TMI Tax Updates - e-Newsletter
November 21, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

• POINT OF TAXATION IN SERVICE TAX – JUDICIAL SCRUTINY
• Section 44AD care required in view of retrospective amendment by insertion of sub-section (6).
• GOVERNANCE PROFESSIONAL

News

• Competition Commission of India and DG, Competition of the European Commission sign MOU on Cooperation in the Field of Competition Laws

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• Draft Rules (5th phase) under Companies Act 2013

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• RBI Reference Rate for US $ and Euro

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• 3rd BRICS International Competition Conference, 2013 inaugurated

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• Text of the Speech of the Union Finance Minister Shri P. Chidambaram at the Second South Asian Diaspora Convention in Singapore Today

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Circulars / Instructions / Orders

VAT - Delhi

• 26/2013-14 - dated 20-11-2013
  Filing of online return for 2nd quarter of 2013-14 – extension of period thereof.

SEZ

• Instruction No. 79 - dated 19-11-2013
  Uniform list of services to be followed in SEZs — regarding.

Highlights / Catch Notes

Income Tax

• Assessment u/s 153A - Name not appearing on warrant or authorization (WOA) - search being authorized in the name of more than one person - decided against the assessee - AT
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• The statement u/s.133A is by itself of no evidentiary value, and it is validity, if so, would only be with reference thereto, i.e., to the extent it explains or corroborates and/or supports the material/evidence found - AT
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• Income was revealed as a result of survey followed by scrutiny assessment done by the A.O. and when it was confronted by the A.O. to the assessee, the later had no option but to surrender its claim for additional depreciation - penalty confirmed - AT
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• Capital gains - transfer u/s 2(47) - Assessee entered into JDA agreement - As per the agreement, the assessee is entitled for 50% of built up area - held as liable to tax as capital gains - AT
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• CIT(A) was fully justified in allowing the claim of the assessee on interest paid on capital borrowed for the purpose of new glass factory set up by the assessee at Jambusar in Gujarat which was nothing but expansion of the assessee’s existing business - AT
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• Setup and commencement of the business activity - Development of airport infrastructure activity - assessee has not completed the stages, which are considered elementary to start the business - AT
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• Deduction u/s 80M - Discrimination with foreign bank - reduction of tax rate way back in 1976 itself is after withdrawing the deduction under section 80M - there is no discrimination. - AT
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• Transfer pricing adjustment - benefit of up to 5% can be allowed only if the variation between the price charged/paid in respect of international transaction and ALP determined by taking the results of comparable cases does not exceed 5% - AT
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• Written off of bad stock - assessee had been regularly making analysis of the bad stock and only after arriving at the conclusion that the stock had become worthless/ unsaleable, the business decision was taken to write-off the stock - Claim allowed - AT
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• Assessee in default u/s 201 - TDS u/s 194C or 194J - A contract, which is intended to be a contract for sale of goods [for delivery], cannot be construed as anything else but a contract of sale. - AT
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• Method of accounting – the assessee had right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change - AT
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• Notice u/s 148 - assessee was very well aware of its right to raise objections since the very beginning and it had not preferred to exercise the same, it is not entitled to seek leave for challenging the legality of reopening and more so, in the second appeal - AT
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• Disallowance of expenditure - Payment of Privilege fees - Nature of expenditure - Exclusive privilege for wholesale trade of Indian made Foreign Liquor & Beer - claim allowed - AT
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Customs

• Confiscation of goods - Once the declared classification has been accepted, there can be no dispute whether the scaffolding could be considered as equipments. old and used scaffoldings imported by the appellant are to be considered as “secondhand capital goods - AT
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• Refund claim - No declaration on invoice - If the appellants have not even mentioned SAD on the invoices, the purchasers is not in a position to avail the credit of the same, this purpose of notification is fulfilled - AT
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Service Tax

• Cenvat credit on Construction Service for setting up of factory - Whether Service tax on setting up of immovable property is a service and goods can be taken as inputs on which credit can be taken - credit allowed - AT
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• Validity of Debit Notes - Availment of cenvat credit – just because before the word invoice, the word debit note has been added, these documents would not cease to be a valid document for the purpose of cenvat credit - AT
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Central Excise

• In view of the addition of Explanation to Section 2 (d), Zinc Dross is to be deemed as 'marketable' and, therefore, they have to be considered as excisable goods and liable to excise duty - matter referred to larger bench - AT
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• Condonation of Delay – Delay of More than 6 years – Such long period of lapse creates a vested right for the respondents not to be dragged into further proceedings - AT
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• CENVAT credit on non-duty paid scrap - Contravention of Rule 25 (a) - duty paying document - invoice of the second stage dealer – The reason that the goods were not available to confiscation should not be a reason to avoid penalty - AT
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• Jurisdiction of the Tribunal u/s 35B – The case is one of rebate of duty, hence CESTAT has no jurisdiction to decide this appeal in view of Clause (b) of first proviso to Section 35 B of Central Excise Act, 1944 - AT
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• Eligibility for cenvat credit on spare parts - the component parts of the Ventra locomotives would have to be treated as inputs eligible for cenvat credit - AT
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Case Laws:

• Income Tax

• 2013 (11) TMI 940
  Assessment u/s 153A - Name not appearing on warrant or authorization (WOA) - search being authorized in the name of more than one person - Held that:- even assessment in the hands of the person/s other than whose names stand mentioned in the WOA, as for example AOP comprising some such persons, can also be validly made if material as to its undisclosed income is found in the search, thus initiated. That is, in case of mis-match between the person/s in respect of whom search is initiated and in respect of whom assets/income is (also) found. The law is comprehensive and contemplates such a situation, prescribing a separate procedure for such cases per section 153C. - Decided against the assessee. Decision of Allahabad High Court in the case of Vandana Verma (2009 (10) TMI 52 - ALLAHABAD HIGH COURT) dismissed wherein it was held that a WOA in joint names of different individuals can lead to a valid assessment/s u/s.153A only in the hands of the AOP or Body of Individuals (BOI) comprising them. Deduction u/s 54F - investment in specified bonds u/s.54EC having been found to be within the prescribed time limit of six months of the date of transfer. The denial of deduction u/s.54F is for the reason that the investment in the residential flat at Pune was made by the assessee only on 15.12.2006. Though the assessee could do so; the limit for the same being two years from the date of transfer, i.e., 26.11.2005, he had to, in terms of section 54F(4), deposit the sum not appropriated toward such investment in the capital gains account scheme with a specified bank or institution by the due date of filing the return of income u/s.139(1) for the relevant year. That having admittedly not being done, the assessee could not validly claim deduction u/s.54F. The facts and circumstances of the case being undisputed, we find the Revenue’s basis for denial of deduction u/s.54F, are completely valid - Decided against assessee. Unexplained income u/s 68 - Held that:- the explanation with regard to that nature and source of credit being satisfactory or not, keeping the entirety of the facts and circumstances of the case into account, is to be drawn. The decisions cited by the assessee have been with reference to the one of positive inference. It is the cumulative effect of all the facts and circumstances of the case on the basis of which the decision as to the capacity or genuineness being established is to be taken. In the present circumstances, we have no hesitation in stating that both the capacity and the genuineness of the impugned credit have not been proved by the assessee, so that no infirmity as to non-satisfaction therewith of the A.O., since confirmed by the ld. CIT(A), supporting his order with a host of case law, has been found by us. We, it would be noticed, have also not referred to the decisions referred to by the first appellate authority, and for the same reason; the law, as summarily explained hereinabove, being trite, with the said decisions being, therefore, cases of application of those principles, on which there is no doubt or dispute, nor possibly could be. The treatment of the impugned credit as the assessee’s unexplained income u/s.68 of the Act is, accordingly, upheld - Decided against assessee.

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• 2013 (11) TMI 939
  Method of accounting u/s 145A - account for purchase, sale and stock - inclusive of duty or exclusive of duty - Deduction u/s 43B - Held that:- the assessee values its inventories as well as its revenue at inclusive of duties, also excluding the credits (as e.g. modvat) in relation thereto. As such, the total actual cost, as incurred, and revenue, as accrued, stands factored into the valuation of the trading parameters, as required by section 145A. However, the assessee, on being questioned in its respect, states of following exclusive method, i.e., just the opposite, claiming that the same nevertheless would have no impact on the quantum of trading income. Why did the assessee state so when its accounts state otherwise, and which in any case, being the mandate of law, has to be observed, if only in the computation of income under the Act? Further, even otherwise; it claiming the difference in method of valuation as of no moment, i.e., of both the inclusive and exclusive methods leading to the same result and, thus, inconsequential, it could demonstrate the same by working out the valuation on both - net and gross - basis. The assessee, however, and inexplicably, does not do so. The fallacy in the A.O.'s working, as it would appear to us, is that while he includes the incidence of duty on the opening and closing stock of goods, he does not do so qua purchases and sales. It is only where the cost is incurred that the same would stand to form part of the operating statement, and qualify for being recognised as a part of cost of goods unsold as at the year-end, i.e., the closing stock by definition. It is this adding of the tax/duty cost to the value of the closing stock without making a corresponding allowance for the same in the trading account that would lead to a distorted picture and a profit figure inconsistent with the actual profit earned/accrued. Section 145A does not purport to yield a notional, but only actual profit, by prescribing inclusion of all cost elements, including tax and duty, where and to the extent attracted/ incurred, in the valuation process. This is, thus, akin to an accounting policy, statutorily prescribed, for uniform application by all assessees. - matter remanded back for re-computation. Deduction u/s 43B - Held that:- if section 43B is considered to have an overriding effect, it would again be to no moment. This is as where the duty is paid during the relevant year (or by the due date of furnishing the return of income) the mandate of section 43B is satisfied; the same tax/duty would stand to be allowed. And where not paid by that date, it cannot be said to have been 'incurred' due to the overriding effect of section 43B (r.w.s 43(2)). That being the case, neither would it stand to be reckoned as cost nor, consequently, liable for inclusion in the valuation of the purchases, irrespective of the method of accounting being followed. - matter remanded back for verification of facts. - Decided in favor of assessee.

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• 2013 (11) TMI 938
  Addition on account of suppression of income – nature of the documents found during the survey - evidentiary value of statement recorded u/s 133A - Held that:- The entries, neatly made, one for each date, for different dates, in a chronological order, by a partner managing the affairs of the firm (i.e., for most part), cannot be a scrawl, without any meaning. - Besides, the assessee's 'explanation', leaves one in no manner of any doubt in this respect. This is as each of the three versions by the assessee in explaining these entries are only in terms of money. - documents are not dumb documents. - high court in the case of Surendra M. Khandhar v. Asstt. CIT [2009 (1) TMI 83 - BOMBAY HIGH COURT], wherein the hon'ble court has clarified that the document found during survey is, unless successfully rebutted by the assessee, presumed to be true. Addition is confirmed as reasonable, meriting confirmation; the assessee having itself disclosed an excess of around 6% on even the expenses recoverable from its clients - The statement u/s.133A is by itself of no evidentiary value, and it is validity, if so, would only be with reference thereto, i.e., to the extent it explains or corroborates and/or supports the material/evidence found – consideration is given to the assessee's argument of netting the amount written on the right side, so that its nature could only be a different, i.e., representing out-lays, only to find the same as not acceptable. This is for the reason that it is not possible that such expenditure is incurred only on few (sixteen) days in a year, or even more importantly, not in the regular course - Further-more, the assessee surprisingly does not receive any amount on the said dates, so that it may represent an either or situation. Rather, the expenditure would not only be incurred on the basis of which the amount stands received, but also, where it is not so, there being as afore-noted a time gap between the entries in each row, so that there is no expenditure on all but 16 days during the relevant previous year – Decided in favor of Revenue.

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• 2013 (11) TMI 937
  Penalty u/s 271(1)(c) - Capitalisation of the cost of machinery - Disallowance of depreciation - Held that:- The computation of total income given in the assessment order, shows that this amount was allowed as depreciation on the travelling expenses of Rs. 1,46,308/- capitalised by the A.O. and although submission to this effect was made by the assessee before the ld. CIT(A), it appears that no finding whatsoever has been given by the ld. CIT(A) on this aspect. In our opinion, there was thus no justification in imposing the penalty in respect of the amount of Rs. 36,577/- which did not represent any addition made to the total income of the assessee. - Decided in favor of assessee. Machinery was used for 182 days making the assessee entitled for depreciation at full rate. The claim of the assessee for depreciation at full rate thus was a bonafide claim and although the assessee accepted the disallowance made by the A.O. on this issue by restricting to only half, we are of the view that no penalty u/s 271(1)(c) of the Act in respect of addition of Rs. 55,375/- could be imposed. - decided in favor of assessee. Penalty due to claim of additional depreciation - Held that:- Provisions of section 32(1)(iia) are very plain and clear which provide that additional depreciation is allowable in the case of any new machinery or plant which has been acquired and installed after 31st March, 2005. The proviso to section 32(1)(iia) makes it further clear that no deduction on account of additional depreciation shall be allowed in respect of any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person. In the present case, additional depreciation u/s 32(1)(iia) was claimed by the assessee on the old machinery which was already used by other person and this relevant fact was not disclosed by the assessee in any form in the return of income filed for the year under consideration. The same was revealed as a result of survey followed by scrutiny assessment done by the A.O. and when it was confronted by the A.O. to the assessee, the later had no option but to surrender its claim for additional depreciation - Therefore, penalty is confirmed on this issue to the extent additional depreciation claimed - Decided against the asssessee.

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• 2013 (11) TMI 936
  Capital gains - transfer u/s 2(47) - Assessee entered into JDA agreement - As per the agreement, the assessee is entitled for 50% of built up area - Whether provisions of section 2(47)(v) can be invoked for exchange of the property for consideration in kind i.e., to receive 50% of the built up area - Held that:- owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter the transferee has taken steps in relation to construction of the building, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) as per the reasons assigned hereinabove. The transferee was undisputedly willing to perform its part of the contract, in this circumstance we have to hold that there is transfer u/s. 2(47)(v) of the Act. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer u/s. 2(47)(v) of the Act. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of S. 45 of the Act on fulfilment of conditions laid down in section 53A of the Transfer of Property Act. Capital gain would be taxable in the year in which such transactions are entered into even if the transfer of the immovable property is not effective or complete under the general law. The assessee entered into an agreement with the builder/developer for development of the impugned land and construction of flats thereon. Also, the assessee signed a delivery note dated 7.3.2005 in favour of the builder/ developer and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 2004-05. In view of the facts and circumstances discussed above, all the conditions of sub-cl. (v) of s. 2(47) are satisfied in this case and therefore, it has to be inferred that a 'transfer' did take place within the meaning of s. 2(47)(v) - Decided against assessee.

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• 2013 (11) TMI 935
  Disallowance of expenditure u/s 37(1) - Expenditure for erection of scaffolding - Nature of expenditure - business expediency or otherwise - Assessee was given rights to display advertisement by means of mounting a banner on the scaffolding erected for carrying out the repairs of the building - Held that:- As seen from the documents placed on record the Municipal Corporation of Greater Mumbai has permitted to display the temporary advertisement on the outer direct wall of Heera Panna Coop.Housing Society vide approval dated 27.04.2005 for which the advertising fee was to be paid of more than Rs.3,75,360. So, it cannot be accepted that assessee has permitted the said Deesha only for an amount of Rs.1.00 lakh when the fee paid/ payble to BMC was much more. As seen from the documents if such amount was towards contributing for maintenance of the building/scaffolding advertisement as contended, the actual payment of the amount spent goes beyond the period of permitted advertisement period. The said services so charged are general in nature, which does not require such receipt/ reimbursement - it cannot be stated that maintenance or cleaning of walls by application of primer coat was the responsibility of M/s Deesha for advertisement so displayed. The affairs are so arranged that the cost to be incurred by the society for their regular maintenance was borne by the said company and receipts were bifurcated into two agreements - scaffolding and the painting expenditure is part of the maintenance of the building and no way connected with the advertisement provided to M/s Deesha. The security watch and ward etc, as claimed by assessee is part of its regular activity of the society and just because an agreement was entered into by arranging the affairs in such a manner, the claim of expenditure which has no relevance for earning the advertisement amounts. This cannot be allowed under section 37(1) or section 57. Moreover as seen from the above, painting expenditure itself was spent over a period of two years, whereas the advertisement was only for a period of two months - Decided against assessee.

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• 2013 (11) TMI 934
  Disallowance of extra ordinary expenses - Payment under VRS scheme - Held that:- payments made under the Voluntary Retirement Scheme was the expenditure incurred by the assessee to save expenses and it was not referable to any income yielding asset. It was held that the said expenditure thus should be allowed in its entirety in the year in which it was incurred and the same could not be spread over a number of years. It was also held that the expenditure incurred by the assessee relating to Voluntary Retirement Scheme as well as on account of gratuity was revenue expenditure and the same was allowable as deduction in the year in which it was actually incurred - Following decision of Commissioner of Income-tax v. Bhor Industries Ltd. [2003 (2) TMI 20 - BOMBAY High Court] - Decided against Revenue. Disallowance of interest - Loan taken for new factory - Held that:- loans had been obtained for the purpose of assessee’s business and the fact that the particular portion of the business for which the loans were obtained had been transferred or closed down did not alter the fact that the loans, when obtained had been for the purpose of the assessee’s business - CIT(A) was fully justified in allowing the claim of the assessee on interest paid on capital borrowed for the purpose of new glass factory set up by the assessee at Jambusar in Gujarat which was nothing but expansion of the assessee’s existing business - Following decision of Veecumsees v. Commissioner of Income-tax [1996 (4) TMI 6 - SUPREME Court] - Decided against Revenue. Disallowance of expenditure - Closure of factory - Held that:- Thane unit was closed by the assessee as a business necessity arising out of statutory compulsion. As further found by him, the business carried on in the said unit was not discontinued but shifted to other places. Having taken note of these facts, the ld. CIT(A) held that the ratio of the decision of Hon’ble Supreme Court in the case of K. Ravindranathan Nair (2000 (11) TMI 3 - SUPREME Court) was clearly applicable to the facts of the assessee’s case and accordingly he directed the A.O. to allow the deduction claimed by the assessee on account of expenses pertaining to the closed Thane factory u/s 37(1) of the Act. At the time of hearing, the ld. D.R. has not been able to bring anything on record to controvert or rebut the finding of fact recorded by the ld. CIT(A) on this issue - Decided against Revenue. Computation of profit u/s. 115JA – Held that:- P&L Account prepared by the assessee for the purpose of 115JA of the Act has been duly certified by the Chartered Accountant. There is no complaint that the same is not in accordance with provisions of part II & Part II of Schedule VI of the Companies Act 1956. As rightly pointed out by the assessee the only restriction in 115JA(2) is regarding the depreciation which has to be in conformity with the method adopted under Companies Act. There is however, departure in section 115JB(2) of the Act which provides that the accounting policies and accounting standards adopted while preparing P&L Account for section 115JB of the Act should correspond to the one adopted for the purpose of Companies Act 1956 - Decided against Revenue. Assessee provided funds for establishing drinking water facilities to the residents in the vicinity of the refinery and also provided aid to the school run for the benefit of the children of those local residents - Monies spent for bringing drinking water as also for establishing or improving the school meant for the residents of the locality in which the business is situated cannot be regarded as being wholly outside the ambit of the business concerns of the assessee, especially where the undertaking owned by the assessee is one which is to some extent a polluting industry – such expenditure are allowable.

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• 2013 (11) TMI 933
  Reassessment of proceedings - Notice u/s 148 - Whether there are enquiries conducted by the AO into the issue of nature of business activities of the assessee for the year under consideration - Held that:- Assessee submitted various details regarding to the commencement of the business relating to the paid-up capitals, expenditure incurred, income earned, services rendered etc in respect of the rest of the questions in the questionnaire. Assessee does not have any fresh or tangible material which works out as a “livewire” to the AO to form an opinion or create a reason to believe that there is concealment of income. It is also obvious from the written reasons mentioned by the AO that the basis for re-opening is essentially the product of the “perusal of the assessment records”. Therefore, issue of notice u/s 148, under the circumstances and the details mentioned above, is not proper and not in tune with the settled position in law relating to the provisions of section 148 of the Act - Decided in favour of assessee. Setup and commencement of the business activity - Development of airport infrastructure activity - Held that:- Feasibility reports both financial and economic viability is not yet obtained, preparation of development plans is not yet complete, mandatory Environmental Impact Study under Environment Protection Act, 1986 by SICOM is not yet complete and 100MW captive power plant is also at preliminary stages. Thus, the assessee has not completed the stages, which are considered elementary to start the business - Aassessee is yet to obtain the environmental clearance under the Environment Protection Act and favourable feasibility reports – On financial and technical fronts, assessee has yet to obtain the approved plans of development, therefore, the business of the development of airport infrastructure cannot be declared “set up” in this year under consideration. Acquiring of land with a stroke of pen of the Government of Maharashtra cannot be attributed to the business activity of the assessee. What has happened in this year in substance is mere appointment of SICOM, YASHADA, M/s Scott Wilson Kirkpatric India Pvt Ltd, other consultants for various other purposes, which constitutes stages prior to the “set up” of the business of the assessee. Therefore, in our opinion, the conclusions of the CIT(A) that the main business is not commenced in the year under consideration does not call for any interference. Reopening of assessment, for AY 2005-06, is bad in law though the interest receipts are chargeable to tax under section 56 of the Act, since the business of the assessee cannot be stated to have commenced in the year under consideration but in the ultimate analysis the appeal filed by the assessee has to be treated as allowed. - Decided in favor of assessee.

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• 2013 (11) TMI 932
  Deduction u/s 80M - Discrimination with foreign bank - DTAA with France - Held that:- Assessee cannot claim a deduction under section 80M without fulfilling the conditions as required under the said section. Assessee before us admittedly does not fulfill the conditions prescribed under section 80M and therefore, cannot claim deduction under section 80M - Since there is only one direct decision given by a Coordinate Bench interpreting the non discrimination clause in the case of foreign Bank in the case of Credit Llyonnais (2004 (2) TMI 279 - ITAT BOMBAY-J) and as there is no other contradictory decision under the same DTAA, we are of the view that the Coordinate Bench decision has to be followed. Even when there is a diversion of views by the different Benches on same issue, then the decision which laid down the principles more elaborately and logically after considering the latest statutory provisions as applicable has to be followed - reduction of tax rate way back in 1976 itself is after withdrawing the deduction under section 80M specifically to the foreign companies and further allowance of deduction as contested by assessee would result in a reverse discrimination of the Indian company vis-à-vis tax rate of foreign company, in our view does not come under the definition of non discrimination. We are not convinced with the contention of assessee with reference to the reduction rate under section 80M - no reason to constitute a Special Bench on this issue when there is no other contradictory order analyzing the Indo-French DTAA particularly invoking non- discrimination clause while taxing dividends under section 115A at a reduced rate - Decided against assessee.

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• 2013 (11) TMI 931
  Unexplained income - Bogus entries in books of accounts - Receipt of gift not disclosed - CIT upheld disallowance - Held that:- assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority - A.O. issued summon under section 133(6) of the Act to the donor Shri Sanjeev Goyal but he did not comply to that summon. Before the CIT(A), the A.O. contended that on sending notice under section 133(6) to the donor it was returned back un-served with the remarks of Postal Authority that nobody of the name of Shri Sanjeev Goyal lives on that address. The assessee expressed his inability to produce the donor. Under the circumstances, the A.O. has discharged his onus but the assessee failed in this regard, therefore, the contention of the ld. Authorised Representative is rejected. During the hearing, the ld. Authorised Representative referred a copy of gift deed. A question was asked that in the gift deed it is stated that the gift was given out of love and affection, therefore, what evidences have been filed by the assessee. The ld. Authorised Representative failed to point out any material or evidence in this regard that the gift was given out of love and affection. Apart from the above, I find that the CIT(A) has given his finding that there is no relationship between the donor and donee assessee. There is no occasion for giving of gift. The donor is neither produced by the assessee for examination, nor is traceable at the given address by the A.O. to verify the correctness of the gift deed and affidavit purported to have been issued by him, which is only a photocopy as filed by the assessee. During the assessment proceeding, creditworthiness of donor as well as the genuineness of the gift is not established. The CIT(A) held that, this amount is correctly added by the A.O. in the income of the assessee holding it his unaccounted money under the garb of bogus gift entry and therefore, he confirmed the addition of ₹ 1,00,000/- made in the assessment order. As regards to addition of ₹ 2,000/- on account of commission paid for obtaining the entry of gift, the CIT(A) held that since he has confirmed the decision of the A.O. holding receipt of ₹ 1,00,000/- in the hands of the assessee as unexplained gift being his unaccounted money, the CIT(A) found that the A.O. has made this addition because he found that the gift of ₹ 1,00,000/- shown by the assessee was not a real gift but a receipt of money in the form of income and such entries are given by the entry giver only after charging of some commission. The CIT (A) held that that the amount of ₹ 1,00,000/- received by the appellant is not a real gift and it is an entry of bogus gift, now the question arises whether such entry would be given by someone without charging any commission. As per human conduct and common market practice of giving of entry, it is not possible to take entry without paying commission - Following decision of Brij Mohan Agarwal Versus Assistant Commissioner Of Income-Tax And Another [2004 (4) TMI 61 - ALLAHABAD High Court] and Commissioner of Income-Tax Versus P. Mohanakala [2007 (5) TMI 192 - SUPREME Court] - Decided against assessee.

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• 2013 (11) TMI 930
  Transfer pricing adjustment - Determination of arm's length price - Rejection of comparables - Held that:- assessee is claiming sales to AEs at ₹ 322.58 crore and similar is the position regarding other components of operating costs including purchases. In such figures of purchases and sales from/to the AEs, not only the transactions with AEs but also certain transactions with Non-AEs stand included. Figure of purchases from AEs also includes purchases from Non-AEs where such purchases were used for sales to AEs. Similarly figure of sales to AEs also includes the figure of sales to Non-AEs where purchases from AEs were used for sales to Non-AEs. This shows that the figures of AE purchases and AE sales considered by the assessee for working out operating profit margin at 6.54% in respect of AEs also include Non-AE transactions. Such a course of action followed by the assessee to determine the profit margin from transactions with the AEs has absolutely no sanction of law. It rather defies and runs contrary to the very definition of 'international transactions' and the mandate of rule 10B(l)(e). Approving the course of action adopted by the assessee for calculating profit margin in respect of AE and Non-AE segments would require rewriting of the relevant provisions as discussed supra. By considering some transactions with Non-AEs also as a part of the AE segment, the computation of the operating profit margin in respect of AE transactions at 6.54% has completely lost its significance. Once the figure of OP/OC margin at 6.54% is itself incorrect, there can be no question of comparing it with that of Non-AE segment at 4.20%, which again stands distorted because of the exclusion of certain purchases and sales from/to Non-AEs from this segment eventually finding their way into the AE segment. Related party transactions in this case are admittedly a little more than 20% but less than 25%. On page 11 of the order passed by the TPO, it can be seen that he adopted filter of related party transactions at 25%. - a case can be taken as uncontrolled if its related parties transactions do not exceed 25% of the total revenue. - the assessee suo motu included this case in the list of. comparables in its transfer pricing study when made on multiple year data (with average profit margin of 3.37%). However when the TPO required the assessee to furnish data of the comparable cases only for the relevant year, the assessee found this case as incomparable because of a higher entity level/segmental OP/TC ratio for the relevant year. The manifest reason for the assessee's exclusion of this case is not far to seek. We, therefore, accept the filter of 25% as applied by the TPO and admit this case for inclusion in the list of comparable cases. Now it has been mandated through the Finance Act, 2012 w.r.e.f. 1.4.2002 that plus minus 5% is not a standard deduction. It is significant to note that when the AO passed the impugned order on 25.09.2012, such amendment had already come into force. The consequences would have been different if the AO had allowed standard deduction of +-5% and the Revenue had orally challenged the grant of such standard deduction contrary to the provisions of law, without there being any legal recourse available to file appeal against the order of the AO u/s 143(3) read with section 144C(13) at the relevant point of time. The case before us is that the AO did not grant such standard deduction and we are required to ascertain as to whether or not his action is sustainable in law. As has been noticed above that the law as on the date as also retrospectively applicable to the relevant assessment year is against the granting of such standard deduction, we see no reason to hold that the assessee be allowed +-5% standard deduction in contravention of the legal provisions. This benefit of up to 5% can be allowed only if the variation between the price charged/paid in respect of international transaction and ALP determined by taking the results of comparable cases does not exceed 5%. In case such variation is more than 5%, then no such benefit of 5% can be allowed on standard basis - Decided in favour of assessee. Disallowance of royalty - Held that:- assessee entered into collaboration agreement with its AE for payment of 2% of contract value for manufacturing, drawing and engineering services and 5% of the selling price as royalty. The assessee applied to the RBI seeking approval in respect of payment of royalty and technical fee through Central Bank of India. A copy of letter addressed by the Central Bank of India to the RBI dated 26.03.2008 is available on page 240 of the paper book. Through this letter, the Central Bank of India forwarded relevant documents along with a copy of the agreement. The RBI vide its letter dated 21.04.2008 requested Central Bank of India to consider the assessee's case in accordance with its AP(DIR Series) No.76 dated 24.02.2007. It is in pursuance to the deemed approval by RBI under the automatic approval scheme that the assessee made payment of royalty and technical fee to its AE. It is relevant to note that such payment has been approved or deemed to have been approved by the RBI. When a payment is made after obtaining due approval from the RBI, how its ALP can be computed at Rs. Nil, is anybody's guess. The fact of approval of the payment by the RBI has been succinctly recorded by the TPO in his order as well. He still chose to propose adjustment in respect of full payment. In our considered opinion, when the rate of royalty payment and fee for drawings etc. has been approved or deemed to have been approved by the RBI, then such payment has to be considered at ALP - Decided in favour of assessee.

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• 2013 (11) TMI 929
  Notice u/s 148 - Deduction u/s 80IA - set off of losses - Held that:- the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA - Decision in earlier case [2012 (11) TMI 507 - ITAT BANGALORE] of the the assessee followed - Decided against Revenue.

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• 2013 (11) TMI 928
  Transfer pricing adjustment - Investment advisory fees - Held that:- The assessee had selected 4 comparables including CRISIL (advisory segment) which gave mean margin of 15.27% which was comparable to the margin of 15% in case of the assessee. The TPO however rejected three comparables other than CRISIL on the ground that these were not comparable and in case of CRISIL adopted both advisory and research segment for the purpose of comparison. The TPO also selected three more comparables, after conducting a further search on the basis of 'investment advisory fees' and identified three comparables i.e. Sundaram BNP Paribas Asset Management Ltd., Deutche Asset Management Ltd. and Urban Infrastructure Venture Capital The mean margin of the four comparables selected by TPO was 57.06% and on this basis the TPO recommended TP adjustment of ₹ 5,33,46,732/-. On objections filed by the assessee, the DRP-II found that the three comparables other than CRISIL selected by TPO had substantial related party transactions in each case and therefore these were not comparable. DRP-II however agreed with the TPO to consider both the advisory and research segment of CRISIL for the purpose of comparison and also agreed on Future Capital Holding Ltd. as a comparable. He also directed the TPO to allow depreciation in case of CRISIL. The new margin computed by DRP in case of Future Capital Holding Ltd. (investment advisory segment) and in case of CRISIL (advisory and research segments) came to 20.56% and 33.3% respectively. CRISIL has substantial revenue from research i.e. ₹ 116.4 crores compared to advisory revenue of only ₹ 8.76 crores. The rating revenue is also high at 130 crores. The annual report of CRISIL for the year 2007 shows that it is India's leading independent and integrated research house which meets the business research requirements of more than 600 domestic and integrated clients having unparalleled width and breadth spanning the entire economy. It has penetration rate of more than 90% in the banking segment and has collaborated with S&P in selling data and information products in India. It has a head count of 1750. In contrast, the research done by the assessee is limited to the advisory work done for only one client and it has only 18 employees out of which there are only four analysts and one trainee engaged in research. Therefore research division of CRISIL in our view is not comparable to the limited research done by the assessee. However it is also true that the assessee is also doing some research as part of its advisory duties. Therefore, results of advisory segment of CRISIL alone could not be comparable to that of the assessee which has both advisory and research functions. Further, in the absence of adequate information, it is not possible to estimate as to how much of the research revenue is related to the advisory segment. In such a situation, in our view, it will be appropriate to exclude CRISIL as a comparable. We are thus, left with only one comparable i.e., Future Capital holding Ltd. (advisory segment) which is acceptable to both the parties. It is possible to compute arm's length price on the basis of even one comparable but in such a case the assessee will not be entitled to benefit of 5% range as per the provisio to section 92C(2). This view is supported by the decision of Delhi Bench of the Tribunal in the case of Haworth (India) (P.) Ltd. v. Deputy Commissioner of Income-tax [2013 (8) TMI 421 - ITAT DELHI] - AO is directed to compute the arm's length price on the basis of income of the comparable Future Capital holding Ltd. (advisory segment), without giving the benefit of 5% range - Decided partly in favour of assessee.

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• 2013 (11) TMI 927
  Disallowance of written off of bad stock - Shortage in stock-in-trade - No evidence produced to prove that the entire loss had crystallized during the year - Held that:- The assessee is in share broking business and many a times, the clients or stock exchange return stocks to the assessee due to reasons such as difference in signature of transferor, forged/ fake share certificate etc. and therefore to take care of such unforeseen circumstances, the assessee has been making provision for such loss @ .01% of turnover. The provision so made is added in the computation of income and actual claim of loss is made after due verification. This year assessee claimed loss of Rs.4,84,796/- which was disallowed by the AO - assessee had been regularly making analysis of the bad stock and only after arriving at the conclusion that the stock had become worthless/ unsaleable, the business decision was taken to write-off the stock - there was no dispute that the assessee was consistently following this accounting practice of write-off of stock - Decided against Revenue. Transfer pricing adjustment - Determination of arm's length price - Expenditure on royalty and business development - Held that:- CIT(A) has examined the business development system followed by other comparable companies in India and has given a finding that these companies on average were incurring business development expenditure which was 6.4% of brokerage turnover whereas similar expenditure incurred by the assessee was only 1.28% including royalty of 1% paid by the assessee . Therefore expenditure incurred by the assessee on royalty and business development could not be considered as excessive compared to the comparable parties. CIT(A) has also applied the TNMM method for benchmarking international transactions. There are 29 comparables selected details of which have already been given earlier which gave an average margin of -5.5% and, in case, loss making companies were excluded, the average margin came to 16.06% whereas in case of the assessee the margin declared was 57.58%. Therefore it is held that no TP adjustment is required to be made in case of the assessee - Decided against Revenue.

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• 2013 (11) TMI 926
  Assessee in default u/s 201 - TDS u/s 194C or 194J - Assessee deducted Tax u/s 194C - Technical service - Default u/s 201(1) - Onus to prove - Held that:- The assessee company needs gas as 'feed-stock [i.e. the raw material] for manufacturing the chemical fertilizers [urea] and for purchasing gas it has entered into a gas-sales-and-transmission-contract dated 23.6.2008 with GAIL as 'seller' and Chambal Fertilizers and Chemicals Ltd as 'buyer' for sale and purchase/transmission of natural gas. Thus the assessee company is a 'buyer' of natural gas and GAIL is a 'seller'. It is found that the GAIL is not at all a contractor for execution of any works-contract but it is a seller of gas simpliciter. The assessee has produced necessary proof of filing the return and payment of Tax and filing of return and payment of tax by GAIL - A principal officer of a company can be deemed to be an assessee in default u/s 201(1) of the Act only when he does not deduct whole or any part of the tax and such tax has not been paid. The GAIL and IOCL have already deposited tax due on their total income as is evidenced from the copies of its acknowledgment of return available on record - Tax deduction at source is transitory tax and it is a mode of collection and recovery of tax under Chapter XVII. Tax deducted at source by buyer is to be allowed credit in the hands of the payee. Explanation to clarify the doubts so raised has been inserted by the Finance Act, 2008 w.r.e.f 1.6.2003 in section 191 of the Act and its plain reading makes it abundantly clear that the deductee can be treated as an assessee deemed to be an assessee in default u/s 201(1) of the Act if the recipient fails to pay such tax directly. A contract, which is intended to be a contract for sale of goods [for delivery], cannot be construed as anything else but a contract of sale. Accordingly, no duty is cast, in the facts and circumstances of the case, on the assessee company to deduct any TDS either u/s 194C or 194J of the Act. Therefore, interest charged u/s 201(1A) of the Act for alleged short deduction of tax has been correctly set aside by the ld. CIT(A). The fact that the assessee was deducing TDS u/s 194C was stated to be on account of abundant caution taken by the assessee. This conduct of the assessee, being taken to be on the safer side, cannot be treated adversary to its interest as has been canvassed by the department - Following decision of Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979 (8) TMI 186 - SUPREME COURT OF INDIA], Skycell Communications v. DCIT [2001 (2) TMI 57 - MADRAS High Court] and Hindustan Coco Cola v. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] - Decided against Revenue.

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• 2013 (11) TMI 925
  Transfer pricing adjustment - Determination of arm's length price - Violation of principle of natural justice - Held that:- show cause notices were issued to the assessee by the TPO at least on two occasions; viz., on 20.4.2009 and 20.7.2009 in the course of T.P. Audit. As far as issue of notice to the assessee before passing of the final order by the Assessing Officer under section 143(3) r.w.s. 144(13) of the Act. Section 144C(13) mandates that upon receipt of the DRP's directions under section 144C(5) of the Act, the Assessing Officer's mandate is to complete the assessment in conformity with the directions of the DRP without providing any further opportunity of being heard to the assessee - Decided against assessee. Reference to TPO - Held that:- it is mandatory for the Assessing Officer to refer all the cases whenever the aggregate value of international transactions is more than ₹ 5 Crores. These instructions are binding on all Assessing Officers. In these cases, there is no need for the Assessing Officer to make a prima facie opinion, except that he/she needs to examine the 3CEB Report to see the aggregate value of international transactions. In the instant case, as the aggregate value of international transactions based on 3CEB Report filed by the taxpayer before the Assessing Officer, exceeded ₹ 5 Crores, he referred the case to the TPO. Therefore, we see no infirmity in referring the matter to the TPO without forming "a considered opinion". In the light of the above reasoning, the first legal point raised by the assessee, namely, the reference to the TPO by the Assessing Officer without forming "a considered opinion" does not stand the test of law and cannot be sustained, therefore this plea of the assessee is rejected - Following decision of Tally solutions Pvt Ltd. v. DCIT [2011 (9) TMI 196 - ITAT BANGALORE] - Decided against assessee. Selection of comparables TPO conducted fresh search for comparables - Held that:- The income arising from international transactions is to be computed having regard to arm's length price as per the guidelines laid down in section 92C of the Act by adopting one of the laid down methods, at the discretion of the competent authority - No ambiguity or absurd consequence of application of Chapter X to persons who are subject to the jurisdiction of taxing authorities in India nor do we find any statutory requirement of establishing that there is a transfer of profits outside India or that there is evasion of tax. Only condition precedent for invoking provisions of Chapter X is that there should be income arising from international transaction and such income has to be computed having regard to arm's length price - Chapter X cannot be made applicable to parties which are subject to the jurisdiction of the tax authorities in India, without there being any material to show transfer of profits outside India or evasion of tax between the two parties - Following decision of Coca Cola India Inc v. ACIT [2008 (12) TMI 67 - PUNJAB AND HARYANA HIGH COURT] - Decided against assessee. From the assessee's T.P. Study and the MSA, it is clear that the assessee group deals with both product development and professional services and the assessee renders services to both the divisions, including product development. The MSA between Yodlee, USA and the assessee envisages product development by the assessee and this aspect does not appear to have been examined by the TPO. Adjustments under Rule 10B - Held that:- Inspite this the TPO has given a detailed disposition on each of the risk involved in the risk profile and his detailed reasons as to why no adjustment is tenable in the case of the assessee - No evidence has been brought on record by the assessee before us, to controvert or to demonstrate that the findings of the TPO were incorrect and that the assessee had a case either for risk adjustment, or for that matter for adjustments for accounting practices, research and development expenditure or marketing expenditure. No case has been made out by the assessee by virtue raising this ground that any of the adjustments sought for are warranted. It cannot be anybody's case that an adjustment has to be necessarily granted whenever or wherever there is difference between the tested party and the comparables. An adjustment for risks etc is a valid principle for comparability, but whether this case entails such an adjustment would depend on the facts of the case. However, in the instant case mere claim for adjustments for risks, research and development expenditure, market expenditure etc serves no purpose as it is not backed by any cogent or clinching evidence. The onus is on the assessee to establish the need for adjustments on specific issues and how these issues affect comparability. In the instant case, the assessee has not discharged the onus and we are, therefore, constrained to dismiss this ground raised by the assessee - Decided against assessee.

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• 2013 (11) TMI 924
  Method of accounting – Cash system of accounting or Mercantile system of accounting - Whether assessee is bound to follow the same method of accounting on continuous basis and not permitted to change the same - Held that:- The assessee on its part succeeded in establishing the change of bona fide because it had ceased to have any business income and had adopted the change well before the search as well as completion of assessment for block period and also before coming of Circular of No.2 of 2002 on the Statute - Since the assessee had followed the same system in all the subsequent years, we see no reason as to why the assessee's choice/preference to adopt the changed system of accounting be not accepted - In view of the totality of the facts and circumstances of the case as well as settled provisions of laws discussed hereinbefore, we are of the opinion that the assessee had right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change - Decided in favour of the assessee. Treatment of interest income on on re-purchase of deep discount bonds (DDB) - Held that:- the learned CIT (A) was not justified in sustaining (i) the addition of Rs.1.19 crores by treating the same as interest income on re-purchase of 700 DDBs and, consequently (ii) confirming the disallowance of Rs.1.19 crores being the assessee's claim u/s 54EC of the Act. - decided in favour of assessee.

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• 2013 (11) TMI 923
  Notice u/s 148 - Objection on reassessment - Held that:- the objections sought to be raised by the assessee are a valuable right, which, if denied, may render the entire reassessment process invalid. Conversely, we hold that in case, it is found from the cogent evidence that the assessee was very well aware of its right to raise objections since the very beginning and it had not preferred to exercise the same, it is not entitled to seek leave for challenging the legality of reopening and more so, in the second appeal before us. Hence, we are of the view that the petition dated 04.05.2012 preferred by the assessee does not deserve acceptance. Accordingly, it is rejected. - Decided against the assessee.

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• 2013 (11) TMI 922
  Disallowance of expenditure - Payment of Privilege fees - Nature of expenditure - Exclusive privilege for wholesale trade of Indian made Foreign Liquor & Beer - Held that:- The Excise Department on the basis of granting license to the buyers of the products sold by the assessee is entitled to license which privilege fees is demanded by the Excise Department. Therefore at no point of time can the assessee claim that it was not the part of expenditure for the purpose of its sales and it’s direct link - It was a controlled item for the purpose of decentralization and the procurement was from outside the State of Orissa was to be considered for sale in Orissa under the sharp eye of Excise Department not because Orissa Sate Beverages Corporation Ltd without having suffered production cost was the wholesale distributor only. This Excise Duty therefore is a privilege of the Excise Department as the Central Excise alone will jeopardize the sale of liquor of the same brand elsewhere causing undue illicit trade from outside the State of Orissa. Incidentally, this issue also takes care of the fact as pointed out by the learned Counsel for the assessee, that the jeeps were procured for the Excise Department were not to be used by the assessee independently had shown the ownership in their books of account and claimed deprecation on it which the learned Counsel for the assessee agreed that the depreciation cannot be allowed to it as the same were put to use by the Excise Department and not the assessee. The depreciation therefore was not to be claimed by the assessee as having not fulfilled the twin conditions being “ownership” and “put to use by the assessee”. Privilege fees therefore becomes integral part and parcel of expenditures to be allowed to the assessee insofar as it is linked to the sale which sale figures are on the basis of license granted by the Excise Department who are in full control in the State and therefore is directly linked to the turnover of the assessee which volume increases the license fees including the payment of privilege fees which remain intact at the threshold. CIT(A) merely followed the earlier decision when the Assessment Year 2003-04 on the actual fact finding he only considered it to be allowed and the license fees which was already claimed as revenue expenditure stood allowed by the Assessing Officer earlier and later as well. The privilege fee therefore is directed to be allowed for all the respective AYs - Following decision of Rajasthan State Beverages v. ACIT [2013 (9) TMI 557 - ITAT JAIPUR] - Decided in favour of assesee. Validity of proceedings u/s.147 - Held that:- cash discount available was rendered to tax in the Assessment Year 2005-06 therefore could not have been claimed in the Assessment Year 2001-02 validates the reopening of the assessment - Decided against assessee.

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• Customs

• 2013 (11) TMI 948
  Regularisation of licence - Confiscation of goods - Import of rough marble blocks on 11-10-2001 - The licensing authority had suspended the advance licence on 17-10-2001 - Held that:- The purpose of regularisation of licence is to rectify/cure the defects, if any, in respect of the transaction and by its very nature, regularisation action is retrospective. What can be regularised is only a wrong action done earlier. Inasmuch as in the present case the advance licence dated 11-10-2001 has been regularised by the licensing authority vide letter dated 17-3-2006, it would imply that the licence has been revived and the appellant are permitted to import rough marble blocks subject to payment of penalty as provided for under the Foreign Trade (Development & Regulation) Act. In the instant case, the appellant has paid the penalties of Rs. 46 lakhs imposed on them by the DGFT authorities. Order of the Adjudicating authority is totally based on the decision of this Tribunal in the case of Bhilwara Spinners Ltd., cited supra. However, since the said decision has been set aside the by the Hon’ble High Court of Bombay in [2011 (3) TMI 112 - BOMBAY HIGH COURT] the impugned order cannot be sustained in law - Therefore, Adjudicating authority is directed to reconsider the matter afresh in the light of the decision of the Hon’ble Bombay High Court.

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• 2013 (11) TMI 947
  Confiscation of goods - Import of old and used scaffoldings - Held that:- These goods were classified by the importer under SH 7308 40 00 of the CTA Schedule and this classification was accepted by the assessing authority for levy of duty. That duty was paid by the importer also. The assessment was final. In this scenario, the description of goods given against the tariff entry is significant and the same reads “equipments for scaffoldings…”. Once the declared classification has been accepted, there can be no dispute whether the scaffolding could be considered as equipments. old and used scaffoldings imported by the appellant are to be considered as “secondhand capital goods”. It is nobody’s case that secondhand capital goods were not freely importable during the material period. They were freely importable without any license whatsoever. If that be so, the appellant’s action did not attract Section 111(d) of the Customs Act and, for that matter, Section 112 of the Act - confiscation ordered by the Commissioner and the penalties imposed by him are set aside - Decided in favour of assessee.

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• 2013 (11) TMI 946
  Import of Phosphoric Acid - Goods cleared on payment of duty - Rejection of refund claims filed on the basis of Shore Out Turn Report - Board’s Circular No. 6/2006, dated 12-1-2006 - Held that:- claimant had paid duty on Ad Valorem basis and the assessment of bulk liquid cargo had also been done on Ad Valorem basis based on Invoice price/quantity by virtue of Customs Circular No. 6/2006 dated 12-1-2006 issued by Ministry of Finance, Deptt. of Revenue, C.B.E. & C., issued from F. No. 467/79/2005-Cus. V, party’s refund claim on the basis of shore outturn report is not acceptable in all these appeal petitions. Appellant paid the duty in accordance with the Board’s Circular No. 6/2006, dated 12-1-2006, which they have agreed to follow - No reason to interfere with the impugned Orders of the Commissioner (Appeals) which have upheld the Orders-in-Original - Decided against assessee.

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• 2013 (11) TMI 945
  Refund claim - assessee cleared the goods on payment of VAT and filed a refund claim in terms of Notification No. 102/07-Cus, the refund claim was rejected on the ground that the appellants has not made endorsement on the invoices as per condition 2(b) of the said Notification by the lower authorities - Held that:- As no SAD is shown in the invoice which amounts that the endorsement as per condition 2(b) of the Notification, appellants are entitled for refund claim - Following decision of RUCHI ACRONI INDUSTRIES LTD. Versus COMMR. OF CUS. (IMPORT), MUMBAI [2010 (12) TMI 1018 - CESTAT, MUMBAI]. Non-fixation of invoices with the stamp showing that no credit would be admissible to the purchaser is a requirement to be fulfilled for non passing of the credit to the said duty mentioned. If the appellants have not even mentioned SAD on the invoices, the purchasers is not in a position to avail the credit of the same, this purpose of notification is fulfilled - Decided in favour of assessee.

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• Corporate Laws

• 2013 (11) TMI 958
  Infringement of trademark and passing off - Deceptively similar advertisments of Plaintiff's product "Ezee" and Defendants product "Easy Wash" - Held that:- Defendant has copied the Plaintiff’s trade mark. The Defendant’s mark is closely and deceptively similar to Plaintiff’s trade mark and by the use of the impugned trade mark the Defendant is infringing the Plaintiff’s trade mark and is passing off its products as that of the Plaintiff’s products - Considering the nature of infringement and with a view to dissuade others from indulging into such activities it is imperative that some punitive damages are awarded to the Plaintiff - Decided in favour of assessee.

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• 2013 (11) TMI 957
  IPO irregularity - Whether it was legally permissible for SEBI Board to review its earlier resolutions passed on November 9, 2009 and February 2, 2010 relating to implementation of the impugned order dated December 4, 2008 - During the period 2003 to 2005, SEBI in the course of its surveillance activity investigated into affairs relating to buying, selling or dealing in shares through IPOs of 21 companies - The investigation revealed that many entities had cornered/acquired shares in IPOs of the aforesaid companies by making fictitious applications in the category reserved for retail investors through the medium of thousands of fictitious/ benami applications for IPOs - Newly constituted two member committee passed an order on December 4, 2008 listing therein various lapses on the part of the appellant as well as the respondent in relation to IPO investigation - Held that:- ordinarily it would not be open to the SEBI Board to review resolutions passed by it in its earlier Board Meetings. This is because, once finality is attached to a proceeding, it would not be open to the respondent to re-agitate the issues by reviewing its earlier orders, unless there are compelling reasons to do so. The dispute in the present case, arises from a PIL filled before the Delhi High Court wherein it was alleged that the Board decisions of the respondent dated November 9, 2009 and February 2, 2010 interalia to treat the impugned decision dated December 4, 2008 as non-est was with a view to confer undue benefit to the appellant, because at the material Mr. Bhave, the then Chairman of the appellant had become Chairman of the respondent. Apex Court, had raised the above query in public interest, in the facts of present case, decision of the respondent to reconsider its earlier decisions taken on November 9, 2009 and February 2, 2010 cannot be faulted - respondent could have taken a stand before the Apex Court that after passing aforesaid resolutions on November 9, 2009 and February 2, 2010 SEBI Board became functus officio in relation to implementation of the impugned order dated December 4, 2008. However, in this case, since Apex Court having wide powers under Article 142 of the Constitution to pass such order as is necessary to do complete justice in any matter had called upon the respondent to consider whether its Board would reconsider passing appropriate resolutions in the matter, the decision of the Board to reconsider its resolutions relating to implementation of the impugned order dated December 4, 2008 cannot be faulted. Accordingly, we hold that ordinarily, SEBI Board cannot review its own resolutions, however, in the facts of the present case, for the reasons stated hereinabove, decision of the Board to review its earlier decisions cannot be faulted. If lapses on the part of the appellant in discharging its regulatory responsibilities noticed during the course of investigation itself were sufficient to fix individual responsibility, then, by applying the same yardstick, the two member committee, in view of the lapses on the part of the respondent in discharging its regulatory responsibilities, would have directed the respondent to investigate and fix individual responsibility on their part. The very fact that the two member committee has not passed any such direction against the respondent, clearly shows, that lapses noticed while discharging regulatory responsibilities could not be the basis for ordering fresh investigation. Therefore, the mere fact that certain lapses were noticed during the course of investigation could not be a ground for ordering fresh inquiry to fix individual responsibility especially when the investigation already conducted did not suggest any individual complicity and no fault was found with such investigation carried out by the appellant. Respondent has found lapses on the part of both the depositories viz., the appellant and CDSL. However, the proceedings in the case of CDSL have been closed on the basis of the SAT order dated January 14, 2009 but not in the case of appellant - when the appellant and CDSL stand on the same footing in the matter of IPO irregularities, the decision of the respondent to close the file in the case of CDSL on the basis of the SAT order and continue to proceed against the appellant inspite of the SAT order is unreasonable and unjustified. Depository system is regulated by both the Depositories and the respondent acts as the Apex regulatory authority. After noticing IPO irregularities, both the Depositories as also the respondent have carried out independent investigations. After ascertaining that there is no individual complicity, various remedial measures have been taken from time to time by the two Depositories on their own and also at the instance of the respondent. Therefore, at this belated stage directing the appellant to institute fresh inquiry to fix individual accountability to the exclusion of CDSL is wholly unjustified and unreasonable. Accordingly, we quash and set aside the impugned order dated December 4, 2008. This order, however, will not come in the way of the respondent to seek compliance of any other remedial measures that may be suggested by the respondent with a view to strengthen the Depository system - Therefore, the impugned order dated December 4, 2008 relating to IPO irregularities is quashed and set aside - Decided in favour of appellant.

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• Service Tax

• 2013 (11) TMI 959
  Cenvat credit on Construction Service for setting up of factory - Whether Service tax on setting up of immovable property is a service and goods can be taken as inputs on which credit can be taken – Held that:- The inclusive portion of the definition of input services covers ‘services used in relation to setting up, modernization, renovation or repairs of a factory, or premises of provider of output service or an office attached to such factory or premises’ - Thus the service use in relation to setting up of factory was specifically covered by the definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules – Relying upon Suzuki Motorcycle (I) Pvt. Ltd. Vs. Commissioner of Central Excise, Delhi [2011 (2) TMI 56 - CESTAT NEW DELHI]. In Board’s Circular dt. 04.01.08, there is a clarification with regard to availing the construction service or commercial or industrial construction service in respect of immovable property which had been rented out and the clarification appear to be on the point as to whether for payment of service tax in respect of renting of the immovable property, the Cenvat Credit of the service tax paid on construction service can be availed - This clarification would not be applicable when construction service has been availed for setting up of factory for manufacture of excisable goods which during the period, of dispute was specifically covered by the definition of ‘input service’ as given in Rule 2(l) of the Cenvat Credit Rules – Decided in favour of Assessee.

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• 2013 (11) TMI 949
  Validity of Debit Notes - Availment of cenvat credit – Waiver of Pre-deposit - Whether the debit notes issued by the service providers are valid documents for availment of cenvat credit by the appellant – Held that:- The documents title debit notes/invoice and the same mentioned service tax registration number of the service provider, mentioned the nature of the service as Business Auxiliary Service and also the details of value of the taxable service and service tax paid - all the information which is required to be mentioned in invoice issued by the service provider is available in the documents and just because before the word invoice, the word debit note has been added, these documents would not cease to be a valid document for the purpose of cenvat credit - Prima facie the appellant have strong prima facie case in their favour - The requirement of pre-deposit of cenvat credit demand, interest and penalty waived till the disposal – Stay granted.

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• Central Excise

• 2013 (11) TMI 956
  Conflicting views in different decisions of the same Tribunal - Clandestine Removal of goods – Assessee manufactured aluminium dross and skimmings – Activity manufacture or not - Held that:- In Bhushan Steel Ltd. vs. Commissioner of Central Excise [2013 (4) TMI 158 - CESTAT, MUMBAI] – it was held that Notwithstanding the addition of Explanation to Section 2 (d) of the Central Excise Act, since the Zinc Dross is not a manufactured product, it cannot be considered as an excisable product thus, they are not liable to duty – and in KEC International Ltd. vs. Commissioner of Central Excise, Jaipur-I [2012 (12) TMI 426 - CESTAT, NEW DELHI ] – in view of the addition of Explanation to Section 2 (d), Zinc Dross is to be deemed as 'marketable' and, therefore, they have to be considered as excisable goods and liable to excise duty - There are conflicting decisions to two Benches of the Tribunal, the matter should be placed before a larger Bench of the Tribunal for resolution of the conflicting views. - matter referred to larger bench.

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• 2013 (11) TMI 955
  Cenvat credit taken on invoices Regarding supply of scrap – Held that:- Octroi receipts issued by Khanna City Municipality do not show the consignor’s name and no inquiry has been conducted with the drivers of the trucks - Commissioner Central Excise, Chandigarh Versus M/s Modern Alloys [2009 (11) TMI 66 - PUNJAB AND HARYANA HIGH COURT ] - it cannot be alleged that the goods covered under the invoices issued by registered dealer to the respondents have not been received by them but have been received in Khanna City – there is no any merit in the Revenue’s appeals – Decided against Revenue.

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• 2013 (11) TMI 954
  Condonation of Delay – Delay of More than 6 years – Held that:- In the case of co-noticees, in the case of other two manufacturers, the orders were to the effect that rest of the proceedings were dropped - It appears from the adjudication order that the copies of the order were not endorsed to the respondents against whom applications are now filed - This does not appear to be relevant because as per section 35E (4) applications were to be filed within three months from the date on which CBEC had passed the order under section 35E (1) - there is delay as mentioned in the application whether or not the order has been communicated to the respondents. After lapse of a long period of over six years, it would become difficult for the respondents who have not been issued with notices regarding further proceedings to have retained evidences that they might have wanted to rely for their defence - Such long period of lapse creates a vested right for the respondents not to be dragged into further proceedings - it will be against the principle laid down by the Hon Apex Court to condone such long delay against express provisions made in the statute – Following CCE Vs. L.P. Shenoy [2003 (2) TMI 138 - CEGAT, BANGALORE] - The case of appeals against parties not connected (other than through the SCN) is on a much weaker footing - the applications for condoning of delay rejected - Thus, the 26 applications which are now treated as appeals in view of the amendments made in section 35E of Central Excise Act, also get rejected – Decided against the revenue.

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• 2013 (11) TMI 953
  CENVAT credit on non-duty paid scrap - Contravention of Rule 25 (a) - duty paying document - invoice of the second stage dealer – Held that:- From Rule 11 (7), it is clear that removal from the premises of a second stage dealer also is removal and a second stage dealer also has to issue proper invoices showing true particulars. This has not been done in this case - there is a contravention of Rule 25 (a) in respect of duty paid goods supplied to Units not availing Cenvat credit - In respect of non- duty paid goods cleared to the manufacturers under invoice showing duty payment there is a clear violation of rules with intent to evade payment of excise duty on final products manufactured (by paying such duty through fraudulent credit) - This duty liability is not on the second stage dealer - the situation will be covered by Rule 25 (d) and also in respect of non-duty paid goods supplied to the manufacturer under invoice showing duty payment - both the goods were liable to confiscation. The reason that the goods were not available to confiscation should not be a reason to avoid penalty - the Hon’ble High Court of Punjab and Haryana has held that penalties can be imposed in such cases under Rule 25 of the rules as it existed at that time – Decided against Assessee.

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• 2013 (11) TMI 952
  Option of 25% reduced Penalty u/s 11AC of Central Excise Act 1944 – Held that:- There has been a clandestine activity on the part of the appellant by processing and clearing of fabrics without recording the same in statutory records and without payment of duty - It is a case of fraud and suppression with intention to evade Central Excise duty - There is no provision in Central Excise law that show cause notice is required to be issued within one year from the date of visit of the Central Excise officers. The appellant contended that once the entire duty liability was paid prior to issue of show cause notice, then there was no question of imposing penalty under Section 11AC of Central Excise Act, 1944 - No specific provision has been quoted by the appellant in grounds of appeal but it is apparent that he is referring to Clause (2A) and (2B) of the Section 11A(2) of Central Excise Act, 1944. It was a case of fraud and suppression with intention to evade Central Excise duty, therefore the correct provision applicable will be Section 11A(1A) of Central Excise Act, 1944, where appellant was also required to pay 25% penalty imposable under Section 11AC of Central Excise Act, 1944 along with interest applicable under Section 11AB of Central Excise Act, 1944 - the adjudicating authority also gave them an option to pay reduced penalty of 25% under Section 11AC of Central Excise Act, 1944 if the payments are made within one month from the date of receipt of Order in Original - no such option was exercised by the appellant – Decided against Assessee.

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• 2013 (11) TMI 951
  Option of 25% reduced Penalty u/s 11AC of Central Excise Act 1944 – Held that:- There was no excess of 3505 kgs of copper rods and the same quantity was actually quantity of bars manufactured by the main appellant - if that quantity taken as excess is set off against the shortages, the net shortage comes to only 2480 kgs on which duty liability accepted by the main appellant comes to Rs.1,76,086/- after allowing cum-duty benefit - the option of 25% reduced penalty was not extended to the main appellant as per the provision of Section 11AC of the Central Excise Act, 1944 - such an option should be specifically given by the adjudicating authority in the Order in Original and if not given, the same can be extended by the appellate authorities – Thus the option of 25% reduced penalty available under Section 11AC of Central Excise Act is extended to the appellant if the same is paid within one month from the receipt of this order, as per the provisions of Central Excise Act, 1944. Imposition of penalty upon the second appellant – Reduction of Penalty under Rule 26 of Central Excise rules, 2002 - Held that:- He was well aware of the day to day activities of the main appellant and was also aware of the shortages - Being authorized signatory, he should have explained the shortages satisfactorily which have been accepted by the main appellant - but he could not do so, penalty is imposable upon him - the original duty demand reduced in these proceedings, hence the penalty on second appellant also reduced under Rule 26 of Central Excise Rules, 2002 – Decided partly in favour of Assessee.

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• 2013 (11) TMI 950
  Jurisdiction of the Tribunal u/s 35B of Central Excise Act – Rebate of duty - Held that:- The case is related to rebate of duty and hence appeal lies to the Joint Secretary (Revenue) and not to CESTAT – BALRAMPUR CHINI MILLS LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD [2012 (12) TMI 302 - CESTAT, NEW DELHI] – The Tribunal has no power to act as Civil Court beyond its jurisdiction - if the appellant so chooses to seek the revisional jurisdiction, it may do so and if there is a delay in seeking remedy before that jurisdiction, it may file application for condonation of delay, which may be considered by that authority in accordance with law - The case is one of rebate of duty, hence CESTAT has no jurisdiction to decide this appeal in view of Clause (b) of first proviso to Section 35 B of Central Excise Act, 1944 – Decided against Assessee.

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• 2013 (11) TMI 944
  Eligibility for cenvat credit on spare parts - Whether the spare parts of the Ventra Locomotive are eligible for cenvat credit – the assessee contended that the spare parts of the Ventra locomotives have to be treated as input and would be eligible for cenvat credit - Held that:- Ventra locomotives fall under Chapter 86 of the Tariff and hence the same are not covered by definition of capital goods - spare parts of ventra locomotive cannot be considered as components of capital goods and would not be covered by definition of capital goods - Following Aditya Cement Vs. Union of India [2007 (3) TMI 190 - HIGH COURT RAJASTHAN] - As such, the component parts of the Ventra locomotives would have to be treated as inputs eligible for cenvat credit - Thus the order upholding the denial of cenvat credit in respect of the components of ventra locomotives is not sustainable set aside – Decided in favour of Assessee. Eligibility for cenvat credit – Goods Input or not - Denial of cenvat credit on cement and DA gas – Inputs to be used within the factory premises – Rule 2(g) of the cenvat credit rules, 2004 - Held that:- Following Union of India Vs. Hindustan Zinc Ltd. [2007 (8) TMI 340 - HIGH COURT OF RAJASTHAN] - The order denying the cenvat credit on DA gas is not sustainable and the same has to be set aside - DA gas was used for repair & maintenance of plant & machinery – but the order for denial of cenvat credit on cement upheld - the cement used in the mines is not eligible as inputs for the purpose of availment of Cenvat credit – Decided partly in favour of assessee.

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• 2013 (11) TMI 943
  Eligibility for cenvat credit - Welding Electrodes used for repair and maintenance – Input or not - Held that:- Following AMBUJA CEMENTS EASTERN LTD. Versus COMMISSIONER OF C. EX., RAIPUR [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT ] - Welding electrodes used for repair and maintenance of the plant and machinery are eligible for cenvat credit - cenvat credit demand is not sustainable and there is no merit in the Revenue’s appeal for imposition of penalty – Decided against the Revenue.

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• 2013 (11) TMI 942
  Clandestine Removal of Goods - Evasion of Duty – Under-valuation of MRP - Waiver of Pre-deposit – Held that:- Following Belgium Glass And Ceramics (P) Ltd. Versus Union of India [2013 (8) TMI 123 - GUJARAT HIGH COURT] - The main appellant has already deposited an amount of Rs.75 lakhs, which is more than 8% of the duty liability - the amount seems enough deposit to hear and dispose the appeals - the applications for waiver of pre-deposit of amounts allowed till the disposal – Stay granted.

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• 2013 (11) TMI 941
  Cenvat credit – Waiver of Pre-deposit – Held that:- The appellant was keeping record for sending these items outside for job working after keeping the Department informed about the movements of the goods - the appellant has been filing regular returns as to the availment of CENVAT Credit - Prima face, the show cause notice hit by limitation - The appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved - The application for waiver of pre-deposit of amounts involved allowed till the disposal – stay granted.

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