TMI Tax Updates - e-Newsletter
November 20, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

TMI SMS

• TDS u/s 194J - the expression technical services takes colour from the expressions managerial services and consultancy services which involve a human element

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Articles

1. JURISDICTION OF SEBI OVER HYBRIDS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Union HRD Minister to Release NBT-NCAER Study on Reading Habits of the Literate Youth of North-East India

2. Computerisation programme for improving management of information about cases handled by CESTAT and also communication between CESTAT and litigants before CESTAT

Notifications

Customs

1. 105/2012 - dated 16-11-2012 - Cus (NT)

Amendment in Customs House Agents Licensing Regulations, 2004 – Regulation 11

2. 104/2012 - dated 16-11-2012 - Cus (NT)

Amendment in Handling of Cargo in Customs Areas Regulations, 2009

3. 101/2012 - dated 16-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Havells India Ltd., QRG Towers 2D, Sector-126, Expressway Noida, U.P.,

4. 100/2012 - dated 16-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Lambda Therapeutic Research Ltd., Near Gujarat High Court, S.G. Highway, Gota, Ahmedabad

5. 103/2012 - dated 5-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s KLJ Resources Ltd., KLJ House, 63 Rama Marg, Najafgarh Road, New Delhi

Circulars / Instructions / Orders

VAT - Delhi

1. 22 - dated 12-11-2012

Clarification regarding details to be filed online in Form Stock-1

2. F.4/Operation Cell/2006/1708-1718. - dated 30-9-2012

ARRANGEMENTS FOR RECIPT AND MOVEMENT OF QUARTERLY RETURNS FOR QUARTER ENDING 30.9.2012

Customs

3. 28/2012 - dated 16-11-2012

Authorized Economic Operator (AEO) programme for implementation — Revised Guidelines.

Highlights / Catch Notes

Income Tax

• Depreciation Approved for BOOT Model Entity Managing Yamuna River Bridge in NOIDA.

  Case-Laws - HC : Depreciation on toll road/bridge - assessee establish, finance, design, construct, operate and maintains a NOIDA-Bridge across the river 'Yamuna' under the BOOT basis - Depreciation allowed - HC
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• Revision Order u/s 263 Overturned Due to New Ground Involving Deeming Fiction Not Addressed in Notice Stage.

  Case-Laws - AT : Revision Order u/s 263 - The revision has been done on an altogether different ground of deeming fiction u/s. 68 which was not even touched upon by the Commissioner at notice stage - revision order set aside - AT
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• "Technical Services" in Section 194J Needs Human Element; Interconnection Services Excluded Under Income Tax Act.

  Case-Laws - AT : FTS - TDS - the expression ‘technical services’ takes colour from the expressions ‘managerial services’ and ‘consultancy services’ which necessarily involve a human element or, what is now a days fashionably called, human interface. - the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as ‘technical services’ as contemplated under section 194J of the said Act. - AT
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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

• Court Rules Landlord Responsible for Retrospective Service Tax on Renting, Not Tenant.

  Case-Laws - HC : Recovery of service tax from the tenant - consequence of retrospective amendment for levy of service tax on renting - Winding up petition - Principally the Petitioner who had let out the premises was liable for such service tax and not the Respondent. - HC
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Case Laws:

• Income Tax

• 2012 (11) TMI 556
  Depreciation on toll road/bridge - assessee establish, finance, design, construct, operate and maintains a NOIDA-Bridge across the river 'Yamuna' under the BOOT basis - Held that:- As decided in Mysore Mineral Limited v. CIT [1999 (9) TMI 1 - SUPREME COURT] that any one in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act etc. The person, who having acquired possession over the building in his own right, uses the same for the purposes of the business or profession though a legal title has not been conveyed to him, but nevertheless is entitled to hold the property to the exclusion of all others. With the insertion of the Explanation-I to Section 32 w.e.f. 1.4.1998 there is no doubt that where the assessee is the lessee of the building in which he carries on business which is not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee of any structure or doing of any work in or in relation to by way of renovation, extension or for improvement to the building, then the provisions of the Income Tax Act, will apply as if the said structure or work is a building owned by the assessee. Explanation-I may apply to renovation or extension or improvement to the building to extend the application of depreciation, if such buildings which are not owned by the assessee but in which the assessee holds a lease or other right of occupancy. The present case stands on a better footing, in which the land is held on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concession period, and which also includes the right to collect tolls and to regulate use of the bridge. Section 32 would, therefore, apply for the purpose of providing depreciation to be worked out in accordance with the law - in favour of assessee. The payment in connection of “take out assistance fee” for redemption of Deep Discount Bonds this Court has already decided the question between the same parties relating to the assessment year 2002- 03 in favour of the assessee.

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• 2012 (11) TMI 555
  Deletion of addition on account of Interest – Held that:- Addition due to Interest paid on purchase of securities by the assessee-company for the broken period as per DTAA be deleted as decided in assesses own case earlier - impugned order is upheld to this extent. This ground is, therefore, not allowed. Advisory fee/Commission - Accrual of Income - Following the decision of court in case of [Kerala Urban Development Finance Corporation Ltd. Versus Commissioner Of Income-Tax ,2002 (12) TMI 18 - KERALA HIGH COURT] Held that:- Income accrued to the assessee at the time of disbursal of loan and hence assessable to tax in the year in which the loan amount was disbursed. Income accrued at that very stage itself and could not have been deferred over the life of loan - CIT(A) was not justified in directing the spread over of the advisory fee over the period of loan - impugned order on this issue is vacated and restore the action taken by the A.O - In the result, the appeal of the assessee is allowed and that of the Revenue is partly allowed. Disallowance of Interest - Assessee in its appeal are similar to those for assessment year 2000-2001 but for change in the amount of Rs. 2,03,34,257 being the interest disallowed u/s 40(a)(i) and also charged to tax under Article 11 of the DTAA. Both the sides are in agreement that the facts and circumstances of the instant year are mutatis mutandis similar to those of the preceding year – in favour of assessee. Advisory Fee - Held that:- In reversing the order of the CIT(A) and restoring the action of the AO in bringing the entire amount to tax in the preceding year, the amount already voluntarily offered by the assessee for taxation in the current year, on the strength of its treatment as deferred income in earlier year, cannot be taxed once again, if the entire amount has been taxed in a year, then no part of the same can be charged to tax in the subsequent year - As the necessary facts in this regard are not available on record impugned order on this issue is set aside and remit the matter to the file of A.O. for examining as to whether the amount of Rs. 24.36 lakh taxed in the current year is part of the amount of advisory fee taxed in assessment year 2000-2001 - partly allowed for statistical purposes.

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• 2012 (11) TMI 554
  Transfer pricing adjustment and levy of interest under section 234B – Whether transfer pricing adjustment should be computed with respect to gross turnover of the assessee or should be limited to volume of transaction entered into with the associate enterprises – Held that:- Claim of the assessee is very reasonable as the adjustment has to be made only with respect to transactions with associate enterprises based on arms-length price and not with respect to total purchases/sales. This view is supported by several decisions of the Tribunal - issue restored to the file of AO/TPO for fresh computation of transfer pricing adjustment after necessary examination and after allowing opportunity of hearing to the assessee - In the result, appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 553
  Revision Order u/s 263 - Following the decision of Bombay High Court in the case of [CIT vs. Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT] Held that:- Unless commissioner comes to a categorical finding that the stand of the Assessing Officer is erroneous, he can not remit the matter back to the file of the Assessing Officer for fresh adjudication. in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. The revision has been done on an altogether different ground of deeming fiction u/s. 68 which was not even touched upon by the Commissioner at notice stage - Impugned revision order is set aside - The assessee gets the relief accordingly - In the result the appeal filed by the assessee is allowed.

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• 2012 (11) TMI 552
  Referring matter to Valuation officer - Following the judgement of Supreme court in case of [Sargam Cinema V CIT, 2009 (10) TMI 569 - SUPREME COURT OF INDIA ] Held that:- Asessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. Even if the books were not produced at least the Assessing Officer should have referred to the valuation officer. Even after that it was not done at atleast at the time when the ld. CIT(A) had forwarded the report for his remand he should have made some comments but nothing was done though it was contended by the ld. DR for the revenue that there was no remand report available but the ld. CIT(A) has given clear finding that report was forwarded to the Assessing Officer and the Assessing Officer in his report has not rebutted the same - order of the ld. CIT(A)is confirmed. Disallowance of Expenses in full or part – Held that:- Expenses debited to profit and loss account in respect of telephone expenses, charity and donation, car expenses, rebate and discount, printing and stationery, labour welfare & cartage, accounting charges, traveling expenses, entertainment and salary confirmed the disallowance to 25% of the expenses for non production of vouchers – order of CIT(A) is confirmed. Profit margin – Held that:- Although Fall in gross profit is only marginal but it has to be noted that the assessee has not made any compliance before the Assessing Officer and the Assessing Officer pointed out serious defects in the books. Therefore, considering overall circumstances of the case, trading addition should be made at Rs. 10,000/- Order of the ld. CIT(A) is set aside and direct the Assessing Officer to make addition on account of lower gross profit at Rs. 10.00 lakhs - In the result, appeal filed by the revenue is partly allowed

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• 2012 (11) TMI 551
  Write -off of Bad debts – revision u/s 263 - Held that:- Sum debited to the Profit (i) the order of the AO, sought to be revised is erroneous; and (ii) it is prejudicial to the interest of revenue. In the present case Assessee had paid interest to the bank and P.F.C. and had raised interest bearing loans and on the other hand, assessee had given interest free advances. The CIT recorded finding that AO had not made any investigation at the time of assessment proceedings in the matter regarding allowability of the claim made by the assessee - having regard to the entirety of the facts and circumstances of the case, speaks about the non-applicability of mind, and non investigation into the issue raised by the CIT - order passed by the CIT u/s 263 of the Act, on this issue is upheld - appeal is disposed of - In the result, appeal of the assessee is partly allowed.

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• 2012 (11) TMI 550
  Unexplained accretion in the capital account - CIT(A) deleted the addition - Held that:- Findings of the CIT(A) clearly demonstrate that requisite evidences were filed by the assessee in the form of copies of account and the movement of funds. The CIT(A) has examined the copies of account and relevant bank accounts and deleted the addition - no infirmity in the findings of the CIT(A) found - in favour of assessee. Unaccounted cash credit - Held that:- The evidences under Rule 46A filed by the assessee, deserve to be admitted, with a view to further the cause of justice and, hence, the same are admitted. Further, the submission filed by the appellant that the parties are existing assessee and evidences filed by the appellant are sufficient, to prove the case within the meaning of Section 68 are to be looked into by the CIT(A) - issue restored to the file of the CIT(A) for fresh adjudication in the light of fresh evidences - in favour of assessee for statistical purposes. Surrender of additional income - Additional income u/s 69B - Held that:- If at the time of survey an assessee himself concedes that the stocks are short and even comes to an agreement regarding the extent of shortage, unless it can be established that such consents or agreement was given or arrived at under threat, coercion, undue influence, misrepresentation or wrong understanding of facts or law, it would bring all efforts put in survey operations to nought if the assessees are allowed to retract from whatever they had stated or agreed to at the time of survey. Thus in view of the factual and legal position it is held that the additional income of Rs.30 Lakh declared by the appellant on account of unexplained investment in construction of factory building of M/s Oscar Remedies is to be taken as unexplained investment and accordingly is to be added to the income of the appellant. The action of the AO is therefore confirmed and ground of appeal is as such rejected - against assessee.

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• 2012 (11) TMI 549
  Interest on Advance against Sister Concern for Non - Business Purposes - Held that:- Addition of Rs. 16,510/- (12% of Rs.1,37,577/-) made on account of interest on amount outstanding against the sister concerns of the assesseee considering it advance for non business purposes has to be disallowed – Onus is on the assessee to prove the advance for Business purpose - appeal of the revenue is allowed. Disallowance of Rs.7,68,000/- made on account of interest not declared by the assessee on undisclosed investment of Rs.64 lacs not declared in the books of account - that the impugned addition is consequential in nature and hence, in view of the findings recorded by the ld. CIT(A) and decision of the ITAT in assessee's own case for assessment year 2006-07, the ground of appeal is dismissed. Addition of Rs.4,08,835/- on account of loss of stock - ssessee failed to prove genuineness of the claim - Held that:- Considering totality of circumstances in which claim of loss has been made does not point out to anything other than genuine business loss and therefore the same is allowed - deductible loss – Order of CIT(A) is confirmed. Addition of Rs.18,200/- made u/s 14A – Held that:- Having regard to the exigency of business and the non-optional investment to be made by the assessee on the direction of the Punjab government, the impugned addition cannot be made, as held by the CIT(A ) - ground of appeal of appeal of the revenue is dismissed. Addition of Rs.2,84,420/- made on account of interest capitalized on proportionate basis, pertaining to the pre-operative period - fund borrowed for the purchase of machinery – Held that:- following the decision on identical issue in assessee's own case, this ground of appeal of the revenue is dismissed. Assessee's claim worth Rs. 7,09,457/- in respect of reducing the income Valuation of Closing Stock - CIT(A) considered that if an addition on consistent application of method of accounting is made in any particular year, then allowance for depletion in closing stock worked out on the basis of some accounting method, deserves to be allowed. Accordingly, the claim of the assessee was allowed by the CIT(A) - No infirmity in the findings of the CIT(A), and therefore, the same are upheld. Ground of appeal of the revenue is dismissed - In the result, appeal of the revenue is partly allowed.

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• 2012 (11) TMI 548
  Whether rectification carried out under section 154 of the Act was both illegal and void, without serving any intimation under section 143(1) and also notice under section 154 of the Act and second grievance was that the issue being debatable was outside the purview of section 154 of the Act Held that:- Where any tax or interest was found due on the basis of return of income after allowing adjustment of tax paid, then an intimation shall be sent to the assessee specifying the same so payable and such intimation shall be deemed to be a notice of demand issued under section 156 and the provisions of the Act shall apply accordingly. Where any refund is due on the basis of such return, the same shall be granted to the assessee and and intimation to the effect shall be sent to the assessee provided that no intimation under sub-section shall be sent after the expiry of one year from the end of the financial year in which the return was made. Rectification under section 154 of the Act was carried out by the Assessing Officer suo motu on 26.3.2009 without any notice to the assessee whatsoever - no merit in the proceedings carried out by the Assessing Officer in this regard - appeal of assesse is allowed. In the interest of justice and in the entirety of the facts and circumstances, issue of adjudication of application moved by the assessee under section 154 of the Act vis-à-vis the claim of set off of brought forward losses for computing book profits under section 115JB of the Act and the tax thereof, restored to the file of the Assessing Officer after affording reasonable opportunity of hearing – appeal is allowed for statistical purposes.

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• 2012 (11) TMI 547
  Exemption u/s 10A - Freight/telecom/insurance/technical services - revision u/s 263 - Held that:- As the assessee was not engaged in the business of rendering technical services outside India. The foreign travel expenses incurred in foreign currency are not required to be excluded from the export turnover for the purpose of computing the deduction allowable u/s 10A. It was stated that the assessee was in fact engaged in carrying out call centre activities and back office operations and the same does not amount to rendering technical services outside India. Total turnover is the sum of the export turnover and domestic turnover. If the concerned charges do not form part of the export turnover as per the definition, then there is no scope to include such charges in the total turnover The CIT thereafter, proceeded to hold that there was non-application of mind by the AO on this aspect and therefore, the order of AO was erroneous and prejudicial to the interest of revenue. The CIT also held that what is excluded from the export turnover need not be excluded from the total turnover as contended by the assessee and set aside the order of the AO for fresh consideration by the AO on the aspects discussed by the CIT in his order u/s 263 . AO has taken a possible view and the CIT cannot in exercise of powers u/s 263 seek to substitute his view with that of the AO. On this basis order u/s 263 cannot be sustained and the same is quashed – Appeal of assessee is allowed.

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• 2012 (11) TMI 546
  Non deduction of TDS - payment for using the transmission lines of power owned by KPTCL and PGCIL - interest u/s. 201(1A) - Held that:- The words ‘managerial’ and ‘consultancy’ involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a sociis, the word ‘technical’ as appearing in Expln. 2 to section 9(l)(viz) would also have to be construed as involving a human element. But, the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Expln. 2 to section 9(1 )(vn) of the said Act. This is so because the expression ‘technical services’ takes colour from the expressions ‘managerial services’ and ‘consultancy services’ which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as ‘technical services’ as contemplated under section 194J of the said Act. Respectfully following the decision of the Tribunal in the case of Bangalore Electricity Supply Co. Ltd. Versus Income Tax Officer (TDS), Ward 16(1), Bangalore [2012 (11) TMI 385 - ITAT BANGALORE] the applicability of Sec. 194J would come into effect only when by making payment of fee for technical services, assessee acquired certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Therefore, the assessee was not liable to deduct tax at source on payments of transmission charges to KPTCL as the provisions of Sec. 194J are not attracted thereon The order of the CIT(A) so far as it relates to transmission charges and reverse the order of the CIT(A) with reference to SLDC charges. In view of the above conclusion, the issues regarding levy of interest, the question whether (SLDC) was Government within the meaning of section 196 and the question whether the liability of the person making payment will stand extinguished on payment of taxes by the recipient of the payment and the question of period of levy of interest u/s. 201(1A) do not require any consideration - in favour of assessee

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• 2012 (11) TMI 545
  Unaccounted investment in property - search and seizure - Held that:- The consideration payable for the property was Rs.36 lacs cash over and above the consideration payable by cheque. The Assessee does not dispute this fact. The Assessee claims that the sum of Rs.36 lacs paid by cash was returned back by the seller to the Assessee. This plea of the Assessee has not been substantiated. The further plea of the Assessee was that the Assessee declared substantial income on account of unexplained investments cannot be accepted as the unexplained investment is in AY 03-04. The declaration of income in the subsequent AY can be explained as out of the amount declared in AY 03-04. In the case of the Assessee there has been no declaration of undisclosed income for AY 02-03, therefore the addition in AY 03-04 has to be made. No grounds to interfere with order of CIT(A) - against assessee. Undisclosed Investment in financial business - Held that:- Assessee pleaded that the disclosure made in the returns of income would be sufficient and no separate addition was called for is not acceptable as the disclosure made of Rs.23,77,949/- was specific and did not cover the undisclosed income evidenced by the seized document which is the basis of this addition. Therefore, we confirm the order of CIT(A) and dismiss ground raised by the Assessee - against assessee. Undisclosed Agriculture income - Held that:- The search had taken place on 28.12.2007. Even prior to the search, the order u/s.143(3) for AY 04-05 has been passed in which, out of Agricultural income declared by the Assessee a sum of Rs.1,04,190/- was treated as Income from other sources. Thus the very same addition cannot be made in assessment u/s.153A and doing so would amount to taxing the same income twice. Therefore direct that the addition so made be deleted - in favour of assessee. Difference in Chit Commission received - Held that:- Assessee who could not substantiate as to how a sum of Rs.69,000 was expenditure incurred in relation to chit commission income therefore confirm the order of CIT(A) and dismiss ground raised by the Assessee - against assessee. Excess cash found as undisclosed income - Held that:- CIT(A) was justified in rejecting the claim of the Assessee with regard to cash found at the time of search, as it was too general and vague. While working out the actual cash the AO has duly taken even expenditure not recorded in the books which would have been met in cash. Thus the action of the AO is very reasonable and the CIT(A) was right in confirming his action - against assessee.

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• 2012 (11) TMI 544
  Revenue expenditure versus capital expenditure - application of AS-11 - foreign exchange loss on conversion of rupee term into foreign currency loan - Held that:- Foreign Exchange Loan was taken in connection with conversion of a rupee term loan into a foreign currency loan. The purpose of the loan was for purchase of machinery which is on capital account. Therefore, the sum in question cannot be claimed as deduction. The sum in question cannot also be capitalised to the value of the machinery for the reason that the machinery has already been put to use - Decided against the assessee. The decision of the Hon’ble Supreme Court in the case of Woodward Governor India Pvt.Ltd. [2009 (4) TMI 4 - SUPREME COURT] would apply only in respect of exchange fluctuation on loans taken for revenue purposes.

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• 2012 (11) TMI 543
  Set off of Losses in case of Amalgamation – Following the decision of Supreme Court in the case of [Marshall Sons & co. (India) Ltd. v. ITO 1996 (11) TMI 6 - SUPREME COURT] Held that:- Amalgamation takes effect on the date of transfer specified in the scheme and not on the date of court’s order. The court further held that the income of the transferor company from the date of transfer would be the income of transferee company. Assessing Officer expressing doubts regarding the scheme of amalgamation being a device to avoid taxes are all without any basis and are in the realm of suspicion and surmises. With regard to the non-filing of revised return of income, provisions of section 72A are applicable, notwithstanding anything contained in other provisions of the Act and the set off of accumulated losses and unabsorbed depreciation of the amalgamating company is deemed to be the loss or unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation has taken effect. In the present case, amalgamation is deemed to have been effected on 31.03.2008 and consequently the claim of the assessee for set off had to be allowed. The objections of the revenue as projected in the grounds of appeal in this regard therefore are devoid of any merit. The fact that TAPL filed the return of income for A.Y. 2008-09 is also of no consequence - Order of the ld. CIT(A) does not call for any interference - appeal by the revenue is dismissed.

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• 2012 (11) TMI 542
  Disallowance of Bad debts – Whether claim for provision for bad and doubtful debts under section 36(1)(viia)(c) on its activity relating to providing infrastructure facility be allowed. Held that:- deduction under section 36(1)(vii) on the basis of write-off and provision under section.36(1)(viia) can both be claimed as long as there was no duplication. Since assessee here was not allowed its claim under section 36(1)(viia)(c) for the provision for bad and doubtful debts, there was no threat of any double deduction being availed by it. There is no dispute that for the amount claimed under section.36(1)(vii), there was an actual write off effected in its books. Claim of Revenue that there was violation of Rule 46A, is without any basis, since assessee has not been given the benefit of provision under section 36(1)(viia)(c) of the Act. Hence, the question of bifurcation of activities becomes redundant. It is to be noted that the assessee is not in appeal before us against disallowance of its claim for provision for bad and doubtful debts under section 36(1)(viia)(c). We therefore, do not find any reason to interfere with the order of the CIT(A). The appeals of the Revenue for all the three years stand dismissed - In the result, appeals filed by Revenue are dismissed.

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• 2012 (11) TMI 541
  Deferred revenue expenditure - Disallowance of expenditure on advertisement - AO found that expense was shown as a deferred revenue expenditure in the asset side of the Balance Sheet – And claim whole sum revenue expenditure in computing taxable income - Whether the benefit accrues in the same year itself or in the subsequent years, as long as the expenditure was incurred in the course of business and was expended in the current year, the same ought to be allowed in the current year – Held that:- As far as corporate advertisement expenses, exhibition expenses, public relation expenses, cultural programme expenses, quota expenses and sales promotion expenses were concerned, since said expenses did not result in creation of any tangible or intangible asset and, moreover, there was no evidence regarding accrual of any specific revenue in years under consideration or subsequently over a defined period with incurring of said expenditure, those expenses could be allowed entirely in year in which they were incurred. In the present case it is not the case of the Revenue that the assessee has not incurred the expenditure as followed in the case of Ashima Syntex Ltd. (2000 (8) TMI 22 - GUJARAT HIGH COURT). In favour of assessee

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• 2012 (11) TMI 540
  Tax deducted at source u/s 194C – Whether non deduction of tax at source from payments to the agents of the truck-owners resulted in the impugned disallowance under section 40(a)(ia) - Held that:- it is not even the case of the Assessing Officer that the assessee was a sub contractor, and rightly so because the assessee required these trucks on hire, from the middlemen or subcontractors, so as to fulfil the obligation of transporting the goods in the course of his business. The payments were not made for transporting the goods but for the hire of the trucks - at the material point of time, this tax withholding requirements did not extend to 'individuals' and that, it was only as a result of the amendment by the virtue of Finance Act 2008 w.e.f 1st June 2008, that individuals were imposed tax deduction obligations under section 194 C(1). so far as pre June 2008 position is concerned, tax withholding obligations under section 194 C in respect of an individual only in cases where the payments were made to a sub contractor for carrying out a part off work, or the work itself, undertaken by the assessee and that too when such individual's turnover from business or profession exceeded threshold specified in section 44AB. When it is not a case of sub contracting, it is wholly immaterial that assessee's turnover exceeded the specified threshold under section 44AB. - the assessee did not have any tax withholding obligation in respect of truck hire payments in the pre-amendment period. - Decided in favor of assessee.

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• 2012 (11) TMI 539
  Disallowance of interest – Assessee has granted interest free loan to a company - AO disallow the proportionate interest on the said amount of loan - Assessee contended that the amount advanced to its sister concern is on account of business expediency - Held that:- After examine the fact whether the sister concern has been supplying raw material to the assessee and the advance was made at free of interest in the course of business transaction needs to be verify. Issue remand back to AO Disallowance u/s 43B – Delay in deposit of Employees' Provident Funds – Held that:- Following the decision in case of AIMIL Limited (2009 (12) TMI 38 - DELHI HIGH COURT) that the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited thereafter, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in those Acts. In so far as the Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payment, if the actual payment is made before the return is filed. In favour of assessee Disallowance of provision for warranty charges - Provisions towards warranty expenses at 10% of the total sales turnover - The Department has the objection that the liability in respect of warranty is contingent in nature – Held that:- It is not disputed that the warranty clause is part of the sale document and imposes a liability upon the assessed to discharge its obligations under that clause for the period of warranty. Once an assessed is maintaining his accounts on the mercantile system, a liability is accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business. Therefore contention of revenue not accepted that the warranty provision is contingent liability. Appeal decides in favour of assessee

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• 2012 (11) TMI 538
  Quantum of loans less than the investments made - Disallowance u/s 14A r.w.r. 8D is warranted - reopening of assessment - Held that:- AO had finalized assessment u/s 143(3) on 31.3.2005 wherein amount of loss claimed in return of Rs.3,73,69,044/- was modified to Rs.3,02,01,092/-. No doubt, in the assessment order, the issue of disallowance u/s.14A was not considered. However, the assessment was completed after considering assessee’s claim of Rs.1.55 crores as exempt u/s.10(33). The assessment finalized on 31.3.2005 was reopened by notice u/s 148 after more than five years from the end of relevant Asst. Year and it is evident that in the notice of reopening there is not even an iota of allegation that any income had escaped assessment attributable to failure on the part of the assessee in not disclosing full particulars. Thus except bald reference, there are no such reasons forthcoming in reopening notice. The notice was based on the assumption that on the opening and closing dates of balance sheet quantum of loans turned out to be less than the investments made & it suggested that loans were obtained for purpose of meeting and sustaining investments leading to exempt income but it cannot be accepted as it can be easily implied in such circumstances that the assessee had its own funds available for investment. Thus mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year - in favour of assessee.

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• 2012 (11) TMI 537
  Addition u/s 68 – Capitation fees – AO argued that any parent of the students was not traceable – Held that:- Out of 54 students, parents of 33 students have replied in affirmative confirming that they had given interest free refundable deposits to the assessee society. The majority of the parents have given testimony in support of the statements given by the assessee society. The reason that the remaining 11 parents have not given any confirmation, does not dilute the probative value of the material evidence available on record. Minority of the parents might not be available at that point of time at the addresses available on record and it might not be possible for them to give confirmation letters within the time frame given by the authorities. The Revenue fails in its appeal filed for the assessment year 2003-04. In favour of assessee Addition on account of receipt of capitation fee – AO argued that purported admissions made by the functionaries of the assessee society in the statements furnished – Held that:- As the statements have been subsequently, retracted. The retractions of those statements made by the functionaries of the society are well supported by the books of account maintained by the assessee with supporting documents and evidences. All the basic details are very much available before the assessing authority, himself. Issue decides in favour of assessee Addition on account of paper found in course of search - A sum of Rs. 23,52,000/- was stated to have been paid to the assessee – Held that:- The assessee explained that a sum of Rs.17,52,000/- had been received by cheque from Shri Amul John Jacob and it was not aware of any money received in cash. As already found in the appeal filed by the Revenue for the same assessment year 2006-07, the CIT(A) has deleted the addition of the said amount of Rs.17,52,000/- made by cheque. When the assessee had accounted for the amount received by cheque, there is no reason to go beyond, only for the reason that in the sheet of paper found in the course of search, the amount recorded was Rs.23,52,000/-. There is no direct nexus with the proposition made by the AO and the paper seized in the course of search. Therefore addition deleted. Issue in favour of assessee Addition on account of undisclosed income – AO on the ground that those receipts were not recorded by the assessee in the books of account – Held that:- As there are no materials available on record to show that the assessee society had received such amounts over and above what was recorded in its books of account. The AO has made a presumption that the assessee society might have received that much amount on the strength of students admitted for medical course. This is only an intelligent presumption. When there is no material available on record, it is not possible to presume that the assessee might have collected capitation fee for admitting students for medical course. In favour of assessee Whether in case of trust addition u/s 68, was taxable at Maximum Marginal Rate or consider as applied u/s 11 – Held that:- Assessee has applied its entire funds in running the Hospital, Medical College and other Educational Institutions. Therefore, the additional amounts covered by sec.68 are treated as part of assessee’s income, still the amounts cannot be brought to tax, as those amounts have been applied for charitable purposes. Issue in favour of assessee

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• Customs

• 2012 (11) TMI 571
  Royalty to foreign collaborators towards transfer of Technical Know-How - direction for addition with the transaction value to arrive at the assessable value of the goods in importation - Held that:- Persuing the licence agreement entered into by the appellant with the foreign collaborator it is seen that the foreign collaborator (Licensor) grants the Licensee (the appellant) a non-exclusive, non-permissible license technology to manufacture and to sell or otherwise to supply the licenced products. In consideration thereof the appellant has to pay the royalty to the Licensor as the percentage of the net sale price of the licence products in the Indian market. Nowhere in the agreement is there any condition that the appellant is required to import any components from the licensor. In fact, in 7 of the agreements there is no condition at all with respect to import/purchase of any components from the foreign collaborator. The appellant is free to import the components either from the collaborator or from anybody else. If that be so, the condition that the payment of royalty is relatable to the imported goods and is a condition for sale of goods cannot be sustained in law. The appellant is liable to pay royalty to the foreign collaborator even when the appellant imports the components from anybody else and do not at all import the components from the foreign collaborator. Thus there is no nexus between the royalty payment and the import of components. There is no evidence which has been produced by the department indicating that the payment of royalty is a condition for the sale of imported components or it is relatable to the imported components. Thus the contention of the Revenue that the royalty amount is to be added with the transaction value to arrive at the assessable value of the goods in importation is rejected - in favour of assessee.

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• 2012 (11) TMI 570
  Revocation of CHA Licence - importer imported 43 consignments of ‘Hot Melt Glue Sticks’ - Out of 43 consignments, seven consignments have been sold by the importer on high seas to M/s. East India Trading Co. – alleged that they have not obtained the authorization from East India Trading Co. & C.S. Enterprises – Held that:- Import documents/declaration have been duly signed by the importer and the same were presented before the Customs authorities, and have not objected to the same and did not ask the appellants to produce authorisation from the importer – it is the joint responsibility of the proper officer and the CHA to obtain the authorisation from the importer and if it is not asked by the proper officer from the CHA to produce the authorization. Therefore, it is presumed that the authorisation is not required. Withdrawal of revocation of CHA licence ordered subject to forfeiture of the security amount of Rs.10,000/-

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• 2012 (11) TMI 569
  Refund claim – payment of excess duty - duty had been assessed for three packages against prior Bill of Entry and duty deposited in advance, but they received only two packages out of a lot of three packages – Held that:- In this case the goods were cleared after the examination as per Section 17 of the said Act and at the time of examination the short landing of the goods had been noticed. Therefore, at the material time itself, the assessment shows that duty payable is Rs. 21,972/- as against the duty deposited of Rs. 45, 982/- and, accordingly, the excess duty paid became refundable

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• Corporate Laws

• 2012 (11) TMI 567
  Misfeasance of Directors – application for recovery from the director - respondent No. 3, it is contended that he is a Non-Residential Indian Director who was not engaged in the day-to-day affairs of the company and cannot be held liable – Held that:- Therefore, in a circumstance whereby the earlier report the observations made by the Statutory Auditors have been relied on by the Chartered Accountant, such observation by the very same Statutory Auditors for the subsequent years to indicate that the amount in fact had not been passed onto the Sister concern cannot be brushed aside, Therefore, if these aspects are kept in view, it cannot be said that there is deliberate attempt on behalf of the respondents to make unlawful gain unto themselves when it is not established that there was loss caused to the applicant-company by such provision in the balance sheet with regard to the marketing strategy of the applicant-company. When the element of misfeasance and there being wilful conduct on the respondents to make gain unto themselves to the detriment of the applicant-company is not made out, in any event this Court need not go into the question as to whether the claim itself was time-barred or not. - Application of the liquidator rejected.

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• Service Tax

• 2012 (11) TMI 575
  CENVAT credit on CHA service - place of removal when goods removed for export but destroyed before export - Held that:- When the goods are removed from the factory for export purposes and the goods are destroyed due to unavoidable reasons, accident caused to the lorry, then in such a circumstances the goods are not deemed to have been removed from the factory gate in terms of Section 5 of the CST Act as sale has not been completed. Section 4(3)(c) of C.E. Act clearly explains that the place of removal is the premises from where excisable goods are to be sold after their clearance from the factory. In the present case, the goods were exported and when export documents are presented to the Customs office, then that is the place of removal as per Section 5 of C.E. Act. The same finding has been rendered by this bench in the case of Koeleman India Pvt. Ltd. v. CC, Bangalore [2005 (4) TMI 228 - CESTAT, BANGALORE]. Thus no reason to take a different view from the same - in favour of assessee.

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• 2012 (11) TMI 574
  Input services - rule 2(l) - interpretation of the expression "used for providing a output service" - appellant engaged in providing taxable services falling under category of renting of immovable property services – Held that:- Immovable property is neither subjected to central excise duty nor to service tax and input credit of service tax can be taken only if the output is a service liable to service tax or a goods liable to central excise duty. Following the decision in Vandana Global Ltd. v. CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], decided against the assessee.

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• 2012 (11) TMI 573
  Condonation of delay - delay of 88 days in filing the appeal – Held that:- Appeal before the Commissioner (Appeals) can be filed within 90 days of the communication of the order impugned and the period can be further extended for another three months if sufficient cause has been shown to the Commissioner (Appeals) for delay - there is a delay of 88 days only, which is also within the extended period of condonation where the Commissioner (Appeals) is having discretionary power to condone the delay on his satisfaction of the explanation shown by the appellant for causing the delay - delay condoned – matter remanded back to the Commissioner (Appeals)

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• 2012 (11) TMI 568
  Recovery of service tax from the tenant - consequence of retrospective amendment for levy of service tax on renting - Winding up petition - Circumstances in which a company may be wound up - Held that:- . The service tax is not a direct tax. It is an indirect tax. The party in a given case, therefore, may agree to pay the service tax as per the terms and conditions of the agreement. Admittedly, there was no such specific agreement with regard to the payment of the service tax. Principally the Petitioner who had let out the premises was liable for such service tax and not the Respondent. As decided in IBA Health (I) (P.) Ltd. Versus Info-Drive Systems Sdn. Bhd. [2010 (9) TMI 229 - SUPREME COURT OF INDIA] while dealing with the concept of bonafide dispute referring to winding up Petition under the Companies Act the amount due and payable should be clear and outstanding on the date of the demand. If any amount, though crystallized, liable to be paid subject to contingencies and/or certain conditions, that just cannot be stated to be the amount due and payable by the Company. Thus it is sufficient to dismiss the Petition as there are disputed questions of facts and the law though revolving around the documents referred and relied by the Petitioner which in no way can assist to settle and/ or crystallize the amount of service tax as claimed from the Respondent.

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• Central Excise

• 2012 (11) TMI 566
  CENVAT credit on Business Auxiliary Service - period in question from April 2005 to June 2007 - Held that:- The claim of assessee is fully supported by the very definition of input service under Rule 2(l) of the CCR, 2004. Sales promotion expressly figure in the inclusion part of the definition. It is not even the Revenue's case that the appellant was not paying commission for sales promotion. Where a particular activity is expressly mentioned in the inclusion part of the definition, one need not bother to examine whether it has satisfied the ingredients of the main part of the definition as decided in CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT]. Board s Circular No. 943/4/2011-CX dated 29.4.2011 (S. No. 5) wherein it was clarified that credit was admissible on the services of sale of dutiable goods on commission basis - in favour of assessee.

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• 2012 (11) TMI 565
  Non payment of duty on MS Ingots - Held that:- Show-cause notice has been issued to the applicant on the basis of statements of Shri Ketan Shah and Shri G.S. Rajpurohit of M/s Vishnu Steel but they were nor cross examined. After waiving the pre-deposit the case back is remanded to the original authority for de novo adjudication after allowing the cross-examination of the third party on whose statement demand was confirmed.

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• 2012 (11) TMI 564
  CENVAT Credit of Service Tax on Outdoor Catering Services - denial - demand of predeposit - Held that:- The adjudication order show that the amount of Rs.35,49,150/- has been recovered from the employees with regard to canteen services. It is the contention of the applicant that though the amount has been recovered from the employees, the applicant has paid the entire Service Tax amount and no Service Tax has been recovered from the employees. The figures submitted by the applicant in the written submissions need verification by the adjudicating authority, particularly when the applicant has not produced invoices issued by the service provider. Also the amount recovered from the employees is whether cum tax amount need to be verified - remand the case back to the original authority for de novo adjudication after waiving the pre-deposit.

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• 2012 (11) TMI 563
  Dismissal of appeal as barred by limitation - Held that:- Commissioner (Appeals) dismissed the appeal drawing a presumption that order in original sent to the assessee through speed post must have been delivered to the appellant as it was not received back undelivered. On perusal of the photocopy of postal receipt pertaining to the dispatch of order in original it is found that it does not contain complete address of the appellant. That being the case, it cannot be concluded that the order in original was actually sent at the correct address of the appellant - remand the matter back to the Commissioner (Appeals) to decide afresh.

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• 2012 (11) TMI 562
  Demand of duty – alleged that Credit had been availed on the basis of invoices issued by the 1st and 2nd stage dealers and not on the basis of commercial invoices issued by M/s. Darmin Steel Suppliers under whose delivery challan and commercial invoices, the payments were made - Held that:- Even though the Rules had undergone modifications, the principles underlying availment of Cenvat credit remained the same - there was no dispute that the appellant before it did purchase the goods and there was absolutely no evidence to show that even one transaction out of several was not genuine and the goods had not been received but only the bills had been raised - demand set aside

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• 2012 (11) TMI 561
  Benefit of Notification No. 1/2011-C.E. (N.T.) - benefit under this notification shall not be admissible unless the unit claiming benefit in terms of this notification reverse the input credit, if any, taken in respect of inputs used in manufacture of such goods on which the said duty of excise was not levied - goods were not manufactured at the site of the construction for use in the construction work at the said site – Held that:- Delhi Metro Rail Corporation Ltd. had contracted and called upon the respondent-assessees to construct pre-fabricated components of different segments to be used in elevated viaducts or manufacture of rings for the tunnel, launching girders and trusses in respect of a project of the said Corporation at Delhi - casting yard itself constitutes the construction site. From the said construction site components have been moved to the different locations where elevated viaducts of the tunnel were being constructed - construction was done virtually all over Delhi and construction sites were interconnected, it cannot be said that any substantial question of law arises – in favor of assesse

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• 2012 (11) TMI 560
  Waiver of pre-deposit – alleged that capital goods were used in the manufacture of non-excisable goods i.e. fractionated pure/impure spirit, which has been further used for manufacture of rectified spirit and as such, they were not entitled to credit on duty paid of said capital goods – Held that:- If the manufacturing processes involved a number of stages and exempted dutiable products came into existence, it cannot be said that capital goods were used in the manufacture of only exempted goods. The entire process is to be taken into consideration and not only the final stage, which may involve only mixing of two products - capital goods cannot held to be exclusively used in the manufacture of exempted intermediate product so as to deny the benefit of modvat credit - pre-deposit waived

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• 2012 (11) TMI 559
  Demand of duty – job work - appellant engaged in the manufacture of various components and tractor on job work basis - raw material was being sent by M/s. HMT on challans issued in terms of the said notification and the goods were being returned to HMT on the basis of very same challans - Tractors became exempt from payment of duty w.e.f. 9-7-2004, with the result that the goods manufactured by the appellant on job work basis were required to discharge duty liability – Held that:- Job worker cannot be expected to ascertain the fact of nature of final product being dutiable or exempted - principal filed declaration with their Jurisdictional Central Excise Authorities and kept on clearing the raw material under job work challan, is sufficient for the job worker to entertain a reasonable belief that the goods being manufactured on job work basis are being used by the principal in the manufacture of dutiable products - Failure on the part of M/s. HMT cannot be taken as a ground to reflect on the mala fide on the part of job worker i.e. the appellant - demand raised after a period of 4-5 years is barred by limitation - same is accordingly set aside and appeal allowed

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• 2012 (11) TMI 558
  Waiver of pre-deposit - financial hardship – demand of duty and penalty - petitioner is a company engaged in manufacturing of textile goods and is 100% Export Oriented Unit - irregularities committed by the petitioners – Held that:- There is no manufacturing or other activity being undertaken by the company and with each successive year, accumulated loss swell - net profit of the company is in negative since long - petitioners have no means of fulfilling the pre-deposit condition - they are not seeking any stay against the duty and penalty demands, but requesting for the appeal being heard on merits without any pre-deposit - pre-deposit waived

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• 2012 (11) TMI 557
  Enhancement of assessable value on the ground that the contract price of transformers manufactured is on F.O.R destination basis therefore the freight is a part of transaction value - Held that:- Purchase order clearly shows ex-factory price - customers will pay certain amount towards freight and the respondents were showing the said freight amount in the invoices and also recovered the same from the customers as per the agreement irrespective of actual transportation charges incurred by the respondents - place of removal in the instant case is factory though the place of delivery is the stores of the Electricity Board and, therefore, the cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value of the goods – in favor of assessee

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• Indian Laws

• 2012 (11) TMI 572
  Suit filled by non registered Partnership firm - whether suit barred u/s 69 of Indian Partnership Act, 1932 - Whether partnership fir is in existence or not - petitioner claimed that a partnership agreement was entered into between the petitioner and respondents - respondents denied the existence of partnership firm / agreement - land development agreement - Held that:- Considering the Deed of Partnership dated 11th August, 1986 as annexed by Plaintiffs it shows that Defendant No.1 has only 9 per cent share in the profits/losses of the Partnership Firm. The suit property is purchased by the Partnership Firm-Laxmi Developers under an agreement for sale dated 31st August, 1986. The Agreement for Sale is signed by the Plaintiff No.4 on behalf of the Firm. Titles of the said M/s. Laxmi Developers in respect of the captioned property are clear and marketable and free from reasonable doubts and encumbrances” Apart from the fact that Plaintiff Nos. 2 and 3 have submitted that their signatures are neither fabricated nor forged, an independent professional i.e. the Chartered Accountant of the Partnership Firm has certified that all the Plaintiffs as well as Defendant Nos. 1, 2 and 3 had signed the Partnership Deed in his presence. Plaintiffs have made out a prima facie case for grant of interim relief in their favour - against the Defendants.

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