TMI Tax Updates - e-Newsletter
November 22, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Service specific accounting code for the purpose of payment of service tax under the Negative List approach All Taxable Services restored - Circular

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• IT Invoking Section 68 involves 3 ingredients, proof of identity of the share applicants, creditworthiness and the genuineness of the transaction as a whole -HC

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Articles

1. EXEMPTION TO SERVICES BY TBI OR STEP

   By: Dr. Sanjiv Agarwal

2. A SIMPLIFIED APPROACH TO SERVICE TAX UNDER REVERSE CHARGE

   By: abhishek gupta

3. Learning from case of Price Waterhouse Coopers (P.) Ltd- avoid casual and careless approach- be more careful.

   By: DEVKUMAR KOTHARI

4. EXEMPTION TO RENTING OF AN IMMOVABLE PROPERTY

   By: Dr. Sanjiv Agarwal

News

1. World Bank Pledges Additional $37 Million for Himachal Pradesh Watershed Development Project

2. Export of Goods and Software - Realisation and Repatriation of Export Proceeds – Liberalisation

3. Commodity-Wise Freight Revenue by Railways goes up by 23.76 per Cent during April-October 2012

4. Eight Lakh E-BRCs issued in First three Months DGFT Writes to heads of Banks to Address E-BRC issues

5. RBI - ADB Conference on Managing Capital Flows: Management of capital flows a concern for both source as well as recipient countries; Merit in acting in coordinated manner in the event of excess capital flow volatility to maximise welfare

6. Auction for Sale (Re-issue) of ‘8.20 per cent Government Stock, 2025’

7. Auction for Sale (Re-issue) of ‘8.19 per cent Government Stock, 2020’

8. Auction for Sale of Government Stock

Notifications

Central Excise

1. 39/2012 - dated 19-11-2012 - CE

Provide exemption to Project ASTRA by amending notification No. 64/95 -CE dt. 16/3/1995

2. 30/2012 - dated 20-11-2012 - CE (NT)

Change in the territorial jurisdictions of Central Excise Zones in the State of Karnataka.

Customs

3. 58/2012 - dated 19-11-2012 - Cus

Provide duty exemption to ASTRA by amending notification No. 39/96-cus dt. 23/7/1996

Circulars / Instructions / Orders

Service Tax

1. 165/16/2012 - dated 20-11-2012

Restoration of service specific accounting code for the purpose of payment of service tax under the Negative List approach All Taxable Services- regarding.

FEMA

2. 53 - dated 20-11-2012

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

3. 52 - dated 20-11-2012

Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation

DGFT

4. 31 (RE 2012)/2009-14 - dated 21-11-2012

Amendment in Para 8.3.1(i) of the Handbook of Procedures Vol.I, 2009-14 – claim of TED by recipient of goods.

Highlights / Catch Notes

Income Tax

• ACIT's assessment order invalid due to jurisdiction transfer to Addl.CIT; successor AO's order rendered ineffective.

  Case-Laws - AT : Revision u/s 263 – non est order - The assessment order has been passed by earlier AO, i.e., ACIT, while said jurisdiction was already transferred to Addl.CIT - Once order of ACIT in question is not quashed, the order passed by successor Assessing Officer will go infructuous. It will enhance the mischief. - AT
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• Retraction of Statement in Stock Discrepancies: Importance of Context in Tax Assessments for Accurate Evaluations.

  Case-Laws - AT : Addition on account of difference in stock – Retraction of statement - factual retraction should not be brushed aside without verifying the facts and circumstances of same. - AT
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• Software Development Costs Treated as Revenue Expenditure Allowed in Income Computation.

  Case-Laws - AT : Revenue or capital expenditure – software development expenditure – Assessee had treated the expenditure as a deferred revenue expenditure in the books of account and claimed it as a revenue expenditure in the computation of income - allowed as revenue expenditre - AT
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• Court Rules Share Application Money Excluded in Shareholding Calculation for Business Losses Set-Off and Carry Forward.

  Case-Laws - AT : Set off & Carry forward business loss - change in share holding - share application money not to be considered for determination of percentage of share holding - AT
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• Insurance Money Excluded from Section 80-IA Tax Deductions Without Direct Business Connection, Court Rules.

  Case-Laws - HC : Deduction U/S 80IA - Insurance money received - in the absence of any nexus shown between the compensation received and the business activities of the industrial undertaking, the compensation could not be held as derived from the undertaking for the purpose of inclusion under Section 80-IA - HC
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• Section 176(3A) Clarifies Full Taxable Income Must Be Considered, No 12.5% Reduction for Business Discontinuance.

  Case-Laws - HC : Discontinuance of business - Taxable Income u/s 176(3A) - total income of the assessee under Section 176 (3A), can not be reduced to 12.5% as net taxable profit - HC
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• Agricultural land sale results in long-term capital loss, eligible for carry forward to offset future gains.

  Case-Laws - AT : Capital Gain – Agricultural land purchase for commercial use - It was definitely a business asset held as such in the books of the assessee hence, loss on sale of such land would constitute a long term capital loss and would be eligible for carry forward for set off to future years. - AT
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• Power Plant Operator Deemed Contractor, Not Eligible for Section 80-IA Industrial Undertaking Tax Benefits.

  Case-Laws - AT : Deduction u/s 80-IA - assessee has not set up any power plant but only operating and maintaining the power plant set up and is a contractor for the purpose of rendering services and hence the charges received by the assessee cannot be treated as profits derived from the industrial undertaking for the purpose of section 80-IA - AT
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• Taxpayers Lose Only Partial Exemption for Homes Over 1,000 Sq Ft u/s 80IB(10) of Income Tax Act.

  Case-Laws - AT : In case, some residential house have a built up area in excess of 1,000 sq.ft., the assessee would not lose the total exemption under section 80IB(10) in its entirety but will only lose the proportionate exemption, under section 80IB(10). - AT
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• Insurance, banking, and electricity companies classified similarly under Companies Act Sec 211; Sec 115JB provisions not applicable.

  Case-Laws - AT : When the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee - AT
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• High Court upholds penalty for bogus deduction claim u/s 35CCA, affirms consequences for fraudulent tax practices.

  Case-Laws - HC : Penalty u/s 271(1)(c) - bogus claim of deduction under Section 35CCA - penalty under Section 271(1)(c) was rightly imposed - HC
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• Proving Identity, Creditworthiness, and Genuineness Essential to Invoke Section 68 for Share Transactions.

  Case-Laws - HC : Invoking Section 68 involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. - HC
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Customs

• BMW 730 D SE Confiscated Over Import Licensing Violation; Valued at Rs. 18,60,725.00.

  Case-Laws - AT : Confiscation - Import of a car - violation of licencing restriction – high end model namely BMW 730 D SE - the assessable value of the impugned car works out to Rs. 18,60,725.00. - AT
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• Customs Notification Amended to Grant Duty Exemption to ASTRA for Financial Relief Under Notification No. 39/96-cus.

  Notifications : Provide duty exemption to ASTRA by amending notification No. 39/96-cus dt. 23/7/1996 - Notification
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FEMA

• FEMA Updates Ease Export Proceeds Repatriation: Streamlined Regulations for Faster Transactions and Reduced Compliance for Exporters.

  Circulars : Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation - Circular
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Corporate Law

• Appeals under Companies Act Section 10F on oppression and mismanagement restricted by Arbitration Act Section 37 limitations.

  Case-Laws - HC : Oppression and mismanagement - Section 10F provides for forum of appeal, provided an appeal is maintainable under Section 37 of the Arbitration and Conciliation Act, 1996. Therefore that all the aforesaid appeal filed under Section 10F of the Companies Act are not maintainable in view of bar under Section 37 of the Arbitration Act, 1996 - HC
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Indian Laws

• High Court Rules Indian Army Files Fall Under RTI Act; Section 8(1)(e) Exemption Conditional, Not Absolute.

  Case-Laws - HC : RTI - Indian Army - notes on files and opinions fall within the ambit of the provisions of the RTI Act. - exemption under Section 8(1)(e) is conditional and not an absolute exemption. - directed to provide information - HC
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Service Tax

• Service Tax Payment Streamlined: Reinstating Codes for Accurate Categorization Under Negative List Approach for All Taxable Services.

  Circulars : Restoration of service specific accounting code for the purpose of payment of service tax under the Negative List approach All Taxable Services- regarding. - Circular
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• Refund Claim for Mistaken Service Tax Payment Subject to Section 11B Time-Bar Constraints of Central Excise Act.

  Case-Laws - AT : Refund claim of service tax paid by mistake of law - the applicability of the provisions (including time-bar) of Section 11B of the Central Excise Act to the refund claim cannot be ruled out on the plank of payment of tax by mistake of law - AT
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• Claim for Revenue Neutrality Accepted, No Penalty Imposed Despite Demand for Duty, Interest, and Penalty on Service Tax.

  Case-Laws - AT : Demand of duty, interest and penalty – claim for the revenue neutrality and consequently absence of intention to evade service tax is acceptable. - no penalty - AT
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• Custodians Auctioning Abandoned Cargo Exempt from Service Tax if Tax Already Paid.

  Case-Laws - AT : Service Tax is not leviable on the activities of the custodian where he auctions abandoned cargo and ST/VAT is paid in respect of that cargo - AT
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Central Excise

• Project ASTRA Receives Exemption via Amendment to Notification No. 64/95-CE Under Central Excise Rules.

  Notifications : Provide exemption to Project ASTRA by amending notification No. 64/95 -CE dt. 16/3/1995 - Notification
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• State-Owned Entity Not Equal to State Government for Legal and Tax Obligations.

  Case-Laws - AT : Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. - AT
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Case Laws:

• Income Tax

• 2012 (11) TMI 634
  Appeal u/s 246 - stay of demand - appeal and stay application both are pending since January, 2011 - held that:- Petitioner to file an application for expeditious hearing of the stay application, stated to be pending along with the appeal - On filing of such an application, the respondent No.3 shall consider and decide the application for stay, expeditiously, as far as possible, within a period of 30 days, from the date of filing of such application - So far as appeal is concerned, the respondent No.3 shall make an endeavour to hear and decide the appeal expeditiously, as far as possible, within a period of 4 months - Till the application for stay is decided or for a period of 30 days, whichever is earlier, it is directed that no coercive steps be taken against the petitioner for enforcing recovery in question - Considering the facts of the case, there shall be no order as to costs.

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• 2012 (11) TMI 633
  Deduction u/s 80IB – Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the assessee was eligible for deduction under Section 80IB(10) in pro-rata basis for housing unit having less than 1500 sq.ft., even though it would defeat the intention behind enacting the said provision, which was only for providing housing facilities for middle income group? held that:- Assessee was entitled to pro-rata deduction in respect of Units which have built-up area less than 1500 sq.ft. Thus, there could be no disallowance of the entire claim – Order of the Tribunal is confirmed, thereby rejecting the Revenue's appeals - In the result, Tax Case Appeals stand dismissed. No costs.

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• 2012 (11) TMI 632
  Discontinuance of business - Taxable Income - ITAT restricted the nett profit at 12.5% of receipt of Arbitration Award when it held that income had to be computed in accordance with Section 176(3A) - held that:- Assessee has received a sum of Rs.1348095/- after discontinuance of business and in view of Section 176(3A) of the Act, this income is required to be added to the total income of assessee. The rate of 12.5% on this income is not the only taxable income but whole of receipt is the income to be taken into consideration and by indirect interpretation the receipt which is required to be taken into total income of the assessee under Section 176 (3A), can not be reduced to 12.5% as net taxable profit of the assessee which is contrary to the provision of Section 176(3A). Therefore, the question is answered that in the facts and circumstances of the case, the I.T.A.T. was not justified in restricting the net profit at 12.5% of receipt of money under Arbitration Award which was received after discontinuation of the business by the assessee and that income had to be computed in accordance with Section 176 (3A) of the Income Tax Act - appeal is allowed, accordingly.

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• 2012 (11) TMI 631
  Deduction U/S 80IA - Insurance money received on loss of production - held that:- in the absence of any nexus shown between the compensation received and the business activities of the industrial undertaking, the compensation could not be held as derived from the undertaking for the purpose of inclusion under Section 80-IA of the Act. Assessee is unable to produce the details regarding the fire accident and the policy before this Court to substantiate its contention, and there being no material to substantiate the contention of the assessee linking the loss to the fire accident, there is no justifiable ground to accept the order of the Tribunal which is not based on factual findings - Order of Tribunal is set aside in allowing deduction - In the result, the above Tax Case (Appeal) is allowed in favour of Revenue.

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• 2012 (11) TMI 630
  Revision u/s 264 - Unexplained Income u/s 68 - Advance received for Sale of Agricultural land - held that:- There is no violation of the provisions of law or procedural irregularity alleged. On the other hand, the petitioner has failed to pursue the statutory remedy of filing the appeal and instead chose to file this writ petition challenging the order passed under Section 264 of the Act, which is not maintainable in view of the alternative remedy available under the statute - Court in exercise of power under Article 226 of the Constitution of India, is not inclined to entertain this writ petition against the order passed under Section 264 of the Income Tax Act, 1961, holding that the order is not prejudicial to the petitioner since the revisional authority has only declined to modify the order of the Assessing Authority. The petitioner has an alternative remedy under the statute - writ petition is dismissed. No costs.

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• 2012 (11) TMI 629
  Deduction u/s 80HHC – Export of cut and trimmed granite blocks - held that:- Assessee's contention that the word 'rough' was wrongly typed in the invoice is totally unbelievable and cannot be accepted as it appears to be an after thought. When that being the position, the Assessing Officer as well as the Tribunal had rightly rejected the case of the assessee by holding that the assessee was not entitled to relief under Section 80 HHC of the Income Tax Act as per CBDT's circular No.729 dated 01.11.1995, as admittedly, rough blocks were exported and not dimensional blocks insofar as the remaining claim of the assessee in respect of the total sales export of Rs.2,09,48,250/-. The assessee had already given deduction in respect of Rs.19,52,965/- in respect of dimensional blocks of granite export is concerned , there is no reason to interfere with the order passed by the Tribunal - Tax Case (Appeal) is dismissed answering the questions in favour of the Revenue. No costs.

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• 2012 (11) TMI 628
  Revenue Expenditure - Expenses relating to Issue of Share Capital - held that:- Order of CIT (A) wherein and whereby the Commissioner has allowed the claim of deduction, except in the case of printing expenses, lead manager fees and advertisement expenses, totalling to Rs.3,08,791/-, said expenses are capital in nature, the same has been rightly rejected by the Commissioner of Income Tax (Appeals) - Commissioner has given categorical finding in respect of other expenses that the nature of the expenses is only revenue, as those expenses are to meet out the day today transactions of the business of the assessee - Order of CIT(A) based on the report received from the Assessing Authority, which has been accepted by the Tribunal and there being no contradiction in the finding of the Tribunal, no reason to interfere with the order - In the result, appeal is dismissed and questions of law raised are answered against the Revenue.

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• 2012 (11) TMI 627
  Unexplained Cash Credits - Whether CIT(A)erred in deleting the addition of Rs. 15,00,000/- made on account of unexplained cash introduced, when the assessee as well as creditor failed to prove creditworthiness of the creditor - Held that:- Assesse explained the source before the Assessing Officer and if the Assessing Officer was not satisfied with the explanation regarding sources in the hands of the buyer then action could have been taken against such buyer and the assessee cannot be saddled with the burden to prove the sources in the hands of the purchaser of the property. The theory of casting of burden to prove the sources of source may not be applicable in case of cash creditor where it can be shown that creditor has deposited the cash in his bank account and given loan to a particular person because it can be argued that such person may have given the cash but this theory cannot be applied in case of sale purchase transaction of the property because no person would give the money to other person to show the same as being received back as advance particularly after the execution of agreement to sell. The Assessing Officer is directed to pass on the information to the concerned Assessing Officer for taking appropriate action in the case of Shri Bakhtawar Singh(purchaser) to examine the source of investment of Rs. 15.00 lakhs which is in dispute - CIT(A) has very correctly decided the issue after taking all precautions and nothing wrong with the order of the ld. CIT(A) and the same is confirmed - In the result, appeal filed by the revenue is dismissed.

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• 2012 (11) TMI 626
  Employees contribution to PF and ESI - Disllowance as the payment made beyond due date - Held that:- As decided in CIT Vs. M/s Nuchem Ltd. [2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] that where the employees' share of contribution to ESI or PF is made before the due date of filing the return of income, no disallowance is warranted. As in the present case assessee had deposited the said amount of employees share of PF and ESI admittedly before the due date of filing the return of income consequently no disallowance is warranted - in favour of assessee. Interest free loans and advance given to related party - Held that:- Though the plea of the assessee before the authorities below was that the advances made to the said parties were not loan accounts and the assessee was having purchase/sale transactions with these concerns during the year under consideration, the CIT (Appeals) had allowed the claim of the assessee both on account of availability of funds with the assessee and also the non-consideration of the entries debited to the account of M/s Shivam Industries. Thus the issue raised by the assessee needs to be relooked by the AO by considering the plea of the assessee and in view of the ratio laid down by the Hon'ble Supreme Court in S.A. Builders Vs. CIT (2006 (12) TMI 82 - SUPREME COURT) that in case the advances between the assessee company and two concerns were on account of business transactions, no disallowance was warranted under section 36(1)(iii) - remit the issue back to the file of the AO for reconsideration - in favour of revenue by way of remand. Expenditure incurred for increase in Authorised Capital of the Company - Revenue v/s Capital - Held that:- As decided in Brook Bond India Ltd. Vs. CIT [1997 (2) TMI 11 - SUPREME COURT] though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit-making, the expenses incurred in that connection still retain the character of a capital expenditure - against assessee. Disallowance under section 14A r.w.r. 8D - Held that:- As held in Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) that the provisions of Rule 8D will be held to be prospective applicable from assessment year 2008- 09 onwards no merit in the orders of the authorities in applying the provisions of Rule 8D for computing the disallowance under section 14A of the Act in the hands of the assessee relating to assessment year 2007- 08 - no merit in invoking the provisions of section 14A of the Act in assessment year 2008 - 09 where the income from the said investment in SBI Mutual Funds has been offered to tax. no merit in invoking the provisions of section 14A of the Act in assessment year 2008 - 09 where the income from the said investment in SBI Mutual Funds has been offered to tax. - in favour of assessee. Construction of building on lease hold land - Disallowance of expenditure - Held that:- We are in conformity with the orders of the authorities below that the said expenditure incurred by the assessee is capital expenditure and the assessee is entitled to the claim of depreciation on the said assets. Reliance placed by the assessee on the ratio laid down in CIT Vs. Hi Line Pens (P) Ltd. [2008 (9) TMI 25 - HIGH COURT DELHI] is misplaced as there Court had allowed the claim of the assessee on account of expenditure on repairs and renovation of rented premises, whereas in the present facts of the case before us, the assessee had incurred the said expenditure on the construction of the building itself from which it had carried on its business in the later period - against assessee. Expenditure on Air Conditioners and coolers and mobile phones - disallowance - Held that:- The above said expenditure incurred by the assessee is purely capital expenditure and is not to be allowed as revenue expenditure, though the assessee is entitled to the claim of depreciation on the said asset - against assessee. Expenditure on modification of premises - Held that:- As the assessee failed to produce bills in respect of the said expenditure no merit in the claim of the assessee - against assessee. Addition invoking provisions section 36(1)(iii) - Held that:- The issue has not been considered by the authorities below in proper perspective and the addition has been made merely because the loan had been raised by the assessee company. The finding of the AO in this regard that the amount has been invested in the land account, does not come out from the documents filed by assessee. In the interest of justice the issue is to be restored back to the file of the AO to decide the same de - novo - in favour of assessee for statistical purposes.

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• 2012 (11) TMI 625
  Addition on account of labour charge – Labour charges on gold jewellery – Assessee shown labour charges @ 5.73% of the gold sale, whereas in earlier year it was 10.9% - Held that:- As no evidence was produced to show about selling readymade jewellery. It is common knowledge that whenever jewellery item is bought from a jeweler, separate making charges are charged. At the same time it is not necessary that in every year the labour charges proportion would remain same. Restrict the addition on account of labour charges to Rs.1.00 lakh. Partly allowed in favour of assessee Addition on account of revaluation of closing stock of gold - Sum of Rs. 3,80,000/- has been taken in account by adopting the same as purchase of gold but the same has not been added to the closing stock and accordingly a sum of Rs. 3,80,000/- was added to the income of the assessee – Held that:- As concluding from the facts that the assessee has already reflected undisclosed sales. The gross profit comes to Rs. 11,41,316/- but the same was done as Rs. 15,21,316/ - in P&L account. This amount has been reflected in books. In favour of assessee Valuation of closing stock – FIFO or weighted average method – Held that:- Since the AO has adopted FIFO method whereas the claim before the ld. CIT(A) was that stock has been valued at average rate when it is not clear whether weighted average was taken or not and therefore, we set aside the order of ld. CIT(A) and remit the matter back to the file of AO with a direction to value the closing stock on weighted average after verification of the same. Remand back to AO Disallowance u/s 40A(3) – Expense incurred in cash more than Rs. 20,000/- - AO argued that out of surrendered income of Rs. 4.00 lakhs, a sum of Rs. 3,80,000/- was shown as gold purchase out of books and Rs.20,000/ - as silver purchased out of books - AO was of the view that this amount must have been spent in cash exceeding Rs . 20,000 - Held that:- The assessee had surrendered a sum of Rs. 3,80,000/ - which was shown as purchases of gold outside the books and this amount was shown as purchases because of the surrender. There is no evidence before the Revenue that this amount was spent in payment of cash exceeding Rs. 20,000/-. Therefore, there is no justification in the addition. In favour of assessee

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• 2012 (11) TMI 624
  Addition u/s 69C - Unexplained Expenditure – Assessing Officer held that the assessee-firm has made payment of Rs.2,07,25,297 (30% of Rs.6,90,84,323) to the retiring partner out of undisclosed sources in order to avail the benefit of assets left by the retiring partner for the business purpose of the assessee-firm. The Assessing Officer applied the provisions of section 69C of the Act and made addition of Rs.2,07,25,297. - held tha:- what is postulated in section 69C of the Act is that first of all the assessee must have incurred that expenditure and thereafter, if the explanation offered by the sssessee about the source of such expenditure is not found satisfactory by the Assessing Officer, the amount may be added to his income. [CIT v. Lubtech India Ltd, 2007 (7) TMI 281 - DELHI HIGH COURT] The showroom was owned by the retiring partner and the assessee-firm continued to pay rent to the retiring partner at the same rate. The firm was not taken over by any of the agency. Therefore, there cannot be question of estimating the value of the goodwill. In the Present case even if it is assumed that some benefit is accrued on the retirement of the third partner, the benefit may be accrued to the surviving partners and not to the assessee-firm. In case of that, if any addition is required to be made the same can be made in the hands of the individual partners and not to the assessee-firm. There is no evidence on record that any amount over and above the amount declared in the capital account has ever been paid to the retiring partner either by the assessee-firm or by the remaining partners. In the absence of any evidence, it cannot be assumed or presumed that a substantial amount of Rs.2,07,25,297 has been paid to the retiring partner by the assessee-firm - no merit in the addition made by the Assessing Officer - Order of the CIT(A) is confirmed - In the result, appeal of the Revenue is dismissed.

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• 2012 (11) TMI 623
  Set off & Carry forward business loss - change in share holding - inclusion of share application money for determination of percentage of share holding - Held that:- Share holding of the Company has changed by more than 51% and management and control of the company has been passed on to Pippal family. There is unabsorbed losses of Rs.29,94,643/- of A.Y. 2004-2005. CIT(A) rejected the assessee's contention that 72.8% of total paid share capital was introduced by family of Shri Hari Kishan Pippal during the F.Y. 2004-05 and not during the year under consideration has no merit in its case because that was simply share application money and no shares were allotted during that year. The shares have been admittedly allotted during the year under consideration for the reasons whatever it may be. Therefore, after considering the totality of the facts of the case in the light of section 79, the A.O. has rightly disallowed the claim of set off of brought forward losses and the CIT(A) has rightly confirmed the order of the A.O - Order of the CIT(A) is confirmed - In the result, appeal of the assessee is dismissed.

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• 2012 (11) TMI 622
  Benefit of Deduction u/s 80 IB – Whether casual,contract labour and electrician be considered as Employee of Co. - held that:- the casual and contract employees including electrician has to be taken into account for the purpose of calculating number of employees. Once the contract and casual employees are taken into account, the number of employees would be more than 10, therefore, the assessee is eligible for deduction u/s 80IB of the Act. - Decided in favor of assessee. Burning Loss – Held that:- Theoretical research made by the universities may be to some extent nearer to the actual burning loss suffered by the companies but there cannot be any standard formula to fix the burning loss. - the burning loss would depend upon the nature of the raw material and the process adopted for conversion of scrap into iron ingots. - There may be various factors which would reduce the burning loss or increase the burning loss. Unless specific materials are available with the assessing officer to say that the burning loss claimed by the assessee is highly excessive or there was no loss at all - the disallowance made by the assessing officer cannot be sustained. - Decided in favor of assessee.

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• 2012 (11) TMI 621
  Addition of 10% of the unsecured loan as interest income. - assessee company advanced unsecured loan to another government company, viz. Trivandrum Rubber Works Ltd with an intention to take over the company. - Following the judgement of Tribunal in assessee’s own case for assessment year 2004-05 and for the reasons stated therein addition 10% of the unsecured loan as interest income on account of interest on advance to Trivandrum Rubber Works Ltd is not justified – Order of lower authorities are set aide and the addition is deleted – Decided in favor of assessee. Disallowance of claim of loss on revaluation of spares as expenditure - Held that:- The loss or gain, if any, in the revaluation would be notional in nature, therefore, the assessee may not have any funds for replacement of asset physically. Loss, if any, in the revaluation of the loose tools and implements would be capital in nature, therefore, the same cannot be allowed while computing the income as revenue expenditure- there is no infirmity in the order of the lower authority , the same is confirmed – Decided against the assessee. Income from Agriculture operations - producing rubber products - Whether Sale value of scrap can be excluded from the turnover while computing income under Rule 7A of the I.T. Rules, 1962 - Held that:- Order of the Tribunal is set aside and the issue is remitted back to the file of the assessing officer to verify whether the income from scrap is obtained in the course of agricultural operation, i.e. in the occurs of taking yield or whether it is natural scrap generated in producing rubber products covered by Rule 7A of the I.T. Rules and to assess the income from scrap accordingly - Assessing officer shall thereafter reframe the assessment order in accordance with law after giving reasonable opportunity of hearing to the assessee – appeal allowed for statistical purposes.

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• 2012 (11) TMI 620
  Deduction u/s 80IB(10) – Whether area of land as per provision u/s 80IB(10) is to be considered on gross or net basis - AO disallowed deduction on ground that the net area of the plot is less than 1 acre for the housing project was not fulfilled - Substantial portion of the plot is reserved for D.P. Roads, hospital building and open space – Held that:- The law is well settled on this issue that so far as opening space and the area of the D.P. Road is concerned, the same cannot be excluded from the total area of the plot. Even the language of Clause (b) does not even remotely suggest that only the net area of the plot is to be considered. So far as the reservation of the hospital is concerned, the same is to be treated as a separate project and the area occupied by the said project has to be reduced from the gross area. Therefore after considering this area covered is more than 1 acre. Issue in favour of assessee Taxability of the profit from housing project u/s 80IB(10) - Assessee has completed the housing project in the A.Y. 2006-07 only, but declared the profit in the A.Y. 2007-08 – Held that:- Since the Completion Certificate has been issued to the assessee in the F.Y. 2006-07 relevant to the A.Y. 2007-08. The assessee is consistently following a particular method of accounting recognizing the profit which has not been rejected in past. We further find that the A.O has not rejected the method of accounting followed by the assessee in the A.Y. 2006-07. We, therefore, hold that there is no justification to bring to tax the part of profit from the housing project declared by the assessee in the A.Y. 2007-08. Accordingly, delete the addition. Issue decides in favour of assessee Disallowance u/s 40(a)(ia) for non-deduction of tax at source - Assessee contended that the payments were not made to contractor but to the various workers/labourers - A.O argued that the payments were made to the contractors, not the labourers/workers – Held that:- As concluded from the facts that the persons to whom the payments are made are the labour contractors and assessee was bound to deduct the tax at source from the payments made to the labour contractors as provided u/s. 194C. Following the decision in case of Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) that disallowance can be restricted to the extent the payments outstanding as on the 31st March of the respective FY. Issue need to be decides on the basis of said judgment, remand back to AO. Depreciation in respect of civil work in windmill – Whether road constructed for movement of the crane and electrical yard fencing are eligible for rate of depreciation at rate of along with windmill 80% or building 10% separately - Assessee has claimed depreciation at the rate of 80% on the Windmills - Civil work consisting of construction of one Windmill foundation and transformer plinth, electrical yard fencing, road for movement of crane and preparation of crane platform - A.O argued that only 10% depreciation can be allowed on electrical yard fencing road for movement of crane and preparation of crane platform – Held that:- Following the decision in case of Parry Engineering and Electronics P. Ltd. (2012 (10) TMI 224 - ITAT, AHMEDABAD) that foundation, civil and electrical work are necessary for the installation of the Windmill and is clearly part and parcel of the Windmill project on which depreciation at the rate of 80% is allowable. In our opinion, road constructed for movement of the crane cannot be said to be the part of the windmill but the electrical yard fencing is a part of the windmill. Issue partly allowed in favour of assessee Taxability on substantive basis – Held that:- We have deleted the addition made by the A.O in the A.Y. 2006-07 in respect of the part of the profit from the Housing project. In the A.Y. 2007-08, the assessee offered the entire profit from the housing project but while completing assessment, the A.O. sustained the addition on the protective basis to the extent of profit brought to tax in the A.Y. 2006-07. As we have deleted the addition made by the A.O in respect of the part of the profit assessed in the A.Y. 2006-07, the same has to be taxed on the substantive basis in A.Y. 2007-08. Issue is favour of revenue

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• 2012 (11) TMI 619
  Revenue or capital expenditure – software development expenditure – Assessee had treated the expenditure as a deferred revenue expenditure in the books of account – And claimed it as a revenue expenditure in the computation of income - Held that:- As the expenditure on development of new product in the line of business being carried out by the assessee is an expenditure related to such business and benefit to the assessee is in the revenue field, inasmuch as it seeks to improve the profitability of the assessee and the enduring benefit cannot be regarded to be in the capital field. The entries in the books of account cannot be demonstrative of the true nature of a transaction. The true nature of a transaction is to be assessed not on the basis of the entries in the books of account alone, but having regard to the realities of the transaction. - Therefore, the expenditure incurred on development of various software packages, for being sold in the assessee’s business of software development and selling, is to be regarded as in the nature of revenue expenditure. - Decision in Empire Jute Co Ltd (1980 (5) TMI 1 - SUPREME COURT) followed - Decided in favour of assessee Carry forward of loss/ depreciation u/s 10A – Whether carry forward of loss/ depreciation can be set off against other normal business income - Assessee was eligible to claim benefit of Sec. 10A – AO argued that Sec 10A was contained in Chapter III which dealt with “incomes which do not form part of total income”, therefore, assessee was not eligible to carry forward unabsorbed loss/depreciation – Held that:- As the provisions of Sec. 10A as it stood w.e.f. 1.4.2001 continued to be a provision for exemption. Sec. 10A(6)(ii) provides that no loss which relates to the business of the undertaking shall be carried forward or set off where such loss relates to any of the relevant assessment years ending before 1.4.2001. - Therefore, losses which are sought to be carried forward by the assessee are for the assessment year ending after 1.4.2001 and, therefore, do not fall in the restriction contained in section 10A(6)(ii). - Decided in favour of assessee Deduction u/s 10A- Foreign exchange fluctuation gain - Whether Foreign exchange fluctuation gain is eligible for deduction u/s 10A – AO argued such income could not be said to be profits and gains derived by an undertaking from the export of computer software – Held that:- As long as gain on foreign exchange fluctuation is on account of collection of export proceeds, it has a direct nexus with the exports undertaken by the assessee and, to that extent, it will also form part of an income eligible for claim of deduction u/s 10A. - Decided in favour of assessee

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• 2012 (11) TMI 618
  Addition on account of difference in stock – Retraction of statement - Due to theft and unaccounted sales – Assessee stated u/s 132(4) that investment made in land and its development by cash generated from such unaccounted sales – Subsequently assessee rectifies such statement u/s 132(4) that only gross profit has been used to purchase & develop the land - AO assessed the undisclosed income being the sale value of gold jewellery found short – Held that:- The assessee has tried to explain his mistake in the statement recorded on behalf of it. The assessee has accounted for the suppressed sales by way of declaration of gross profit on account of the suppressed sales. Assessee tried to clarify his stand immediately after the receipt of the statement recorded u/s.132( 4) on 20-05-02 and after realizing that there has been mistake in the statement. Such factual retraction should not be brushed aside without verifying the facts and circumstances of same. The addition in question is not justified while assessee has already declared gross proceeds on unaccounted sales as discussed above. The Assessing Officer is directed accordingly. Addition deleted. Issue in favour of assessee

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• 2012 (11) TMI 617
  Validity of Order by CIT u/s 263 – The assessment order has been passed by earlier AO, i.e., ACIT, while said jurisdiction was already transferred to Addl.CIT - Whether the CIT can set aside such an order by invoking provisions of section 263 – Held that:- The CIT has clearly observed that order of Assessing Officer dated 7-09-09 is non est because jurisdiction of this case was already transferred to Additional CIT Satara range on 04-09-2007. The CIT further observed that order of Assessing Officer is set-aside as an abundant precaution. The assessment order has been passed by earlier Assessing Officer, i.e., ACIT of Satara Circle, Satara, while said jurisdiction was already transferred to Addl.CIT, Satara Range, Satara, w.e.f. 04-09-2009. In such situation, order passed by ACIT, Satara Circle, is illegal order. Now question arises as to whether the CIT can set aside such an order by invoking provisions of section 263 of the Act. In our opinion the answer is in the affirmative. It is not in dispute that the concern Assessing Officer was not having jurisdiction over the matter due to transfer of jurisdiction discussed above. In case such illegal order passed by the Assessing Officer being erroneous and prejudicial to revenue, is not set aside, it will amount to perpetuation of error. - Once order of ACIT in question is not quashed, the order passed by successor Assessing Officer will go infructuous. It will enhance the mischief. - Decided in favor of revenue.

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• 2012 (11) TMI 616
  Additions towards business income from lease of buses – Held that:- As the same issue has been duly consider by ITAT, Chennai ‘B’ Bench in assessee's own case while considering the appeals for the Assessment Years 2002-03 to 2006-07 filed before it and deleted similar additions after examining the facts of the case. Issue decides in favour of assessee Additions on account of interest and chit bazar – Held that:- The Tribunal also had considered the appeals in the case of very same assessee for AY 2002-03 to 2006-07, this issue has not been raised therein. In these circumstances, justified in following his earlier orders and granting relief to the assessee.. Issue decides in favour of assessee Addition on account of unexplained money – Cash found during search - Books of accounts were not available at the time of search - Assessee had maintained books and they were produced before the assessing authority - Books were not rejected in the course of assessment – Held that:- When we consider the entire aspects, in view of the fact that the cash balance was available in her hands as per cash book. The CIT(A) has deleted the addition of Rs.17 lakhs on sound and reasonable ground. In favour of assessee Addition on account of unexplained investment - Gold jewellery and diamonds – Held that:- The assessee coming from an affluent family, reasonable amount of jewellery was received at the time of marriage and other occasions from her parents and other close relatives. As examined the statements made by different persons at the time of search and has tabulated the details of gold ornaments available in the hands of different persons and has reasonably worked out the account of gold jewellery in the hands of the assessee.. In favour of assessee

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• 2012 (11) TMI 615
  Disallowance of expenditure for Assessment year 2007-08 - AO has made an adhoc disallowance of Rs.2,50,000 from the total expenditure of Rs.9,94,262/- claimed by the assessee as assessee is not able to verify expenses. It was contended by the learned AR that for the subsequent assessment year i.e.2008-09 the AO had accepted the expenditure claimed by the assessee and has only made a small disallowance of Rs.50,000/- from the expenditure claimed. Held that:- Considering the totality of facts and circumstances involved, ends of justice will be met if the disallowance is restricted to Rs.1 lakh only - this ground of the assessee is allowed in part. Unexplained Cash Deposit - Issue restored to the file of the AO who shall examine the cash deposits in the bank account of the assessee and make an enquiry to find out whether these represent towards LIC premiums paid by policy holders to the assessee for remitting the same to the LIC if he deposits in the saving account are reconciled then the assessee’s claim is to be accepted and, no addition can be made of the said amount u/s 68 of the Act. Levy of Interest- Being consequential to the final determination of income, the ground raised by the assessee has become infructuous and accordingly the same is dismissed as such - In the result, the appeal is treated as allowed in part for statistical purposes.

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• 2012 (11) TMI 595
  Addition u/s 68 - ingenuine share transactions - ITAT deleted the addition - reopening of assessment - Held that:- AO had examined the bank accounts and had deduced a pattern by which the bank accounts were used only as a conduit to receive the monies and pay them out on the same day. This pattern, coupled with the general admission made by Pradeep Kumar Jindal one of the directors of company admitted to providing accommodation entry to the assessee and the failure of the share applicants to produce the directors before the AO, all taken cumulatively, should have forced Tribunal necessitating a deeper probe into the matter. The Tribunal chose to rest its decision on the sole fact that the share applicants had established there identity by filing confirmation letters and copies of their income tax returns. This is hardly sufficient for the purpose of discharging the creditworthiness of the share applicants and the genuineness of the transactions. Invoking Section 68 involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The Tribunal failed to keep in mind these aspects of the matter and has chosen to dispose of the appeal on the limited question of the identity of the shareholders. The present case is one where there is enough material in the possession of the Assessing Officer which warrants explanation from the assessee regarding the nature and source of the share application monies - matter remitted back to ITAT for fresh decision - decided against the assessee

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• 2012 (11) TMI 594
  Offshore Installations – ship/ vessels engaged in drilling operations. - qualifying ships - held that:- Vessels were consistently registered under Section 407 of the Merchant Shipping Act and had a valid certificate which was produced for consideration by the appellate authority who sought remand report and vessel is a qualifying ship for sea in terms of clause (a) of Section 115VD. The Tribunal noticed that unlike in the case of offshore installations which are stationed at one place, the very nature of the activity in which the assessee engaged is to carry out operations in different places; necessarily, at least for a short duration the vessel has to be stationed at one place. In these circumstances, Revenue’s contentions that the vessel is nothing but “offshore installations” has no merit, in the case of Matdrills of the kind put to use by the assessee - reasoning and findings of the Appellate Commissioner and the Tribunal cannot be found fault with - substantial question of law is therefore answered in favour of the assessee and against the Revenue - appeals are consequently dismissed.

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• 2012 (11) TMI 593
  Undisclosed Stock – release of seized gold - one kg of gold already released - held that:- As Assessment proceedings are still not complete and one kilogram of gold has been released to the petitioner after this writ petition was filed and what is held by the Department is, according to the Department, insufficient to realise the probable demand. In such circumstances, the prayer sought in this writ petition, cannot be granted and therefore, the writ petition is dismissed. This shall be without prejudice to the right of the petitioner to seek appropriate orders once the assessment proceedings attained finality.

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• 2012 (11) TMI 592
  Claim u/s 43B - Contribution to provident fund – Following the judgement of court in case of [CIT versus Vinay Cement Ltd. 2007 (3) TMI 346 - SUPREME COURT OF INDIA] held that:- If employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. In so far as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed - no reason to deny the benefit of Section 43B, which starts with a non obstante clause and which clearly lays down that the assessee can take benefit of deduction of such contributions, if the same are paid before furnishing of the return - no merit in the appeal filed by the revenue, which is accordingly dismissed.

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• 2012 (11) TMI 591
  Deduction u/s 80P(2)(a)(i) - Held that:- Investment of funds by the banks including the non-reserves were part of the banking activities since no bank would like its reserve funds to remain idle and not earn any interest. This is not only prudent business management but is also a part of the activity of banking. Therefore, the interest earned on such deposits is directly attributable to the business of banking followed by decision of court in case of [Mehsana District Co-operative Bank Ltd. Versus Income-Tax Officer 2001 (8) TMI 15 - SUPREME COURT] decided in favour of the assessee and against the revenue and the present appeals are also dismissed.

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• 2012 (11) TMI 590
  Undervaluation - Difference between the circle rate and the purchase price of immoveable properties - ITAT deleted the addition - Held that:- The express provision of Section 50-C enabling the revenue to treat the value declared by an assessee for payment of stamp duty, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property. The finding cannot start and conclude with the fact that such stamp duty value or basis is higher than the consideration mentioned in the deed. The compulsion for such higher value, is the mandate of the Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In the present case, the revenue did not rely on any objective fact or circumstances, consequently, the Court holds that there is no infirmity in the approach of the lower authorities and the Tribunal, granting relief to the assessee - in favour of the assessee. Addition u/s 68 - CIT(A) deleted the addition - Held that:- The record reveal that the PAN number and material particulars of the Director (of the assessee) and his proprietorship concern, was made available, even the Income Tax Returns concerned, were filed. The CIT (A) scrutinized this aspect in detail, and held that the assessee had discharged its onus of proving that the funds were received, and revealed particulars of the source. This court finds no unreasonableness in regard to such findings, as to call for interference under Section 260-A of the Act - in favour of the assessee.

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• 2012 (11) TMI 589
  Penalty u/s 271(1)(c) - bogus claim of deduction under Section 35CCA - ITAT deleted the levy - Held that:- Both the CIT (Appeals) and the Tribunal have not examined the facts of the present case in the manner expected of them & has merely based its conclusion on certain previous orders without any discussion of the facts of the present case. The question of concealment of income and whether the revised return was filed voluntarily or not is a question of fact to be examined and decided upon the facts and circumstances of the each case and, therefore, it was not permissible to the Tribunal to merely rely on earlier orders where this issue was considered and penalties were cancelled. At best, those earlier cases could only have a persuasive value. Thus the Tribunal has committed an error in upholding the order of the CIT (Appeals) cancelling the penalties, without assigning any valid reason and without examining the facts. As the cash book did not contain the name of the donee, though an entry had been made regarding the donation. Even in the donation account appearing in the assessee’s ledger the name of the donee had not been entered when the survey was conducted on 06.10.1983 in the assessee’s premises. The survey of the assessee’s premises under Section 133A took place on 06.10.1983, two months prior to the date of filing the revised return. The survey itself was a result or as a follow up action to the searches and other inquiries conducted earlier. The proceeds of the donation cheque had already been taken out of the bank account which itself had been closed on 13.08.1982. In the light of these facts, the contention that the revised return was filed voluntarily is untenable. Reverse the order of the Tribunal and hold that the penalty under Section 271(1)(c) was rightly imposed - against the assessee.

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• 2012 (11) TMI 588
  Deduction u/s 80IB – Held that:- As the assessee had produced the completion certificate in respect of the projects Jains Sagarika, MRC Nagar, Chennai and Jains Swarnakamal, Vadapalani, Chennai and the projects at Velacherry, Chitlapakkam and Virugambakkam. As far as the projects at Manapakkam and Pallavaram are concerned, if the assessee had submitted certificates from sewerage and Electricity Board, which according to the Commissioner would not satisfy the requirement of the Rules, as already pointed out, in the absence of any requirement under Section 80IB(10)(a) of the Income Tax Act and going by the provision, as it stood during relevant assessment year, 2004-05, it is difficult to accept the contention of the Revenue that the claim for deduction rested on the assessee's production of completion certificates - appeal filed by the Revenue is rejected.

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• 2012 (11) TMI 587
  MAT - Deduction for gains on sale of investment - disallowance as profits from insurance business are to be taken to be balance of the profits as disclosed by annual accounts subject to the adjustments provided in clause 5(a) to (c) - Held that:- The assessee, being an Insurance Company is not required to prepare its accounts as per Part II & III of Schedule VI of the Companies Act 1956. The proviso to sub. Sec (2) of sec. 211 of the Companies Act creates an exemption of applicability of sub. Sec. (2) of sec 211 which requires that every P&L accounts of the Companies shall be prepared as per the requirement of Part II of Schedule VI inter-alia in respect of Insurance companies or banking companies or any other companies engaged in generation and supply of electricity for which a form of profit and loss account has been specified in or under the Act governing such class of company. Even if an Insurance Company does not disclose any matter in the Balance Sheet and P&L account because the same is not required to be disclosed by the Insurance Act shall not be treated non-disclosure of a true and fair view of the state of affairs of the company as the said condition has been relaxed by sub sec 5 of sec 211 of the Companies Act. Thus when the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee - in favour of assessee.

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• 2012 (11) TMI 586
  Expenditure on improvement of lease hold premises - Revenue v/s Capital - Held that:- If the Revenue's request for remitting the matter for examination of the entire expenditure, including what was allowed by the AO himself, were to be acceded to the assessee would be worse off having regard to the fact that the AO himself has allowed its claim and permitted deduction of Rs. 70 odd lakhs. Thus as the Tribunal made a limited remand to the lower authorities to determine the exact nature and quantum of brick work which would entitle the assessee to the deduction claimed u/S 37 limited to Rs. 2.75 crores no substantial question of law arises - in favour of the assessee. Deduction u/s 10A - disallowance as services rendered by the assessee were not "computer software" - assessee granted the benefit of Section 80HHE - Held that:- The AO's order has alluded to the CBDT Circular dated 26.09.2000 which explains the services as including back-office, operations, call centres, content development or animation, data processing engineering and design, geographic information system services, human resource services, insurance claim processing, legal databases, medical transcription, pay roll, remote maintenance, revenue accounting, support centres, web-site services etc. It is apparent that the CBDT itself had interpreted the term "computer software" occurring in Explanation 2 to Section 10A in an expansive rather than a narrow manner as was done in the present case by the AO. In this case the materials placed by the assessee on record reveal that its "program management system" was nothing but a development of software which assisted in management services. The assessee's "program management services" which is a method of providing software to achieve a particular end cannot be said to be excluded from the term "computer software". This Court accordingly holds that the findings of the Tribunal are sound and do not require any interference - in favour of assessee. Disallowance of Bad debts - Held that:- Once the CIT (Appeals) after satisfying himself about the correctness of the findings by the AO, held that the latter had made additions wrongly by not actually seeing that the amount was written off, a finding that was endorsed by the Tribunal that finding of fact cannot be interfered with by the High Court exercising its jurisdiction under Section 260A. The Revenue's arguments cannot also be accepted as it would amount to accepting their position, plainly not permitted in an appeal to this Court under Section 260A, which his confined in its consideration to substantial question of law - in favour of assessee. Interest u/s 234D - Held that:- As decided in IT v. Jacabs Civil Incorporated, Mitsubishi Corpn. [2010 (8) TMI 37 - DELHI HIGH COURT] this provision came into force on 01.06.2003 and was applicable only from the assessment year 2004-05. Thus it could not have been applied as it was done by the AO in the present case - in favour of assessee.

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• 2012 (11) TMI 584
  Taxability of mobilization revenue attributable to the operation of the vessel beyond 200 nautical miles from the Indian costline. - Payments made to assessee outside India – Following the decision of court in case of [SEDCO FOREX INTERNATIONAL INC.(formerly known as Forex Neptune International Inc.) Versus CIT 2007 (9) TMI 196 - UTTARAKHAND HIGH COURT] held that:- Mobilization charges paid to assessee by ONGC had no nexus with the actual amount incurred by assessee for transportation of drilling units of rigs to India – thus, mobilization charges weren’t reimbursement of expenditure – in view of fictional taxing provision u/s 44BB, AO is justified in adding the amount received by assessee towards mobilization charges for the purpose of imposing income tax - grievance sought to be raised by the assessee is rejected - In the result, appeal filed by the assessee is dismissed.

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• 2012 (11) TMI 583
  Eligibility of prorata claim u/s.80IB(10) with reference to area of residential portion of housing project – Whether assessee’s housing project undisputedly including some residential units, which are of an area exceeding 1,000 sq.ft. (built-up),the whole of the profit of the housing project is not eligible for deduction under section 80IB(10)- Deduction under section 80IB(10) allowed earlier is hereby withdrawn. Since the assessee has furnished inaccurate particulars of income and concealed the particulars of income, the penalty proceedings are initiated under section 271(1)(c) for wrong claim of deduction under section 80IB(10). As decided by Tribunal that, in case, some residential house have a built up area in excess of 1,000 sq.ft., the assessee would not lose the total exemption under section 80IB(10) in its entirety but will only lose the proportionate exemption, under section 80IB(10). Hon'ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under section 80IB(10)even if the project had commercial element in excess of 10%. section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project.In the present case hold that assessee is entitled for deduction under section 80IB on pro-rata basis. The A.O. is therefore, directed to allow the deduction under section 80IB(10) on pro-rata basis as discussed above. This ground of appeal is allowed. In the result, Revenue’s appeal is dismissed. Rectification order – Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the High Court in the said case was that writ petition against order under s. 254(2) cannot be rejected on the ground of availability of alternate remedy. The Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under s.80IB(10) or not. the judicial result is the same that the High Court has upheld the reasonings and findings given by the Tribunal in its order. Lower authorities were not having advantage of above legal decision to apply to the facts of the assessee’s case to reach a conclusion. So in the interest of justice Order of the CIT(A)is set aside on the issue and restore the same to the Assessing Officer with a direction to decide the same as per fact and law after providing due opportunity to the assessee of being heard - both the appeals filed by the assessee are allowed for statistical purposes.

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• 2012 (11) TMI 582
  Condonation of delay in filling appeal – Delay of 86 days - CIT(A) has mainly dismissed the appeal on the point of limitation – Held that:- As the brother of assessee was under treatment for his accident at the relevant point of time so he could not file the appeal in time. It is possible that in case brother of assessee is fighting for his life after accident, his priority for filing the appeal in time may be disturbed. According to us, the assessee was prevented by reasonable cause in filing the appeal and so the delay is directed to be condoned. Issue remand back to AO - In favour of assessee Disallowance of petrol expenses of vehicle – Whether assessee can claim expense incurred in relation to income earned from partnership firm u/s 10(2A) - AO argued that there was absence of nexus of the expenditure with remunerations received by the assessee from partnership firm as a working partner – Assessee claim expense after deducting 20% of the vehicle expenses as personal expenses - Expenses on car are incurred u/s 37(1) for earning income in the form of remuneration and interest – Held that:- In such a situation, provision contained in section 14A will come into operation and any expenditure incurred in earning the share income will have to be disallowed. We find that the CIT(A) at relevant point of time was not having the benefit of the Special Bench decision in case of Shri Vishnu Anant Mahajan (2012 (6) TMI 297 - ITAT, AHMEDABAD). Issue Remand back to AO Disallowance of Depreciation on vehicle against income u/s 10(2A) – Held that:- Section 14A deals only with the expenditure and not any statutory allowance admissible to the assessee. A statutory allowance u/s 32 is not an expenditure, hence it cannot be subject matter of dis-allowance u/s 14A. Following the decision in case of Hoshang D. Nanavati (2011 (3) TMI 89 (Tri)) – Remand back to AO Addition on account of Agricultural Income – AO observed that books seems to have been written in one sitting, self-made bills – AO made reject agricultural income and consider the same as Income from other source - Held that:- The claim of the assessee has been rejected mainly on account that earning from the crops shown by the assessee were not tallying with the 7/12 extract which is the record of crop on the agricultural holding of the assessee. Thus, the assessee could not correlate the income from its agricultural holding by cogent reasoning. Addition justified. In favour of revenue

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• 2012 (11) TMI 581
  Deduction u/s 80-IA of the Income Tax Act, 1961 – industrial undertaking versus works contract - Held that:- Assessee did not satisfy the conditions prescribed under the said section as he has not set up any power plant but only operating and maintaining the power plant set up and is a contractor for the purpose of rendering services and hence the charges received by the assessee cannot be treated as profits derived from the industrial undertaking for the purpose of section 80-IA of the Act - Decision of Supreme Court in case of [A.M. Moosa vs. CIT 2007 (9) TMI 24 - SUPREME COURT OF INDIA] followed – Order of Commissioner of Income-tax (Appeals) is confirmed – appeal of assessee is dismissed. Whether Reserve created for plant maintenance expenditure is an application of Income - Held that:- Following the decision of court in case of [CIT v. Shiv Prakash Janak Raj And Co. Pvt. Ltd 1996 (9) TMI 5 - SUPREME COURT] Held that: - AO has not examined the contract agreement entered into by the assessee which is for a period of 15 years and has only considered the quantification of fee as for one year - therefore, in the interest of justice this issue needs detailed examination by the AO - Order passed by the learned CIT(A) is set aside and remit the matter back to the file of the AO to examine the entire issue de novo - appeal raised by the assessee is allowed for statistical purposes. Interest u/s 234 D – Following the decision of court in case of [CIT v. infrastructure Development Finance Co. Ltd.2011 (9) TMI 591 - MADRAS HIGH COURT] - Held that:- As Regular assessment had been completed on March 30, 2004 and section 234D came into operation on and from June 1, 2003, which was prior to the completion of the regular assessment, the assessee was liable to pay interest on the excess refund amount received as contemplated under section 234D of the Act. It is not the year of assessment that falls for consideration in such circumstances, but the date on which the regular assessment order has been passed - appeal raised by the assessee for the assessment year 2003- 04 is dismissed. Allowability of Bad debts - Held that:- Claim of bad debt amount claimed as bad was offered for earlier taxation - assessee is eligible to claim bad debt - order passed by the learned CIT(A) is set aside and remit the matter back to the AO with the direction to examine sec. 36(1)(vii) of the Act and decide the issue afresh in accordance with law – appeal allowed for statistical purposes.

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• 2012 (11) TMI 580
  Capital Gain – Agricultural land purchase for commercial use and sold without use, constitute capital asset or not - Assessee purchase land for setting up the power plant – Later on due to some constraints assessee sold part of land and incurred loss - AO argued that the concerned agricultural land not being a capital asset - Loss on the sale of the same would not result in any long term capital loss - No such loss would be permitted to be carried forward for purposes of set off in future years – Held that:- As the assessee purchased this land with no intention to use it for carrying out any agricultural operations, but to set up a power plant. Right from its acquisition and upto the date of its sale, no agricultural operations were carried out on this land by the assessee or by any person on behalf of the assessee. Consequently, as on the date of sale, the concerned land cannot be treated as an agricultural land. It was definitely a business asset held as such in the books of the assessee hence, loss on sale of such land would constitute a long term capital loss and would be eligible for carry forward for set off to future years. In favour of assessee Interest u/s 234D – Interest on excess refund - Assessee contended that the provisions of Sec. 234D came into force in June 2003 and cannot have the application in respect of the A.Y. 2003-04 – Held that:- Following the decision in case of Infrastructure Development Finance Co. Ltd. (2011 (9) TMI 591 - MADRAS HIGH COURT) that since the regular assessment had been completed on March 30, 2004 and section 234D came into operation on and from June 1, 2003, which was prior to the completion of the regular assessment, the assessee was liable to pay interest on the excess refund amount received as contemplated u/s 234D. It is not the year of assessment that falls for consideration in such circumstances, but the date on which the regular assessment order has been passed. In favour of revenue Recognition of income - Whether in case where receipt is uncertain and is subject to the outcome of the events in future, can be treated as accrued during the relevant period – Held that:- If a receipt is uncertain and is subject to the outcome of the events in future, it cannot be treated as having accrued during the relevant period. Since TNEB has refused to accept as its liability the start up fuel cost incurred by the assessee the income in respect of start up fuel cost based on the invoices raise by the assessee cannot be treated as having accrued to the company even it has been following mercantile system of accounting. In favour of assessee

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• 2012 (11) TMI 579
  CIT's revisionary powers u/s 263 - disallowance of privilege fee, Special privilege fee and special privilege fee as allowed by AO - Held that:- The amount of privilege fee is a balancing charge on the P&L account being variable and not based on quid pro quo. Also, only the amount that remains out of margins after deducing expenditure including income tax would be the sum to be paid as privilege fee. The amendments passed by the Andhra Pradesh Legislature on 16-04-2012 to the Andhra Pradesh Excise and Andhra Pradesh (Regulation of trade in Indian made foreign liquor, Foreign Liquor) Acts, (Amendment) Act, 2012(Andhra Pradesh Act No. 5 of 2012), has to be examined and analyzed with respect to newly inserted section 4C, it only reaffirms the fact that it is the profit that is sought to be appropriated. The new amendment to Excise Act, clearly establishes the fact that the entire income of the assessee is not that of the State and only the amounts specified as privilege fees is income of the State. With respect to newly inserted section 4A, the invoices raised by the assessee do not indicate separate amounts as privilege fee or special privilege fee or sports privilege fee. And with respect to the newly inserted section 4B, the manner of computation is not specified under 4B and the computation needs to be made u/s 23A and the implication of AS-22 is to be examined. As the CIT has no occasion to consider the amendments passed by the Andhra Pradesh Legislature on 16-04-2012 as the said amendments came after the CIT passed the order u/s 263 on 29/03/2011 the order of the CIT is to be set aside and restore the issue back to his file with a direction to decide the issue de-novo after examining the said amendments and in accordance with law - in favour of assessee for statistical purposes.

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• 2012 (11) TMI 578
  Revision of orders prejudicial to Revenue – Following the decision of court in case of [CIT vs. M/s. Sundeam Auto Ltd 2009 (9) TMI 633 - DELHI HIGH COURT] Held that:- Once there is any enquiry, may be inadequate inquiry, it cannot give an occasion to the Ld. CIT to pass order under section 263, merely because he has a different opinion in the matter. CIT is not justified in canceling the assessment made by the AO u/s 143(3) of the Act. The order of the Ld. CIT is, therefore, bad in law and is therefore, set aside. Thus, all the grounds of the assessee are allowed. Set off and carry forward of losses – Held that:- alternative plea taken by the assessee before the Ld. CIT that the assessee is having a carry forward loss and does not have any business income in coming years, is an alternative argument only, which was to claim the loss in the future years – in favour of assessee.

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• 2012 (11) TMI 577
  Registration u/s 12AA – Held that:- At the stage of processing application under section 12AA of the Act is limited to whether the activities are genuine and in consonance with the objects of the trust or institution and where education is being imparted as per the rules and the factum of the establishment and running of schools is not disputed, then the activity is said to be genuine activity and the enquiry regarding genuineness of the activities cannot be stretched beyond that. As regards Surplus of Trust nothing has been brought on record whether any surplus has been used for non charitable activities - CIT is directed to allow Registration to the assessee-trust under section 12AA(a) of the Act. Thus, all the grounds of the assessee are allowed.

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• 2012 (11) TMI 576
  Whether CIT(A) was justified in upholding the AO's action of curtailing deduction u/s 80HHC as claimed by assessee, on an erroneous interpretation of provisions of section 28(iiid)and section 80HHC – Held that:- Following the decision of court in case of [M/s Topman Exports Versus Commissioner of Income Tax, Mumbai 2012 (2) TMI 100 - SUPREME COURT OF INDIA] Entire amount received on sale of the Duty Entitlement Pass Book (DEPB) represents profit on transfer of DEPB for the purpose of the computation of deduction u/s 80HHC. DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 and is taxable accordingly - Assessing Officer is directed to recompute deduction under section 80HHC of the Act in line with the directions of the Hon'ble Apex Court – In the result, appeal filed by the assessee are allowed for statistical purposes

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• Customs

• 2012 (11) TMI 649
  Duty drawback Section 74 of the Customs Act 1962 - challenge to the letter denial process of duty drawback claim - letter was challenged by way of certiorarified mandamus and thereafter the writ petition was amended for the relief of mandamus to direct the respondents to pass a speaking order. - held that:- That relief cannot be granted unless and until the petitioner complies with the direction issued in the letter dated 4.10.2005 as the respondents cannot pass a speaking order without relevant records that have to be produced by the petitioner. No mandamus as sought for can be issued in this writ petition except giving liberty to the petitioner to submit the reply with relevant records to the authority and canvass the issue on merits and in accordance with law. The Writ Petition stands disposed of as above. No costs. Consequently, connected miscellaneous petition is closed.

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• 2012 (11) TMI 648
  Confiscation - Import of a car - violation of licencing restriction – high end model namely BMW 730 D SE - Held that:- Person who has lived in a foreign country for a period of 3 years and above is entitled to import a car without licence provided the vehicle was in his use for a minimum period of one year before his return to India - vehicle was procured by the appellant only on 9-8-2010 and shipped immediately thereafter as seen from the Bill of Lading dated 27-8-2010. Therefore, the import is clearly in violation of licensing restrictions - car is liable for confiscation Whether the car should be confiscated absolutely or allowed to be redeemed on payment of fine – Held that:- Appellant was living in a foreign country for about 3 years. Further, there is no allegation that the vehicle was sought to be imported by somebody else using the name of the appellant or any other similar allegations - option to redeem the vehicle on payment of fine deserves to be given to the appellant. Enhancement of the value – Held that:- Vehicle has been imported in violation of licencing restrictions and attempted to be cleared declaring a price lower than even the admitted price - enhancement of value is upheld. - the assessable value of the impugned car works out to Rs. 18,60,725.00.

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• 2012 (11) TMI 647
  Refund - provisional assessment - doctrine of unjust enrichment – Held that:- Consequent to provisional assessment, refund arising on final assessment does not require test of unjust - No case was brought out by Revenue with the cogent evidence showing that appellant made refund claim not arising out of finalisation of provisional assessment - import was for captive consumption and appellant has not been unjustly enriched – in favor of assessee

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• 2012 (11) TMI 639
  Penalty - Prohibition on import of second hand goods – Held that:- Initially Tribunal had reduced fine and penalties to the range of 15% and 5% of the assessable value. From the repeated imports made by the importer it is quite clear that the fine and penalties imposed are not wiping out the profit margin, probably because the wrong value declared also. Considering the repeated nature of the offence there is need to increase this fine and penalty. But still there is no justification for increasing the penalty to about 62% and 25% of the assessable value approved - penalty reduced - appeal is allowed partially.

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• 2012 (11) TMI 610
  Notice of intimation of personal hearing - held that:- If it is a case of confiscation of goods, the same will be in terms of Section 124 of the Customs Act. The petitioner will have to establish in the proceedings, as against the goods under import, that there is no contravention. The question of release of goods is totally different from adjudication as in this case. Both cannot be clubbed together. If the goods are not released, petitioner has to work out his remedy independently. The show-cause notice proceedings cannot be stalled unless it is shown that the authority acted without jurisdiction or contrary to law. Further, Notice of intimation of personal hearing is an administrative letter and quashing that letter is of no consequence and hence the writ petition is misconceived without application of mind and is, therefore, liable to be dismissed - writ Petition is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.

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• 2012 (11) TMI 609
  Refund in cash - Appellants imported goods and filed two Bills of Entry for home consumption dated 1-9-2005 - Customs EDI systems assessed the Bill of Entry showing Basic Customs Duty at the rate of 7.5%, the Appellants paid Custom duties on the said Bills of Entry based on such assessment - But actually the Customs duty was reduced from 7.5% to 3.75% vide Notification No. 79/2005 which came into force on 1st September 2005 i.e. the date of filing of the Bills of Entry – Held that:- This is a case of simple mistake in assessment on account of the fact that computer systems of Customs were not promptly updated. Quite often the notification issued on a day and effective from that day is available to officers outside the Ministry and the public only by evening of the day in the next few days - onus is on the appellants to prove that the incidence has not been passed on is not a heavy burden - appellants are eligible for the impugned refund in cash

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• 2012 (11) TMI 600
  Demand of duty - 100% EOU - re-import of the exported goods under Notification No. 52/2003, - appellant had given an undertaking to re-export the said capsules within six months from the date of re-import - due to short shelf life, the said capsules could not be marketed and, therefore, the appellant decided to destroy the goods – Held that:- Due to short shelf life of medicinal capsules, it has deteriorated and it has become unfit for marketing. Therefore, the duty can be demanded only on the value of the deteriorated goods which have to be determined in accordance with sub-section (3) of Section 22 of the Customs Act. It is for the appellant to establish that the goods which they have proposed to destroy has no commercial value whatsoever and no duty liability would be involved - matter remanded back to the original adjudicating authority - appeal is allowed by way of remand.

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• 2012 (11) TMI 599
  Classification - appellant imported - Memory Stick, SD Cards and Micro SD Cards are solid state non volatile storage devices, classifiable under sub-heading 8523 5100 - Departmental Representative emphasised that since the goods imported are not exclusively meant for external use with a computer or laptop as a plugin device and are also not exclusively meant for fitment inside CPU Housing/laptop body, the same are not covered by Sl. No. 17 of the table to the Notification No. 6/2006-C.E. – Held that:- Scope of the entry against Sl. No. 17(ii) of the table to the Notification as it stood during the period of dispute, cannot be interpreted on the basis of the wordings of the entry as the same stood w.e.f. 7-5-2010 - requirement of pre-deposit waived

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• Corporate Laws

• 2012 (11) TMI 646
  Scheme of Winding up - Whether the creditor Malanpur was correctly treated and classified with the Inter-Corporate Depositors and not as a secured creditor - Malanpur sold the pledged shares for consideration of Rs.1.39 crores - Held that:- Malanpur cannot be treated as a distinct class of creditor on the ground that it was a decree holder. It was certainly not a secured creditor. Also in agreement with the counsel for the Malanpur that even if the scheme has been sanctioned and payment to the creditors is to be made under the scheme, criminal proceedings under Section 138 of the NI Act cannot be stayed or quashed by the Company Court. Considering the Terms of Settlement Spice Jet or Modi Group cannot urge and contend that 55,60,000 shares are liable to be forfeited or should be forfeited. The said contention would be contrary to the settlement and stand which they have taken before the company court. The compromise and settlement between them clearly stipulates that these shares are not liable to be forfeited. Modi Group and Spice Jet had argued and contended that sale and transfer of 55,60,000 pledged shares by Malanpur was null and void and contrary to law & reference was made to the orders passed in the Civil Suit at Calcutta. It will not be appropriate and proper for us to go into and examine the said orders of the Calcutta High Court and proceedings as it is clearly beyond what is required and mandated by the Supreme Court in the order dated 6th July, 2009 wherein opined that the High Court should decide the said question in accordance with law and in the meanwhile, status quo as regards the transfer of shares shall continue till the High Court decides the matter expeditiously. Thus examination or go into the question on merits relating to the proceedings pending before the Calcutta High Court and the orders passed therein is not warranted. We express no opinion in this regard.

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• 2012 (11) TMI 608
  Scheme of Arrangement - Held that:- As there are 23 secured & 509 unsecured creditors of the transferor company their consent have not been obtained, thus a meeting is required to be held & in the case the Transferee Company have no secured creditors & there are 10 shareholders whose consent has also not been obtained. The aforenoted separate meetings of secured creditors and unsecured creditors of the Transferor Company and shareholders and unsecured creditors of the Transferee Company shall be held at Executive Club, 439, Village Shahoorpur, PO Fatehpur Beri, New Delhi 110074 will be held on 01.12.2012, Thursday as headed by the appointed Chairperson & Alternate Chairperson - if the Quorum is not present in the meetings, the meetings would be adjourned for 30 minutes and thereafter, the persons present in the meetings would be treated as proper quorum & for the purpose of computing the quorum the valid proxies shall also be considered. Both the Companies will publish advance notice of the aforesaid proposed meetings in “Business Standard” (English Delhi Edition) and “Dainik Bhaskar” (Hindi Delhi Edition) minimum 21 days in advance before the Scheduled date of meeting & Individual notice too to be sent by ordinary post minimum 21 days in advance - The Chairpersons/Alternate Chairpersons shall file their reports within two weeks of the conclusion of the respective meetings.

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• 2012 (11) TMI 607
  Oppression and mismanagement - whether against an order passed by the learned Single Judge of this Court in a civil suit terminating or refusing to terminate the civil suit because of the provisions of Section 8 of the Arbitration and Conciliation Act, an appeal under Clause 15 of the Letters Patent would lie or is barred by the provisions of Section 37 of the Arbitration and Conciliation Act - Held that:- As per the order in UOI Versus MOHINDRA SUPPLY COMPANY [1961 (9) TMI 41 - SUPREME COURT] Section 39 of Indian Arbitration Act is para materia to section 37 of the Arbitration Act, 1996. The qualifying expression “to the court authorised by law to hear appeals from original decrees of the Court passing the order” in Section 39(1) does not import the concept that the appellate court must be distinct and separate from the court passing the order or the decree. The clause merely indicates the forum of appeal. As under Code of Civil Procedure, 1908, right of appeal under the Letters Patent was saved both by Section 4 and the clause contained in Section 104(1), but by the Arbitration Act of 1940, the jurisdiction of the Court under any other law for the time being in force is not saved, the right of appeal can therefore, be exercised against orders in arbitration proceedings only under section 39, and no appeal (except an appeal to that Court) will lie from an appellate order. Conjoint reading of Section 5 with Section 37 of the Arbitration Act, 1996, it is clear that judicial authority is barred from intervening in any proceeding which are not otherwise provided in Part I of the Arbitration Act, 1996. The Arbitration Act, 1996 being a self-contained code and the order under Section 8 passed by the judicial authority or by the court is not appealable under Section 37, the present appeal under Section 10F is not maintainable. There is no merit in the submission of Mr. Dwarkadas, the Learned Senior Counsel that there is no bar under Section 37 from hearing appeal against any other order nor specifically mentioned in Sections 37(1) (a) and (b) and 37(2) (a) and (b). As from the expression used “and from no others”, it is clear beyond reasonable doubt that appeal is not maintainable against any other order other than what is mentioned in Section 37 (1) (a) and (b) and 37 (2) (a) and (b). There is clear bar under Section 37 restricting right of appeal only against specified orders set out therein and no other orders. Section 5 of the Arbitration Act, 1996 leave no room for doubt that judicial authorities and court is restrained from intervening in matters governing domestic arbitration “except where so provided”. Thus an order passed under Section 8 of the Arbitration Act, not having been provided as appealable order under under Section 37, recourse to Section 10F of the Companies Act is not permissible. Thus on interpreting Section 5 of the Arbitration Act, 1996, it is clear that the remedy of an appeal to an appellate court would be permissible only if so expressed, specifically or by necessary implication, in Part I of the Arbitration Act, 1996, and not otherwise. Section 10F provides for forum of appeal, provided an appeal is maintainable under Section 37 of the Arbitration and Conciliation Act, 1996. Therefore that all the aforesaid appeal filed under Section 10F of the Companies Act are not maintainable in view of bar under Section 37 of the Arbitration Act, 1996 and are dismissed.

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• Service Tax

• 2012 (11) TMI 653
  Refund claim of service tax paid by mistake of law - denial if claim on bar of limitation - Held that:- As the provision of law which excluded renting of immovable property to hotels from the levy was in existence at the time of payment of service tax in question and continued to be in force till the date of refund claim and thereafter, the applicability of the provisions (including time-bar) of Section 11B of the Central Excise Act to the refund claim cannot be ruled out on the plank of payment of tax by mistake of law - against assessee.

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• 2012 (11) TMI 652
  Penalties u/s 76, 77 and 78 - CESTAT deleted the levy u/s 80 - Held that:- Tribunal has noted that the assessee has paid the entire amount of service tax liability along with interest prior to issuance of the show cause notice and has not disputed the liability to pay service tax and interest. The assessee held a bona fide belief that it was liable to pay customs duty on the drawings and designs imported by it as the same were goods. Under the circumstances, no mala fide intention could be attributed to it in not discharging the service tax liability under the category of "Intellectual Property Rights Services". Thus, the Tribunal found that reasonable cause as envisaged under section 80 has been shown by the assessee for failure to discharge its service tax liability. As to whether or not reasonable cause has been made out is a question of fact. No substantial question of law so as to warrant interference - in favour of assessee.

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• 2012 (11) TMI 651
  Demand of duty, interest and penalty – penalty under Section 78 on the ground that service tax and interest were paid before the order was issued – Held that:- Assessee is a 100% EOU - services were clearly input services for the appellant, the assessee was eligible for credit of service tax if the same had been paid by them - their claim for the revenue neutrality and consequently absence of intention to evade service tax is acceptable. Therefore, there is no justification for imposition of any penalty under Section 78 at all. Therefore, the party's appeal challenging the penalty under Section 78 has to succeed. As it is a clear case of revenue neutrality and a case where intention to evade service tax is absent, the penalty under Section 76 which is imposable deserves to be waived in the light of provisions of Section 80 of the Finance Act, 1994.

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• 2012 (11) TMI 642
  Demand of service tax – 100% EOU operating under STP Scheme – Demand under the category of “manpower recruitment and supply agency service” – Held that:- Appellants are involved in running projects and delivering developed software after testing and installing the same for use by the clients - entire responsibility of paying and supervising the manpower deployed for developing the software/undertaking the project is on the appellants and clients have a right to reject the software development and seek for modification - their activities as mere ‘manpower supply agency services’ may not be appropriate - stay granted.

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• 2012 (11) TMI 613
  Status after upholding of Constitutional validity of levy of Service Tax - Renting of Immovable Property - the amount available in deposit with the 8th respondent Bank to be paid over to the 6th respondent (Department) - Following the decision of court in case of [Retailers Association of India V. Union of India 2011 (8) TMI 58 - BOMBAY HIGH COURT]held that:- Writ petition is disposed of directing the 8th respondent to verify the relevant records, ascertain the exact amount deposited by the petitioner and thereupon, the amount along with the accruals thereon should be paid over to the 6th respondent. This the 8th respondent shall do as expeditiously as possible and at any rate within 4 weeks from today.

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• 2012 (11) TMI 612
  Waiver of pre-deposit - Service Tax demands - appellant was running a container freight station and was functioning as custodian of the bonded warehouses under the provisions of the Customs Act - In respect of unclear cargo, they had undertaken auction of the goods - The demand of Service Tax is on the income received from the sale of uncleared cargo after meeting the various expenses incurred under the category of "Cargo Handling Services" and "Storage & Warehousing Services" – Held that:- Board Circular No.11/1/2002-TRU dated 01/08/2002 has clarified that Service Tax is not leviable on the activities of the custodian where he auctions abandoned cargo and ST/VAT is paid in respect of that cargo - pre-deposit waived

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• 2012 (11) TMI 611
  Erection, Commissioning or Installation Service – appellants are registered as Government Civil Contractor and engaged in the activity of providing, lowering and laying of sewerage and water supply pipeline including construction of chambers, operation, maintenance and repair work to water supply distribution network, underground drainage work etc. to various Government bodies - Held that:- Water supply project is an infrastructure facility and a civic amenity which the State provides in public interest and not an activity of commerce or industry. Therefore, the appellants are not covered under the category of Erection, Commissioning or Installation Services Regarding GTA service - as per the Notification No. 32/04 the appellants are entitlement for seventy five per cent abatement received under GTA services - they have already paid the service tax on twenty five per cent of the amount paid as GTA service by claiming abatement as per Notification No. 32/2004

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• 2012 (11) TMI 602
  Demand – assessee provided taxable services as well as exempted services – non- maintenance of separate accounts of inputs services and capital goods used - they were entitled to utilise only 20% of the credit - excess utilisation of Cenvat credit – Held that:- Restriction to use 20% of the credit in case of non-maintenance of separate Cenvat accounts for taxable and exempted services is only in respect of inputs service credit - matter remanded to original adjudicating authority for verification of the records and to restrict the credit utilisation only in respect of inputs service credit.

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• Central Excise

• 2012 (11) TMI 645
  Cutting and slitting of HR/CR Coils and sheets - additional activities such as pickling and oiling - whether it amounts to manufacture? - cenvat credit - Held that:- As till 1st March 2005 the Revenue has accepted that the activity carried on by the assessee constituted manufacturing activity in view of Board Circular dated 7th September 2001 and accordingly held that the assessee is entitled to take credit of duty paid on HR/CR coils. It is only because, the Board, on 2dn March 2005 has withdrawn the Circular dated 7th September 2001 the Revenue is claiming that the activity carried on by the assessee does not amount to manufacturing activity. It is relevant to note that the Board in its Circular dated 7th September 2001 had only held that the activity of cutting/slitting of HR/CR coils in to sheets or strips constitutes manufacture. Admittedly, the assessee had carried on additional activities such as pickling and oiling on the decoiled HR/CR coils, which is a complex technical process involving huge investment in plant and machinery. Since these additional activities were not considered by the Board in its Circular dated 7th September 2001, the withdrawal of the said Circular cannot be a ground to hold that the activity carried on by the assessee did not constitute manufacturing activity - in favour of assessee.

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• 2012 (11) TMI 644
  Captive consumption of yarn and base fabric - exemption - Notification No. 14/2002 dated 1.3.2002 v/s Notification No. 22/96-CE dated 23.7.1996. - grey processed fabric - Held that:- Captive consumption has been exempted under Notification no. 22/96-C.E., dated 23-7-1996 and hence the appropriate duty required to be paid under the aforesaid condition read with the relevant notification is NIL and hence the condition relating to payment of appropriate duty has been satisfied. Also C.B.E. & C. Circular no. 680/71/2002-CX, dated 10-12-2002 which clarifies that the exemption under Notification no. 14/2002-C.E. is applicable to the composite Textile Mills even though they are exempted from payment of duty under Notification No. 22/96-C.E. in respect of captively consumed yarn and base fabric. The circular clarifies that textile fibres, raw material for composite mills, are brought from the market and hence have to be deemed to be duty paid in view of the Explanations to the said Notification no. 14/2002. Issue is already settled by the Tribunal in the case of Simplex Mills Co. Ltd. Vs. Commissioner of Central Excise, Mumbai [2005 (4) TMI 406 - CESTAT, MUMBAI] in favour of assessee.

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• 2012 (11) TMI 643
  Demand of credit availed and lying utilized - Held that:- Demand orders have been passed without issue of any show cause notice and without hearing the appellants. Hence the appellants had no chance to present the factual details before the Original Authority to arrive at the proper calculation. As the orders were passed in breach of principle of natural justice the case is remanded to original authority for deciding the issue afresh providing a reasonable opportunity of hearing to the appellants - in favour of assessee by way of remand.

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• 2012 (11) TMI 641
  Waiver of pre-deposit - stay – CESTAT was directed to dispose of the appeals - petitioner was directed to co-operate with the CESTAT in disposing of the appeals – Held that:- Petitioner has co-operated with the CESTAT for disposal of the appeals. In fact, even before the receipt of the order of this Court, the petitioner has informed the CESTAT by filing the memos at Annexures-’E’ and ‘F’ to take up the appeals for final hearing - respondents cannot contend that the petitioner has not co-operated with the CESTAT for disposal of the appeals - petitioner has co-operated with the CESTAT and the CESTAT has already reserved the matter – pre-deposit waived

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• 2012 (11) TMI 640
  Limitation - Refund claim - petitioner had supplied aviation fuel to Air India - foreign bound flights such fuel would not attract excise duty - petitioner mistakenly paid the same - petitioner claimed that entire claim was made within the period of limitation. – Held that:- Being a question of fact which would require examination of bulky materials, it would not be appropriate on our part to scan through such documents and to make our final conclusive remarks on the rival contentions. If on availability of evidence on record, it is established that the petitioner has fulfilled the mandatory and substantive requirement of the Rules and the notification, its refund claim should not be defeated on the ground of some procedural infraction or the documents not being supplied in the original at the outset.

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• 2012 (11) TMI 638
  Demand of duty, interest and penalty – extended period of limitation – Held that:- Neither the show cause notice nor the order-in-original has brought any cogent evidence that the appellant knowingly manufactured goods not fit for consumption - There is no testing of goods done at any stage. When the intention to cause evasion remained absent, the belated show cause notice dated 25-1-2010, in absence of any mala fide shall not bring the appellant to the fold of law - Neither any cogent evidence nor suppression brought on record to penalize the appellant. In absence of wilful breach of law, the penalty proceedings became unsustainable

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• 2012 (11) TMI 637
  Cenvat credit - duty paid goods was sold by assessee - goods were not accepted by the buyers, it was returned back - buyer issued invoices wherein duty payment column showed as “nil” – Held that:- They have made exercise on the basis of audit advice - authorities should independently examine the allegation, if any, and if required, conduct inquiry and then it should come to a rational conclusion discharging the statutory duties. Such an essential exercise is absent in the orders passed by both the authorities below - order merely pointed out certain defects. Neither there was any inquiry conducted against the buyer nor any investigation made into the record of the appellant with the version of supply of goods. In absence of proper inquiry into the material fact an arbitrary order passed becomes unsustainable - appeal is required to be allowed dispensing requirement of pre-deposit

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• 2012 (11) TMI 636
  Cenvat credit – common input used for dutiable and exempted goods – non-maintenance of separate accounts – Revenue proposed to demand 10% of the value of exempted products as per provision in rule 6(3). For certain period, the amount demanded is 5% in view of change in the rate prescribed under rule 6(3) of CENVAT Credit Rules, 2004 – Held that:- When an assessee gave a calculation of credit attributable to the inputs used in the manufacture of exempted products, the only option available to Revenue was to either accept the calculation or say what is wrong with the calculation and give Revenue's calculation with proper basis and ask the assessee to rebut Revenue's calculation. It was no longer open to demand 10% of the price or 5% of the price as the case may be of the exempted products - matter remanded back to the adjudicating authority for calculating the amount to be reversed correctly after giving proper reason for rejecting the method given by the assessee

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• 2012 (11) TMI 635
  Waiver of pre-deposit - Denial of SSI exemption on the ground that the goods are being manufactured under the brand name of other - contention of applicant is that the brand name is registered in the name of M/s. Pandit D.P. Sharma & Sons - In M/s. Sharma Chemicals and M/s. Himtaj Ayurved Pvt. Ltd. one son and grandson of Pandit D.P. Sharma are the directors therefore his son and grandson is legally entitled to use the brand name after the death of Pandit D.P. Sharma – Held that:- Provisions of SSI notifications provide that the benefit of notification is not available in case the goods are manufactured with the unregistered or registered brand name of others. In the present case M/s. Himtaj Ayurved Pvt. Ltd. is manufacturing goods with the brand name of others - applicants had not produced any legal documents to show that the applicants got right to succeed in respect of the trade name owned by the companies run by the father and grandfather of the applicant – appellant directed to deposit

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• 2012 (11) TMI 606
  Benefit of the Notification No. 74/93-CE dated 28.2.1993 denied - manufacture of PSC poles - Held that:- The Notification lays down twin conditions, and unless both the conditions are satisfied exemption cannot be claimed. Admittedly, Chhattisgarh State Electricity Board is not a Department of the Government. Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. Hence the PCC poles manufactured in the factories which admittedly belong to the Electricity Board does not qualify for exemption. That apart, the intended or actual user of the poles also being the Board itself, and not any Department of the State Government, the other condition is also not fulfilled - against assessee. Penalty under Rule 25 - Held that:- As prior to the decision of Larger Bench of the Tribunal there are divergent views on the issue it is not a case for imposition of penalty hence deleted.

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• 2012 (11) TMI 605
  Determination of Liability to pay Excise Duty - Following the decision of court in case of [New Horizons Ltd. and Anr. vs. Union of India and Others, 1994 (11) TMI 203 - SUPREME COURT OF INDIA] held that:- Doctrine of lifting veil, piercing the veil, peeping or seeing through the veil is invoked when the corporate personality is found to be opposed to justice, convenience or interest of Revenue and agree with him that Courts come to rescue of Revenue where subterfuge to it is caused inside corporate veil. In the present case GTC was controlling KCPL and JKCL beginning from manufacture till marketing of the goods. Such finding alone was enough to hold that GTC had gained at the cost of Revenue controlling the MRP and realised sale proceeds over and above the MRP declared - appellant was duty bound to deposit the amount of excise duty determined by CESTAT within a period of three months from the 25.04.2011, if it was interested in pursuing the present appeals - Since the appellant has failed to do so, the inevitably result of such failure is the dismissal of these appeals - grievance cannot be gone into by this Court, since the entire controversy has been settled by the Supreme Court as is evident from the above extract - appeals are accordingly disposed of.

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• 2012 (11) TMI 604
  Refund – Held that:- No dispute about the eligibility of refund on merits - refund claim was filed by the appellant within the period of limitation - protest letter was filed by the appellant at the time of original payment of duty by the manufacturer of the goods - denial of refund claim is not at all warranted – refund allowed

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• 2012 (11) TMI 603
  Extended period of limitation - SCN - allegations about willfull suppression of the facts of manufacture and clearance of branded manufactured tobacco and roasted cut Supari - contention raised by learned counsel for the petitioners that before deciding the objections raised in reply to the earlier show cause notice dated 19.08.2011 (Annexure P8), the impugned show cause notice dated 6.01.2012 could not have been issued by the first respondent is wholly misconceived – Held that:- It is not a case of prejudging of the issue and that it is not a case of the show cause notice being without jurisdiction - writ petition deserves to be and is hereby dismissed in limine.

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• 2012 (11) TMI 601
  Cenvat credit - input service – Held that:- Appellant has used the vehicles owned by them either for transportation of their employees or for transportation of goods which is an integral part of the business of appellant-firm. Therefore, the service tax paid on the insurance premium of such vehicles is an 'input service' as defined under Rule 2(l) - insurance of vehicle is in relation to the maintenance of the vehicles and is eligible for credit as input service

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• 2012 (11) TMI 598
  Waiver of pre-deposit - fulfilment of condition for availing exemption - use of fly ash of the percentage prescribed under Notification No. 6/2002-C.E. - alleged that more than 10,000 MTs of fly ash was not supplied by the said Santhosh Kumar, has not adduced any evidence to show that assessee has procured and used any other substitute raw material to produce the quantity of asbestos cement sheets accounted as manufactured and cleared by the assessee - Held that:- Condition relates to use of minimum of 25% by weight fly ash/phosphor-gypsum - person duly authorized by the assessee having failed to produce the necessary evidence - assessee has chosen to record the disputed quantity also as having been procured only from MTPS though the alleged supplier Shri Santhosh Kumar has failed to produce any reliable evidence in this regard - assessee (the first applicant) has not, prima facie, established the use of minimum percentage of fly ash prescribed under Notification No. 6/2002 and thus has not made out a prima facie case for waiver - second applicant, without any evidence for procurement from third parties has prepared documents showing additional supply of fly ash and therefore abetted 1st applicant in wrongly availing the exemption – both the appellants directed to make pre-deposit

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• 2012 (11) TMI 597
  Denial of SSI exemption – Held that:- Just because the brand name NITCO is being used by other group companies, the appellant firm cannot be denied the benefit of SSI exemption. The show cause notices do not disclose any evidence in support of the allegation that other group companies of NITCO group are owned by the appellant firm or its partners - there is no basis for clubbing the clearance of the appellant firm with the clearance of other group companies for determining their eligibility for SSI exemption

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• 2012 (11) TMI 596
  MRP Valuation - Settlement Commission - MRP was being worked out was from 19-4-2007 to 15-2-2008 - At the relevant point of time, the Central Excise Rules, 2008 were not in existence. But at the same time, instead of going as per the provisions of the law the notional price revision of 10% for subsequent period, for arriving at MRP for the relevant period, and in the name of practical approach for the subsequent period, has made reduction in the weighted average MRP by the factor of 10% - Held that:- Policy adopted by the Settlement Commission is neither legal nor in any manner conducive to the object of the Act and as the same is challenged by both the sides and as fallacy of reasoning had been well made out - entire basis cannot be sustained – matter remanded to Settlement Commission

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• 2012 (11) TMI 585
  Cut flowers cleared to DTA - flowers grown by 100% EOU - Held that:- From reading of para 3(a) of the Notification No. 126/94-CUS. as existed during the period of dispute it is clear that the notification contained a machinery provision for determining, the Custom Duty chargeable on the inputs used in the production of non-excisable goods cleared to DTA and as per this machinery provision, the duty was to be in an amount equal to the Custom Duty chargeable on the finished goods, as if imported, as such. However, after the amendment of this Notification w.e.f. 18-5-01, the duty on the inputs used in the production of non-excisable goods cleared to the DTA was to be calculated on actual basis. The amendment to the Notification No. 126/94-CUS. w.e.f. 18-5-01 by the Notification No. 56/01 can have only prospective effect and it cannot be given retrospective effect. In view of this, during the period of dispute, Customs duty on the inputs used in the production of cut-flowers cleared to DTA has to be calculated as per the provisions of the Notification, as it existed during that period. Thus the Custom Duty has been correctly charged in respect of DTA clearances of the cut-flowers - against assessee.

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• CST, VAT & Sales Tax

• 2012 (11) TMI 654
  Writ Petition to direct the respondent to furnish the copies of the documents seized from the premises of the petitioner during the inspection - Held that:-Respondent is directed to furnish the documents seized during inspection of the business premises of the petitioner, on 26.09.2011 and 27.09.2011, as well as the relevant information relating to D-3 proposals to the petitioner, within a period of fifteen days from the date of receipt of a copy of this order - On receipt of the said documents and the information to be furnished by the respondent, petitioner shall raise its objections to the notice, dated 31.07.2012, within a period of four weeks thereafter - On such objections being raised by the petitioner, the respondent shall consider the same and pass appropriate orders, thereon, on merits and in accordance with law, as expeditiously as possible, without being influenced by the D-3 proposals made by the inspecting officers - writ petition is ordered accordingly - Consequently connected Miscellaneous Petition is closed.

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• 2012 (11) TMI 614
  Release of Goods detained – e – transit pass - held that:- All the documents clearly show that the goods are consigned from the State of Tamil Nadu to another State covered by valid documents under Section 69 of the TNVAT Act 2006 including transit pass as required was caused to be delivered at the time of crossing the last check post or barrier. In this case, the petitioner has caused to deliver the e-transit pass which is valid for transit on or before 3.11.2012 at 1.57 pm and hence the rule is complied. Therefore, the authority is bound to consider the same for release of the goods detained once the requirement of Section 70(2) of the TNVAT Act 2006 and the Rule has been complied. Since the petitioner in this case has submitted the required documents issued by a competent authority, there is no manner of doubt that the Detention Notice has no force in law and liable to be set aside and accordingly, the same is set aside - Consequently, the proceedings under Section 72 of the TNVAT Act 2006 for composition of offence has no legs to stand as it is a consequential order. Hence, the Notice of Composition is also set aside - In the result, the impugned order in both the writ petitions are set aside. The Writ Petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed.

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• Indian Laws

• 2012 (11) TMI 650
  Information retained in the form of file notings - whether or not the file notings and the opinion of the JAG branch fall within the provisions of Section 8(1)(e) of the RTI Act? - Held that:- Section 2(f) of RTI Act inter alia defines information to mean “any” “material” contained in any form including records, documents, memo, emails, opinions, advises, press releases, circulars, orders, log books, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body, which can be, accessed by a public authority under any other law for the time being in force. The scope and ambit of the right to the information to which access may be had from a public authority is defined in Section 2(j). Therefore, information which is available in the records of the Indian Army and, records as indicated hereinabove includes files, is information to which the respondents are entitled to gain access. An over-view of the Act would show that it mandates a public authority, which holds or has control over any information to disclose the same to a citizen, when approached, without the citizen having to give any reasons for seeking a disclosure. And in pursuit of this goal, the seeker of information, apart from giving his contact details for the purposes of dispatch of information, is exempted from disclosing his personal details as per Section 6(2). Thus notes on files and opinions fall within the ambit of the provisions of the RTI Act. The possessor of information being a public authority, i.e., the Indian Army it could only deny the information, to the seeker of information who are respondents in the present case, only if the information sought falls within the exceptions provided in Section 8 of the RTI Act. Therefore, the argument of the petitioners that the information can be denied under Army Rule, 184 or the DoPT instructions dated 23.06.2009 are completely untenable in view of the over-riding effect of the provisions of the RTI Act. First proviso of Section 8(1), which categorically states that no information will be denied to any person, which cannot be denied to the Parliament or the State Legislature. Similarly, sub-section (2) of Section 8, empowers the public authority to over-ride the Official Secrets Act, 1923 and, the exemptions contained in sub-section (1) of Section 8, of the RTI Act, if public interest in the disclosure of information outweighs the harm to the protected interest. Thus exemption under Section 8(1)(e) is conditional and not an absolute exemption. Thus the contentions of the petitioners that the information sought by the respondents (Messers V.K. Shad & Co.) under Section 8(1)(e) is exempt from disclosure, is a contention, which is misconceived and untenable. The writ petitions are dismissed. The impugned orders passed by the CIC are sustained. The information sought by Messers V.K. Shad and Ors will be supplied within two weeks from today, in terms of the orders passed by the CIC.

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