TMI Tax Updates - e-Newsletter
November 20, 2013

Case Laws in this Newsletter:

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

News

1. International Finance Corporation (IFC) Issues the first Tranche of US $ 161 Million Under its US $1 Billion Global Rupee Bond Program

2. RBI asks NBFCs to get ready for Settlement of Dues through Lok Adalat to be held on November 23, 2013

3. PM to inaugurate 3rd BRICS International Competition Conference 2013 on 21st November, 2013

4. RBI Reference Rate for US $ and Euro

5. Security Printing and Minting Corporation of India Limited (SPMCIL) Conferred with Engineering Excellence Award(S) 2013

6. Text of the speech of the Union Finance Minister Shri P Chidambaram at the inauguration of Bharatiya Mahila Bank

7. Government approves twenty proposals of Foreign Direct Investment (FDI) amounting to Rs. 915.83 Crore

8. Quarterly Report on Public DEBT Management for the Quarter July to September 2013 Released

Notifications

VAT - Delhi

1. F.3(384)/Policy/VAT/2013/985-996 - dated 14-11-2013 - DVAT

In continuation to Notification No.F.7 (420)/Policy/VAT/2011/1203-1213 dated 11/02/2013 regarding filing of Audit report by dealers having turnover of RS.10 crores or more during 2011-12 or 2012-13 in Form AR-1

2. F.3(384)/Policy/VAT/2013/942-953 - dated 7-11-2013 - DVAT

In partial modification of Notification No.7(420)/Policy/VAT/2011/1203-1213 dated 11/02/2013 regarding submission of audit report in Form AR-I for the year 2012-13 by dealer having turnover of Rs.10 crores or more

Circulars / Instructions / Orders

Income Tax

1. 09/2013 - dated 19-11-2013

Clarification in respect of Circular No.5/2010 – F. No. 142/13/2010 –SO (TPL) dated 03.06.2010- regarding.

2. Instruction No.17/2013 - dated 19-11-2013

Issues relating to export of computer software Direct tax benefits -Clarification reg.

3. Instruction No. 16/2013 - dated 31-10-2013

REVISION OF INSTRUCTION NO.9/2006 ON RECEIPT/REVENUE AUDIT OBJECTIONS.

FEMA

4. 75 - dated 19-11-2013

Trade Credit for imports into India- Online submission of data on issuance of Guarantee/Letter of Undertaking (LoU) /Letter of Comfort (LoC) by ADs

5. 76 - dated 19-11-2013

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

DGFT

6. 38 (RE-2013) / 2009-14 - dated 20-11-2013

Permission for export of Finished Leather, Wet Blue and EI Tanned Leather through ICDs/CFSs.

Companies Law

7. 18/2013 - dated 19-11-2013

Clarification with regard to applicability of provision of Section 372A of the Companies Act, 1956.

Highlights / Catch Notes

Income Tax

• Section 54E Allows Exemptions for Depreciable Assets, Ignoring Legal Fiction u/s 50.

  Case-Laws - HC : Section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under Section 54E cannot be denied by referring to the fiction created u/s 50 - HC
  Visit to Get Source

  ---

• Section 80I Tax Deduction Denied for Zarda Yukta Pan Masala Due to Tobacco Content Classification Change.

  Case-Laws - HC : Deduction u/s 80I - Zarda Yukta Pan Masala - Once tobacco is mixed, even in a small quantity, the Pan Masala becomes a tobacco preparation, which is a separate and distinct commercial commodity - HC
  Visit to Get Source

  ---

• Determining Correct TDS Section for Freight Contracts: Section 194C vs. Section 194I of Income Tax Act.

  Case-Laws - AT : Section 194C or Section 194I - The assessee has carried out freight and transportation works contracts with three transporters who transported the goods belonging to the assessee and its clients to various places through their vehicles - TDS u/s 194C - AT
  Visit to Get Source

  ---

• Assessee Challenges Disallowance u/s 40(a)(i) for Non-Deduction of Tax on Overseas Agent Payments u/s 195.

  Case-Laws - AT : Disallowance u/s 40(a)(i) - TDS u/s 195 - the assessee paid certain amounts to overseas agents for procurement of export orders. The agents have not provided any managerial/technical services - No TDS - AT
  Visit to Get Source

  ---

• Taxpayer's Unsecured Loans Reclassified as Income u/s 41(1) of Income Tax Act; Addition Confirmed.

  Case-Laws - AT : Addition u/s 41(1) of the Income Tax Act - initially amount shown as unsecured loans was treated as own money later on - additinos confirmed - AT
  Visit to Get Source

  ---

• Interest on Non-Performing Assets Not Considered Accrued Income for Tax Purposes, Clarifies Tax Provision on Doubtful Debts.

  Case-Laws - AT : Interest on sticky advances – accrual of income - provision of interest on doubtful debts - the interest income relatable to NPA advances did not accrue to the assessee - AT
  Visit to Get Source

  ---

• Income Tax Authority Denies Registration u/s 12AA, Citing Assessee as Extension of Canadian Organization.

  Case-Laws - AT : The DIT(E) after considering the record before him, has observed that the assessee is not an independent organisation, it is an extended wing of organisation of Canada - Denial of registration u/s 12AA sustained - AT
  Visit to Get Source

  ---

• No Permanent Establishment in India: Cruise Ticket Sales Not Taxable as Income for Assessee.

  Case-Laws - AT : Since No PE in India, No income has been accrued to the assessee in India in respect of booking or sale of tickets for ‘tour packages’ of the cruises in India - AT
  Visit to Get Source

  ---

• Section 44C Excludes Head Office Employee Expenses for Services in India; Only Covers Common Head Office Costs.

  Case-Laws - AT : Section 44C refers to common head office expenses and cannot encompass the expenses exclusively incurred by the expenses incurred by head office employees exclusively for rendering services in India - AT
  Visit to Get Source

  ---

• Income from Buying and Selling Shares Classified as Business Income Due to Profit Motive and Risk Involvement.

  Case-Laws - AT : Purchase and sale of share & securities - It is a clear case of systematic activity being perused with a profit motive, deploying capital and bearing the concomitant risk - Held as business income - AT
  Visit to Get Source

  ---

• Income from Breeder and Foundation Seeds Ruled as Agricultural, Exempt from Non-Agricultural Tax Classification.

  Case-Laws - AT : Assessing Officer was not justified in treating agricultural income in respect of sale of breeder seeds and foundation seeds as non-agricultural income - AT
  Visit to Get Source

  ---

• Misunderstanding of Section 40A(2) Leads to Erroneous Disallowance; CBDT Circular Clarification Results in Deletion of Additions.

  Case-Laws - AT : Disallowance u/s 40A(2) - the addition has been agreed to due to misunderstanding/misconception of provisions of law and is against the clarification given by the CBDT vide Circular - additions deleted - AT
  Visit to Get Source

  ---

• Court Establishes Reasonable Net Profit at 17.08% for Undisclosed Income and Unaccounted Turnover.

  Case-Laws - AT : Undisclosed income - Unaccounted turnover - reasonable estimation of net profit - the average of the 13.735% and 23.99% must give rise to a reasonable percentage of NP ie 17.08%. - AT
  Visit to Get Source

  ---

• New Section 41(1) Rules: No Automatic Set-Off for Sundry Creditors and Debtors; Liabilities and Receivables Assessed Separately.

  Case-Laws - AT : Additions u/s 41(1) - cessation of liability - there cannot be any automatic set off of the amounts relating to amounts payable to sundry creditors against the amount receivable from sundry debtors - AT
  Visit to Get Source

  ---

Customs

• Confiscated Goods Get Redemption Option; BIFR Proceedings Don't Affect Customs Act Seizure and Confiscation Actions.

  Case-Laws - AT : Confiscation of goods - Redemption option given to assessee - BIFR proceedings are not applicable to the seizure and confiscation for violation of the provisions of the Customs Act. - AT
  Visit to Get Source

  ---

• Customs Duty Refund Requires Invoice Declaration; Exact Wording Not Critical if Intent is Clear per Notification No. 102/2007.

  Case-Laws - AT : Refund of ACD / SAD - Notification No. 102/2007 - Declaration on Invoice for no cenvat credit - The wordings of the language used will not make the difference as long as the intent and purpose of making endorsement is satisfied - AT
  Visit to Get Source

  ---

• Telegraphic Message to Mahatma Gandhi in New Delhi Classified as Historical Item under CTI 97050090.

  Case-Laws - AT : Classification - Import of telegraphic message addressed to “Mahatma Gandhi, New Delhi” with certain scribbling in hand on the message - item is of historical interest - classifiable under CTI 97050090 - AT
  Visit to Get Source

  ---

• Royalty Payments Not Linked to Imported Goods Value: No Valuation Adjustment Required for Imported Components.

  Case-Laws - AT : Valuation of goods - Royalty payment of goods - royalty paid has no nexus either with the price of the imported components nor it is a condition of sale of the imported components - no addition - AT
  Visit to Get Source

  ---

Service Tax

• Court Grants Partial Stay on Excluding Service Values from Gross Taxable Amount for Security, Videography, and Other Services.

  Case-Laws - AT : Whether the value received by the assessee in respect of services such as security, videography, photo rolls, iron boards, locking and sealing material etc. should be excluded from the gross taxable value - stay granted partly - AT
  Visit to Get Source

  ---

• Appellant Ineligible for Notification NO.12/2003-ST; Must Pay Service Tax on Total SIM Card Charges.

  Case-Laws - AT : Benefit of Notification NO.12/2003-ST will not be available to the appellant and service tax has to be paid on the gross amount charged for the supply of SIM cards. - AT
  Visit to Get Source

  ---

• Laying pipelines not considered 'Commissioning or Installation Service' for service tax; pipes not seen as equipment.

  Case-Laws - AT : Pipes or pipeline does not come under the category of ‘plant, machinery or equipment' and therefore laying of pipeline does not come within the scope of ‘Commissioning or Installation Service' - AT
  Visit to Get Source

  ---

• Cenvat Credit Applicable to Business Auxiliary Services, Including Commission Agents, Under Cenvat Credit Rules.

  Case-Laws - AT : Cenvat credit - Business Auxiliary Service - Services of commission agents – if the Cenvat Credit Rules permit Cenvat credit in respect of certain services, the same has to be allowed - AT
  Visit to Get Source

  ---

• Appellant Challenges Reverse Charge Mechanism for Non-Rendered Services; Credibility Questioned, Partial Stay Granted.

  Case-Laws - AT : Reverse charge - Appellant contends that provisions were only made in records and no service was rendered to the appellant by foreign agency - appellant has not come out with clean hands - stay granted partly - AT
  Visit to Get Source

  ---

• Cement and steel for foundations aren't inputs for capital goods or final products. Clarification on input classification.

  Case-Laws - AT : Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods or as inputs in relation to the final products - AT
  Visit to Get Source

  ---

• Floating Storage Operations Not Taxable as Warehouse Service Under Current Regulations.

  Case-Laws - AT : Activity of maintaining floating storage and offloading unit system and was to operate the system efficiently to receive storage and deliver correctly - not taxable as storage or a warehouse keeper service - AT
  Visit to Get Source

  ---

• Court Grants Stay on Pipeline Contract for Tamil Water Supply Project by Tamil Water Supply and Drainage Board.

  Case-Laws - AT : Works Contract Service on supply and laying of pipelines for water supply project awarded by Tamil Water Supply and Drainage Board - Stay granted. - AT
  Visit to Get Source

  ---

Central Excise

• Exemption for Niacin Valuation Under Notification No. 10/96-CE Requires Strict Interpretation to Avoid Misuse.

  Case-Laws - AT : Valuation of Niacin - Captive consumption - job work - Notification No. 10/96-CE - Such exemption being granted at public cost that cannot be liberally construed to grant undue benefit to the appellant - AT
  Visit to Get Source

  ---

• Appellant Penalized for Issuing Fake Cenvatable Invoices u/r 26(1) of Central Excise Rules 2002.

  Case-Laws - AT : Penalty under Rule 26(1) of Central excise rules 2002 - Bogus Cenvatable invoices issued - the appellant was liable to pay penalty - AT
  Visit to Get Source

  ---

• Extended Limitation Period Inapplicable for BOPP Film Valuation to Sister Concern Due to Revenue Neutrality, No Malafide Intent.

  Case-Laws - AT : Extended Period of limitation – Valuation of BOPP film cleared to the sister concern - in case of revenue neutrality, no malafide can be attributed to the assessee so as to justify invocation of longer period of limitation - AT
  Visit to Get Source

  ---

• Court Rules Unassembled Structures Not Prefabricated Buildings Under Tariff Heading 94.06 Based on Case Law Analysis.

  Case-Laws - AT : Classification of goods – supply of pre-fabricated building - the structure supplied by the appellants in unassembled form cannot be treated as prefabricated building under Tariff heading 94.06. - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2013 (11) TMI 910
  Deduction available u/s 54EC with capital gains u/s 50 - sale of depreciable assets – Held that:- There is nothing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Sections 48 and 49 but also applies to other provisions - Section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under Section 54E cannot be denied by referring to the fiction created under Section 50 - The benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either under Sections 48 and 49 or under Section 50 - The legal fiction created by the statute is to deem the capital gain as short term capital gain and not to deem the asset as short term capital asset. Following CIT Vs. Assam Petroleum Industries (P.) Ltd. reported in [2003 (6) TMI 23 - GAUHATI High Court] - Capital gain arising of long term capital asset, if invested in specified asset, the assessee is not to be charged capital gains and exemption provided under Section 54EC of the Act cannot be denied to the assessee only on account of the fact that deeming fiction is created under Section 50 of the Act - Legal fiction created under Section 50 of the Act is though restricted to computation of capital gains, such deeming fiction cannot restrict application of Section 54EC which allows exemption of capital gains, if assessee makes investment in the specified assets - Decided against Revenue.

  ---

• 2013 (11) TMI 909
  Deduction u/s 80I - whether 'Zarda Yukta Pan Masala' is a tobacco preparation – Held that:- Pan Masala is not a mixture of tobacco but when it is mixed with tobacco, it becomes a tobacco preparation – Following State of Orissa v. Radheshyam Gudakhu Factory [1987 (8) TMI 405 - SUPREME COURT OF INDIA] - 'gudakhu' is product of tobacco, and that although a major part of molasses and other constituents are added to the tobacco the essential and effective ingredient remains tobacco, and therefore 'gudakhu' is known as a product of tobacco in common parlance - The percentage of tobacco in the mixture, is not material - Once tobacco is mixed, even in a small quantity, the Pan Masala becomes a tobacco preparation, which is a separate and distinct commercial commodity - Decided in favour of Revenue.

  ---

• 2013 (11) TMI 908
  Section 194C or Section 194I - TDS deducted u/s 194C - Assessee in default under section 201(1) r.w.s. 194C(1) - Cargo handling charges should be treated as rent u/s 194I or as a work contract u/s 194C - Held that:- The assessee has carried out freight and transportation works contracts with three transporters who transported the goods belonging to the assessee and its clients to various places through their vehicles - The assessee had not taken the trailers/cranes on hire or rent from the said parties - The assessee has given sub-contracts to the said parties for the transportation of goods and not for renting out of machineries and equipments - In the circumstances, the said transactions would fall within the purview of section 194C of the Act as the assessee was responsible for paying the amount for carrying out work in pursuance of contracts between the assessee and the transporters and as such was required to deduct tax at source at the rate prescribed under the said section - Following decision of COMMISSIONER OF INCOME TAX (TDS) Versus SWAYAM SHIPPING SERVICES PVT LTD [2011 (1) TMI 797 - GUJARAT HIGH COURT] - Decided against Revenue.

  ---

• 2013 (11) TMI 907
  Disallowance u/s 40(a)(i) - Application of S.195 - Non deduction of TDS on overseas commission payments made to the non-resident under section 195(2) - CIT deleted disallowance - Held that:- assessee has made certain payments to overseas agents as commission and no TDS was deducted. According to the Assessing Officer, the assessee's business is situated in India and the payments were also made from India and according to section 195, the assessee is under obligation to deduct TDS. Therefore, by invoking section 40(a)(i), he has disallowed an amount of Rs. 5,62,13,826/-. On appeal, the CIT(Appeals) deleted the disallowance on the ground that the commission was paid to non-resident agent and it cannot be said to have been accrued in India and section 195 have no application. The only issue for our consideration is as to whether the assessee is under obligation to deduct the TDS under section 195 or not. The CIT(Appeals), by considering the entire facts and circumstances of the case passed a detailed order by observing that section 195 have no application to assessee's case - In the present case, the assessee paid certain amounts to overseas agents for procurement of export orders. The agents have not provided any managerial/technical services. The payments received by the non-resident Indian are not taxable in India - section 195 have no application to assessee's case - Following decision of The Commissioner of Income Tax Delhi-IV, New Delhi Versus EON Technology P. Limited [2011 (11) TMI 20 - DELHI HIGH COURT] - Decided against Revenue.

  ---

• 2013 (11) TMI 906
  Addition u/s 41(1) of the Income Tax Act - initially amount shown as unsecured loans was treated as own money later on - Held that:- Money was received by the assessee in course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, by influx of time the money has become the assessee's own money - The assessee itself has treated the money as its own money and taken the amount to its profits and loss account. There is no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody else's money. Reliance has been placed upon the CIT vs.T.V. Sundaram Iyenger & Sons Ltd. [1996 (9) TMI 1 - SUPREME Court] - In the present case considering the fact that the firm is a sister concern of assessee, has dissolved w.e.f. 31-3-2006, no interest paid during the year under review, no material on record to prove that it has demanded the repayment of amount at any time nothing on record to demonstrate that assessee has paid the amount till date, A.O's action of making addition u/s. 41(1)cannot be faulted – Decided against the Assessee.

  ---

• 2013 (11) TMI 905
  Legal and professional charges – Held that:- The charges paid for consultancy pertains to only services provided and those charges cannot be said to be relating to purchase of vehicles - The expenditure claimed by the assessee at a sum of Rs.1,92,660/- does not pertains to capital expenditure – Decided in favour of assessee. TDS on expenses – Held that:- The authorities have already disallowed a sum of Rs.59,890/- on which no TDS was made and that said sum form part of a sum of Rs.2,18,,953/- from where the AO has started computation – Decided in favour of assessee.

  ---

• 2013 (11) TMI 904
  Interest on sticky advances – accrual of income - provision of interest on doubtful debts - Held that:- As per Circular dated October 6, 1952 issued by CBDT, where interest accruing on doubtful debts is credited to a suspense account, it need not be included in assessee's taxable income, provided the Income tax Officer is satisfied that recovery is practically improbable– Following UCO Bank vs. CIT [1999 (5) TMI 3 - SUPREME Court] - A beneficial circular is not to be treated as inconsistent with the provisions of statute and binding on the authorities - In respect of interest on "sticky advances" interest income is to be taxed only when actually received as prescribed by CBDT Circular - The law as laid down in UCO Bank is that in terms of CBDT Circular the interest is to be added as income only when actually received or credited in respect of the "sticky advances" while making assessment for a financial institution – Following Vashist Chay Vyapar Ltd. [2010 (11) TMI 88 - Delhi High Court] – the interest income relatable to NPA advances did not accrue to the assessee - Decided against Revenue.

  ---

• 2013 (11) TMI 903
  Condition for denial of registration under section 12AA of the Income Tax Act – Charitable purpose u/s 2(15) - Held that:- Section 12AA of the Act provides procedure for registration of a trust/charitable institution. Clause (a) of subsection (1) of section 12AA empowers the CIT/DIT(E) to call for such documents or information from a trust/charitable institution as he thinks necessary in order to satisfy himself about genuineness of activities of a trust/charitable institution and may also make such enquiry, as he may deem necessary in this behalf. The said provisions in section 12AA make it clear that the CIT/DIT(E) is not supposed to allow registration with a blind eye. The DIT(E) after considering the record before him, has observed that the assessee is not an independent organisation, it is an extended wing of organisation of Canada functioning through local institution viz., LVPEI. This fact was also established from the letter dated 1.6.2011 issued by LVPEI. The identity of the assessee itself is in doubt. Being so, registration u/s. 12AA was not granted. Genuineness of the activities carried on by the assessee as charitable is doubtful - Brought on record by the DIT(E) that the assessee not at all maintained books of account, bills and vouchers in their original form. All original documents have been kept by LVPEI. Funds are received by the LVPEI from foreign organisation and thereafter funds are parted with by LVPEI to the present assessee which shows that the assessee has been used as a tool in the hands of LVPEI – Assessee is not an independent organization functioning independently – Accordingly, registration denied u/s 12AA of the Income tax act – Decided against the Assessee.

  ---

• 2013 (11) TMI 902
  Income accrues/arises or is deemed to accrue/arise in India – Assessee-company is receiving the remittances of tickets sold by the Indian company outside India – Held that:- Following assessee’s own case for the A.Y. 2008-09 - Assessee was not having any ‘business connection’ in India within the meaning of section 9(1)(i) of the Act - No income has been accrued to the assessee in India in respect of booking or sale of tickets for ‘tour packages’ of the cruises in India which was done through Star Cruises (India) Travel Services Pvt. Ltd. (SCITC) - Decided in favour of assessee.

  ---

• 2013 (11) TMI 901
  Transfer pricing adjustments - selection of comparable - ALP – Held that:- matter remanded back to AO to again refer the matter to the TPO for determining the arm’s length price afresh in the light of his order for AY 2008-09 after verifying whether the assessee was carrying on same functions in the year under consideration as in AY 2008-09. In case he finds that there is no change in functional profile then the assesse company should be treated as involved in the business of engineering, design and drawing and accordingly, arm’s length price is to be determined. Regarding deduction u/s 80HHE - Held that:- The proviso to sec. 92C(4) prohibits any deduction under Chapter VI-A to be allowed on the enhancement made as per the TPO’s order. Therefore, the only logical conclusion that can be drawn is that no effect is to be given to the addition made by the Assessing Officer as per the TPO’s order while computing deduction under Chapter VI-A. The Assessing Officer’s view cannot be accepted that by the enhancement of income as per the TPO’s order, only the total turnover would be increased and not the export turnover or the total income - If at all the effect is to be given to the enhancement of income made by the TPO, it will have the impact of increasing the assessee’s export turnover, then total turnover and finally, the total income. If all three are increased, obviously, the deduction claimed by the assessee under Chapter VI-A would increase – Matter remanded to the file of A.O. to decide the issue in the light of the above observation. Interest on delayed payment to be treated as income derived from activities contemplated u/s 80HHE - Whether in view of Explanation (d) to sec. 80HHE, which defines the ‘profits of the business’, 90% of the impugned amount is to be reduced or not as it is in the form of interest on delayed payment – Held that:- As per Govinda Chaudhary & Sons [1992 (4) TMI 8 - SUPREME Court], wherein it was held that interest awarded to assessee by arbitrator in respect of a contract was assessable as business income - In the present case also there is no dispute that the impugned amount was business income. However, for the purposes of claiming deduction u/s 80HHE, the profits of the business have been specifically defined in Explanation (d) to sec. 80HHE – Relying upon the judgment in the case of Liberty India vs. CIT, [2009 (8) TMI 63 - SUPREME COURT], it has been held that interest on delayed payment cannot be treated as income derived from activities contemplated u/s 80HHE. Amount written back u/s 41(1) to be included in total turnover for computation of deduction u/s 80HHE – Held that:- There was no effect on turnover of the respective years because these amounts were claimed only as expenditure and did not affect the turnover of the respective year. Therefore, in the current assessment year when these amounts are written back then they cannot form part of total turnover – Decided against the Assessee.

  ---

• 2013 (11) TMI 900
  Travelling and conveyance expenditure – Held that:- This amount was spent by the employees of PAC, US “in India, in Indian currency - The provisions of section 44C cannot apply – Section 44C refers to common head office expenses and cannot encompass the expenses exclusively incurred by the expenses incurred by head office employees exclusively for rendering services in India, this cannot be covered within the ambit of section 44C - Only the expenditure incurred outside India can be brought within the purview of this provision - Complete details in respect of all the items of traveling expenses have been made available in the paper book starting with Ledger account of travel expenses with each relevant invoice number, nature of expenditure, amount of expenditure etc. – Section 37 cannot be invoked – Decided in favour of assessee. Interest u/s 234B – Held that:- Following Director of Income-tax (International Taxation) v. NGC Network Asia LLC [(2009) 313 ITR 187 (Bom) - When the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B - As the assessee before us is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source – Decided in favour of assessee.

  ---

• 2013 (11) TMI 899
  Registration u/s 12AA – Held that:- As per the report of Additional Commissioner - Money was collected from members of the Karikulam church and the same was deposited in the taxpayer's bank account. At the time of marriage, the money was refunded to the respective lady member along with its interest - It appears that the taxpayer is not doing any charitable activity other than collecting money from the members of the Karikulam church and deposited the same in the bank account of the taxpayer trust. At the time of marriage of the lady members it was refunded along with interest - The details of collection of money and how it was deposited and how the taxpayer institution meets its day to day affairs are not available on record - It is also not known whether the taxpayer is receiving any deposits or donation from third parties to meet the regular day-to-day activities - The matter needs to be re-examined by the Administrative Commissioner and bring on record the entire activity of the taxpayer trust – The issue was restored for re-examination.

  ---

• 2013 (11) TMI 898
  Purchase and sale of share frequency; holding period; utilization of borrowed capital, etc., which have to be considered in their entirety, even as it is trite that even a single transaction could be in the nature of trade, so as to qualify for being considered as a business transaction or on trading account - In the instant case, assessee has itself classified the said transactions as share trading transactions in the tax audit report - The total number of transactions works to 150 and 120 in the case of both the assesses i.e. father and son respectively; the corresponding turnover being at Rs.489.79 lakhs and Rs.412.12 lakhs, which, in view of the short holding period, would work out to a (turnover) ratio at as high as 10, i.e., of the capital employed, including that borrowed, on which interest has been claimed and allowed - It is a clear case of systematic activity being perused with a profit motive, deploying capital and bearing the concomitant risk, both business and financial, inasmuch as the borrowed capital stands also deployed - Therefore, no infirmity inflicts the Revenue finding their nature as of business, and assessing the income accordingly as business income – Decided against the Assessee.

  ---

• 2013 (11) TMI 897
  Penalty levied by RBI – the company entered into a loan agreement with one, M/s. N. B. Investment Ltd., Mauritius (the lender) for an external commercial borrowing (ECB) of USD - Held that:- delay for a few days in informing the RBI in respect of a foreign loan transaction carried out – Following Haji Aziz & Abdul Shakoor Bros. vs. CIT [1960 (11) TMI 15 - SUPREME Court]– Any expense which is paid by way of penalty for a breach of the law cannot be said to be an amount wholly and exclusively laid for the purpose of the business - The nature of levy is in respect of a contravention of a provision of law - The penalty is not compensatory in nature therefore not deductible u/s. 37(1) Fee paid to ROC – Held that:- The nature of the expenditure, whether capital or revenue, would vary depending not on the purpose for which it stands incurred, but on its timing - Such expenditure is capital in nature – Following Brooke Bond India Ltd. v. CIT [1997 (2) TMI 11 - SUPREME Court] - The amount is to form a part of the company’s own capital, and there is no repayment obligation in its respect, so that it is toward providing an enduring benefit, a part of its capital structure - The deduction u/s.35D is allowed by the statute only for the reason that the said expenditure is capital in nature – Decided against Revenue. Disallowance of interest on bank deposits – Held that:- The interest on bank deposits is considered as assessable u/s.56 - The assessee could be allowed setting off of the interest income against the interest on borrowed capital – Following Sanghvi Jewellery Mfg. Co. (P.) Ltd. v. ITO [2011 (11) TMI 514 - ITAT MUMBAI] - There is no definite finding in the matter on record as to the source of the capital invested in bank deposits, i.e., borrowed or otherwise – The issue was restored for fresh decision.

  ---

• 2013 (11) TMI 896
  Disallowance u/s. 14A – Held that:- Following Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - If there were sufficient interest free fund available with the assessee presumption is that investment would have been made out of interest free funds generated/available with the assessee,that if the interest free funds were only to meet the investment then, no disallowance could be made u/s. 14A of the Act – Following Bunge Agribusiness(India) (P) Ltd. [2011 (6) TMI 403 - ITAT MUMBAI] - If sufficient funds available both interest free and interest bearing then a presumption would arise that interest free funds had been generated for investments and no dis-allowance of interest could be made u/s. 14A – The issue was restored for fresh decision. Rebate u/s. 88E while computing MAT u/s 115JB – Held that:- Following M/s. Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT] – If the transaction on which STT is paid is included in the total income of the assessee where the total income is assessed either under the provisions of the Act or under Section 115JB when tax chargeable on such income is arrived at - The tax paid u/s 88E is given deduction, by way of rebate, u/s 87 - Decided against the Revenue.

  ---

• 2013 (11) TMI 895
  Deduction u/s 80IB(10) - Completion of project - Whether assessee is liable for deduction u/s 80IB(10) when some units are completed and some are not - Held that:- Assessee has obtained permission for construction of four buildings H-1, H-2, H-3, H-4 and G building. The said G building was to be given to the PMC to be allotted to the weaker section of the society. The housing project was approved by the local authority on 28.05.2003 wherein plan for construction of whole project including H-1, H-2, H-3 & G building, and first floor of H-4 building was sanctioned. The assessee was planning to purchase further TDR for construction of remaining floors of H-4 building. As the project was sanctioned before 01.04.2004, the due date of completion of the project was 31.03.2008. It is undisputed that the assessee has received the completion certificate in respect of H-1, H-2, H-3 & G building on 19.03.2008 and 06.03.2007. However, in respect of the building H-4, the assessee submitted that the TDR could not be purchased and, therefore, the building H-4 could not be completed and hence the completion certificate was not issued by the PMC for the H-4 building having four flats. Assessee has received the completion certificate with regards to buildings H-1, H-2, H-3 and G as stated above. So assessee is entitled for claim of deduction u/s.80IB(10) in the stipulated time in respect of completed buildings of the project in question. The construction on H-4 building could not be completed for the conditions beyond the control of the assessee for which assessee is not claiming the deduction u/s.80IB(10). In such situation the assessee should not be denied claim of deduction u/s.80IB(10) in respect of completed buildings and claim of the assessee should not be completely denied - Following decision of Dy.CIT Vs. Brigade Enterprises (P) Ltd. [2008 (8) TMI 453 - ITAT BANGALORE-A] - Decided in favour of assessee.

  ---

• 2013 (11) TMI 894
  Disallowance u/s 40A(2) - Difference in purchase price - Held that:- Assessing Officer has not brought on record any evidence that the fair market value of the seeds purchased by the assessee company was less than the actual expenditure incurred. The purchase of seeds was for legitimate business needs of the assessee. The excessive payment cannot be presumed and it has to be established by the Assessing Officer. The CBDT has issued Circular No.6P dated 6th July, 1968 wherein it has been laid down that the Income Tax Officer is expected to exercise his judgment in reasonable and fair manner. It should be borne in mind that the provision is meant to check evasion of tax through excessive or unreasonable payments to relatives and associate concerns and same should not be applied in a manner which will cause hardship in bonafide cases. In the case under appeal, it was noticed that the assessee has incurred huge losses in the years under appeal and has substantial carried forward losses of earlier years. In view of this fact, there could not be any possibility of evasion of tax by purchasing seeds from Directors of the company at excessive price. It was also noticed from the assessment order that the assessee has agreed for the addition u/s.40A(2). However, it was noticed that the addition has been agreed to due to misunderstanding/misconception of provisions of law and is against the clarification given by the CBDT vide Circular dated 6th July, 1968. In view of the above, the CIT(A) was justified in observing that the assessee is entitled to contest the addition - Decided against Revenue. Disallowance of live stock expenses - Held that:- Assessing Officer has taxed receipt from sale of milk as income in all the years under consideration. The milk which has been sold has been produced by cows and buffalos i.e., live stock. The live stock expenses related to the income earned from sale of milk was allowable expenditure. The live stock have been used for both agricultural as well as dairy farming activities. Accordingly, the Authorised Representative requested 50% expenses for maintaining live stock to be allowed. The said contention of the Authorised Representative was accepted by the CIT(A) and the Assessing Officer was rightly directed to allow 50% of the live stock expenses disallowed by him. Accordingly, disallowance to the extent of Rs.15,172/-, Rs.14,655/-, Rs.16,659/-, Rs.10,612/-, Rs.13,321/-, Rs.3,840/- in A.Ys. 2002-03 to 2007-08 respectively were rightly deleted by the CIT(A) - Decided against Revenue. Sale of seeds - nature of income - Held that:- foundation seeds or hybrid seeds produced in own land or lands taken on lease will be the result of agricultural operations and the profits arising out of such activities shall be treated as agricultural income. - Assessing Officer was not justified in treating agricultural income in respect of sale of breeder seeds and foundation seeds as non-agricultural income Exemption of agricultural income u/s 10 - contract farming - Assessee produce basic seeds in its own lands and hybrid seeds on the lands leased by it – AO’s objection are that the germplasm is generated out of scientific research and, therefore, it is not agricultural activity – Held that:- Simply because the basic seeds are not fit for human consumption, it cannot be said that the produce is not agricultural produce. The assessee procures germ plasm and sows in its own field, and carries on all agricultural operations and produces the basic seeds. The Basic Seeds so harvested are again put through agricultural operations intimately connected with leasehold land for finally bringing out the Hybrid Seeds. Only for the reason that the Basic Seeds are sown in leasehold land and the manpower required are arranged through contract farming, it does not mean that the operations carried out by the assessee are not agricultural operations. Assessee has carried out basic as well as secondary agricultural operations. Therefore, entire such income of the assessee is agricultural in nature - Decided against Revenue. Disallowance of interest u/s.36(1)(iii) - Loan given to sister concern - Held that:- It could not be said that in the cases where appeal is not preferred against the order of the Assessing Officer, addition was correctly made. The assessee has pointed out that Vikrant Malleables Pvt. Ltd. is declared sick by BIFR as per RBI instructions and interest could not be charged to such unit and hence the principal itself is doubtful of recovery and there was no question of recovering interest. As per the provisions of section 153A, it is evident that assessee has to file return of income as per the applicable provisions of the Income Tax Act and as if the return is filed u/s.139 of the Act. It is nowhere stated that in the above provisions that the deduction u/s.24 to which assessee is entitled could not be claimed in the return to be filed in response to notice u/s.153A, which has not been allowed in the original assessment and which has not been contested in appeal. It is settled law that the provisions of the Income Tax Act and the machinery of the Income Tax Department is for assessing and taxing correct income of the assessee as per the provisions of the Act. In view of the above, the Assessing Officer was not justified in disallowing interest u/s.36(1)(iii) amounting to Rs.4,50,000/- in each year under appeal and he was rightly directed to delete the same in all these years. This factual and legal finding needs no interference from our side because Vikrant Malleables Pvt. Ltd. was undisputedly declared sick by BIFR as per RBI instructions, interest could not be charged on such units. Hence, principal itself was doubtful of recovery at relevant point of time. So there is no question of recovery of interest - Decided against Revenue.

  ---

• 2013 (11) TMI 893
  Undisclosed income - Unaccounted turnover - Held that:- In estimating any escaped turn, it is inevitable that there is some guess work. The AO while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation - AO was justified in arriving at the said turnover of Rs 167.23 Cr following the formula of 35:65 of accounted and unaccounted sales turnovers. As such assessee gave in writing in favour of adopting Rs 167.23cr as the gross turnover too. Thus, the exercise of extrapolation is justified and reasonable. Therefore, the determination of the unaccounted sales turnover at Rs 108.70 cr is proper and it does not call for any interference - Decided against assessee. Best Judgement assessment - Held that:- AO/CIT(A) must have some material/data to support the estimation of the Net profit of the Project. Other side of determination of material based net profit is obviously granting of relief on account of the hidden expenditure for earning of said net profit of the project. Scope of Reasonable Expenditure - Held that:- The underlined logic is that the unaccounted expenditure is always unevidenced and never maintained. Therefore, transferring onus on to the assessee in matters of this kind is not approved. Ex consequenti, it is for the AO allow necessarily reasonable deduction towards such unaccounted expenditure without demanding evidences, considering the nature of industry and also evidences relating to extents of net profits earned by the assessee. Considering the above legal position on the matter, we are of the clear-cut opinion, the AO’s conclusions on this issue are certainly erroneous. Reasonableness of 40% adopted by the CIT(A) - Held that:- the search material based-NP percentage stands on higher pedestal and hence superior and credible in quality and acceptability vis a vis the 40% picked up by the CIT(A) from nowhere and without any basis. In that sense, the basic requirements relating to best judgment assessments are out of their mind when they considered both Rs 108.70 cr or 40% of Rs 167.23 cr as the assessable income of the project –Prime Mall. Therefore, we have no hesitation in rejecting the estimation of NP adopting the said baseless 40%. Various available percentages of net profit - Held that:- What is fair and reasonable estimation of profits of the project than what is based on the assessee’s own books of account on one hand and the assessee’s seized documents on the other? Ex consequeinti, we restrict ourselves to the data pertaining to the assessee’s own case ie average NP 13.735% ie data emanating from the returns filed u/s 153A of the Act and NP of 23.99%. Thus, we are of the opinion, the reasonable percentage of profits of the project – Prime Mall lies somewhere in the range of said NPs ie 13.735%-23.99%. - the average of the 13.735% and 23.99% must give rise to a reasonable percentage of NP ie 17.08%. It is directly linked to material gathered in search on one side and audited books of course in respect of accounted sales of Rs 58.53cr on the other. - AO directed to work out the taxable profits of the project–Prime Mall accordingly. - Decided in favor of assessee.

  ---

• 2013 (11) TMI 892
  Additions u/s 41(1) - cessation of liability - assessee claimed setoff with sundry debtors - Held that:- the assessee has not booked the income receivable from sundry debtors i.e. ETV Kannada during the relevant year i.e. A.Y. 2003-04. The assessee has not written off the said debt. Hence, at this stage there cannot be any automatic set off of the amounts relating to amounts payable to sundry creditors against the amount receivable from sundry debtors. - Decided against the assessee.

  ---

• 2013 (11) TMI 891
  Allowability of deduction under section 10B and under section 80HHE of the Act - Deduction under section 10B is allowable to 100% export oriented undertakings engaged in the export of articles, things or computer software and which have been approved for this purpose by the competent authority. Deduction under section 80HHE is available in respect of profit from the export of computer software or from its transmission to a place outside India or from providing technical services outside India in connection with development/production of computer software - Assessee is engaged in contract research activity on behalf of the foreign pharmaceutical companies and is also engaged in medical transcription activity – Held that:- The matter restored to the file of Commissioner(A), to decide the issue afresh in the light of various judgments s.a. CIT vs. Black & Veatch Consulting (P) Ltd [2012 (4) TMI 450 - BOMBAY HIGH COURT ], wherein it has been held that deduction under section 10B has to be allowed before setting off brought forward losses. Also, in the light of judgments in the case of Shirke Constructions Ltd.[2007 (5) TMI 194 - SUPREME Court], wherein it has been held that brought forward loss has to be adjusted before allowing deduction under section 80HHC. Treatment of expense regarding renovation of director’s office which being the rented premises, a capital expenditure of revenue expenditure – Held that:- In view of Explanation -1 to section 32(1) inserted from assessment year 1988-89, the capital expenditure incurred by way of renovation or extension or improvement even in rented premises has to be considered as owned by the assessee on which depreciation is allowable - Full details of expenditure has not been brought on record either in the order of AO or in the order of CIT(A). Further CIT(A) has also mentioned that copy of agreement with landlord had not been produced by the assessee which in our view is necessary in understanding the true nature of expenses - Matter requires fresh examination and hence restored this issue also, back to CIT(A) for passing a fresh order.

  ---

• Customs

• 2013 (11) TMI 890
  Confiscation of goods - Over valuation of goods - Imposition of redemption fine and penalties - Held that:- there was over-valuation of the consignment of silk waste and semi-processed silk material which was sought to be exported. We agree with the findings recorded by the adjudicating authority that such goods are liable for confiscation under the provisions of Section 113 - redemption fine imposed by the adjudicating authority in lieu of such confiscation is also correct as the goods were cleared for export by the lower authorities on execution of bond and bank guarantee as per the direction of their lordships in Civil Petition - no reason to interfere in such a reasoned order for confiscation of such goods and hence uphold that portion of the order and reject the appeal to that extent. Appellant M/s Western Silks has filed the shipping bills and documents, wherein it has been conclusively held that the said goods were over-valued, we are of the view that the appellant M/s Western Silks is correctly penalized under Section 114 of Customs Act, 1962 - goods which were seized, were allowed to be exported and the consideration for such export has already been received in advance, the penalty imposed on M/s Western Silks seems to be excessive in this case and dis-proportionate - ends of justice will be met if the penalty imposed on M/s Western Silks, Ahmedabad is reduced - there is no dispute as to the fact that he is a proprietor of M/s Western Silks. It is settled law that proprietor and the firm are not independent of each other and hence having upheld the penalty imposed on M/s Western Silks, we are of the considered view that penalty imposed on the proprietor is unsustainable and needs to be set aside - Decided partly in favour of assessee.

  ---

• 2013 (11) TMI 889
  Confiscation of goods - Redemption option given to assessee - Held that:- paper waste of Chinese origin was brought into India from Nepal in the impugned truck by the appellant - Since the said paper waste was brought in the impugned truck, confiscation of the truck was also ordered by the original authority and both the confiscations were upheld by the Ld. Commissioner (Appeals) - order of the Commissioner (Appeals) in respect of the confiscation and confirmation of fine and penalty against the appellants is upheld - appellant’s unit is under BIFR proceedings and the benefit of the BIFR proceedings should be given to the appellant in view of the nature of the unit, I find that the BIFR proceedings are not applicable to the seizure and confiscation for violation of the provisions of the Customs Act. Moreover, the appellants have already deposited fine in respect of paper waste and the penalties imposed in the present case. In respect of the truck which was already released provisionally to the appellant and they are using the same for their business purpose - No reason to reduce redemption amount - Decided against the assessee.

  ---

• 2013 (11) TMI 888
  Refund of ACD / SAD - Notification No. 102/2007-Cus dated 14.9.2007 - Goods imported by the appellants were subsequently sold by them by raising the invoice - The said invoice also bear endorsement as - ‘we do hereby certify that we have not given the credit of Additional Customs duty in this invoice’ - Orginal adjudicating authoruty sactioned Refund claim - Commissioner set aside order of refund - Held that:- condition only requires that the importer while issuing the invoice for sale of the goods, specifically indicate in the invoice that no credit of the additional duty of customs levied under sub section (5) of Section 3 of Customs Tariff Act, 1975 shall be admissible. Admittedly, the appellants in their sales invoices has endorsed the same laying down that - ‘we do hereby certify that we have not given the credit of Additional duty of Customs in this invoice’. The reason of the appellate authority that such endorsement is not as per the language of condition 2(b) of the notification cannot be appreciated as it only requires the importer to specifically indicate in the invoice that no credit of Additional duty of Customs is admissible to the buyers of the goods. First of all, the same cannot be considered to be a language required to be picked up by the importer for the purpose of endorsing the invoice. The purpose of said condition is that a clear endorsement should be made on the invoice to indicate that no credit of Additional customs duty paid is available to the buyer as credit. Admittedly, such endorsement stand made by them. The wordings of the language used will not make the difference as long as the intent and purpose of making endorsement is satisfied - Following decision of assessee's own case in [2009 (10) TMI 823 - CESTAT NEW DELHI] - Decided in favour of assessee.

  ---

• 2013 (11) TMI 887
  Waiver of pre deposit - Non-compliance of the stay order - Held that:- The appellant paid the amount of duty and penalty on 01.02.12 - two amounts were directed by the first appellate authority to be deposited for hearing and disposing the appeal by the appellant. The appellant having complied with the direction of the first appellate authority to pre-deposit of the amount, though belatedly, we find that he should be given an opportunity of presenting his case before the first appellate authority on the merits of the issue. Accordingly, we set aside the impugned order and direct the first appellate authority to restore the appeal of this appellant to its original number and decide the same on the merits of the case after following the principles of natural justice - matter remanded back.

  ---

• 2013 (11) TMI 886
  Classification of goods - Import of telegraphic message addressed to “Mahatma Gandhi, New Delhi” with certain scribbling in hand on the message - Classification under Customs Tariff Item 49021010 or CTI 97050090 - Confiscation of goods - Held that:- There is no definition of the expression “historical interest” in Customs Act, Customs Tariff Act or Import Policy. Neither is the expression defined in Antiquities and Art Treasures Act, 1972. This Act only uses the expression to give an inclusive definition of antiquity. Antiquity is defined to include any manuscript of historical value which has been in existence for more than 75 years. This definition cannot be interpreted to mean that manuscripts which are not antiquity cannot be of historical interest - To be classified under Customs Tariff Heading 9705 an item need not be an item of antiquity. In fact antiquity is classifiable under Heading 9706 - To be classified under this heading an item need not be an item of antiquity. In fact antiquity is classifiable under Heading 9706 - Commissioner (Appeal), the impugned sheet of paper commands a price of US$ 2074 only for the historical interest in the paper and we do not find anything wrong with the finding of the Commissioner (Appeal) that the item is of historical interest and hence classifiable under CTI 97050090. Once the goods are classified under the said tariff item goods imported without licence is liable to confiscation and the person importing the goods is liable to pay penalty.

  ---

• 2013 (11) TMI 885
  Valuation of goods - Royalty payment of goods - Held that:- As per the terms and conditions of the license agreement, the royalty payment is for the use of trade mark and the cost of raw materials/components imported by the appellant from the foreign principal or from their subsidiary/affiliated companies is excluded while computing royalty. In other words the royalty paid has no nexus either with the price of the imported components nor it is a condition of sale of the imported components. Therefore, the question of adding the royalty either under Rule 9(1)(c)/10(1)(c) or 9(1)(d)/10(1)(d) of the Customs Valuation Rules, 1988/2007 does not arise and transaction value has to be accepted - Decided in favour of assessee.

  ---

• Corporate Laws

• 2013 (11) TMI 884
  Registration under Section 12(1B) of the SEBI Act, 1992 and Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 - Appellant launched Collective Investment Schemes without obtaining any registration - Collective investment scheme as defined under Section 2(ba) read along with Section 11AA of the SEBI Act - vires of Section 11AA of the SEBI Act challenged - Whether or not the business carried on by the Appellants is in the nature of CIS - Held that:- contributions of the customers are quite evidently pooled together and then utilized for the purposes of the scheme carried on by the Appellants. The fact that neither the area nor the location of a particular plot of land being supposedly sold to the investor is mentioned in the 'Certificate of Property' provided for our perusal demonstrates that the money received from a particular investor is not utilized for the purchase and development of one particular plot, but for all the land owned by the Appellants in general. Even from the application form we observe that there is no space ear-marked therein with respect to specifics of the plot allotted to the investors. Further, the plot of land has all along been denoted as a 'proportionate undivided interest'. All of the above denotes that the business of the Appellants is not really in the nature of regular real estate. Appellants unequivocally assure the investors of high returns in the form of profits which may be immovable property - The investors therefore seem to be contributing to the scheme with the clear view of receiving profits, whether in the form of returns or of property whose value increases owing to the developmental activities carried on by the Appellants - when each customer/investor is a recipient of 'property' it is apparent that each customer/investor is admittedly a recipient of one of the benefits contemplated under Section 11AA(2)(ii), namely, 'property'. 'Certificate of Property' is more in the nature of a certificate of investment - certificate falls completely within the scope of the definition of the terms "securities" as provided in Section 2(h) of SCRA which as amended by the Securities Laws (Amendment) Act, 2004, w.e.f. October 12, 2004, now includes units or any other instrument issued by any Collective Investment Scheme to the investors in such schemes. Therefore, the certificate issued to the investors readily falls within the meaning of the expression "securities". Property in question, the investment involved and the management thereof are all in the hands of the Appellants with the customers having no role to play whatsoever, since the scheme is operated by the Appellants on the customers' behalf. In this connection, we note that the Supervision Agreement executed between the Appellants and their customers states that during the period of development, although the customer may inspect the land, he would so only after informing the company of such intention and after giving due notice to the Appellants. Further, the agreement in question also states that there shall be no interference of the investor as regards the working, management, control and supervision of the land in question in any manner. Further, the fact that a power of attorney giving an authorized representative of the Appellants the authority to execute documents and deeds on behalf of the customer is executed by all investors proves beyond a shred of doubt that the property along with the contribution received under the scheme is managed by the Appellants. Role of the customers is no more than that of hapless investors, standing and observing the show from the sidelines as it is run by the Appellants - Appellants were/are under an obligation to apply for registration with the SEBI as per the requirements laid down in the CIS Regulations and the SEBI Act. In this connection, it is pertinent to note that in the interpretation of such regulatory measures, like the CIS Regulations in hand, the most important task is to determine the 'pith and substance' of the provisions concerned, i.e., their true and essential character - Closing or winding up such CISs is an extreme measure to be resorted to in rare cases of adamant companies who do not wish to abide by the CIS Regulations, in the matter of registration and other conditionalities laid down therein. Considering the large number population involved and the long and tedious process of implementing the scheme of repayment involved which would entail a number of steps before money is finally received by the investors, including going through more than one and a half applications; ascertaining the amount / money to be paid in each and every case; disposing off the property; writing and dispatching cheques to the investors etc., we are inclined to grant them a longer period of time than that provided by SEBI - Order modified - Decided partly in favour of appellant.

  ---

• Service Tax

• 2013 (11) TMI 920
  Stay application - whether the amount received by the assessee from banks and financial institution towards reimbursement of some of the services offered by the assessee to the banks/ financial institutions must be excluded from the gross value of the taxable service in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 - Held that:- Whether the value received by the assessee in respect of services such as security, videography, photo rolls, iron boards, locking and sealing material etc. should be excluded from the gross taxable value, in view of provisions of Rule 5(2) of the Service Tax Rules is not wholly free from doubt at this stage. However, the entirety of the assessee’s claim for exclusion does not appear to be based on any sound legislative of statutory basis - Prima facie case not in favour of assessee - Stay granted partly.

  ---

• 2013 (11) TMI 919
  Demand of service tax - Reimbursement charges collected by the appellant from their clients - Held that:- Following decision of INTERCONTINENTAL CONSULTANTS AND TECHNORATS PVT. LTD. Versus U. O. I. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT] - Rule 5 is struck down which mandates for inclusion the reimbursements, for discharge of service tax liability. We are of the view that the appellant has made out a prima facie case for the waiver of the amounts involved - stay granted.

  ---

• 2013 (11) TMI 918
  Demand of service tax - Inclusion of value of SIM cards in the taxable value of telecommunication services - Held that:- SIM cards/ Recharge Coupons are not “goods” but service and service tax alone can be levied on the supply of such cards/coupons. While considering the case of Vodafone India Ltd. by the hon'ble Bombay High Court, these decisions of the Kerala and A.P. High Court was not brought to the notice of the Court and therefore, the said decision has to be considered as “per incuriam”. In view of the above factual and legal position, we hold that the benefit of Notification NO.12/2003-ST will not be available to the appellant and service tax has to be paid on the gross amount charged for the supply of SIM cards. Therefore, the demand of Service Tax confirmed by the adjudicating authority is sustainable in law and we hold accordingly - Following decision of Commissioner of Central Excise & Customs, Cochin Versus Idea Mobile Communication Ltd. [2008 (9) TMI 292 - KERALA HIGH COURT], THE STATE OF ANDHRA PRADESH Versus M/s BHARAT SANCHAR NIGAM LTD, HYDERABAD [2011 (9) TMI 216 - Andhra Pradesh High Court] - Decided against assessee. What is the rate of tax that should apply, that is, whether the rate prevalent at the time of rendering of the service or the rate prevalent at the time of receipt of payment for the services rendered, especially in a case when payment is received in advance - Held that:- rate of tax that should apply in respect of service tax is the rate prevalent at the time of rendering of the service and not the rate prevalent at the time of receipt of consideration or the rate prevalent on the date of payment of tax as that would create uncertainties. The basic feature of a tax system is its certainty. Therefore, any interpretation that leads to uncertainties should be eschewed - Following decision of Maharashtra Chamber of Housing Industry vs. U.O.I. [2012 (1) TMI 98 - BOMBAY HIGH COURT] - Decided against assessee. Whether the extended period of time could have been invoked for demand of service tax - Held that:- Adjudicating authority has held that only normal period of time would apply in respect of demand of service tax on the gross amount charged as the records of the appellant had been audited by the Department and no suppression could be alleged. If that be so, in respect of application of rate of tax on the balance of talk time available in respect of pre-paid SIM cards/re-chare coupons and the rental advance, the same logic should apply. Therefore, we hold that in respect of these demands also, the normal period of time shall only apply and not the extended period of time. Demand of service tax on the gross amount charged for the supply of SIM cards/re-charge coupons. We also hold that such supply does not constitute supply of goods and the provisions of Notification No.12/2003-ST has no application. We also uphold the demand of differential service tax on advance rentals received and balance of talk time available at the enhanced rates w.e.f. from 13-5-2003 and 10-9-2004. However, the demands shall be sustainable only for the normal period of limitation and the service tax shall be recomputed for the normal period. On such recomputed demand, interest liability would accrue. Penalty under section 76 shall also apply on such recomputed demand.

  ---

• 2013 (11) TMI 917
  Demand of service tax - Tax on Commissioning and Installation Service - laying of submarine pipelines, for the transport of petroleum crude oil from Bombay High and Bassein Filed Offshore sites - Held that:- Activity covered under the tax net is only ‘commissioning or installation of plant, machinery or equipment'. This Tribunal in the case of Indian Hume Pipes Co. Ltd. [2008 (7) TMI 71 - CESTAT, CHENNAI] held that pipes or pipeline does not come under the category of ‘plant, machinery or equipment' and therefore laying of pipeline does not come within the scope of ‘Commissioning or Installation Service'. In any case, laying of pipelines has been specifically covered under ‘Commercial Construction Service' which came into effect from 16/06/2005. During the impugned period, the activity of laying of pipeline was not covered under the ‘Commissioning and Installation Service'. Therefore, we do not find any infirmity in the Commissioner's order dropping the demand - Decided against Revenue.

  ---

• 2013 (11) TMI 916
  CENVAT Credit - Waiver of pre deposit - Outdoor and catering services - Held that:- Applicant had rendered Outdoor Catering Services and Business Auxiliary Services to M/s Tata Cummins. Prima facie, I find that the Applicant had availed the CENVAT Credit of the Service Tax paid on the input services rendered by M/s. Pankaj Industries, which related to service of marketing of the projects in Tata Steel, Jamshedpur. I agree with the contention of the ld. AR for the Revenue that prima facie, there is no nexus between the services rendered by M/s. Pankaj Industries to M/s. Tata Steel Ltd. and the output services, i.e.Outdoor Catering Services provided by the Applicant to M/s. Tata Cummins Ltd. - Prima facie case not in favour of assessee - Stay granted partly.

  ---

• 2013 (11) TMI 915
  Cenvat credit - Business Auxiliary Service - Services of commission agents – Waiver of Pre-deposit - Revenue was of the view that the service of Business Auxiliary Service (commission agent) used for procuring the sales orders is not input service – Held that:- Relying upon CCE, Ludhiana vs. Rightway Fabrics Pvt. Ltd. [2012 (6) TMI 21 - CESTAT, NEW DELHI] - The commission agent services are covered by the expression sales promotion and activities relating to business – Thus it is covered by the definition of input service and would be eligible for Cenvat credit - The Tribunal being a creature of Central Excise Act, 1944 cannot go into the question of the vires of Rules framed thereunder and while deciding the issue - the Tribunal is required to go by Rules framed by the Central Government under the powers vested on it under Section 37 of the Central Excise Act and if the Cenvat Credit Rules permit Cenvat credit in respect of certain services, the same has to be allowed – Prima facie the appellant have a strong case in their favour - The requirement of pre-deposit of Cenvat credit demand, interest thereon and penalty waived till the disposal – Stay granted.

  ---

• 2013 (11) TMI 914
  Waiver of pre deposit - Appellant contends that provisions were only made in records and no service was rendered to the appellant by foreign agency - Held that:- The materials brought to our notice today are only some accounting figures without the material evidence to show that there was a dialogue between the appellant and foreign service provider and that was not materialized and provision was only book entries. Neither there is any whisper in the published accounts about materialization of the dialogue between the parties nor the Director’s report was placed before us to appreciate that shareholders of the company were informed about the contract. Such propositions are enough to ask for pre-deposit when fluctuation in foreign currency, TDS was involved in the entire transaction as shown to us today - All the above aspects prove that appellant has not come out with clean hands to claim that there should be waiver of pre-deposit and no incidence of tax arose - Prima facie case not in favour of assessee - stay granted partly.

  ---

• 2013 (11) TMI 913
  Cenvat Credit - Whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant - Held that:- The Section 37(2) refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, 'capital goods' defined in the CENVAT Credit Rules in the context of providing credit of duty paid, have to be excisable goods. - Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules for the impugned period - Following decision of Vandana Globals Vs. C.C. Ex, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - Prima facie case not in favour of assessee - Decided against assessee.

  ---

• 2013 (11) TMI 912
  Storage or warehouse keeper – recipient of service from foreign party i.e. PROSAFE – Held that:- In terms of the agreement, PROSAFE was responsible for maintaining floating storage and offloading unit system and was to operate the system efficiently to receive storage and deliver correctly in accordance with the specification and operating requirements. That does not bring the activity of PROSAFE squarely within the fold of Section 65 (105) (zza) as a storage or a warehouse keeper - Being an agent of the process of production, it was not a storage or warehouse keeper. Therefore, service was not provided by the foreign agency as storage or warehouse keeper - appellant shall not be liable to pay service tax as the recipient of service of the nature not falling within the purview of Section 65 (105) (zza) of Finance Act 1994 read with Section 65 (102) - Following decision of Aban Loyd Chiles Offshore Ltd. Versus Commissioner of Service Tax, Chennai [2012 (7) TMI 287 - CESTAT, CHENNAI] - Decided in favour of assessee.

  ---

• 2013 (11) TMI 911
  Waiver of pre deposit - Works Contract Service on supply and laying of pipelines for water supply project awarded by Tamil Water Supply and Drainage Board - Held that:- on an earlier occasion, the said service rendered by the very same applicant was sought to be classified by Revenue under Erection, Commissioning or Installation Service under section 65 (39a) of the Finance Act,1994 which was set aside by the Tribunal in their own case as reported in [2008 (7) TMI 71 - CESTAT, CHENNAI]. Prima facie, we find that laying of pipelines is for water supply for the project of TWAD Board which is a non-commercial organization. In view of that pre-deposit of tax along with interest and penalty is waived and its recover is stayed during pendency of the appeal - Stay granted.

  ---

• Central Excise

• 2013 (11) TMI 883
  Interest on Rebate claim – Held that:- The refund claim sanctioned but adjusted against the confirmed demands where the said confirmed demand are subsequently set aside, the assessee would be entitled to the interest from the date of expiry of three months from the date of filing refund claim – Following Intas Pharmaceuticals Ltd. Vs. CCE, Ahmedabad [2011 (8) TMI 354 - CESTAT AHMEDABAD] – as per section 11BB of Central Excise Act, 1944 if the refund claims filed are not sanctioned within three months, the Revenue is under legal obligation to pay interest till the date the same are actually given to the assesse - they would be entitled to get interest from the date of expiry of three months from the date of filing of refund claim - Decided in favour of Assessee.

  ---

• 2013 (11) TMI 882
  Clandestine removal of goods – Physical weightment of goods - Held that:- Demand of duty on the goods found short during the course of physical verification by central excise officers - The duty involved on the goods has already been paid by the appellant and also appropriated by the lower authorities and penalty is imposed under Rule 25 of the Central excise Rules, 2002 on the appellant - Physical verification of the goods was done by the officers on 30.11.2007 - The weight of the goods found short was ascertained on the basis of number of pipes and tubes found short multiplied by the sectional weight mentioned in the catalogue of the appellant themselves - There is no substance in the arguments of the appellant that no actual weighment was done by the Department during the course of verification – order upheld with regard to demand of duty as well as the confirmation of penalty against the appellant – Decided against Assessee.

  ---

• 2013 (11) TMI 881
  Eligibility for cenvat credit on MS Angles, Channels, Bars and Plates - Assessee contended that the steel items were used in fabrication of various components of machinery – Held that:- The Assistant Commissioner has given a clear finding based on the verification report of the Superintendent that the steel items, has been used as components of machinery classifiable under Chapter 84 - the items have been used in the machinery which are permanently embedded to the earth are eligible for Cenvat credit - Following Jodhpur Alloys Pvt. Ltd. vs. CCE, Jaipur [2013 (11) TMI 842 - CESTAT NEW DELHI] - the steel items, have been used as components of the machinery, it is not material whether that machinery is fixed to the earth/embedded in the earth or otherwise – Decided against revenue.

  ---

• 2013 (11) TMI 880
  Valuation of Niacin - Captive consumption - job work - manufacture niacin and such niacin captively consumed in the manufacture of ‘niacin feed premix’ - Rule 8 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules 2000 – Entitlement for Exemption under Notification No.10/96 – Eligibility for Cenvat credit – Held that:- ‘Niacin feed premix’ is manufactured by the appellant was not animal feed for which it is not entitled to the duty exemption on niacin - ‘animal feed premix’ was branded as ‘Proolay N95’ which is distinct goods without that being an animal feed - Appellant failed to prove that it manufactured animal feed in essence and substance what that is commonly understood in the market - Niacin feed premix and animal feed are two distinct goods as may be appreciated from their nature and class as is revealed from Chapter 39 of Central Excise Tariff Act, 1985 because chapter 23 has recognised preparation of a kind used in animal feeding without that being animal feed – it does not say animal feed supplement is same as animal feed. Following CCE, Guntur vs. Surendra Cotton Oils Mills & Fert. Co. [2000 (12) TMI 103 - SUPREME COURT OF INDIA] - The appellant only manufactured a mixture of chemicals in its factory which is called as Niacin Feed Premix but did not manufacture animal feed in the same factory using niacin - thus it was not eligible to the duty exemption under the notification - Legislature consciously granted duty exemption to the intermediate product if such product is used in the same factory to manufacture the notified finished goods under Notification No. 10/96-CE - Such exemption being granted at public cost that cannot be liberally construed to grant undue benefit to the appellant – Thus the benefit of duty exemption on niacin was rightly rejected. Duty shall be levied on niacin in accordance with law and the goods in question shall be valued in accordance with CAS -4 - No cenvat credit is available on niacin being used in the goods subjected to nil rate of duty - Interest on duty demand would be leviable - No penalty shall be levied on the appellant for the confusion of the legal position – Decided against Revenue.

  ---

• 2013 (11) TMI 879
  Eligibility for cenvat credit - Welding Electrodes used for repair and maintenance of plant and machinery - assessee contended that the repairing is an activity distinct and different from manufacture - Held that:- Following M/s The Kanoria Sugar & General Manufacturing Company Ltd. vs. CCE, Allahabad [2013 (7) TMI 787 - CESTAT NEW DELHI] - Welding electrodes used for repair and maintenance of the plant and machinery would be eligible for Cenvat credit – Decided against Revenue.

  ---

• 2013 (11) TMI 878
  Penalty under Rule 26(1) of Central excise rules 2002 - Bogus Cenvatable invoices issued - Held that:- Even during period prior to 01.03.07 penalty could be imposed on a registered dealer for issue of bogus cenvatable invoices without supplying any goods, under Rule 25(i)(d) and 26 of Central Excise Rules, 2002 - Following Vee. Kay. Enterprises Vs. Commissioner of Central Excise [2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT] - Inspite of non-applicability of Rule 26(2), penalty could be levied as the assesse was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as they claimed to have sold the goods in respect of which the Cenvat Credit was taken - In such a case, Rule 25(1)(d) and 26(1) are also applicable - The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty - The assesse issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged – the appellant was liable to pay penalty – Decided in favour of Revenue.

  ---

• 2013 (11) TMI 877
  Extended Period of limitation – Valuation of BOPP film cleared to the sister concern - Held that:- The appellant had filed the price declaration showing clearance of the goods to their sister concern unit on the basis of cost of production - The declaration stand approved by the Revenue without raising any objection - extended period was not available to the Revenue. Whatever duty was being paid by the assessee, was available as credit to their sister unit and the said credit was being utilized by their sister unit for payment of duty on their final product -the entire situation was revenue neutral – Relying upon CC vs. Textile Corporation Marathwada Ltd. [2008 (9) TMI 57 - SUPREME COURT ] - in case of revenue neutrality, no malafide can be attributed to the assessee so as to justify invocation of longer period of limitation - demand is barred by limitation and is also not sustainable on the point of revenue-neutrality – Decided against Revenue.

  ---

• 2013 (11) TMI 876
  Classification of goods – supply of pre-fabricated building - Advelorem or Nil rate of duty - Whether the goods would be classifiable under Heading 7308 @ 16% advelorem or under Heading 94.06 at nil rate of duty – Held that:- The adjudicating authority observed that though the purchase order termed the supply as ‘supply of pre-fabricated building’, the actual supply made by the assessee are only structures - They were undertaking the work of erection of structure at site supplied by them, all other items of works were bought out items - The AC sheets which cover the structure are supplied by the customers themselves - The work order is not for a complete building but it is only for supply of pre-fabricated structure along with certain fixation work to be done at the site. The building must have a wall as is apparent from the HSN Explanatory Notes. It has been held that the structure supplied by the appellants in unassembled form cannot be treated as prefabricated building under Tariff heading 94.06. - Decided against the assessee. In respect of other purchase orders - Held that:- The classification as pre-fabricated building cannot be changed for the reasons that roofing sheets or walls were bought-out items or supplied by the buyer of the product - The classification has to be decided by the facts whether the goods manufactured are made to measurements of a building and that the components manufactured and supplied will give essential characteristics of a building as may be seen from purchase orders and bills of materials. - it would be covered within the Heading 94.06 as pre-fabricated building. So, the goods supplied in respect of the other purchase orders are rightly classifiable under sub-heading No.9406.00. - Decided in favor of assessee. The finding of the adjudicating authority that though the purchase order terms the supply as ‘supply of pre-fabricated building’, the actual supply made by the assessee are steel structure is without examining all the purchase orders in proper manner - matter remanded back to the original authority to re-quantify the demand.

  ---

• 2013 (11) TMI 875
  Exemption notification no. 5/98 - use of power - Examination of chart and reply to the show cause notice - Quantum of demand of duty – Revenue was of the view that the Goods manufactured at different factory and cleared from a different factory and the assesse took the wrong availment of the Benefit of Notification No. 5/98 – Held that:- The Commissioner has not considered the chart and has not given a categorical finding as to whether the traded goods were also included in the value of total clearance - the fact that the lacquered/polished sheets which were being cleared by the appellant, has also been held to be excisable goods by referring to the fact that appellant was paying the duty on the same in their unit located at C-18A cannot be appreciated - The same is not depending upon the fact that the assessee was himself clearing and paying the duty on the said sheets, may be on account of lack of knowledge but the issue is dependent upon the declaration of law by the Courts. Appellant relied upon METLEX (I) PVT. LTD. Versus COMMISSIONER OF C. EX., NEW DELHI [2004 (2) TMI 387 - SUPREME COURT OF INDIA] which has to be considered by the Commissioner - In the case of subsequent confirmation of demands, benefit of Canvat credit has to be allowed to the assessee, subject to production of eligible Cenvat credit invoices – Relying upon Formica India Division vs. CCE [1995 (3) TMI 98 - SUPREME COURT OF INDIA] - Order set aside and the matter remanded back to the Commissioner to examine the chart prepared by the appellant and submitted to him along with reply to the Show cause notice – Decided in favour of Assessee.

  ---

• 2013 (11) TMI 874
  Cenvat credit taken on partly finished screen printing machine – Machines cleared under Notification No.108/95 – Held that:- The goods which are final products in the hands of one person can be an input in the hands of another person who is further processing the goods by another manufacturing process - The Section Note 6 of Section XVI clearly lays down that process of the type done by the appellant amounts to manufacture –Order set aside – Decided in favour of Assessee.

  ---

• CST, VAT & Sales Tax

• 2013 (11) TMI 921
  Jurisdiction of the Joint Commissioner under Section 34 of the Tamil Nadu General Sales Tax Act - Initiation of penal proceedings - Held that:- The assessee did not produce any material, except to the extent on merits, to hold that penalty cannot be levied - if the assessee had had no grievance as regards the issue raised by the Revenue proposing to levy penalty before the first Appellate Authority, we do not find any inhibition even otherwise on the authority of the Joint Commissioner to invoke his revisional powers to give a direction to the Assessing Officer to invoke penalty in view of Section 23 on the violation of Form XVII. Thus, we reject the prayer of the assessee as to the jurisdiction of the Joint Commissioner under Section 34 of the Tamil Nadu General Sales Tax Act to give such directions to the Assessing Officer as regards initiation of penal proceedings - Decided against assessee.

  ---