of the Act - appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 502
  Penalty u/s 271 (1) (c) - disallowance of amortization claim written off in relation to membership fee paid to stock exchanges - Held that:- As decided in Ananthraman Veerasinghaiah & Co. v. CIT [1980 (4) TMI 2 - SUPREME COURT] the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. Entitlement to depreciation on the membership fee of stock exchange u/s 32 is allowed to assessee as upheld by the Hon'ble Apex Court in M/s Techno Shares & Stocks Ltd. Versus The Commissioner of Income Tax IV [2010 (9) TMI 6 - SUPREME COURT OF INDIA ] as the AO has not been able to establish that the claim of the assessee for deduction of depreciation u/s 32 was not bona fide or that any specific particulars were concealed or furnished inaccurate. Thus a mere disallowance of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction of depreciation on membership fee of stock exchange u/s 32 was debatable issue. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee as confirmed in CIT v. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]. It can at best be a "wrong claim" not "a false claim" - in favour of assessee.

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• 2012 (11) TMI 501
  Undisclosed income u/s 158BC – Discrepancy in stock of finished products and work in progress – Addition on account of inter-se stock position at various stages in the production line - Held that:- As the stock register of furnished goods is kept for central excise purpose and products are not 100% pure & require further processing. Pre-shipment goods pending approval are recorded for MIS purposes but not for central excise purposes as it may require further processing in case the sample was not approved. As search occurred during the middle of year and sales made out of the stock of finished products have been only recorded later and exported and have been duly accounted for in books, there is no need to treat the value as undisclosed income. In favour of assessee Discrepancy in stock of raw materials – Assessee accepting that there is a discrepancy of 730 kgs in an item – But the AO was not agree with the view of assessee – Held that:- After considering the arguments and examining the documents placed on record, only addition of 730kgs value of HCO was required to be confirmed. Even though assessee explanation was that the stock could be out of earlier issued for process, the same cannot be accepted in the absence of reconciliation, so to that extent the addition required to be confirmed. Partly allowed in favour of assessee Discrepancy in stock valuation – Between MIS statement and books - No variation in quantities mentioned but only in valuation of the stock - Difference arose due to different valuation rate adopted – Held that:- Just because MIS statement prepared by factory manager was found, no addition can be made without examining whether the rates adopted on the quantity was not according to the accounting principles. No such exercise was undertaken by AO. Since assessee accounted the stock according to the principle of accountancy being followed and certified by management and auditors, we agree with the argument that variation cannot be brought to tax as undisclosed income on the basis of difference in valuation in books. In favour of assessee Deduction u/s 80HHC – AO argued that there are sales proceeds includes proceeds other then export proceeds - Held that:- Where book results can neither be altered nor have been rejected/altered by the revenue authority and which show export proceeds being received by the assessee. Therefore, the deduction as claimed u/s 80HHC should be allowed to the assessee, within the premise of section 158BH. In favour of assessee

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• 2012 (11) TMI 500
  Registration u/s 12AA - CIT granted registration from A.Y 2009-10 and not from A.Y 2007-08 - rectification application filled by assessee against CIT(A)'s order - Held that:- A bare perusal of the provisions of section 154 clearly reveals that mistake apparent from record must be obvious and patent mistake and not something which can be established by a long drawn process of reasoning, on points on which there may be conceivably two opinions. A decision on merit on a debatable issue does not constitute mistake apparent from record u/s 154 as confirmed in T.S. Balaram, ITO v. Volkart Bros.[1971 (8) TMI 3 - SUPREME COURT]. The assessee or the revenue is not entitled to seek review and reversal of the issues decided, in the order, on merit, in the guise of rectification application u/s 154. In the present case there does not exist rectifiable mistake in the impugned order of the CIT, thus the provisions of section 154 cannot be invoked. The rectification application of the appellant has been rightly rejected by the CIT, as the issue has been considered and decided by him in consonance with the fact situation and the provisions of section 12A(2) r.w. second proviso to Section 12A(1)and its sub-clause (aa). A drastic amendment has been made curbing the power of condonation for registration covering the past years by addition of a proviso and sub-clause (aa) to Section 12A(1)(ii) and substitution clause (b) in the proviso w.e.f. 1.6.2007 by the Finance Act, 2007. Any application filed on or after 1.6.2007 is entitled to registration only for the F.Y during which registration is filed. Further, no merit in the appeal filed by the assessee, as the CIT has granted registration u/s 12AA w.e.f. A.Y 2009-10, having regard to the fresh application dated 14.4.2008, filed by the appellant. The issue involved in the rectification application filed by the assessee, before the CIT(A) is highly debatable much less the mistake apparent from record - Also the condonation of delay application of the assessee is dismissed in absence of proving 'sufficient cause' - against assessee.

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• 2012 (11) TMI 499
  Deduction for head office expenses towards Indian branch - Held that:- Once the amount is found to be exclusive expenditure incurred by the head office towards the Indian branch, the same is required to be allowed in terms of Sec 37(1), without clubbing it with shared head office expenses as per sec. 44C. Accordingly, we hold that no adverse inference can be drawn against the assessee on this issue and such exclusive expenses incurred by the assessee are required to be allowed as deduction u/s 37(1) without any reference to section 44C. In favour of assessee Disallowance of expenses towards earning exempt income – Whether Sec. 14A is applicable on securities on which exempt income was earned held as stock-in-trade - Assessee is an Indian branch of foreign bank - Interest was claimed as exempt u/s 10(15)(iv) earned on tax free bonds - Held that:- Following the decision in case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) that contention raised by the assessee for not applying the provisions of 14A is not accepted. Issue remits back with direction to decides on the basis of above mention judgment. Issue remand back to AO Disallowance of expenses towards earning interest & dividend income – Whether provision of Sec. 14A is applicable where income is chargeable to tax on gross basis at special rate u/s 115A - Held that:- Following the decision in case of Rajasthan State Warehousing Corporation (2000 (2) TMI 5 - SUPREME COURT) that if an assessee is carrying an indivisible business then the entire expenditure including that which was incurred for earning the tax free income would be a permissible deduction. Section 14A does not provide that if income is liable to tax at a lower rate then also the proportionate expenditure should not be allowed as deduction against the other business income. Section 14A is the deduction of expenses incurred by the assessee in relation to income not at all chargeable to tax and not the income chargeable to tax at lower rate of tax. In favour of assessee Assessee received from and paid interest to overseas branches – Whether the provision of interest by a PE of a foreign enterprise payable to HO and/or other branches outside India is allowable deduction - AO argued that assessee is covered by section 9(1)(v)(c) - Interest paid by the HO is taxable in India - Held that:- Following the decision in case of ABN AMRO BANK, N.V. (2005 (8) TMI 294 - ITAT CALCUTTA-E) neither any deduction is allowed for the interest paid to HO or foreign branches nor income is recognized in respect of the interest earned in transactions between the HO and PE. Therefore we hold that hold that no deduction be allowed for interest paid to HO at Rs. 19,09,987 and at the same time no income can be taxed on account of interest earned from HO. Issue of assessee partly allowed in favour of assessee Disallowance of deduction claimed u/s 43D - In respect of interest on bad or doubtful debts where assessee is a Scheduled Bank - AO argued that the claim of the assessee is not tenable because the assessee has credited such amount in the RFDI Account – Held that:- Assessee is entitled to claim of such interest u/s 43D and the claim of the assessee cannot be rejected simply on the ground that interest has been credited on such type of debts in the reserve account. However, for the verification of the figures, we direct the AO to see that what has actually received by the assessee during the year has been offered to tax. Issue decides in favour of assessee and remand back to AO Interest Tax Act. 1974 – Interest Tax on amount of interest received - Interest on non-performing assets as described in section 43D can be assessed only in a condition that either they are credited to P&L Account or it is actually received - Whatever interest is actually received on such assets is taxable – Held that:- AO has to recompute the assessable interest after giving the assessee a reasonable opportunity of hearing and if there is incorrectness in the interest computed as assessable the same may also be removed. Issue decides in favour of assessee & remand back to AO

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• 2012 (11) TMI 498
  Deduction u/s 80IB(8A) - AO argued that assessee sold services that was output of its research to the pharmaceutical companies – without prior permission of the prescribed authority - Violation of Rule 18DA(2)(a) – Held that:- As per Rule 18DA, if at any stage it is found that any provisions of the Act or the rules have been violated, the prescribed authority specified may withdraw the approval so granted. The authority has not withdrawn the approval of the assessee for the assessment year under consideration but has further granted the extension of the approval for a further period of three years. AO himself in the subsequent year i.e. 2009-10 in the order passed u/s 143(3) has discussed at length Sec. 80IB(8A) & Rule 18DA(1) and has finally concluded that the assessee is entitled to deduction u/s 80IB(8A). Appeal decides in favour of assessee

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• 2012 (11) TMI 497
  Unaccounted Money – fact finding authority - evidentiary value of the seized paper - during the search operation, a note was seized from the business premises of the assessee. Such note was written in his own handwriting. In the note several amounts were written and against each figure, names of persons connected with such amount was mentioned. On both sides of the page, all figures were totalled up. In his statement during the search, the assessee admitted that such amounts represented unaccounted money. - Only during the course of the assessment proceeding, the assessee produced a note written by Shri Bhanwarlal suggesting that he had never received any money from the assessee. Held that:- Mere note purported to have been given by Shri Bhanwarlal would not dislodge other voluminous and material evidence. The Tribunal found that the contents of the note cannot be readily believed. Tribunal had taken into account all relevant factors, examined evidence on record and came to the conclusions which are purely factual in nature. The High Court should not have taken upon itself the responsibility to go into the question whether the findings of facts reached by the tribunal are correct. The only question that the High Court was called upon to determine was whether on the facts found by the tribunal, the receipt in question should not have been considered by the tribunal as Revenue receipt. Tribunal committed an error in appreciating the evidence on record and in particular the answers given by the assessee in his statement recorded by the Revenue Authority during the search and thereafter. Even if two views were possible, it would not be possible for to overturn the findings of fact arrived at by the Tribunal particularly when Tribunal had taken into consideration all relevant evidence. It is not a case of no evidence and in that view of the matter, the findings of the Tribunal cannot be categorized as perverse - In the result, Appeal is decided against the assessee and in favour of the Revenue.

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• 2012 (11) TMI 496
  Penalty u/s 271 - suppression of turnover - Held that:- The suppression of turnover is different from the suppression of income. If there is suppression of turn-over, there is liability to pay excise duty. Merely because the excise duty is paid, there is no presumption that it leads to taxable income in the hands of the assessee. The tax under the Income Tax Act is payable for the income in excess of the limit prescribed under the Act. It is in this context, after the Settlement Commissioner under the Excise Act resolved the dispute between the parties, which waived the penalty, then whether he had income or not, he was forced to file revised returns and then pay tax as well as the interest for delayed payment of tax. All this was done prior to issue of notice u/s 148 or may be after the survey was conducted by the Income Tax Department. That by itself would not lead to a conclusion that there was concealment of income, as rightly held by the Tribunal - no substantial question of law which arise for consideration - in favour of assessee.

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• 2012 (11) TMI 474
  Reassessment proceedings - block assessment under section 158BC - unaccounted gold ornaments - Held that:- On plain reading of the reasons recorded, the stock of gold ornaments valued at Rs.29,77,726/- was subject matter of block assessment under section 158BC. AO after considering the material on record in fact made an addition of Rs.29,77,726/- as undisclosed income of the petitioner. Such addition was set aside by the Commissioner (Appeals). The order of Commissioner (Appeals) deleting such addition was upheld by the Tribunal. Thus, when the undisclosed income determined by the AO included Rs.29,77,726/- being the value of gold ornaments which the assessee claimed to be belonging to its customers was subject matter of block assessment, the same cannot be made the subject matter of regular assessment under Chapter XIV of the Act. Under the circumstances, the reopening of assessment in relation to a matter which was subject matter of block assessment is evidently without jurisdiction. When the Commissioner (Appeals) as well as the Tribunal have examined the issue on merits and have held in favour of the petitioner, the AO can have no reason to believe that income chargeable to tax has escaped assessment. For this reason also, the reopening of assessment under section 147 is without jurisdiction - in favour of assessee.

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• 2012 (11) TMI 473
  Gross profit on sale of stock - additional income deleted by CIT(A) - Held that:- The assessee had transferred the stock of old stock of cloth at book value to its sister concern which according to the A.O. should have been transferred at cost plus profit. The assessee’s submission is that the stock was old and non-moveable stock which it had been carrying forward from earlier years has not been disputed by the Revenue by bringing any material to the contrary on record. Further, it is a settled law that Revenue cannot claim to put itself in the armchair of the businessman and assume the role to decide as to how to run the business. A businessman cannot be compelled to maximise its profits. CIT (A) has also given a finding that the case of the Revenue is that it is of a sale to sister concern at a price which is less than its market value. The Revenue has not brought any specific material on record to show a particular sale price. No deeming provision of the nature of section 40A(2)(b) for sales transaction. The Revenue has also not been able to controvert the findings of the CIT (A) or rebut his observations. Thus no reason to interfere in the order of CIT (A) - in favour of assessee.

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• 2012 (11) TMI 472
  Bogus creditors - CIT(A) deleted the addition - Held that:- Balances of sundry creditors appearing in the balance sheet could not have been assessed as income in the hands of the assessee without proving them to be non-genuine. There is no finding of the AO that the assessee has paid these creditors out of unaccounted money or the balance shown in the balance sheet as sundry creditors were fictitious entries. Assessee has submitted before the CIT(A) that these balances consisted of earlier years’ balances also but the AO has not made further inquiries in the matter by issuing summons etc. to the creditor parties to verify the genuineness or otherwise of balances in the trade accounts - addition made was rightly deleted by the CIT(A) - in favour of assessee.

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• 2012 (11) TMI 471
  Personal expenses - Disallowance of Traveling, Telephone and Mobile Expenses - Held that:- The assessee could not produce supporting vouchers for each and every item of expenses claimed under the head “Travelling, Telephone and Mobile Expenses”. The disallowance made on account of personal element involved under this head of the expenses at the rate of 10% at Rs.58,929/- could not be said to be excessive - against assessee. Disallowance of Credit card expenses & penalty for delayed payments - Held that:- As assessee has not made any submissions before the CIT(A), there is no mistake in the order of the CIT(A) in confirming the disallowance - against assessee. Disallowance u/s.40(a)(ia) - Held that:- As decided in Merilyn Shipping & Transports Vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] the provision of section 40(a)(ia) are applicable only to the amount of expenditure which is payable on 31st March of every year and it cannot be effected to disallow which had been actually paid during the previous year, without deduction of TDS - thus disallowance is restricted to Rs.4,85,252/- amount payable as on 31-3-2005 and the balance disallowance is deleted - partly in favour of assessee. Addition on estimation of closing stock - CIT(A) deleted the addition - Held that:- The method of accounting of the assessee was same as adopted by the assessee in the earlier period and has been accepted throughout by the department. There is no valid reason for disallowance of 50% of the purchases and the AO has not taken into consideration RA bill for the month of March, as also payment received during the month. In the facts and circumstances of the case, there being no valid reason for making the addition on account of estimation of closing stock - in favour of assessee. Disallowance on account of site expenses - CIT(A) deleted the addition - Held that:- The assessee could not file site-wise break-up of the site expenses, and therefore the disallowance made at Rs.32,448/- by the AO was quite justified - against assessee. Disallowance of office expenses - Held that:- There is no finding of any non-genuineness of the expense claimed under the head “salary & wages”. These expenses incurred under the head “salary & wages” by nature did not allow any personal use of the assessee, and therefore the CIT(A) was justified in restricting the disallowance to the extent of 10% of the traveling expenses and of telephone and mobile expenses claimed by the assessee - partly in favour of assessee.

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• 2012 (11) TMI 470
  Reopening of assessment - claimed exemption u/s 10B for the assessment year 2004-05 which is the 11th year - Held that:- In the present case, it is not the case of the Revenue that the assessee had not furnished the relevant documents or the information at the time of the assessment. The original assessment order was passed on 29.9.2006. Thereafter, the order was revised by the AO on 23.3.2007. Subsequently, after the elapse of four years notice u/s 148 was issued. The reason for reopening does not fall within the ambit of the provisions leading to escapement of assessment as the assessee had started claiming deduction u/s 10B from the assessment year 1995-96 and not from the assessment year 1994-95. Therefore, 10th and the last year for claiming deduction under the provisions of section 10B is assessment year 2004-05 and not assessment year 2003-04 as has been wrongly held by the AO as well as the first appellate authority - in favour of assessee. Disallowance of deduction u/s 10B - Held that:- As decided in CIT Vs. DSL Software Ltd. [2011 (10) TMI 423 - KARNATAKA HIGH COURT] The said denial of the benefit runs counter to the spirit of section 10B and it would negate the object with which the amended provision was brought in. The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production. The order has been passed by the CIT(A) in a non-judicious and arbitrary manner. The order is not only against the law laid down by the Hon’ble High Court but smacks malafide on the part of the CIT(A). As CIT(A) has committed "intellectual dishonesty" extending it to the limit of perversity. The impugned order has burdened the assessee with the avoidable cost of litigation before the Tribunal and harassment. The appeal of the assessee is allowed with costs of Rs.25,000/- - appeal in favour of assessee.

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• 2012 (11) TMI 469
  Reopening of assessment - undisclosed commission and interest paid to branches period beyond four years - Held that:- The perusal of the computation of total income filed along with return of income that the assessee has disclosed the interest and commission paid to the head offices and branches and also interest earned from head offices and branches. Once these primary facts have been disclosed before the Assessing Officer and has also been accepted by him after verifying them in scrutiny proceedings, it cannot be held that there was any failure on the part of the assessee to disclose fully and truly all material facts on these issues. Even though, the AO has mentioned about the failure on the part of the assessee in the "reasons recorded", however, such a failure cannot be ascribed or inferred from the material placed on record for the simple reason as to what the Assessing Officer is contending in the reasons recorded is the legal inference of taxability of such income. It is not in dispute that the AO on September 15, 2003, had himself carried the file to the CIT(A) and on the very same day, rather the same moment in the presence of the AO, CIT(A) granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of four years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. Thus re-assessment proceedings u/s 147 are treated as void ab initio - in favour of assessee.

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• 2012 (11) TMI 468
  Rectification of order - assessee seeking rectification in the order of the Tribunal confirming valid service of notice u/s. 148 - Held that:- In this case the Tribunal after considering the entire facts and circumstances of the case held that there is valid service of notice u/s. 148. The order of the Tribunal may not be drafted in a manner as the assessee wanted. Because the order is not in favour of the assessee that cannot be said to be an error having mistake apparent on record. The Tribunal cannot be said to be committed an error as the Tribunal not elaborately given the finding that the order of the Tribunal relied upon by the assessee's counsel is not analysed. The Tribunal after taking due care taken a conscious decision that there is a valid service of notice u/s. 148. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. The words used in s. 254(2) are 'shall make such amendment, if the mistake is brought to its notice'. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision - The power to rectify a mistake under s. 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. Thus, what it could not do directly could not be allowed to be done indirectly - no infirmity in the order of the Tribunal and the petition filed by the assessee cannot be said to be falls under the purview of section 254 - against assessee.

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• 2012 (11) TMI 467
  Deduction u/s. 80IB(10) - denial of claim for for want of completion certificate - Held that:- There is no dispute that the assessee has been following percentage completion method and also the assessee furnished the evidence in the form of property assessment document, water connection documents, pollution control permission etc. On an examination of the notices issued by the Bangalore Mahanagar Palike (Municipal Corporation) in respect of 141 flat owners in the assessee's housing project, it is seen that in the notices dated 17.1.2007 in response to the flat owners applications dated 1.12.2006 requesting for assessment and allotment of municipal numbers, the Municipal Corporation had issued notices for payment of the required taxes for the initial assessment. The proof of payment of taxes in certain cases has also been produced. Thus it would appear that the applicants, being flat owners, had individually filed application before the Municipal Corporation for allotment of municipal numbers and assessment. The notice, as above, clearly indicates that the municipal numbers were being allotted in respect of newly constructed residential apartments. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) though all other requirements of the section being fulfilled - If the Revenue is taxing the profit in the year under consideration on the ground that the assessee is adopting "Percentage Completion Method" then the natural corollary should be that the connected deduction ought to be granted simultaneously in this year or the other method of computation is that the Revenue must not tax the profit of the project yearly on the basis of "Percentage Completion Method" but tax the entire profit on completion of the project by applying "Project Completion Method" - direct the AO to allow deduction u/s. 80IB(10) - in favour of assessee.

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• 2012 (11) TMI 466
  Deduction u/s. 80IB(10) - denial of claim as the assessee is not a developer and only carried on the work of contractor and build the residential complex - Held that:- the assessee has been engaged as a builder and not as a contractor. In the present case, the assessee having right to 60% in the constructed area and also a share in the undivided property, cannot be called a mere contractor. Thus the claim of deduction u/s. 80IB(10) is to be granted to the assessee to the extent of its share and there cannot be double deduction - in favour of assessee. Non production of completion certificate - Held that:- Intention would only have been that for the project as a whole, there should be certification from the relevant authority proving the commencement and completion, and not that a completion certificate should be there in every year of the project span. Thus, the Assessing Officer need not insist on the completion certificate in this assessment year, this is the right meaning of the statute - in favour of assessee. Calculation of built up area - AO included the proportionate share of common area in the size of each flat - Held that:- The Finance Act (No. 2) of 2004 inserted the definition of "built up area" to clarify this position, thus finding merit in the contention of the assessee that the proportionate common area should be excluded from the calculation or flat size - in favour of assessee. NIL deduction v/s full deduction v/s proportionate deduction u/s 80IB - Held that:- The assessee is eligible for deduction u/s. 80IB in respect of those flats whose size is within the prescribed limits - in favour of assessee. Work-in-progress related to Maredpally Project credited to the Profit and Loss A/c - Held that:- he Assessing Officer may be directed not to reduce the eligible deduction u/s. 80IB by taking into account the work-in-progress relating to Maredpally site since the quantification of the work-in-progress has not affected the deduction claimed by the assessee u/s. 80IB(10). As the CIT(A) not adjudicated this ground, this issue is remitted back to the file of the CIT(A) for fresh adjudication - in favour of assessee for statistical purposes. Chit dividend, scrap sales and discount on materials are to be considered as income from business eligible for deduction u/s. 80IB(10) as decided in CIT v. Kovur Textiles & Co. [1980 (1) TMI 8 - ANDHRA PRADESH HIGH COURT ]. However, the other income i.e., rent on vacant flat, interest on deposit cannot be considered as income from business and the same has to be considered as income from house property/income from other sources, respectively - partly in favour of assessee.

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• 2012 (11) TMI 465
  Income from the share transactions - Capital gain v/s business income - Held that:- The assessee has made several transactions of purchase of shares during the relevant year under consideration, and if there high volume, frequency and regularity of the activity carried on by the assessee in a systematic manner, it would partake the character of business activities carried on by the assessee in shares, and it cannot be said that the assessee has merely made investments in shares. Matter remanded back to AO to redetermine the income relating to each category of shares as business income or income from capital gains as the case may be, in conformity with Circular No.4 of 2007 dated 15.6.2007.

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• 2012 (11) TMI 464
  Unexplained investment in the factory building - case referred to DVO - Held that:- A.O. did not reject the books of account regularly maintained by the assessee by invoking section 145(3). The assessee raised the ground before the CIT(A) that reference under section 142A to the D.V.O. is without jurisdiction as the A.O. did not reject the books of account. The CIT (A) rejected the assessee's contention with general observation without pointing out serious infirmity in the books of account maintained by the assessee. The CIT (A) on general presumption stated that the cost of construction recorded in the books of account is not supported by bills and vouchers without pointing out any specific instances. The CIT(A) has failed to point out any material in support of his finding that the books of account maintained by the assessee is liable to be rejected under auction 145(3). No convincing reasons why the CIT(A) has estimated cost of construction only on the basis of D.V.O.'s. report when the A.O. made reference to D.V.O. without rejecting books of account regularly maintained by the assessee - order of the CIT(A) is set aside by deleting the addition sustained by the CIT(A) - in favour of assessee.

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• 2012 (11) TMI 463
  Imposition of Penalty u/s 271D,271E – For violation of provisions of sec 269SS, Sec 269T – Shri Suryakant R. Shah (S.R. Shah) was the spouse of a partner of the assessee firm and trustee of B.G. Education Trust which was running a school in the name of Ambe Vidyalaya. The collection centre for the fees of the hostel and the school was at a single place. Sometimes, the fees collected by the hostel were handed over to Shri S.R. Shah as the working hours of the bank might have been over. Since Shri S.R. Shah held the cash on behalf of the hostel for its safe custody, according to the assessee, the same did not imply that the hostel had given any loan to Shri S.R. Shah. Similarly, if some amount was received from Shri S.R. Shah, the same did not mean that hostel had accepted any loan from Shri S.R. Shah in cash. It was the case of the assessee that if some expenditure was incurred by the hostel or the school students and the amount was reimbursed to the hostel by the Managing Trustee of the school, that is, Shri S.R. Shah the same did not become a deposit or loan given or taken by way of cash. Held that:- There was reasonable cause for the assessee to indulge into cash transactions in violation of Section 269SS of the Act. Shri S.R Shah acted as a custodian only, holding the money for a brief period, and that the same were deposited in the hostel's bank account at the earliest opportunity. The provisions of sections 269SS and 269T of the Act would not be applicable. Consequently, the question of contravention of such provisions attracting penalty under sections 271D and 271E of the Act would also not arise. - Decided in favour of appellant.

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• 2012 (11) TMI 462
  Adjustment to ALP - CUP v/s TNMM method - assessee trader of coffee - Held that:- As considered in AY 2006-07 TPO as well as the DRP have not considered the objections raised by the assessee against the comparables selected by the TPO for arriving at the ALP. As seen from the submissions of the assessee, the glaring differences that appears that comparable used by TPO is in the business of processing and trading in spices, whereas the assessee is in the business of trading in Coffee. As the facts of present year are same as above it would be appropriate to consider as to which the most appropriate method for determining the ALP to the TPO for fresh consideration. The fact the assessee adopted CUP method as the most appropriate method will not be conclusive and the endeavour of the assessee and the revenue should be to arrive at the correct ALP. Assessee also submitted that the price at which the Coffee Board sells Coffee seeds should not be taken as bench mark - remand the matter to the TPO for fresh consideration.

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• 2012 (11) TMI 461
  Validity of order passed u/s 263 by CIT(A) - sale of theatrical rights - DR submitted that CIT(A) had not considered the applicability of Rule 9A - Held that:- It is evident from the order of the CIT(A) that the claim of cost of production of film was a subject matter of appeal before the CIT(A) and CIT(A) after consideration of remand report of the AO gave his finding. Therefore, this order of the AO, undisputedly had merged with the order of the CIT(A) as far as the claim of cost of production of film is concerned. AO specifically stated in the remand report to make "working of deduction allowable u/r 9A" of I.T. Rules. Further, also observed from para-10 of the assessment order that the AO called for the details from the assessee by issuing notice u/s 142(1) dated 18-12-2009 to furnish details of cost of production allowable as per Rule 9A of Rs. 27.19 crores. As mentioned hereinabove, the AO after considering the reply filed by the assessee vide letter dated 29-12-2009 as mentioned by the AO considered the claim of the assessee to the extent of Rs. 24,84,37,124/- and disallowed the balance amount of Rs. 2,34,91,380/-. Therefore, it is not factually correct that the AO at the time of making the assessment did not consider the applicability of Rule 9A vis-a-vis claim of the assessee on cost of production of film. CIT in his revisional proceedings cannot travel beyond reasons given by him for revision in show cause notice issued u/s 263. CIT has not exercised his revisional jurisdiction u/s 263 in respect of allowability of claim of production of film in the context of Rule 9A of I.T. Rules validly as the assessment order on this issue had already been merged with the order of CIT(A) dated 12-10-2011 much before issue of show cause notice dated 19-3-2012 to assume jurisdiction u/s 263 therefore, that the order of ld. CIT dated 29-3-2012 is liable to be vacated - in favour of assessee.

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• 2012 (11) TMI 460
  Cancellation of Registration granted u/s 12A - Held that:- The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee's institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non-maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The definition of Charitable Purpose as given u/s 2(15) of the Act refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". - eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assessee, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1)(c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution - In such circumstances, order u/s 12AA(3) of the Act, cannot be sustained - In the result,appeal of the assessee is allowed.

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• 2012 (11) TMI 459
  Penalty for failure to submit returns or statements in time - reasonable cause - No notice issued for default under section 272A (2) (k) - Held that:- There is mistake in notice as regards mentioning of clause (2) of section 272A of the Act is covered by section 292BB which provides that where an assessee has appeared in any proceeding or co-operated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such case shall be precluded from taking any objection in any proceeding or enquiry under this Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner - confirm the order of the CIT(A) upholding validity of impugned proceedings on the strength of notice issued under section 272A(2)(c) - against assessee. No provision in the Act for issuing separate notice for levy of penalty under section 272A(2) for late or non-filing of form 24Q and 26Q - against assessee. Penalty - reasonable cause - As decided in Royal Metal Printers (P) Ltd. Versus ACIT [2010 (1) TMI 938 - ITAT, MUMBAI] the delay in filing the returns, even if they are characterized as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically. In the present case the requirement of filing form 24Q was new one for the assessee and as being the first year of filing such return, thus there is no dispute about the fact that the tax has been deducted by the assessee, there was reasonable cause for delay in filing of returns - penalty cancelled - in favour of assessee.

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• 2012 (11) TMI 458
  Disallowance of expenses in relation to the exempt income u/s. 14A - held that:- The High Court observed that the assessee had not retained the shares with the intention of earning dividend income which was incidental due to his sale of shares which remained unsold by the assessee. The High Court, therefore, did not uphold the order of the Tribunal disallowing the expenditure in relation to the dividend from shares. Thus there being a direct judgment of a Hon’ble High Court on this issue, the same has to be followed in preference to the decision of the Special Bench of the Tribunal in the case of M/s. Daga Capital Management P. Ltd. (2008 (10) TMI 383 - ITAT MUMBAI).

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• 2012 (11) TMI 457
  Reassessment proceedings - question of jurisdiction raised by assessee - Held that:- The petitioner had changed his registered office w.e.f. 4th November, 1989 from first floor 6376 Naya Bans Delhi to Y-192, Loha Mandi, Naraina, New Delhi, and thereafter w.ef. 3rd October, 2000 from Y-92 Loha Mandi, Naraina, Delhi to Room No.9, Y-3C, Loha Mandi, Naraina, Delhi. The principal place of business is at Agra, where he has a floor mill. In his affidavit filed in the High Court, Shri Ashok Kumar Agrawal has described himself to be working as Director of the petitioner company and has given his address as 6/26, Bhai Gali, Belanganj, Agra. He has not annexed the acknowledgment of return or assessment order of the year 1999-2000, with which we are concerned in the present case. It was in the search and seizure operations carried out in Ganga Ram Agrawal Group of cases, a report was sent by Addl. CIT (Inv), Agra on 10.12.2003 reporting the debts of the assessee in the books of accounts of the Agrawal Groups of persons in respect of assessee from which it was derived and on which reasons were recorded by Addl. Commissioner of Income Tax, Range-4, Agra in the notice under Section 148 that the income of Rs. 1,32,45,426/- of the assessee for the year 1999-2000 has escaped assessment. The limitation will expire on 31.12.2006. The respondent no.1 took extreme caution and care before assuming jurisdiction, which was concurrently vested in her. The petitioner admittedly has a branch office and principal place of business at Agra. The respondent no.1, as A.O., send the matter firstly to DCIT, Circle-5 (1), New Delhi and thereafter DCIT, Circle-3 (1), New Delhi which was very surprising as to why these officers at Delhi did not take over the jurisdiction. They simply returned the papers back to respondent no.1, firstly by advising her to pass order in view of G.K.N. Driveshafts (India) Ltd.'s case (2002 (11) TMI 7 - SUPREME COURT) and thereafter returning the papers on the ground that the assessment order of the year 1999-2000, was not accompanied with the letter. It appears that the Assessing Officer at Delhi were either trying to avoid or had some reasons not to assume jurisdiction over the matter. The respondent no.1, before proceedings with the matter, requested for permission of the Commissioner of Income Tax-II, Agra to proceed with the matter who was directed to frame protective assessment orders, so that there is no loss of revenue. The order dated 1.12.2006 giving such direction to her was sufficient to allow her to assume jurisdiction for making assessment. Thus no error of jurisdiction committed by the respondent no.1 in proceedings with the assessment of the income under Section 147/148 which had escaped from the assessment of the petitioner-assessee in the assessment year 1999-2000 - against assessee.

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• 2012 (11) TMI 456
  Non deduction of TDS - payment made to Mathadi Board - disallowance u/s 40(a)(ia) - Held that:- there is no contractual relationship as a principal and contractor between these assessees and Mathadi Board, but, in fact, in pursuance of the provisions of the Act as well as the scheme, both these assessees are bound to engage the labourers or the workers through the Mathadi Board therefore, the disallowance made by the A.O. invoking the provisions of section 40(a)(ia) was not justified - in favour of assessee. Disallowance for non-deduction of tax u/s 194A - Held that:- There is no dispute about the fact that the assessee has obtained the Form No. 15G has provided under section 197A(1)(ia) but the assessee did not furnish the said Form to the CIT, Kolhapur. Thus it is only the procedural lapse. Once the assessee has obtained the Form No. 15G from the payee assessee, has no legal obligation to deduct the tax on the payment made to payee - in favour of assessee.

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• 2012 (11) TMI 455
  Transfer pricing - arm's length price - intra-group services - selection of Comparable - TPO made the addition on various grounds - Held that:- The assessee's objections in this regard were, as such, rejected without passing a speaking order - remit this matter to the file of the ld. DRP, to be decided afresh in accordance with law on considering the aforesaid data provided by the assessee before the TPO.

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• 2012 (11) TMI 454
  Auction of immovable property on non payment - right of highest bidder (petitioner) - stay granted for further proceedings on appeal filled by assessee - appeal allowed without hearing the petitioner - Held that:- Proclamation of sale and holding a public auction are only the initial steps towards sale of immovable property of a tax defaulter to recover such amount through sale of his properties. The highest bidder, whose offer is accepted, during such public auction, has the responsibility to deposit 25% of the purchase money on spot, failing which, the acceptance of offer stands revoked. However, before the sale can be confirmed in favour of the highest bidder, several steps are to be completed and intervening factors to be taken into account, like within fifteen days from the date of public auction, the purchaser has to pay remaining 75% of the amount. Even then the sale is subject to confirmation and the tax defaulter, at various stages, has right either to intervene, pay off the tax or question the very proclamation i.e under Rule 60 he can apply to set aside the sale of immovable property upon deposit of the amount of tax dues, of course before the confirmation of sale. He also has a right to question any order that the Tax Recovery Officer may have passed under the schedule. Rule 86(1) provides for a statutory appeal against any such order before the Chief Commissioner or the Commissioner. Sub-rule (3) empowers the appellate authority, pending its final decision in appeal, to stay the execution of the certificate. It was in exercise of such statutory right of appeal that the respondent No.3 carried order of the Tax Recovery Officer before the Commissioner and questioned the very proclamation of sale. When such appeal was filed, the auction was not even conducted. The petitioner was nowhere in picture. In such appeal, it is unable to find as how at least at the outset the petitioner could have been made a party. The question of joining the petitioner as a respondent in such an appeal at a later stage also would not arise since by merely being the highest bidder in a public auction, the petitioner did not get any vested right in the property. His time for depositing remaining 75% of the amount had not yet expired nor before such date he had deposited the remaining amount. Even after depositing the remaining 75% of the amount, the sale was subject to confirmation & long before such steps could be completed, the Commissioner on the very day of the public auction, had stayed the entire proceedings. Thus as Respondent No.3 had succeeded in requiring the settlement commission to entertain his application for settlement on which certain demand orders were passed & payments were also made the petitioner has made out any case for interference. Departmental authorities are directed to return to the petitioner the amount of 25% of the bid offer deposited by him on 31.03.2000 with simple interest @ 8% per annum from such date till actual payment.

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• Customs

• 2012 (11) TMI 532
  Treating bunkers to be as a part of the vessel's machinery to attract Entry No.89.08 of the Schedule to the Customs Tariff Act, 1985 - Held that:- Considering the reliance placed by assessee on book titled “Ship Design and Construction” for demonstrating that fuel and oil contained in the engine department tanks is always associated and connected with the machinery and engine of the ship which forms an integral part of the vessel and also as per the definition of LDT of ship, oil stored in other tanks on the ship are not included in the LDT, however, oil in engine room tanks is included in the LDT and it, therefore, forms part of the vessel and is classifiable along with the ship under Heading No.89.08. As the fuel and oil contained in the engine tanks is considered to be fuel and oil contained in the vessel's machinery and engines, the same would directly fall within the ambit of sub- para (b) of paragraph 2 of the above referred circular No . 37/96-Cus dated 03.07.1996 and once the fuel and oil contained in the bunkers, that is, engine room tanks, fall within the ambit of sub- para (b), as a natural corollary the same would be classifiable along with the vessel under Heading No.89.08 - in favour of the assessee.

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• 2012 (11) TMI 531
  CHA – mis-declaration – alleged that during the course of investigation, the DRI recorded a statement of Shri Mukesh Thakkar, Proprietor of the appellant firm wherein the appellant under duress admitted mis-declaration - Held that:- Based on a retracted statement without any corroborative evidence, this charge cannot be established - during the inquiry proceedings, the exporter as also the employee of Shri Vijay Mange have testified the licence was not sublet at all and the transaction was undertaken by the appellant himself - none of the charges imputed against the appellant have any basis. Further the investigating officers, whose cross-examination was sought for by the appellant, never presented themselves for cross examination during the inquiry proceedings, thereby denying the appellant a reasonable opportunity to prove his case - charges have been proved does not stand any legal scrutiny and is perverse and bad in law – In favor of assessee

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• 2012 (11) TMI 530
  Drawback benefit - export realization in foreign exchange – Held that:- Where Drawback has been paid but the sale proceeds have not been realized in respect of such exports with stipulated time period, such Drawback is to be recovered in terms of sub-rule (2) - RBI master Circular No. 6/2010-11 stipulate as under “The claims settled in Rupees by ECGC and private insurance companies regulated by IRDA should not be constituted as export realization in foreign exchange - Respondent exporter herein is not entitle to any Drawback benefit and the demand confirmed by the original authority under above mentioned Rule 16A(2) of the Customs, Central Excise [Duties] & Service Tax Drawback Rules, 1995 is legal & proper

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• 2012 (11) TMI 519
  Classification – manufacture of Automation Products, Distribution Control Systems etc. and imported materials required for manufacture of such final products - appellants claimed the classification of the licences under the category of CTH 8538 80 20 - Assistant Commissioner reclassified the said licences under CTH 8538 90 00 – Held that:- Software licence certificates are part and parcel of the hardware imported by the appellants. - the software licence certificates, prima facie, related to software pre-loaded into the hardware and the cost of pre-loaded software undisputedly stands included in the assessable value of hardware. - submission of the appellant that the software licence certificate should fall under CH 4907 as Documents of title conveying the right to use Information Technology Software cannot be accepted

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• 2012 (11) TMI 517
  Debonding – demand of duty – raw material - Held that:- what can be demanded is the customs duty on the unutilized raw material which are lying in stock, at the rate of duty prevalent at the time of payment of duty on the original value of importation - duty demands have been confirmed in respect of raw materials and consumables consumed and utilised in the manufacture of goods which have been exported during the period from 1997-98 to 2001-02. Such a duty demand is totally and completely unsustainable Debonding – demand of duty – capital goods - Held that:- Appellant has achieved export obligation and value addition during the first five year block period and achieved positive NFE during the second five year period. Thus non-fulfilment of the conditions of notifications under which the goods are obtained duty-free does not arise at all. Consequently, confiscation of goods under Section 111(o) of the Customs Act, 1962 cannot be upheld as also the imposition of penalty under Section 112(a) Customs Act, 1962 - Duty on the capital goods can be demanded only after grant of depreciation on the capital goods at the rate prevalent on the date of expiry of the warehousing licence - duty on the depreciated value of capital goods at the rate of duty prevalent on the date of debonding - matter remanded back to the original adjudicating authority - appeals are allowed by way of remand.

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• 2012 (11) TMI 489
  Penalty u/s 114A(i) - Held that:- The appellant herein was not served upon any show cause notice in order to make effective contest and reply to the allegations made in the show cause notice, thus issue needs to be reconsidered by the adjudicating authority after considering the reply in the defences taken by the appellant before coming to any conclusion. The heavy penalty has been imposed on the appellant without adhering to the principles of natural justice. On this ground itself the issue to the extent it is challenged before us needs to be set aside - direction to Commissioner of Customs, Kandla to serve the show cause notice on the appellants & appellant's advocate.

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• 2012 (11) TMI 488
  Notification No.32/97/Cus. dated 1/4/1997 - denial of claim as the activity undertaken is not an activity of jobbing - Held that:- The word jobbing has not been defined under the Customs Notification No.32/97/Cus. dated 1/4/1997 and therefore one would have to apply general meaning of the word jobbing which would mean carrying out predetermined job as directed by the supplier of raw material and returning the resultant product to the supplier. The aforesaid activity is admittedly being carried out by the assessee Revenue's contention that the activity carried out by the respondent is not job work in view of the decision of Prestige Engineering India Limited (1994 (9) TMI 66 - SUPREME COURT OF INDIA) is misplaced as in that case it was dealing with Central Excise Notification Notification No.119/75 dated 30/4/1975. Thus as decided in CCE, Trichy v. Rukmani Pakkwell Traders (2004 (2) TMI 69 - SUPREME COURT OF INDIA it is impermissible to interpret one notification with the aid of another notification. It would therefore, be inappropriate to import definition of the job work given in excise notification No.119/75 dated 30/4/1975 while construing Customs Notification No.32/97/Cus. dated 1/4/1997. All that Notification requires is that there should be value addition of 10% or more in the exported product than the value of the goods imported. Further, the Notification nowhere provides that the benefit of Notification would not be available where any indigenous material is used in the manufacture of export product. As it is not permissible to either add or subtract words to exemption notifications as held in M/s. Hemraj Gordhandas v. H.H. Dave, ACCE & C, Surat and others(1968 (9) TMI 112 - SUPREME COURT OF INDIA) no denial to claim is warranted - in favour of assessee.

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• 2012 (11) TMI 487
  Claim for refund on excess duty paid rejected - unjust enrichment - ordered for credit the amount of refund to the consumer welfare fund on presumption of unjust enrichment - Held that:- As from the Cost Accountant's Certificate reproduced by assessee it can be seen that net realisation was Rs. 1.87 Crores approximately and appellants had suffered a loss of Rs. 4.44 Crores approximately. The Commissioner has rejected this claim on the ground that raw material cost was about 1.13 Crores whereas, the net realisation was Rs. 1.87 Crores and therefore, the realisation of finished goods is higher than the cost of finished goods. However, the cost itself shows that the value of materials consumed was Rs. 4.10 Crores and other costs have to be added. Only when the material imported is sold as such, the method adopted by the Commissioner can be acceptable. In a case like this, where raw material have been used for manufacture, what is required to be seen is the total cost incurred for the finished goods and not the difference between the cost of raw material and the price of finished goods without taking other expenses/raw materials/ inputs into account. Therefore, the method adopted by the learned Commissioner to reject the cost certificate cannot be sustained. The cost certificate clearly shows that the appellant's realisation from POY was less than the cost incurred by them for manufacture and therefore, it cannot be said that they have passed on the duty liability to the customers. As appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund - in favour of assessee by way of remand.

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• Corporate Laws

• 2012 (11) TMI 529
  Claim of secured creditors and the workmen to balance due - company became sick - BIFR recommended for winding up of the company - Held that:- It is worthwhile to note that the proviso to Section 529 creates a deeming fiction in law and makes it clear that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen, to the extent of the workman's portion thereunder. Section 529A of the Act opens with non-obstante clause, giving the workmen's dues and secured creditors' dues, as defined under the proviso to Section 529(1), an over-riding effect over the other provisions of the Act as well as any other law in the matter of priority of payment of dues. A secured creditor who has a charge over the assets of a company in winding up, merely by instituting an application before the DRT or any other special forum without effectively pursuing that remedy and taking effective steps to realize his security would not stand outside the winding up proceedings. If the sale of secured assets is effected by the Official Liquidator subject to control of the Company Court and such amounts are utilized for discharging the debts of the secured creditor as well as statutory charge of the workmen created under Sections 529 and 529A, then, in effect, the secured creditor would be deemed to have participated in the winding up proceedings and not stood outside the same. It is for the reason that a secured creditor has to take steps by filing petition before any other forum just to protect his legal right and to prevent the claim from getting barred by time. Thus one fact is clear that respondent No.8 has realized its security without prejudice to the proceedings taken by it before the Debts Recovery Tribunal. Furthermore, the security was realized strictly within the scope of Section 529(1) and its proviso. That has to be protected in terms of Section 529A(1)(b) because the secured creditor has not relinquished its security for the general benefit of the creditors but realized the same in terms of Section 47(1) of the Insolvency Act. Once the twin requirements stated in the proviso to Section 529(1) are satisfied, the scheme contemplated under clause (c) of the proviso to Section 529 read with Section 529A of the Act would come into play. The Court cannot overlook the reality & the scheme of these provisions, thus, has to be understood to make it practicable and in consonance with the accepted commercial principles. It is precisely for these reasons that it is to be accepted that workmen's charges as well as that of the secured creditors have to be paid in preference to all others, but with inter se pari passu charge on the amounts realized from the sale of the security or otherwise. As in the present case, the secured creditor has realized its security but without putting the security or the receipts thereof in the common hotch potch of the winding up proceedings for the general benefit of the creditors. Thus, in terms of Section 47(1) of the Insolvency Act, the secured creditor in the present case is entitled to the balance due to it, deducting the net amounts realized. If the secured creditor would have participated in the winding up proceedings in its entirety with the security being realized and/or relinquished for the general benefit of the creditors and not restricted to the compliance of Section 529 it would not be entitled to the benefit of Section 529A. As already discussed, it is not the case herein. It may also be noticed that the amounts, by the consent of the parties, have already been disbursed and utilized by the workmen as well as the secured creditors in terms of Section 529 which obviously are subject to adjustment as per the orders of the Court. Thus reiterating the view expressed in Andhra Bank Versus Official Liquidator (2005 (3) TMI 465 - SUPREME COURT OF INDIA) the High Court should re-compute the amounts payable pari passu between the secured creditors and the workmen in accordance with the principles stated above.

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• 2012 (11) TMI 486
  Revival of company - application filled major shareholders - two applications by Deccan and Sylvan praying for sale of assets of the company in liquidation - Held that:- Sylvan and Deccan both prayed for distribution of the sale proceeds that would not be possible at this stage. Deecan's right to claim money out of the sale proceeds is a subject matter of suit. Sylvan would have to protect it in accordance with law & that such stage has not come. Even if appeals arising out of order dated April 20, 2011 allowed the situation would not change. The fact, the Apex Court passed orders including the one dated September 26, 2000 where the Apex Court directed the Official Liquidator to sell the assets at the best possible price keeping interest of all creditors cannot be ignored. The said order was passed at the instance of Allahabad Bank. The next order was passed on October 18, 2010 when the Apex Court adjourned the Special Leave Petition filed by ARC (major shareholder) which was ultimately dismissed by the Apex Court. As of date, the attempt of ARC to revive the company failed at all stages. As after the order dismissal of SLP ARC filed another scheme in June, 2011, that was, awaiting disposal before the learned Company Judge. Initially the Court directed the property to be sold as a going concern. Subsequently, it was directed to be sold "as is where is" basis. Accordingly, assets were sold, thus no scope to interference arises. ARC was represented before His Lordship when Deccan and Sylvan were heard on their applications. Thus the learned Judge should have given a hearing to ARC. In any event, such defect is cured by us by giving a full-fledged hearing to ARC on merits. Gourinandan participated in the sale and became the successful bidder. They are supposed to pay the purchase price. On such payment being made Official Liquidator would transfer the right, title and interest. It would then be open for Gourinandan to set up industry with the concurrence of the State by resolution of dispute, if any, they would be having with the State pertaining to the land in question. Official liquidator would not be in any way responsible for the same. The learned Junior Standing Counsel rightly contended, the land revenue issue would be strictly within the domain of Land Tribunal or any other appropriate forum dealing with such situation. Neither the Company Court nor the Court of Appeal in extension of the company jurisdiction, would be competent to deal with the same. The learned Judge rightly declined to interfere.

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• Service Tax

• 2012 (11) TMI 528
  Fees paid to Mandated Lead Arrangers (MLAs) - Service tax demand with interest thereon & penalty u/s 76 & 78 - Held that:- The Service Tax liability in the case has been fastened on the appellant under section 66A under the Reverse Charge Mechanism which came into force w.e.f. 18.4.2006. Therefore, for the period prior to 18.4.2006, the provisions of Section 66A will have not any application and out of demand of Rs, 8,05,24,006/- an amount of Rs. 2,79,08,777/- pertains to the period prior to 18.4.2006 and this demand is obviously not sustainable. Assessee not put on notice - Held that:- In the SCN it has been clearly mentioned that the arrangement fees, agency fees, commitment fees or other fees are required to be paid under course of providing the above services for raising funds/loan on behalf of M/s Tata Steel Ltd. SCN also stated that on going through the agreements for providing loan or fund, it is found that different foreign institutions have been providing different service to M/s TATA in relation to the availment of loans or raising funds on behalf of M/s TATA. The above service provided by them is classifiable under Banking and other Financial services and taxable under clause (zm) of Section 65(105). Thus it prima facie appears that the appellants have been put to notice with regard to the activity undertaken by them and also linking the activity undertaken by them with Service Tax law provisions. The rationale for classification of the service under ‘Banking and Financial Services' has been clearly spelled out. The appellant had not made out a prima facie case for complete waiver of pre-deposit thus directed to make a pre-deposit of Rs. 1 crore towards dues adjudged within a period of eight weeks from order date - against assessee.

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• 2012 (11) TMI 527
  Waiver of pre-deposit – Held that:- While deciding the stay application it is to be borne in mind whether the assessee is having any prima facie case, whether balance of convenience lies in their favour or not, and thereafter, it is to be seen whether irreparable loss of revenue will be caused to either sides. The three basic principles have not been considered and he has asked them to make a pre-deposit of the entire demands on the plea that they have not pleaded financial hardship. Instead of going through the financial hardship, first, while deciding the stay application, it is the duty of the Commissioner (Appeals) to consider whether the adjudicating authority is having the jurisdiction to decide the issue or not, which was not considered - As the stay application has not been decided on merits of the case, therefore, the order of dismissal of the appeal is not sustainable in the eyes of law

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• 2012 (11) TMI 526
  Chargeability to Service Tax - Held that:- the different classifications have been adopted based on different modes of payment, for the same activity. The same confusion prevails in respect of the consideration received from the book makers. There is a total confusion in the minds of the adjudicating authorities as to the nature of the tax and the measure of the tax. On this ground alone the impugned orders deserve to be set aside. The appellant herein is involved in conducting the event of horse racing. The appellant has permitted other race clubs to commercially use or exploit this event. The appellant receives a royalty from these race clubs towards this right to commercial use or exploitation. Thus the activity undertaken by the appellant merits classification under the taxable category of services of permitting commercial use or exploitation of any event organized by a person or organization which was brought under the tax net with effect from 1-7-2010. Such providing of space should be along with other facilities specified therein. It is not the case of the department such facilities have been provided to the book makers or the caterer. Therefore, no merit in the argument that the renting of office space to the caterer/book maker is liable to be classified as business support service. - Decided in favor of assessee.

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• 2012 (11) TMI 494
  Erection, Commissioning or Installation, Commercial or Industrial Construction, Works Contract, Goods Transport Agency - non inclusion of value of site material used in providing services - Held that:- As decided in C.S.T., BANGALORE Versus TURBOTECH PRECISION ENGINEERING PVT. LTD. [2010 (4) TMI 344 - KARNATAKA HIGH COURT] the question of liability under the works contract service was examined and it was held that it will be effective only from 01.06.2007. Therefore, for the period prior to 1-6-07, the meaning of 'Works Contract' as commonly understood i.e. a contract for work, and labour and in other words, a service contract has to be adopted, and it would not be correct to treat a work contract as something different from a service contract. If such a work contract is an indivisible service contract, whether or not involving use of goods which get consumed or get passed on to service receiver either as such or in changed form, and that service is taxable, the works contract will attract service tax and if the work contract is a composite contract involving sale of goods and one or more services and those service are taxable, the service tax will be chargeable on the value of these services. Thus a contract for erection, installation and commissioning, even if involving transfer of property in goods on which state VAT/Sale Tax is paid, would attract service tax even for the period prior to 1-6-07, Similarly a divisible contract involving consulting Engineer's service (preparation of drawings/designs, preparation of operation manuals, or other technical assistance), procurement of goods, erection, installation and commissioning would attract Service Tax on Engineering Consultancy component and erection installation and commissioning component even prior to 1-6-07. This is so there is nothing in Sec. 65(105) and Section 66 of the Finance Act, 1994 from which it can be inferred that the taxable services defined in various clauses of Section 65(105) have to be standalone services and will not attract tax, if they are provided along with other services or providing of the service involves supply/use of goods on which VAT or Sales Tax is payable. Under-valuation - the appellant had separately collected the amount in the cost of wind energy converter as site material which was in reality required for various services rendered for installation of wind mills there was under valuation of services such as electrical work, civil work, D.P. structure, metering etc. Also what was used to supply 4 items to sub-contractors for use in construction of foundation and the same were mentioned in the purchase order as free issue material thus prima facie it is conveyancing that these items cannot be considered as part of the wind energy converter and therefore inclusion of cost of these materials in the wind energy converter was wrong and showing them as free supply was also wrong. Having availed CENVAT Credit on input/input service, the appellant could not have taken the benefit of abatement. Therefore, prima facie, that charge has also to be upheld. The appellant has not been able to make out a prima facie case for complete waiver & as regards financial difficulty, no balance sheet or annual report was produced. The appellants should be required to deposit an amount of Rs.4.5 crores which is less than 10% of the total demand of Service Tax and less than 5% of the total amount of demanded as Service Tax, interest and penalty imposed.

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• 2012 (11) TMI 493
  CENVAT credit on the GTA services upto 18.04.2006 - Held that:- The issue is no more res integra relying on Hon'ble High Court of Punjab & Haryana in the case of CCE Chandigarah Vs. Nahar Industrial Enterprises Ltd [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. Even as per Rule 3(4)(e) of the Cenvat Credit Rules, 2004, the Cenvat credit may be utilized for payment of service tax on any output service - in favour of assessee.

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• 2012 (11) TMI 492
  Demand of service tax along with interest and various penalties were confirmed. - Held that:- As appellant has paid the substantial amount out of the amount confirmed against them the pre-deposit of balance amount of service tax, interest and penalty is to be waived - recovery stayed during the pendency of the appeal. As the impugned order is an ex-parte order therefore, in the interest of justice, an opportunity to the appellant to defend their case is to be given - remand the matter back to the adjudicating authority for fresh consideration.

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• 2012 (11) TMI 491
  Waiver of Service Tax Liability, Interest and Penalty - Held that:- Claim for treatment of the service under the Works Contract has never been made before lower authorities and it is too late for making such claim at this stage. As regards the claim that demand included the amount received prior to 10.09.2004,. Consultant could not contradict the submissions made by . A.R. that the deduction has already been allowed for the amount received prior to 10.09.2004. - stay granted partly.

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• 2012 (11) TMI 484
  Service tax on a transaction took place abroad under the reverse charge mechanism - Held that:- Leviability of tax being an issue for decision, the matter has to go before the Division Bench in view of the provisions of Section 35 D(3) of the Central Excise Act, 1944.

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• Central Excise

• 2012 (11) TMI 535
  Exemplary cost on Two Officers - Held that :- As ordered by The High Court in assessee’s own case [2011 (11) TMI 55 - PUNJAB AND HARYANA] that exemplary cost on two officers is to be imposed. Apparent from the facts and circumstance of the case appeal is allowed and the cost on two officers had been waived. 0rder of the High Court is set aside.

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• 2012 (11) TMI 534
  Waiver of pre-deposit - Transaction value – discount - assessee are giving 10% to 20% discount to their sales agents – Held that:- Sale associate/agents are getting a higher discount compared to the buyers who directly buy from the appellant manufacturer - sales associates/agent are rendering certain services to the appellant manufacturer and it is on account of these services, they are getting a higher discount - discounts given to the sales agents cannot be completed abated while determining the transaction value - To what extent these discounts should be included in the transaction value can be decided only after examining the issue in depth - appellant directed to make a pre-deposit of 50% of duty.

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• 2012 (11) TMI 533
  Cenvat credit on air travel service – alleged that no nexus with the manufacture and the appellants have not produced evidence to show that these services were used for the business purpose - Held that:- Appellants have produced a Chartered Accountant’s certificate wherein it has been certified that the expenditure on Air Travel has been booked as Revenue expenditure and related to the final products and the cost of services have been included in the assessable value - In the case of Dr. Reddy’s Lab Limited (2009 (9) TMI 287 - CESTAT, BANGALORE ) it was held that credit of service tax paid on input or Air Travel service is eligible. In view of above, the appeal is allowed.

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• 2012 (11) TMI 525
  Whether the goods seized from the godown of other party ( R Ltd)and subsequently confiscated were liable to duty in the hands of assessee on allegation that assessee had manufactured and cleared the said goods without payment of duty and without issue of Central Excise invoices – R Ltd submitted that goods procured from M/s K supported by invoices who in turn had purchased said goods from assesse - Held that:- It can be seen from SCN that R Ltd specifically produced invoices of M/s. K and statements recorded from the proprietor of M/s. K specifically states that they had purchased these goods from assessee and statements recorded from the personnel of assessee company clearly indicate that assessee never dealt with R Ltd directly. Goods were supplied through their dealer M/s. K. If that be so and if the evidence as regards receipt of goods on valid documents from M/s. K were produced, lower authorities should have considered that evidences in proper perspective. Be that as it may, it can be seen from SCN, that the goods which were purchased by M/s. K was duty paid as per the report of Superintendent of Central Excise having jurisdiction over the factory premises of assesse. In view of the forgoing, impugned order to the extent it confirms demand on assessee along with interest and imposition of equivalent amount of penalty and penalties imposed on M/s K and its proprietor seems to be unsustainable – Decided in favor of assessee

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• 2012 (11) TMI 524
  Cenvat credit on outward transportation - Held that:- There is no dispute as to the fact that appellant has produced few specimen purchase orders and other documents before the first appellate authority to canvas their point that the goods cleared from the factory premises are on FOR basis. The first appellate authority has not allowed the appeal only on the ground that they could not produce further documents to him till the date of order, thus this issue needs to be reconsidered as to whether all the documents are required to come to conclusion for deciding whether the despatches made by the appellant are on FOR basis or otherwise. Also to consider the judgment in the case of Ambuja Cements Limited (2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT) wherein decided that the place of removal in case of FOR basis, is the premises of customer before coming to a conclusion.

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• 2012 (11) TMI 523
  Pre-deposit of duty, interest and penalty - Held that:- Show Cause Notice is issued demanding duty even beyond the period of five years. Further that the Revenue raised an audit objection and the audit para was closed as evident from the letter dated 23.02.2010 and the issue was reopened and the present Show Cause Notice was issued. Thus as the demand is time barred pre-deposit of the dues are, therefore, waived for hearing of the appeal.

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• 2012 (11) TMI 522
  Non payment of duty - Used transformer & lubricating oil, MDEA (methyl diethanol amine) and nickel/copper/zinc/iron catalysts - Held that:- For demanding duty on a excisable goods, firstly the same are to be classified under a tariff heading and thereafter applicable rate of duty is to apply but in the present case neither in the impugned order nor in the order-in-appeal there exists any finding regarding the classification of items in question. The matter requires re-consideration by the adjudicating authority thus impugned order is set aside after waiving the pre-deposit of the dues adjudged - in favour of assessee as directed.

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• 2012 (11) TMI 521
  Cenvat Credit - Questioned amount is regarding availment of Cenvat credit of Rs. 74,918/- in respect of inputs purchased by the appellant in the month of June, 1999 and for confirmation of demand of duty of Rs. 45,388/- and 16,153/-, which was paid by utilising the said unavailable Modvat credit, such credit was availed by the appellant, under intimation to the Revenue. Held that:- Provisions of unjust enrichment or limitation do not apply to such refund of pre-deposit. As such there could be no objection by the Revenue for the refund of such pre-deposited amount - set aside the impugned order and appeal allowed with consequential relief to the appellant - in favour of appellant.

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• 2012 (11) TMI 520
  Penalty – alleged the supplier of respondent were issuing invoices without supply of materials thus enabling the person purchasing invoice to take fraudulent Cenvat credit - Held that:- Goods were not transported and the fact that the transporters were paid in cash does not help the case of the Respondent - goods were not received in the factory of the Respondent, the burden to prove otherwise had shifted to the Respondent and no concrete facts to prove their claim has been put forward - goods were never transported to the factory of the Respondents is established - Decided against the assessee.

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• 2012 (11) TMI 518
  Penalty under Section 11AC of the Central Excise Act – alleged that shortage in physical stock of ‘inputs’ on the date of visit of the factory by the departmental officers – Held that:- Though there was a shortage of inputs noticed by the Department, but no evidence has been brought on record either from their past conduct or evidence showing any attempt to remove such ‘inputs’ from the factory without discharging/reversing Cenvat credit - penalty equivalent to the duty involved, only on account of the shortage in the physical stock of inputs noticed during the visit of the officers, cannot be upheld under Section 11AC of the Central Excise Act, 1944 - waiver of pre-deposit allowed.

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• 2012 (11) TMI 516
  Debonding of 100% EOU – depreciation on capital goods - duty is to be paid on the capital goods on the depreciated value - whether the depreciation is to be calculated as per the provisions of Notification No. 52/2003-C.E., or as per the provisions of Notification No. 53/97-Cus. In this case, the Commissioner has calculated the quantum of depreciation as per the provisions of Notification No. 52/2003-Cus. holding that it is the provisions of this Notification, which would be applicable – Held that:- Since the goods had been imported during June 1997 - July 1998 period by availing exemption under Notification No. 53/97-Cus., dated 3-6-1997, it is the provisions of this Notification, which would be applicable for determining the quantum of depreciation available to the appellant - In terms of para 5(a) of this Notification, the duty on the used capital goods at the time of debonding is payable on the depreciated value at the rate in force on the date of payment of duty and in terms of explanation to para 5(a) of the Notification, the depreciation is to be allowed for the period from the date of commencement of commercial production upto the date of payment of duty - matter has to be remanded to the Commissioner for re-quantification of the duty demand Penalty under Section 117 of Customs Act and Rule 26 of the Central Excise Rules, 2001/2002 - DTA clearances were in excess of the prescribed limit of 5% of export turnover and that they did not give intimation to the Department regarding their export performance – Held that:- Penalty on the Managing Director and Director cannot be imposed under Section 117 of Customs Act, 1962 and Rule 26 of Central Excise Rules - matter is remanded to the Commissioner for de novo adjudication for the purpose of re-quantification of the duty demand

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• 2012 (11) TMI 485
  Refund of penalty - Imposition of Penalty for Evasion of Duty - Held that:- Following the decision of court in case of [Union of India Versus M/s Rajasthan Spinning & Weaving Mills AND Commissioner of Customs [2009 (5) TMI 15 - SUPREME COURT OF INDIA] Once the conditions specified u/s 11AC of the Central Excise Act are satisfied, penalty becomes mandatory and there is no scope of discretionary power. In the present case appellants were importing inputs and availing the CENVAT Credit of CVD amount is paid. The credit of CVD amount paid by the 100% EOU was availed on the strength of the invoices issued by 100% EOU. Whereas there is restriction for taking credit in respect of the inputs received from 100% EOU. This mistake was pointed out by the Revenue and the duty and interest was paid.It cannot be said that there was willful mis-statement or suppression of facts with intent to evade payment of duty as required for imposition of penalty under Section 11AC of the Act - final order of the Tribunal reducing the penalty to Rs. 1 lakh, which has been already paid by the appellants,is not challenged by the appellant. Therefore, appellants are not entitled for refund of the penalty already paid by them.

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• 2012 (11) TMI 483
  Recovery of redemption fine - application for modification of stay order - Held that:- The Tribunal is empowered to waive the deposit of duty demanded and penalty levied. As there is no requirement for deposit of redemption fine for hearing the appeal before the Tribunal, therefore, the question of waiver of redemption fine for hearing the appeal does not arise. No merit in this application and the same is dismissed.

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• 2012 (11) TMI 482
  Waiver of pre-deposit of Duty, Interest and Penalty - held that:- Goods manufactured by the job worker on which appropriate duty has been paid was further used by the job worker in the manufacture of the goods which were returned to the applicant on payment of appropriate duty. Credit cannot be demanded simply on the ground that the goods manufactured by job worker are not received in the factory of the applicant - Pre-deposit of the same is stayed during the pendency of the appeal - stay petition is allowed.

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• 2012 (11) TMI 481
  Penalty u/s 11AC - Assessee reverse the credit on rejected inputs on the basis of sales value instead of credit availed on such inputs under rule 3(5) of CCR AO impose penalty u/s 11AC Held that:- Since the assessee continuously, in every statutory monthly return declared the goods and, therefore, the limitation would run from the relevant time and notice could have been issued only within a period of 12 months, therefore, beyond the period of 12 months, no demand could have been raised. Therefore allegation of suppression of facts with intent to evade payment of duty is not sustainable and the demand beyond the normal period of limitation is time barred. Appeal decides in favour of assessee

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• 2012 (11) TMI 480
  Demand of duty - manufacture of various Machineries and Bulkers – Held that:- Cabins are built up by M/s. Commercial Engineers & Body Builders Co. Ltd. and clearing the same under benefit of Notification No.5/98-CE dt. 2.6.1998 without payment of duty - cabins are fabricating by the job worker and job worker is liable to pay duty in respect of the cabin and job worker being independent manufacturer is availing the benefit of notification - duty by adding Rs.45,000/- to the assessable value of bulkers cannot be confirmed against the present assessee, who is manufacturing bulkers - job worker is wrongly availing the benefit of Notification No.5/98-CE dt. 2.6.98 the job worker is liable to pay duty and not the present assessee

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• 2012 (11) TMI 479
  Demand of duty - Job work - exemption under Notification No. 214/86 - For the job work, MS plates were sent by M/s. Larsen & Toubro to the Appellant - they had not sent back the scrap as per provision of Rule 5(9) of Rule 4 of Cenvat Credit Rules, 2004 – Held that:- After doing the job work, the finished goods were returned to M/s. Larsen & Toubro. Certain amount of waste was generated in the course of job work. Such goods were sold by M/s. L&T to the Appellants itself. On such sale, L&T had paid excise duty - no revenue loss in the matter and it is only a procedural mistake - order is set aside and appeal is allowed.

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• 2012 (11) TMI 478
  Demand of excise duty and penalty – recovery of dues from the auction purchaser unit in terms of Rule 230(2) of the Central Excise Rules, 1944 - petitioner submitted that it had purchased the industrial unit in an auction from UPFC in March, 2002 free from all encumbrances. At the time of purchase of the unit there was no provision in the Central Excise Act relating to recovery of arrears of the erstwhile manufacturer from the buyer of the unit – Held that:- Even if it may be taken that there is no charge on the property on the plant and machinery, of the Excise duty, for which show cause notices were given prior to the sale of the UPFC, the petitioner as a purchaser under the terms of the agreement dated 14-3-2002, of the plant and machinery had agreed to bear all statutory liabilities arising out of plant and machinery of the industrial unit Penalty - Excisable duty becomes due and payable at the time of manufacture of the goods, the penalty in the present case was imposed by adjudicating orders dated 29-8-2002, and 22-7-2003, after the sale deed dated 8-3-2002 of land and building and the agreement of plant and machinery dated 14-3-2002 were executed - penalty as a quasi criminal liability, was leviable on represented through its Board of Directors, and personally on director of the company - penalty, therefore, having been levied and imposed after the purchase of land & building and plant & machinery installed in the unit which earlier belonged to M/s. P.J. Steels Ltd., Muzaffarnagar, is not payable by the petitioner, and is not covered under the stipulation in the sale deed and agreement as statutory liability nor it arose out of plant and machinery of the industrial unit - writ petition is partly allowed to the extent that the petitioner shall not be liable to pay penalties imposed upon M/s. P.J. Steels Ltd. and its Director under the impugned orders.

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• 2012 (11) TMI 477
  Demand of duty, interest and penalty – alleged that appellants received certain quantity of molasses from the Khandsari Sugar Factory and as per the provisions of Rule 4(2) of the Central Excise Rules, the purchaser is liable to pay Central Excise duty in case of molasses received from Khansari Sugar Factories – Held that:- If the duty is paid by Khandsari Unit, no demand can be raised against the recipient of the molasses on the ground that there should be no double taxation on the same goods - order is set aside and the appeal is allowed.

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• 2012 (11) TMI 476
  Determination of capacity of production - Appellants were manufacturing Pan Masala containing tobacco known as Gutka with two Retail Sale Prices namely, Rs. 1.00 per pouch and Rs. 0.50 per Pouch - two different RSPs of the goods manufactured by them was falling in the same slab – Held that:- Provisions of the first proviso to Rule 8 applies only when Pan Masala with two RSPs falling under two different slabs are manufactured - Rule 8 talks about a situation when the assessee-commences to manufacture Pan Masala of a new RSP during the month - Rule 8 is very punitive in nature in a situation where the same machine is used for manufacturing Pan Masala of more than one RSP - pre-deposit waived

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• 2012 (11) TMI 475
  Assessable value of the physician sample packs distributed free of cost – Held that:- Show cause notice was issued on 11th June, 2008 - extended period would not be invoked in cases where the matter is referred to the Larger Bench and also discussed the effect of the Circular issued by the Board, the Tribunal held in the instant case that the demand is barred by limitation - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2012 (11) TMI 495
  Purchase tax under section 9 read with section 24(3) - job-work done by the petitioner on stock transfer of goods to other States by working out the purchases of goods utilised in manufacture including the consumable stores - taxable event – Held that:- Act of purchase of goods which are used in the manufacture of end-products and not the act of despatch or consignment - petitioner becomes liable to pay purchase tax when it purchase the raw material being the last purchaser - petitioner cannot escape the liability to pay purchase tax. It is on the basis of sound taxation policy of the State in respect of the declared goods that if sales tax is paid on the manufactured goods then the purchase tax on the raw material would not be payable but if sales tax is not paid then the liability to pay purchase tax is to continue. The aforesaid policy has been incorporated by the legislation in order to avoid double taxation - Decided against the assessee.

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• Indian Laws

• 2012 (11) TMI 490
  Termination of probation order - petitioner is a practicing advocate in the Calcutta High Court as well as CESTAT - Held that:- Rule 9(2) of the CESTAT Members (Recruitment and Conditions of Service) Rules, 1987 apart from prescribing the substantive provisions with regard to termination during probation, also prescribes the procedure, whereby such termination is to be carried out. Therefore, when the two provisions, i.e. Rule 8(3) and Rule 9(2) are read harmoniously, there is no conflict between them. The only interpretation that follows upon a conjoint reading of the said two rules is that the services of a probationer member can be terminated at any time during the period of probation and, if the probationer member happens to be a judicial member directly appointed from the bar, then his services can be terminated only after giving him one month’s notice. Thus agreeing with the submission made by the petitioner that if no notice had been given in terms of Rule 9(2) of the said Rules, the termination/discharge order dated 20-11-2009 would be bad - in - law & not agreeing with the submission made by the respondent that Rule 8(3) would apply only during the three year period of probation and that Rule 9(2) would apply only to a situation of an unconfirmed member beyond the period of three years. There is no such indication in the rules. In any event the salutary principle of interpretation must not be forget that when there is any doubt, the benefit must go to the employee. Thus as a result the ‘discharge’ order dated 20-11-2009 are set aside. The writ petition is allowed to the aforesaid extent.

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