TMI Tax Updates - e-Newsletter
November 23, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Current year's depreciation and brought forward unabsorbed depreciation both are allowed to be set off from the Long Term Capital Gains - Tri

  ---

• Deduction u/s. 10B with regard to surrendered business income during search proceedings u/s 132 - pro-rata deduction allowed. - Tri

  ---

• Hire-purchase have two elements -bailment and sale in the sense that it visualizes an eventual sale which fructifies when option is exercisable by the purchaser

  ---

• The word “any“ occurring in S. 3 of the Expenditure Tax Act does not mean “all“ alone but it means “all“ or “every“ as well as “some“ or “one“ -HC

  ---

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

  ---

Articles

1. SANCTION OF A SCHEME UNDER SECTION 391 OF THE COMPANIES ACT, 1956 DOES NOT AMOUNT TO COMPOUNDING OF AN OFFENCE UNDEER SECTION 147 OF NEGOTIABLE INSTRUMENTS ACT, 1881

   By: DR.MARIAPPAN GOVINDARAJAN

2. EXEMPTION TO SERVICES BY TBI OR STEP

   By: Dr. Sanjiv Agarwal

3. A SIMPLIFIED APPROACH TO SERVICE TAX UNDER REVERSE CHARGE

   By: abhishek gupta

News

1. Production of Iron Ore

2. Technical Panel to Firm up Views on Major IT Cases

3. Steps to Recover PSBS’ NPAS

4. New Deposit Insurance Premium Structure

5. Funds Earmarked for Infrastructure Development

6. Reduction in Fiscal Deficit by increased Tax Collection

7. Bank Credit to Minorities

8. Second Quarter Review of Monetary Policy 2012-13 – Unhedged Foreign Currency Exposure of Corporates

9. Second Quarter Review of Monetary Policy 2012-13 – Non-Performing Assets (NPAs) and Restructuring of Advances

10. India Signs Loan Agreement with World Bank for US$ 70 Million for Additional Financing of Karnataka Health Systems Development and Reform Project

Notifications

Central Excise

1. 354/78/2010-TRU(Pt-1) - dated 21-11-2012 - CE

Corrigendum - Notification No. 34/2012-Central Excise, dated 10/09/2012

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. 59/2012 - dated 21-11-2012 - Cus

Impose customs duty on skimmed milk powder by amending notn No. 12/12- Cus dt 17/3/2012

4. 354/78/2010-TRU(Pt-1) - dated 21-11-2012 - Cus

Corrigendum - Notification No. 49/2012, dated 10/09/2012

5. F.No.437/17/2011– Cus. IV - dated 20-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - Additional Director General of Customs— Areas of jurisdiction

Income Tax

6. 43/2012 - dated 10-10-2012 - IT

DTAA - Agreement For Exchange Of Information With Respect To Taxes With Macao Special Administrative Region Of People’s Republic Of China

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

DGFT

3. 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.

Customs

4. F. No.450/95/2012-Cus.IV - dated 20-11-2012

Measures for promoting cost efficiency of imports by Indian Trade and Industry – regarding.

Highlights / Catch Notes

Income Tax

• Jurisdiction and Macao SAR ink tax information exchange deal to boost transparency, cooperation, and combat tax evasion.

  Notifications : DTAA - Agreement For Exchange Of Information With Respect To Taxes With Macao Special Administrative Region Of People’s Republic Of China - Notification
  Visit to Get Source

  ---

• Section 143(2) Notice for Regular Assessment: Six-Month Limit Starts from End of Financial Year, Not ITR-V Filing Date.

  Case-Laws - AT : Notice u/s 143(2) for regular assessment u/s 143(3) - period of of limitation of 6 months to be computed from the end of the financial year in which the return was furnished and not from the date of filing of form ITR-V – AT
  Visit to Get Source

  ---

• Tax Liabilities Require Notice u/s 156; Non-Compliance Leads to Interest on Unpaid Amounts.

  Case-Laws - HC : All tax liability, except advance tax, have been made liable to be followed by a notice under section 156 and only when the assessee fails to comply with the conditions of the notice under section 156 and fails to pay the due amount, then he is liable to pay interest. - HC
  Visit to Get Source

  ---

• High Court Upholds ITAT's Decision to Remove Penalty for Inaccurate Income Details Due to Taxpayer Distress.

  Case-Laws - HC : Penalty u/s 271(1)(c) -order of ITAT deleting the penalty on the ground that Assessee was in distressed and filed inaccurate particulars of Income sustained. - HC
  Visit to Get Source

  ---

• Set off current and brought forward depreciation against Long Term Capital Gains u/s 32(2) legal fiction.

  Case-Laws - AT : Current year's depreciation is to be allowed as set off from the Long Term Capital Gains and brought forward depreciation is to be treated as current year's depreciation as per the legal fiction of section 32(2), the same is also to be allowed to be set off from the Long Term Capital Gains - AT
  Visit to Get Source

  ---

• Court Clarifies "Any" in Section 3 of Expenditure Tax Act: Includes "All," "Every," "Some," or "One.

  Case-Laws - HC : The word "any" occurring in Section 3 of the Expenditure Tax Act does not mean "all" alone but on the other hand it means "all" or "every" as well as "some" or "one". - HC
  Visit to Get Source

  ---

• High Court Confirms Taxpayer's Refund with Interest Despite Late Filing, Overruling Section 239(2)(c) of the Income Tax Act.

  Case-Laws - HC : Interest on Delayed Refund - Whether the Tribunal was right in directing the assessing officer to grant refund where the return was filed on 29.03.1996 after one year from the end of the assessment year in violation of the provision of the Section 239(2)(c) of the Act? - held yes - HC
  Visit to Get Source

  ---

• Hire-Purchase Explained: Bailment and Sale Elements, Sale Happens When Buyer Meets Terms and Opts to Purchase.

  Case-Laws - HC : Hire-purchase concerns two elements - bailment and sale in the sense that it visualizes an eventual sale which fructifies when the option is exercisable by the purchaser after fulfilling the terms of the agreement. - HC
  Visit to Get Source

  ---

• Section 153A: Case Can't Be Reopened Without Incriminating Evidence; Additions Deemed Unsustainable.

  Case-Laws - AT : Reopening of a concluded case u/s 153A - in absence of any incriminating material found as a result of search, the addition made u/s 153A cannot be sustained - AT
  Visit to Get Source

  ---

• Pro-rata deduction allowed u/s 10B for business income found during search u/s 132.

  Case-Laws - AT : Deduction u/s. 10B with regard to surrendered business income during search proceedings u/s 132 - pro-rata deduction allowed. - AT
  Visit to Get Source

  ---

• Special Bench Decision Leads to Two-Year Delay Excusal in Income Tax Case Appeal by Assessee to CIT (Appeals).

  Case-Laws - AT : Condone the delay about 2 years - The subsequent decision by the Special Bench of the Tribunal has enlightened the assessee to knock the doors of CIT(A) - Delay condoned. - AT
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

Customs

• Customs Authorities Release New Measures to Boost Cost Efficiency for Indian Trade and Industry on Imports.

  Circulars : Measures for promoting cost efficiency of imports by Indian Trade and Industry – regarding. - Order-Instruction
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

FEMA

• FEMA 2012 Amendment: New Guidelines for Foreign Exchange Deposits and Compliance for Individuals and Entities.

  Notifications : Foreign Exchange Management (Deposit) (Amendment) Regulations, 2012 - Notification
  Visit to Get Source

  ---

• 2012 FEMA Amendment Updates Regulation 5 on Foreign Securities Transfers by Non-Residents to Align with Global Standards.

  Notifications : FEMA - (Transfer or Issue of Security by a Person Resident Outside India) (Amendment) Regulations, 2012 - Amendment in regulation 5 - Notification
  Visit to Get Source

  ---

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
  Visit to Get Source

  ---

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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

Central Excise

• Triguard Toothpaste & Mouthwash Dosage Doesn't Require Prescription: "10 ml Twice Daily or as Directed.

  Case-Laws - AT : Merely because the dosage says that 10 ml twice daily or as directed by the Physician in case of Triguard Toothpaste and Triguard Mouthwash, it does not mean that these products need a Doctor’s prescription for purchase - AT
  Visit to Get Source

  ---

• High Court Rules Penalties Apply to Original Company, Not Dubious Entities, for SSI Exemption Violations.

  Case-Laws - HC : SSI Exemption - fictitious company / dubious company - Penalty to be imposed on original company and no penalty on dubious company - HC
  Visit to Get Source

  ---

VAT

• Concessional Entry Tax on Raw Materials Valid Despite Out-of-State Transfers of Manufactured Goods.

  Case-Laws - HC : Concessional levy of entry tax on Raw materials used in Manufacturing Process – the benefit of concessional levy under Rule 3(4) cannot be denied to the petitioner on the ground of transfer of manufactured goods to the branches situated outside the State. - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (11) TMI 679
  Notice u/s 143(2) for regular assessment u/s 143(3) - computation of period of limitation - Filing of form ITR-V – held that:- The scheme framed by CBDT has clarified that the date of transmitting the return electronically shall be the date of furnishing of return, if the form ITR-V is furnished in the prescribed manner and within the period specified. In this case, the period specified is 31-12-2010 or 120 days from the date of uploading the return whichever is later. Admittedly form ITR-V was received by CPC on 29-11-2010 is within the prescribed time in the prescribed manner in the prescribed form. Hence, for all practical purpose, the date of filing of the return shall relate back to the date on which the return was electronically uploaded i.e. 25-09-2009. Therefore, the contention of the ld.DR that receipt of Form ITR-V is the date of receipt of return has no merit at all - date of filing of the return of income is 25-09-2009. Therefore, the notice served on the taxpayer u/s 143(2) on 26-08-2011 is beyond the period of six months from the end of the financial year in which the return was furnished. Therefore, the notice issued by the assessing officer u/s 143(2) is invalid. Hence, it cannot be acted upon. Consequently, the assessment order passed by the assessing officer cannot stand in the eyes of law. Therefore, the same is quashed. the object behind the filing of form ITR-V the method prescribed by CBDT for transmitting the same by ordinary or speed post and the consequence of not filing the Form ITR-V within the specified time are left open to be decided in appropriate appeal.

  ---

• 2012 (11) TMI 678
  Interest u/s 220(2) for delayed payment of legitimate Government dues which always remained quantified to the extent of Assessee's liability to pay balance self-assessment tax in pursuance of revised return by him on 12.1.1984 - held that: - all tax liability, except advance tax, have been made liable to be followed by a notice under section 156 and only when the assessee fails to comply with the conditions of the notice under section 156 and fails to pay the due amount, then he is liable to pay interest. No other provision has been shown to us creating any liability for self assessment default cases and for deemed defaulter under section (3) of section 140A. Undisputedly notice under section 156 was given to the assessee after final assessment order dated 24th March, 1992. The authorities were, thus, right in holding that the assessee in the present case was liable to pay interest from the date of the order dated 24th March, 1992. - Decided against the revenue.

  ---

• 2012 (11) TMI 677
  Penalty u/s 271(1)(c) - Assessee was in distressed and filed inaccurate particulars of Income - held that:- Assessee has claimed the expenditure of amount of liability of the interest accrued which, in fact, was found that he did not pay within the financial year. However, for that purpose the assessee was not asked to furnish explanation etc. was the reason given by the Tribunal - Tribunal committed no mistake in allowing the appeal of the assessee and in fact in this appeal no question of law is involved and question of law as framed is because of misreading of the order passed by the Tribunal wherein only contention of the assessee's representative has been recorded with respect to the distressful state of mind of the assessee - provision providing for penalty upon mere giving wrong particulars and this fact is not an admitted fact - no force in the submission of Revenue to accept the mechanical reading of the said Section only which is in isolation to the facts of the case, therefore, this Tax Appeal is dismissed.

  ---

• 2012 (11) TMI 676
  MAT - Whether the Tribunal was justified to hold that provision for wages of Rs. 48,19,00,000/- should be set off against the income for assessment year 1989-90 for computation of taxable income for the assessment year 1990-91 for the purpose of section 115 J of the Income Tax Act? - held that:- revenue could not satisfy that because of this decision of I.T.A.T. there will be any variation in the tax effect. - Therefore, there is no need to answer this question and the appeal is liable to be dismissed because it is not affecting the revenue in any manner. - Decided against the revenue.

  ---

• 2012 (11) TMI 675
  Technical or Consultancy Service – Deduction of TDS u/s 195 - Whether US company, which incidentally was a subsidiary of the assessee, was rendering any technical services, which warranted a deduction of tax at source, in accordance with Section 195 of the Act – Held that:- Technical or Consultancy Service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. In other words, payment of consideration would be regarded as "fee for technical included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied." The scope of work would show that different types of services were rendered by the subsidiary in USA. With regard to the Marketing Agreement, and Overseas Services Agreement, no part thereof was having income element which was chargeable to tax under the provisions of Income-tax Act in India in view of Article 12.4 of DTAA. Therefore, insofar as payments made against bills raised by the non-resident entity of the assessee based on these two agreements, assessee could never be fastened with liability to deduct tax at source. However, for the second agreement, namely, "Offshore Development (Facilitation) Agreement", one of the items of services rendered by the entity abroad could have an element of income chargeable to tax in India, since it could involve making available technical services to the assessee in India. If the services rendered by the entity abroad with regard to the said agreement were such that technical skills were made available to the assessee in India, then of course, Section 195 of the Act will apply. Assessee having not made any application under Section 195(2) of the Act, it could be fastened with a failure to deduct tax at source as specified under Section 195 of the Act. Then of course, rigours of Section 40(a)(i) would be attracted - Orders of authorities are set aside and remit the issue insofar as it relates to payments made by the assessee to its subsidiary abroad with regard to "Offshore Development (Facilitation) Agreement" back to the file of the A.O. for consideration afresh in the light of DTAA between India and USA, in accordance with law - In the result, appeal of Revenue is partly allowed for statistical purposes.

  ---

• 2012 (11) TMI 674
  Set off and Carry forward of Business loss as well as current year's depreciation against Long Term capital gains – held that:- legal fiction created by provisions of Sec. 32(2) of the Act has been subjected to the provisions of Sec. 72(2) and 73(3) of the Act.In case of set off of business loss vis-a-vis depreciation, the first preference shall be given to the business loss as per the provisions of Sec. 72(1) of the Act for the simple reason that the business loss can be carried forward only upto 8 assessment years whereas the depreciation can be carried over upto unlimited period. Brought forward unabsorbed depreciation is treated as current years' depreciation because of the legal fiction, therefore the treatment given to the current year's depreciation is equally applicable to brought forward depreciation after the application of Finance Act, 2001 - current year's depreciation is to be allowed as set off from the Long Term Capital Gains and brought forward depreciation is to be treated as current year's depreciation as per the legal fiction of section 32(2), the same is also to be allowed to be set off from the Long Term Capital Gains - In the result, appeal filed by assessee is allowed.

  ---

• 2012 (11) TMI 673
  Expenditure Tax, Interpretation Of Taxing Statutes, Writ – Tariff of the rooms exceeded the prescribed limit of Rs.1,200/- Held that: - No doubt, the word "any" is capable of having more than one meaning but that will not prevent the courts from making an endeavour to place the correct and true meaning with due regard to the consequences resulting in hardship, injustice and absurdity. A construction should always be made to achieve the object of the enactment rather than to defeat the same. Therefore, we hold that the word "any" occurring in Section 3 of the Expenditure Tax Act does not mean "all" alone but on the other hand it means "all" or "every" as well as "some" or "one". Held that:- the assessee is liable for levy of tax under the Expenditure Tax Act 1987 as admittedly the assessee's tariff rate exceeded the limit of Rs.1,200/-. However, though the assessee is held to be liable, that would not be taken to mean that the entire expenditure of the assessee as found by the Assessing Authority should be brought to tax. Since the tax is payable by the customers who avail any of the services enumerated under Section 5 of the Act, it is such expenditure incurred by such person who occupies and the expenditure incurred during such time for all or any of the services rendered alone would constitute chargeable expenditure and the assessee becomes liable for the same under Expenditure Tax Act. Accordingly, the assessment order made by the Assessing Officer bringing the entire expenditure liable for expenditure tax is held as not correct. - Decided in favor of revenue. Decision in case of [H. P. Tourism Development Corporation Versus Union of India And Others 1998 (12) TMI 59 - HIMACHAL PRADESH HIGH COURT], followed.

  ---

• 2012 (11) TMI 672
  Interest on Delayed Refund - Whether the Tribunal was right in directing the assessing officer to grant refund where the return was filed on 29.03.1996 after one year from the end of the assessment year in violation of the provision of the Section 239(2)(c) of the Act? - Held that:- on a reading of Sections 239, 240 and 243 of the Act, one will know that while Section 239 covers cases of the assessee on self-assessment making a claim for refund within the time limit specified therein, Section 240 provides for refund which is contemplated under the Act without even an application from the assessee, but must emanate from the Officer itself consequent on the order passed on appeal or other proceedings under the Act. Barring these two provisions, there is no other provision, which speaks on refund to the assessee consequent on the assessment. Even in the absence of any such specific provision placing responsibility on the assessee/an Officer to seek or grant refund, Section 243 of the Act contemplates grant of interest in cases, where the assessee is entitled to refund even without making an application in contract to cases where on application, refund to be granted would carry no interest. Thus, on a return filed, where there is determination of income under the Act and the assessment order relates to refund to be granted to the assessee as per Section 243(1)(a) of the Act, refund has to be granted within a period of three months. If the Assessing Officer does not grant the refund, the refund would carry interest as contemplated under Section 243(1)(b) of the Act. - Decided in favor of assessee.

  ---

• 2012 (11) TMI 671
  Rental income – Income from Business / Property - "(1) Whether Tribunal was correct in law in holding that the rental receipts derived from letting out of properties should be assessed under the head 'Business'? - (2) Whether Tribunal was correct in law in holding that the expenses incurred for the purpose of letting out of the properties should be allowed as 'business expenditure'?" – held that:- Company had taken lands on 90 years lease with the objects of constructing I.T. Company with all its infrastructural facilities, the same was for the purpose of establishing and providing the amenities required to run, maintain, manage or administer computer centres for manufacturing or processing software packages and /or hardware materials and components required for computer industry, to exploit it as a business proposition - order of the Tribunal is confirmed, thereby, holding that the lease rentals are assessable as business income only - Decided in favor of assessee.

  ---

• 2012 (11) TMI 670
  Notice of Reassessment – AO held that he had reasons to believe that the amount declared as hire-charges were, in fact, interest. - Following the decision of court in case of [Syal Leasing Ltd. Versus Assistant Commissioner of Income-Tax And Another 2003 (9) TMI 47 - PUNJAB AND HARYANA HIGH COURT ] held that:- AO has already determined that the relevant agreements executed by the petitioner were with a view to finance the vehicles and that those were not leasing agreements. That finding of the AO was affirmed by the CIT (Appeals). Feeling aggrieved by the orders of the CIT (Appeals), the petitioner has preferred an appeal before the Income-tax Appellate Tribunal which is pending - In view of the findings recorded by the AO in the case of the assessee for the AY 1998-99 AO had sufficient reason to believe to issue a notice u/s 148 – decided against Assesssee. Real nature of the transaction - Hire purchase vs Sale - Held that:- Total amount payable and the period of payment, as hire-charges is part of the agreement; the sample agreement produced - executed by the assessee with one Sh. Amit Singh, discloses that the hirer was to pay Rs.12,500/- per month, effective from 10.02.2001 and that the hirer could, at any time during the hire, become owner of the vehicle on making payment of hire fully for the whole period of agreement. Having provided so, the agreement is silent as to what constituted the period of its tenure. Hire-purchase concerns two elements - bailment and sale in the sense that it visualizes an eventual sale which fructifies when the option is exercisable by the purchaser after fulfilling the terms of the agreement. In the present case, however, the tenure of the agreement itself is unknown; the hirer, in fact, is the registered owner of vehicle. Having regard to these features and the other discussed elaborately by the Tribunal and the CIT(A), this Court is of the opinion that findings impugned in this case do not call for any interference on the merits. This question too is answered against the assessee - appeal is meritless; it is, therefore, dismissed. Decision in K.L. Johar & Co. (1964 (11) TMI 58 - SUPREME COURT OF INDIA), followed

  ---

• 2012 (11) TMI 669
  Sale of Sugar at concessional price to its Members on monthly basis - difference between the fair market price and the concessional price taxable or not - held that:- CIT(A) would be entitled to look into the Accounts and verify the basis for sale of sugar at concessional price on month-to-month basis - CIT(A) would give liberty to both sides to produce relevant documents - remit the cases to CIT(A) to de-novo consider the matter - civil appeals filed by the Department are disposed of with no order as to costs.

  ---

• 2012 (11) TMI 668
  Penalty u/s 271(1)(c) - Concealment of Income - held that:- Tribunal was justified in observing that the assessing officer before imposing penalty did not held any independent inquiry and no specific and concrete materials were brought on record by the assessing officer to establish the fact that the assessee had really concealed the amount and Tribunal was also justified in the facts of the case, in observing that no material indicating any specific asset, investment or income to the extent of the said amount were brought on record - Tribunal has not committed any error. Therefore, the question is answered that in the facts of the case, the ITAT was right in deleting the penalty levied under Section 271(1)(c).

  ---

• 2012 (11) TMI 667
  Whether an amount can be taxed in hands of firm as well as in the hands of the partners - held that:- Appeals succeed on this point and the matter is required to be remanded to the Assessing Officer for finding out about the fact of the assessment of partners as the appellant has placed on the record only assessment order made by the Assessing Officer and whether that order attained the finality or not is not known - allowing the appeal of the revenue for taxing the amount in question in the hands of the firm is set aside and the matter is remanded to the Assessing Officer. Deletion of Addition of Rs.23,74,842/by the C.I.T. (A) - held that:- Revenue was right in seeking remand in view of the fact that during the course of assessment proceeding, the assessee submitted revised return and the statement of the account audited by the Chartered Accountant and the Tribunal though observed that earlier also audited accounts were submitted and both the accounts are running altogether in contrast then in that situation, it was a fit case for remanding the matter to the Assessing Officer for recording its finding of fact with respect to the pleas of the parties.

  ---

• 2012 (11) TMI 666
  Penalty under section 271(1)(c)– Concealment of Income and furnishing of inaccurate particulars - held that:- The addition made in the assessment cannot ipso facto lead to the inference that there has been concealment of income or furnishing of inaccurate particulars of such income by the assessee. In the aforesaid context, the acceptance of addition by the assessee for buying peace with the department will not lead to an inference that the assessee has admitted concealing particulars of its income or furnishing inaccurate particulars of income. Further Held that:- Contention of assessee that he is following the same method of valuation of closing stock consistently from its very inception and the department has never raised any objection with regard to the method of valuation of closing stock adopted by the assessee. In the aforesaid background, it cannot be said that the assessee has furnished inaccurate particulars of its income. Similarly, with regard to the addition made on account of cash payments above Rs.20,000/- which was disallowed u/s 40A(3) and also the claim of expenditure in the Profit & Loss A/c towards stamp duty the finding of the CIT (A) that such additions cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income is quite acceptable - appeal of revenue is dismissed - in favour of assessee. Decision of Supreme court in case of [COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS FVT. LTD 2010 (3) TMI 80 - SUPREME COURT], followed.

  ---

• 2012 (11) TMI 665
  Reopening of a concluded case u/s 153A - assessment in case of search / requisition - The AO ultimately completed the assessment u/s 143(3) allowing the claim of loss. In course of search assessment proceedings u/s 153A, the AO again considered the loss claimed of Rs.77,50,000 and made the addition only on the basis of the books of account of the assessee and not on the basis of any search material found as a result of search and seizure operation. Held that:- it is clear that there is no incriminating material found as a result of search on the basis of which the addition has been made. The AO has considered materials which is the subject matter of regular assessment. - in absence of any incriminating material found as a result of search, the addition made u/s 153A cannot be sustained - Decided in favor of assessee.

  ---

• 2012 (11) TMI 664
  Rectification of order u/s 254 - Reassessment - notice u/s Sec. 148 - amendment made to section 143(2) with retrospective effect – issuance of notice within 12 months from the end of the month in which the return in response to notice under section 148 was submitted. - Held that:- On account of the said amendment, as long as a notice u/s.143(2) is issued before the expiry of the time limit as prescribed in 2nd proviso(b) for making the re-assessment, even if had been issued beyond the one year time limit from the date of the filing of the return, the effect of this amendment is to validate all those notices. In the result, since these provisos retrospectively made with effect from 1/10/1999 that would indicate that the provisos are transitional in character merely validating those notices in respect of re-assessment proceedings but otherwise not disturbing the law being limited upto 30/09/2005 but nothing to apply a return furnished on or after 1st day of October-2005. Apparent mistake so as to rectify u/s.254(2) - held that:- while deciding this appeal the Tribunal had only limited scope and ought to remain confined to the observation of the Tribunal as expressed vide an earlier order dated 22/03/2005. Firstly, those directions were meant for the A.O. and secondly, the applicable provisions of section 148 were not either referred or considered hence tantamount to per incuriam in nature. - We therefore re-call our order dated 31/12/2010 so that the relevant dates of issuance of notice u/s.148 and the returns filed in compliance of the said notice be examined in the light of the 2nd proviso to section 148(1) of the Act. The order is recalled and the Registry is directed to fix the appeal for hearing in due course as per law. - Decided against the assessee.

  ---

• 2012 (11) TMI 663
  Deduction u/s. 10B of the Income-tax Act - CIT(A) granted deduction u/s 10B after excluding the additional income surrendered by the assessee during search proceedings u/s 132 – Held that:- Since the seized paper was connected with the business activity of the assessee i.e. exports and the AO added the additional business income in the business income of the assessee from exports and also granted deduction u/s 10B of the IT Act to the assessee, would prove that the assessee was also entitled for deduction u/s 10 B of the IT Act on additional business income also. Considering the facts and circumstances noted above in the light of the above discussions and the case laws referred to above, we are of the view the assessee is entitled for deduction u/s 10 B of the IT Act on pro-rata basis. - Decided in favor of assessee partly.

  ---

• 2012 (11) TMI 662
  Addition on account of alleged sundry creditors u/s. 41(1) of the Act - cessation of liability – Held that:- matter requires reconsideration at the level of the learned CIT(A). The AO made protective assessment by following the order for assessment year 2003-04 in which the Tribunal has restored the matter to the file of the learned CIT(A) for reconsideration. According to the learned Counsel for the assessee the matter is still pending before the learned CIT(A) for his consideration. Addition of gross profit at 7.43%. Revenue challenged the order of the learned CIT(A) in restricting the addition made by the AO on account of low gross profit from 15% to 7.43%. - held that:- The assessee has not challenged the rejection of the book results u/s 145(3) of the IT Act. - considering the history of the assessee we are of the view the learned CIT(A) rightly and reasonably applied the gross profit rate of 7.43% for computing business income of the assessee.

  ---

• 2012 (11) TMI 661
  Condone the delay - appeal before CIT(A) – delay of 1 year 10 months and 16 - The assessee had submitted before the ld. CIT(Appeals) that the reason for delay in filing the return was because of the wrong advise given by the assessee’s counsels that not to pursue the additions/ disallowances before the ITAT and therefore the assessee had proceeded to pay the demand as per CBDT’s circular no.2/2006 dated 17.01.2006. However, in view of the decision of the Special Bench of the ITAT in the case of M/s. Topman Exports and Others in ITA No.5769/Mum/2006, the assessee realized that it had a fool proof case in its favour for seeking deduction under section 80HHC. Held that:- assessee remained under good faith and bonafide impression of the given legal position and did not proceed to indulge in cost prohibitive protracted litigations by availing the remedy before the chain appellate authorities starting with learned CIT(A)- Mere fact that the assessee cooperated with the Revenue based on the circular issued by the CBDT should not put the assessee on in a weaker footing - The subsequent decision by the Special Bench of the Tribunal has enlightened the assessee to knock the doors before the appellate authority for justice. In these circumstances, the request of the assessee for the delay of condonation for all the assessment years seems to be reasonable and justifiable. Therefore, in the interest of justice, we hereby condone the delay in filing the appeals before the ld. CIT(A) by the assessee and remit back the issues before the ld. CIT(A) to decide the case as per law and merit. - appeals of the assessee are allowed

  ---

• 2012 (11) TMI 660
  Allocation of administrative and general expenses – Held that:- Actual direct expenses are to be allocated directly and the common expenses, has to be apportioned on a reasonable basis, which has been done by the AO in the present case and hence, no interference is called for - allocation of administrative expenses and general expenses amounting to Rs.3.86 Lakhs and Rs.438.79 lakhs towards Daman & Baddi units respectively for computation of deduction u/s 80IB is upheld – against assessee Disallowance u/s 14A of the Act in respect of the Director’s Remuneration – alleged that appellant has received dividend from mutual fund which is exempt u/s 10(35) of the I.T. Act – Held that:- matter remitted back to AO for fresh decision. Allocation of interest expenses - allocation of interest expenses to the Baddi unit in the ratio of turnover against the allocation made by the appellant on the basis of investment while calculating profit eligible for deduction u/s.80IC of I.T. Act – alleged that appellant has a common pool of funds as well as common bank accounts for its entire business being carried out from headquarters - A.O. therefore allocated interest proportionately to this unit on the basis of ratio of sales of the undertaking – Held that:- Appellant has claimed that since no other specific loans were taken for establishment of the said unit, no interest cost should be allocated to the said unit - total investment in Baddi Unit and Daman Unit is very low inasmuch as 0.28% and 0.09% respectively, as compared to investment in other unit - It is perfectly justified in making the interest allocation at Rs.3.60 lakhs in case of Daman Unit and at Rs.1.16 lakhs in case of Baddi Unit on the basis of ratio of investment in fixed assets and in directing the AO to modify the calculation accordingly - in favour of the assessee Grant of relief to the extent of allocation of the salary already made by the assessee - allocation of salary expenses on the basis of the sales ratio on the Daman unit u/s. 80IB and Baddi unit u/s. 80IC of the Act – Held that:- To the extent of allocation of salary already made by the appellant, the same should be reduced to avoid double disallowance - direct the A.O. to grant relief accordingly - CIT(A) has in principle approved the stand of the A.O. but he has given direction to the A.O. that to the extent of allocation of salary already allocated by the assessee, the same should be reduced to avoid double disallowance. He has not given finding as to what extent, there is double disallowance - this aspect should be examined by the A.O - matter remanded back to the file of the A.O

  ---

• 2012 (11) TMI 659
  Rectification of error - erroneous order of AO or ITAT - held that:- in a situation when a Revenue Officer either do not follow an order of the Supreme Court or do not correctly apply the ratio laid down therein or if do not follow the law laid down therein, then he is the one who has committed the mistake. As far as the Tribunal is concerned, the appeal of the assessee was allowed following the cited decisions and once an appeal has been allowed, then consequential effect ought to have been given by the AO. Due to this reason, there should not be any grievance against the order of the Tribunal but it should be, if at all, against the order of the AO while giving effect to the order of the Tribunal. That is why on enquiry, ld.AR Mr.Patel has made a statement at the Bar that against the order giving effect to the ITAT’s order, a remedial action has already been taken by filing an application u/s.154 of IT Act, as also an appeal has already been filed. Under these circumstances, we hereby hold that there was no mistake on the part of the Tribunal so as to rectify u/s.254(2) of IT Act - miscellaneous petition dismissed.

  ---

• 2012 (11) TMI 658
  Income from other sources- nexus between income and expenditure - Liquidator’s Account - held that:- there was no accrual of interest liability - though “mercantile system” of accounting was adopted by the assessee. - the assessee has to prove the basis on which the interest expenditure of Rs.34.80 lacs was claimed. - A.O. is hereby directed to proceed accordingly as per law. - matter remanded back. Addition of interest income under the head rent income - held that:- First of all, Assessing Officer has to verify the exact nature of the earning of an income and then it is suggested to verify the nature of expenditure having any nexus with the earning of rental income. Only that portion of the expenditure which has connection with the earning of rental income is therefore an admissible deduction subject to the ceiling or limitation prescribed u/s. 23 & 24 of the I.T.Act. - matter remanded back for fresh decision.

  ---

• 2012 (11) TMI 657
  Addition on account of low G.P. - alleged that during the year under consideration the gross profit was 7.37 % as against the gross profit at 7.79% in the last year – Held that:- the Revenue authorities must have come across the case of other assessee’s whereby securing similar or more turnover the assessee suffers a loss in the business or secured lesser profit than the assessee. - In the instant case, as no specific defect in the various expenses claimed by the assessee in the P&L A/c. could be pointed out by the Revenue, the Ld. CIT(A) was not justified in arbitrarily applying the rate of net profit of 3%. As the additions are found to be not based on cogent and relevant material and are based merely on the surmises and conjectures, the same are found unsustainable on the facts of the instant case. We, therefore, delete the addition Addition on account of unaccounted sale of diamond powder expenses - As per AO, no proof was given by the assessee for excessive consumption of the diamond powder for the year under consideration – Held that:- Consumption of diamond powder was excessive and appeared to be unreasonable considering the overall circumstances of the case. The assessee has also failed to establish the reasons for abrupt enhancement in consumption of diamond powder – addition upheld – against assessee Disallowance on account of foreign travel expenses – alleged that no bill was available in respect of foreign exchange purchase – Held that:- Foreign exchange was purchased in the names of relatives. Assessee’s argument was that those persons had gone for market survey. As per AO, no report about the work carried out by those persons was furnished. It was also pointed out by the AO that those relatives had no professional qualification or any experience of the business – matter remanded to AO

  ---

• 2012 (11) TMI 656
  Cancellation of registration u/s.12AA of the Income Tax Act - Held that:- When under the Act a specific provision for cancellation of registration is prescribed and the cancellation is possible under specific condition then fulfillment of those conditions are necessary for invoking the jurisdiction u/s.12AA(3). - In the present case the reason for cancellation for registration was that the definition of charitable purpose u/s.2(15) has been amended therefore the assessee has not carried out the activity as per the definition of “charitable purposes” – direction not to cancel the registration u/s.12AA(3) of IT Act – In favor of assessee

  ---

• 2012 (11) TMI 655
  Hypothetical / imaginary income. - accrual of interest – alleged that assessee advanced loan/s to M/s. Trivandrum Rubber Works Ltd. - advance to a company under the same management by way of an unsecured loan, repayment of which was not regular – Held that:- Merely because the balance-sheet classifies the amount as an unsecured loan, and in our view not incorrectly, without anything more, would not by itself clothe the assessee with the right to receive interest, considering that there is, as aforesaid, no other legal or contractual basis for contending so - It is also not the Revenue’s case that any interest has been received on the said loan even on a subsequent date, so as to consider it as having been accrued, including for the relevant year - no legal or factual basis to confirm any interest as receivable from the lendee company, so as to consider it as having accrued, and the impugned income only represents a hypothetical/imaginary income - Addition deleted – In favor of assessee

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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 2.12 crores. In addition , during the year under consideration the reserve surplus of assessee company had increased from 4.81 crores to 8. 39 crores implying there by generation of funds by the assessee company itself out of its business activities. As AO has failed to refer to any borrowed funds utilized for the purposes of investment in the said fixed asset no disallowance warranted - in favour of assessee. Freight in and freight out payment - non deduction of TDS - Held that:- As decided in Merilyn Shipping 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.

  ---

• 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

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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

  ---

• 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

  ---

• 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.

  ---

• 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

  ---

• 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.

  ---

• Customs

• 2012 (11) TMI 695
  Writ of Mandamus, directing the respondents to release goods - import of used / secondhand Digital Multifunction Print and Copying Machines - held that:- Competent authority of the Customs Department viz.,Assessing Authority is directed to assess the goods in terms of the Customs Act with the relevant Foreign Trade Policy as may be applicable and if it is found that the issue requires adjudication, the same shall be adjudicated taking into consideration the practice that is followed in similar cases without discrimination. Such exercise to be done preferably within a period of three weeks from the date of receipt of a copy of this order. The petitioners in each case represented by their counsel undertake that they will co-operate with the Customs Department for early disposal of the matter - writ petition is disposed of in terms of the direction issued - connected miscellaneous petition is closed. No costs.

  ---

• 2012 (11) TMI 694
  Clearance of unbranded carbide dies declaring the value based upon the invoices raised by the supplier, which was based on contract price - assessing authority did not agree with the declared value and enhanced the same – Held that:- Merely because the importer has cleared. The goods at enhanced value to save the demurrage charges or otherwise, by itself, does not mean that the importer is consenting to enhance the value. It is right of the importer to contest the enhancement and fact of clearance of goods, cannot preclude the importer from exercising the right of appeal - Assessing authority has not passed a speaking order giving reasons for rejection of the declared price, he set aside the assessment order - matter remanded to the original adjudicating authority

  ---

• 2012 (11) TMI 693
  Demand of duty – re-assessment of the Bills of Entry - re-assessment of the Bills of Entry, which were incidentally finally assessed on 25-5-2001 – Held that:- The provisions of Customs Act, 1962, clearly lay down that the assessment of Bill of Entry is an appealable decision and if the said Bills of Entry were indicated as finally assessed and there being no change in rate of duty as well as amount of duty, there cannot be any presumption that said Bills of Entry were provisionally assessed and remained to be provisionally assessed. - Decided in favor of assessee.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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.

  ---

• Corporate Laws

• 2012 (11) TMI 691
  Winding up petition - Held that:- The learned Judge rightly observed that the conduct of the company was dishonest but could not extend the relief to the petitioning creditor, as pre-requisite to admit a winding up petition at the instance of the unsecured creditor would denote, there must be a quantified just debt due to the creditor by the company. The appellant-creditor was inconsistent in his stand. The appellant creditor in his affidavit claimed that the last payment as claimed by the company was not made on January 28, 2006. Even in 2008 company made payments through Account Payee Cheques aggregating rupees two lacs. The appellant-creditor gave credit for those three cheques and contended that the purported final payment of rupees sixty two thousand three hundred and sixty five as on March 2008 would automatically fall flat as the cheques were issued on October 3, 2008 much after the said date. In short, if the account was settled finally how could there be further payments? The appellant however does not explain as to how he would adjust the said three payments as against his claim made in the statutory notice of demand as well as petition. Thus as no definite conclusion as to the quantum could be achieved it would not be proper to admit the winding up petition - against creditor.

  ---

• 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.

  ---

• Service Tax

• 2012 (11) TMI 700
  Refund of the service tax paid as per Notification No. 41/2007-S.T. dated 06.10.2007 - denial of claim as time barred - Held that:- As per para 2 (e) of Notification No. 41/2007-ST prior to its amendment, the exporter could claim refund before the end of August 2008. Any refund claim filed after August 2008 but before 18.11.2008 would have been time-barred. As on 18.11.2008, the date with effect from which the period of limitation was extended to 6 months, the exporter acquired the right to claim refund and this right could be exercised up to 31st December 2008. This clarification is of no aid to the appellant who exported goods in the quarter January to March 2008 and filed refund claim on 10.06.2008. The subject amendment can, by no stretch of imagination, be capable of enabling the appellant to file refund claim beyond the prescribed period of 60 days inasmuch as the amendment itself came into effect after the period of 6 months from the last date of the quarter January to March 2008 - against assessee.

  ---

• 2012 (11) TMI 699
  Service of adjudication order - Held that:- Sending the order at correct address by registered post is a sufficient compliance of section 37-C of Central Excise Act, 1944 and it is for the assessee to rebut the presumption of service by cogent evidence that in fact order was never served upon him. The appellant in the present appeal in hand failed to discharge its burden of proof - this is a case of service on any authorized person, nor the case of closure of factory nor the case of rebuttal of presumption of by appellant - both stay application and appeal fail to succeed. Accordingly both are dismissed.

  ---

• 2012 (11) TMI 698
  Canvat credit of the service tax paid on courier service – samples to the customers through courier – alleged that appellant did not produce the documentary evidence to show that the ownership remained with him till the goods were delivered at the premises of the customer and the courier charges were part of the price charged for the goods – Held that:- Appellant has all the necessary documents and want an opportunity to produce the same - matter remanded back to the original adjudicating authority to consider the documents to be submitted by the appellant in this regard

  ---

• 2012 (11) TMI 697
  Refund of the penalty paid – penalty set aside – Held that:- In the case of penalties the burden to show that the penalty has been passed on to another person is on the department and not on the assessee as in the case of duty - penal liability can never be passed on to another person who has not committed the offence - department has to prove that unjust enrichment would mean that some extra effort is required in addition to merely looking at the balance sheet or profit & loss account on the part of the department – In favor of assessee

  ---

• 2012 (11) TMI 685
  Erection commission and installation service – the appellants were showing the entire value received from the purchaser of their solar system as sales and installation and commissioning of the same as free of cost in their invoices and the VAT was also paid on the entire amount treating the same as sale. - the question of imposing Notification No. 1/2006 – Held that:- order is set aside and the matter is remanded to the original adjudicating authority

  ---

• 2012 (11) TMI 684
  Demand of service tax under the category of Business Auxiliary Service - whereas the confirmation of demand and imposition of penalty has been done by treating the services rendered as ‘Cargo Handling Service’ – order of authorities beyond the show cause notice – order set aside

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• Central Excise

• 2012 (11) TMI 690
  SSI Exemption - fictitious company / dubious company - Imposition of Penalty - aggregate value of the clearances of M/s SECO and M/s Xenon - Whether penalty can be imposed upon dubious company whose existence cannot be denied because of the reason that the said dubious company in fact existed and obtained the excise certificate - held that:- Once it is held that one was the original company and another was the dubious company, further finding is recorded in this case that the other company in fact did not indulge in the manufacture and the clearance of the goods, and therefore, the Revenue gave show cause notice to both the companies giving them opportunity so that they can show that they separately did the transactions under consideration. Word “independent existence” does not denote the physical existence of the fictitious company, but, it denotes the existence of independent transaction by the company, which cannot be accepted in a case when it is found by the Revenue that the said company is a fictitious company of other original company who did the transactions. Tribunal was right in holding that the penalty could not have been imposed upon the fictitious company which, in fact did not do any transaction and all the transactions were done by the original company and rightly interpreted the judgment of [GAJANAN FABRICS DISTRIBUTORS Versus COLLECTOR OF CENTRAL EXCISE, PUNE 1997 (5) TMI 50 - SUPREME COURT OF INDIA] and the question referred above raised before us are answered that in the facts of this case, no penalty could have been imposed upon the respondent M/s Xenon company - Tax Case is answered and disposed of accordingly.

  ---

• 2012 (11) TMI 689
  Refund of differential in excise duty - denial of claim - appellant had received the lesser amount against price of the goods supplied. - Held that:- The onus of proving the excess excise duty paid is on the appellant but the assessee here has failed to point out any evidence to substantiate his plea that the goods supplied through the relevant invoices were wrongly described as long length cables instead of short length cables. Merely because BSNL has made less payment, the claim for refund cannot be justified, because the levy of excise duty is based upon the transaction value at the time of clearance and not on the payment made by the purchasers. Thus rejection of refund claim is warranted - against assessee.

  ---

• 2012 (11) TMI 688
  CENVAT credit on capital goods denied - delay in filing appeal by 25 days - Held that:- The reasons for delay as explained by assessee that the person dealing with the excise matter was transferred and new person took charge of excise matters therefore, the appeal was filed beyond the normal period of limitation. As assessee had sufficiently explained the delay in filing the appeal before the Commissioner (Appeals) the matter is remanded to the Commissioner (Appeals) to decide on merits, on showing the deposit of the above mentioned amount of Rs. 5 lakhs - in favour of assessee by way of remand.

  ---

• 2012 (11) TMI 687
  Condonation of delay - delay of 350 days - Held that:- The applicant is taking contradictory stand i.e. in the application the contention is that applicant was not in a position to take decision for filing the appeal whereas during the arguments applicants blame his Counsel. Thus the applicant failed to show sufficient cause for delay. The COD application is dismissed - against assessee.

  ---

• 2012 (11) TMI 686
  Job work by EOU - Applicability of Notification 214/86 – waiver of pre-deposit - Extended period of limitation - alleged that benefit of the said notification is not applicable to 100% EOU who are governed by the FTP policy and they are not entitled for carrying out any job work – Held that:- Question of invoking the longer period of limitation or not arises only in cases where there is violation of provisions of law and the demand is otherwise sustainable on merits - ER-2 Returns filed by the appellants (some samples) wherein the fact of doing the job work clearly reflected - appellants undertaking the job work was in the knowledge of Revenue - Revenue as well as the appellants were entertaining a belief that they are entitled to do the job work - appellants’ sister concern who received the goods from the appellants was utilizing the same for the manufacture of their final product on which duty was being paid by them. As such the duty even if paid by the appellants would have been available as Modvat credit to their sister concern who was in a position to use the same for payment of duty on their final product. As such the appellants were not benefited by this procedure being adopted by them - appellants have a good case on limitation as also on revenue-neutrality – waiver of pre-deposit allowed.

  ---

• 2012 (11) TMI 683
  Enhancement of penalty - Shortage of stock – penalty u/r 25 - Held that:- So far as shortage of stock is concerned the authority has found that there was no cogent evidence before him to appreciate that the shortage has been rightly worked out mathematically. Estimation is not substitute to the mathematical precision when method of inventory taken is challengeable. - There was no circumstantial evidence to appreciate imposition of penalty along with confiscation. Penalty u/r 10 - When the appellate authority found, that there was controversy and Rule 10 deals with unaccountal of the stock on daily basis he levied penalty of Rs. 50,000/-. The cumulative effect of the shortage and excess stock is quite possible to flow from unaccountal of stock on daily basis - appellate authority went to the root of the matter to penalize to the extent of Rs. 50,000/-. That appears to be proper and that is confirmed - Revenue’s appeal is dismissed.

  ---

• 2012 (11) TMI 682
  Waiver of pre-deposit – classification of dental care products/tooth paste - appellant submits that the product contains medicaments having therapeutic or prophylactic properties which is meant for use for oral or dental hygiene and therefore, they are rightly classifiable under Heading No. 3003.10 of Central Excise Tariff Act, 1985 as P or P medicaments – Held that:- Merely because the dosage says that 10 ml twice daily or as directed by the Physician in case of Triguard Toothpaste and Triguard Mouthwash, it does not mean that these products need a Doctor’s prescription for purchase - department was of the view that these products merit classification as ‘Cosmetics or toilet preparations’ falling under Heading No. 3306.10 - In view of the higher abatement claim the appellant was liable to pay differential duty - product classified as ‘Cosmetics or toilet preparations’ falling under Heading No. 3306.10 of the First Schedule to the Central Excise Tariff Act, 1985 – appellant directed to make pre-deposit

  ---

• 2012 (11) TMI 681
  Cenvat credit of differential duty - Superintendent of Central Excise requested to return the RT-12 return submitted for the period from July, ‘95 to Jan. ‘96 and the matter was kept pending for a long time because of the file at your office was not available in current desk – Held that:- In the absence of any response from the department, the appellants were compelled to take credit of the impugned amount on 21-12-1999, which they intimated to the jurisdictional Superintendent through their third letter - concerned authorities have not done their work and not returning the assessed copies of the RE-12 returns to the appellants, and on the other hand in demanding back the impugned amount from the appellants which was paid in excess by them in respect of which they were entitled to take the credit - demand notice and the resultant orders issued by the authorities below are fully unjustified. There are no documents available with the department nor any have been produced in the course of the hearing to prove to the contrary that the appellants are not entitled for the credit of the impugned amount - orders are set aside and the appeal is allowed

  ---

• 2012 (11) TMI 680
  Cenvat credit - stocks of grey fabrics - Whether respondent-assessee is entitled to CENVAT Credit under Notification No. 35/2003-C.E. (N.T.), on the stock of grey fabrics treating the same as input or finished goods – Held that:- Stock of grey fabrics lying in stock with a dealer who sells processed fabrics (after getting it processed on job work by an independent processor) are stock of inputs and not stock of finished goods - When the notification makes no distinction between the dealer and the manufacturer for the purpose of credit, it is not proper to restrict the higher credit to stocks of grey fabrics with a person registered as manufacturer only. The assessee dealer is entitled to credit, treating grey fabrics as input - appeal filed by the Revenue is rejected

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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.

  ---

• 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

  ---

• 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

  ---

• 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

  ---

• 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

  ---

• CST, VAT & Sales Tax

• 2012 (11) TMI 696
  Concessional levy of entry tax on Raw materials used in Manufacturing Process – As per Rule 3(4) of Rules, 1999, If the scheduled goods are used as raw material by a manufacturer and a declaration in Form E-15 is furnished by such manufacturer to the seller, he is entitled to Concessional levy of entry tax. Regarding Sale of finished goods outside the state - held that:- There is nothing in Rule 3(4) or declaration given in Form E-15 that in order to avail the concessional rate in terms of Rule 3(4), manufacturer is required to sell the finished products inside the State and he will be disentitled to avail the concessional levy of tax in terms of Rule 3(4) if the goods are dispatched/transferred to outside the State. - party no.2 has no authority/power to import any condition into the Rule 3(4) of Rules, 1999 as the same results in legislation which is clearly impermissible under law. Regarding stock transfer / branch transfer - held that:- the benefit of concessional levy under Rule 3(4) cannot be denied to the petitioner on the ground of transfer of manufactured goods to the branches situated outside the State. Regarding use of coal as raw material in manufacturing of electricity - held that:- the coal is not a raw material of end product, i.e., sponge iron, billets and H.R. coil.14 - Petitioner is not entitled to avail concessional levy of entry tax on purchase of coal which is used to generate electricity in the captive plant. - Decision in the case of [Union of India v. Ahmedabad Electricity Co.Ltd. and others,2003 (10) TMI 47 - SUPREME COURT OF INDIA] followed. Return of goods sold outside state - held that:- It is the duty of the petitioner to show how the petitioner dealt with those finished products returned to its plant. If the petitioner could establish that entry tax has been collected on sale of those goods inside the State, no further entry tax is leviable. Otherwise, it is always open to opposite party no.2 to complete the assessment in accordance with law - matter is remanded back to the Assessing Officer to redo the assessment in terms of the observations/direction - In result, writ petition is allowed in part.

  ---

• 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.

  ---

• Indian Laws

• 2012 (11) TMI 692
  Liability of Insurance Company - To indemnify appellant not being a third party - Workman's Compensation Act - The insurer resisted the claim on the grounds that the claimant had suppressed the fact that he was the Managing Director of the company and hence, the application deserved to be thrown overboard; that even if the petition was entertained the insurance company could not be held liable to indemnify the respondent as the appellant was himself the owner being the Managing Director and under no circumstances he could be treated as a third party; that the policy taken by the company did not cover an occupant in the vehicle but only covered the owner for a limited quantum and hence, the claim was not allowable as sought for. Held that:- Before the High Court, the Competent Authority of IRDA had stated that on 2nd June, 1986, the Tariff Advisory Committee had issued instructions to all the insurance companies to cover the pillion rider of a scooter/motorcycle under the “comprehensive policy” and the said position continues to be in vogue till date. The question that emerges for consideration is whether in the case at hand, the policy is an “Act Policy” or “Comprehensive/Package Policy”. - Matter remanded back to the tribunal to scrutinize the policy in a proper perspective and, if necessary, by taking additional evidence and if the conclusion is arrived at that the policy in question is a “Comprehensive/Package Policy”, the liability would be fastened on the insurer.

  ---

• 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.

  ---