Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 24, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
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Self Reliance in Printing of Currencies
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Search by IT Department
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Implementation of NPS
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Cut in Subsidy on Certain Items
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Bilateral Investment Promotion & Protection Agreements Signed with 82 Countries
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Premium Collected by the Life Insurance Industry Decelerates by 2.33% during the Period Ending 30th September, 2012 over the Previous Period Ending 30th September, 2011
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Life and Social Security Insurance Schemes Available in Rural Areas
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Revival of Sick Fertilizer Industries
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India-US agreed to Deepen their Cooperation Bilaterally and in Multilateral Fora to Achieve Strong, Sustainable, and Balanced Growth going Forward
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Government Takes Several Measures to Revive the Economy including better Access to Finance for Manufacturing Sector, Fast Tracking of Large investment Projects in Infrastructure Areas, use of Buffer Stocks to Moderate Food inflation and Reducing the Volatility of Exchange Rate among others; Monetary and Fiscal Policies are Complementary and Expected to Restore the Growth Momentum
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Direct Tax Collections of Rs.2,65,417 Crore made till 15th November, 2012 during the Current Financial Year 2012-13
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Recent Economic Reform Measures including Reduction in the Subsidy on Diesel, Disinvestment in Certain PSUs and Steps to Strengthen the investment Climate are Expected to Revive Market Confidence and Restore Growth Momentum
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Rs. 52,275.55 Crore Released by the Government to give benefit to 3.45 Crore Farmers; no Proposal to Waive off Agricultural Loans of Farmers
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Violation of Company Law
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Saudi Business Delegation keen to invest in India USD 750 Million Saudi – Indo Investment Fund in Offing
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Fertilizer Subsidy to Farmers
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Approval to Foreign Investments in Pharmaceutical Sector
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Development of Single Point Mooring and allied facilities off Veera (outside Kandla creek) in Gulf of Kutch at Kandla Port
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Participative models for rail-connectivity and capacity augmentation projects
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Acquisition of 50% equity in M/s. Legacy Iron Ore Limited by NMDC Ltd
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Disinvestment of 9.50% paid up equity capital in NTPC Limited out of Government of India’s shareholding of 84.50%
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Extension of the Integrated Low Cost Sanitation Scheme (ILCS) into the 12th Five Year Plan with revised features and cost estimates
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Continuation of IT Modernisation Project of Department of Posts – Phase II
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Development of Integrated Passenger Terminal Building and associated works at Netaji Subhash Chandra Bose International Airport, Kolkata
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Approval of the pricing formula for procurement of bioethanol suggested by the Expert Committee, coupled with a floor price and a ceiling price
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Production of Iron Ore
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Technical Panel to Firm up Views on Major IT Cases
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Steps to Recover PSBS’ NPAS
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New Deposit Insurance Premium Structure
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Funds Earmarked for Infrastructure Development
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Reduction in Fiscal Deficit by increased Tax Collection
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Bank Credit to Minorities
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Second Quarter Review of Monetary Policy 2012-13 – Unhedged Foreign Currency Exposure of Corporates
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Second Quarter Review of Monetary Policy 2012-13 – Non-Performing Assets (NPAs) and Restructuring of Advances
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India Signs Loan Agreement with World Bank for US$ 70 Million for Additional Financing of Karnataka Health Systems Development and Reform Project
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The determination of undisclosed income consequent to search action and framing assessment under section 153C of the Act is different from regular assessment or it is not substitute for regular assessment. - AT
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Computation of capital gains - market price of the shares cannot be taken for the purpose of computation of capital gain as per sec. 48 when there is no under statement of sale consideration - AT
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Payment of interest to a cooperative bank which is not a scheduled bank - provisions of section 43B are not applicable - HC
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DTAA - Agreement For Exchange Of Information With Respect To Taxes With Macao Special Administrative Region Of People’s Republic Of China - Notification
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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
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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
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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
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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
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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
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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
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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
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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
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Deduction u/s. 10B with regard to surrendered business income during search proceedings u/s 132 - pro-rata deduction allowed. - AT
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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
Customs
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Measures for promoting cost efficiency of imports by Indian Trade and Industry – regarding. - Order-Instruction
FEMA
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Foreign Exchange Management (Deposit) (Amendment) Regulations, 2012 - Notification
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FEMA - (Transfer or Issue of Security by a Person Resident Outside India) (Amendment) Regulations, 2012 - Amendment in regulation 5 - Notification
Service Tax
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Service tax liability on the GTA services - recipient of the services - payment of service tax utilizing cenvat credit – appellant directed to make payment through TR6 Challan / PLA but no interest liability. - AT
Central Excise
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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
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SSI Exemption - fictitious company / dubious company - Penalty to be imposed on original company and no penalty on dubious company - HC
VAT
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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
Case Laws:
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Income Tax
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2012 (11) TMI 722
Deletion of Disallowance of Interest u/s 43B - payment of interest to a cooperative bank – held that:- Sec 43B of the Act is applicable only in respect of any amount paid as interest to a scheduled bank. A scheduled bank as defined in Explanation 4 to Section 43B of the Act would have the same meaning as contained in the Explanation to Section 11(5) (iii) of the Act. Shree Mahalaxmi Mercantile Cooperative Bank limited is not included within the meaning of a Scheduled Bank. Sub Clause (iii) of sub section 5 of Section 11 speaks about the deposit of any amount in a scheduled bank or co-operative Society engaged in banking but the same is of no consequence - Therefore, no fault can be found with the order of the Tribunal dated 26/10/.2009 - in favour of respondent- assessee and against appellant-revenue.
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2012 (11) TMI 721
Settlement of Case - the objections of the petitioner to the admissibility of the applications are turned down and the Settlement Commission has decided to proceed with the consideration of those applications on merits. - held that:- It is clear from the above that at this stage only a prima facie view is expressed by the Settlement Commission and rightly so because of the reason that the applications are yet to be considered on their merits. At this stage, it is still open to the Income Tax Department to raise objections, which are available under the law, opposing the said applications. It is only after the applications are considered on merits in the light of submissions made by applicants (respondents herein) and the opposition of the department on the merits of these applications that Settlement Commission would arrive at a final conclusion whether to accept the applications of the respondents or not and even if these are to be accepted on what terms. In exercise of extraordinary jurisdiction under Article 226 of the Constitution of India, it is not necessary to go into the validity of the impugned order at this stage. - petition dismissed.
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2012 (11) TMI 720
Rejection of Revision u/s 264 – Penalty - CIT stated that revision proceedings are contemplated only to mitigate the situation faced by the assessee who are unable to approach the appellate authority for relief. The Commissioner noted that the assessee had already exercised his right of appeal before the appellate authorities. He cannot claim relief under section 264 of the Act. - held that:- The fact that the assessee had preferred appeal against quantum additions would not therefore, take away his right to file revision application against the order of penalty. - Commissioner was wholly misguided in his approach. With respect to the Commissioner's stand that deletion of quantum additions not having achieved finality, the revision should be dismissed, also not in agreement.- The penalty was based on certain quantum additions. Such additions came to be deleted by the Commissioner(Appeals). Further appeal by Revenue before the Tribunal was rejected. When the Commissioner was deciding the revision petition of the assessee, what was prevailing was the order of the Tribunal. It may be that further appeal by the Revenue against such decision of the Tribunal was pending before High Court. Mere pendency of appeal before High Court or even admission would not annul the order of the Tribunal or even of course in absence of stay, keep it in abeyance. - Matter remanded back to CIT for fresh consideration.
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2012 (11) TMI 719
Business loss or capital loss - Loss arising on redemption of units as business loss - held that:- Going by the decision of the Apex Court in G.Venkataswami Naidu & Co. V. Commissioner of Income-Tax [1958 (11) TMI 5 - SUPREME COURT] that ultimately the intention and the circumstances alone have to have a bearing on the question as to whether the transaction is only of investment or in the nature of trade, since the question as to whether the income earned as an income from investment or an income arising from a nature of adventure in the nature of trade has to rest on a finding of fact, particularly with reference to the intention of the party herein and the surrounding circumstances, in the absence of any such finding of the Tribunal, matter remanded back to tribunal.
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2012 (11) TMI 718
Writ petition - Challenging Insertion of Conditions in third and forth provisos to Section 80 HHC (3) of the Act by amendment of Taxation Laws (Second Amendment) Act, 2005 - held that:- Supreme Court had transferred all the matters to Gujarat High Court in order to avoid confusion and difficulties in enforcement of conflicting judgments of different High Courts, it would be appropriate in these writ petitions to follow the judgment of the Gujarat High Court - Writ Petitions, other than the first four Writ Petitions, are disposed of in the terms of the order and judgment of the Gujarat High Court. The first four writ petitions, in any event, stand disposed of by the order and judgment of the Gujarat High Court.
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2012 (11) TMI 717
Transfer pricing - ALP - selection of comparable - incremental adjustment of Rs. 5.84 crores to the income returned by the assessee as Arm's Length Price (ALP) adjustment. - held that:- transfer pricing analysis has been made by the assessee as well as the authorities below only on the basis of internal comparables. At the same time, there is no case that instances of external comparables are unavailable. External comparables are available in the industry carried on by the assessee company. In an environment where sufficient number of external comparables are available, it is imperative to examine those external comparables also alongwith internal comparables so as to come to a balanced finding on the matters relating to deciding of ALP and consequential adjustment called for, if any - matter remanded back.
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2012 (11) TMI 716
Computation of Short term and long term capital gains - Cost of acquisition u/s 48 - Difference between actual sale price and market price at the time of sale - There is no allegation either by the Assessing Officer in the remand report or by the Commissioner of Income Tax (Appeals) that the assessee understated sale consideration; but addition has been made by taking into consideration the market price of the shares. Held that:- section 48 does not have any reference to the market value of the asset; but it refers only to the consideration received or accruing as agreed between the parties to the transaction. - market price of the shares cannot be taken as full value consideration for the purpose of computation of capital gain as per sec. 48 when there is no under statement of sale consideration - Decided in favor of assessee.
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2012 (11) TMI 715
Unexplained Addition on account of capital introduced by partners out of Agricultural Income – Held that:-In the case of Veeraiah,considering the smallness of the amount ie Rs.1 lakh and the fact that he was having some agricultural Lnad holding the genuineness of the source for credit in the capital account is not to be doubted and hence delete the same. With respect of M.Srikanth - Held that:- As the assessee has produced documents for land holdings only to the extent of 3.66 acres, which are in his father’s name,it is reasonable to restrict the addition in respect of credit entry in the account of M. Srikant to Rs. 4,00,000/- by allowing credit for the agricultural income of this partner as against the addition of Rs. 7,00,000/- made by the Assessing Officer and confirmed by the CIT(A). With respect to G Venkata Rao – Held that:- As the assessee furnished the details of holding of 11.3 acres ,the probability of earning agricultural income could not be ruled out. However, he had not appeared before the AO for personal examination due to his health condition and, therefore, we find it reasonable to restrict the addition to Rs. 4,00,000/- as against Rs. 7,00,000/- made by the Assessing Officer and confirmed by the CIT(A). Interest on Capital u/s 40(b) - With respect to the plea of the Counsel that the CIT(A) has not justified confirming the additions reading the interest of above three credits, AO noticed that the assessee had claimed interest of Rs.11,26,527/- on the capital account of the partners computed at the rate of 18% p.a. since the provisions of Sec.40(b)(iv) of Act permits interest on partners’ capital account @ 12%, the AO disallowed the balance excess amount of Rs.3,75,509/. with respect to additions u/s.68 of the Act is restricted and the addition in the case of B. Veeraiah has been deleted,issue is set aside to the AO to rework the interest after taking into consideration the additions sustained in the case of M. Srikant and G. Venkata Rao - In the result the appeal of the assessee is partly allowed for statistical purposes.
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2012 (11) TMI 714
Disallowance of Interest Paid - Assessment after search and seizure - AO observed that the assessee failed to prove with evidence like books of account and bank statement about the nexus between he interest claim and interest received. He also observed that assessee’s claim that interest paid on loans were utilized for earning income is not acceptable in the absence of evidence. - held that:- In the present case, there is no incriminating material found during the course of search to frame assessment u/s 143(3) read with section 153C of the Act. The determination of undisclosed income consequent to search action and framing assessment under section 153C of the Act is different from regular assessment or it is not substitute for regular assessment. Being so, the AO shall frame assessment on the basis of incriminating material found during the course of search action under sec. 153C of the Act. The Assessing Officer was not justified in making additions by way of disallowance of interest without any specific incriminating material on hand. - Decided in favor of assessee. Decision case of Vijaybhai N. Chandrani Vs. ACIT [2010 (3) TMI 770 - GUJARAT HIGH COURT], followed.
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2012 (11) TMI 713
Conversion of investments into stock in trade - Capital gain v/s Business income - reopening of assessment - Held that:- The provisions of section 45(2) cannot be made inapplicable to the instant case merely for the reason that the assessee, the owner of the capital asset, has neither converted into nor treated the impugned investment as the stock in trade voluntarily. In denial of the same to the assessee, the Revenue authorities have adopted the principle of ‘literal interpretation’ which must not have been done by the revenue in order to avoid the absurdity of interpretation as in view of the ratio of the Apex Court in the case of K P Verghese [1981 (9) TMI 1 - SUPREME COURT]. Therefore, AO is duty bound to make the assessment in accordance with the provisions of the Act including the provisions of section 45(2). Date of conversion for the shares sold in AY 2006-07 - Held that:- It is trite law that every assessment year is an unit of an assessment. Any transaction can be accounted by applying accounting entries, arriving at the cost of acquisition of shares or market price or their fair market value is not impossible considering the availability of material on record. So far as the capital gain relatable to the capital asset so converted for the assessment year 2006-07, 1.4.2005 has to be taken as the date of conversion, which cannot be altered in respect of the capital assets sold in the relevant previous year. If any other assets are sold in the preceding assessment year 2005-06, assessment for which is allegedly reopened, about which there is no clarity before us, the date of conversion would be 1.4.2004. As there is need for data for determining the assessable capital gains upto the date of conversion and the business income upto the date of sale of the impugned capital asset for arriving at proper taxable ‘capital gains’ and the ‘business income’ within the meaning of the said provisions restore the matter to the file of the AO for computation - partly in favour of assessee.
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2012 (11) TMI 712
Telecommunication Charges - reduction from the export turnover - held that:- expenses excluded from export turnover should also be excluded from the total turnover - Decision in ITO Vs Saksoft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] followed. - Decided in favor of assessee. Disallowance u/s 40(a) – Non deduction of TDS - Held that:- Legislative intent is clear that only the outstanding amount or the provision for expense (and not the amount already paid) is liable for disallowance if TDS is not deducted. Also, s. 40(a)(ia) creates a legal fiction by virtue of which even genuine and admissible expenses can be disallowed for want of TDS. Sec 40(a)(ia) can apply only to expenditure which is “payable” as of 31st March and does not apply to expenditure which has been already paid during the year.” - Order of the CIT(A) is set aside and restore this issue to the file of the Assessing Officer to decide the same - decided in favor of assessee. Decision in M/s Merilyn Shipping Transport & Others [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] [(SB)(Vizag)], followed.
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2012 (11) TMI 711
Administrative Expenditure - Director’s Remuneration - commercial expediency - In case of [CIT Vs. New Savan Sugar and Gur Refining Co. Ltd., 1989 (4) TMI 12 - CALCUTTA HIGH COURT] high court has held that even if a particular expenditure is un-remunerative, such expenditure is nonetheless is proper deduction, if such expenditure is made wholly and exclusively for the purpose of making or earning such income. Director’s Remuneration - Conscious selection of a director, who has to be paid extraordinary remuneration in order to avail of his services has been made by the company as a policy decision. The expenditure is for the purpose of earning income the amount paid as remuneration is deductible. Therefore, order of the CIT(A) is set aside and deleted the addition of Rs. 49,66,499/- made by the Assessing Officer on account of remuneration paid to director and administrative expenses - In the result, appeal of the assessee is allowed.
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2012 (11) TMI 710
Addition on account of interest payments to non genuine cash creditors - Held that:- Most of the repayments were made either during the periods when the assessment proceedings were going on or thereafter. In such circumstances, it was expected of the assessee to at least have the correct address at the time of repaying the amounts, especially when assessee had not filed any confirmation in respect of these deposits. Thus, majority of the addition is liable to be confirmed except where summons were served or where summons were not received as unserved - out of these two additions the assessee was given a relief of Rs.2.91 lakh in respect of unexplained credits and Rs.85,751/- in respect of interest thereon and balance addition was confirmed Addition u/s. 69B of the Income-tax Act - assessee is engaged in the cheque discounting business – Held that:- Transaction had been recorded on the next working day when the payment was made on earlier working day after the business hours - assessee had submitted the explanation which is rightly accepted by Ld. CIT(A) since the assessee had given the cash after the business hours or on Saturday and accordingly the transactions have been entered on the next working day. The explanation has been substantiated from various documents submitted by the assessee - addition deleted Addition made by estimating the commission income u/s. 145 of the Income-tax Act - assessee had shown the cash payment to various parties against cheque discounting - Assessing Officer was of the view that it is not possible for him to deduce accurate income and therefore on show-cause given to the assessee he rejected the books of account u/s 145(3) of the Act – Held that:- In addition to the specific addition made and to meet the ends of justice the AO made presumption that the assessee had understated commission income of such transaction and accordingly estimated the income of Rs.5 lakh over and above the commission declared by the assessee – CIT in his order by accepting the explanation of the assessee deleted the addition
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2012 (11) TMI 709
Addition on account of cash found at the time of search – Held that:- Assessing Officer after giving credit of business cash of Rs.44,213/- as determined by him on page-9 of the assessment order made an addition of Rs.4,49,558/- as undisclosed income of the assessee-company being unexplained cash - explanation of the assessee that the cash found for which the additions have been made was cash-in-hand available with other family members is without any cogent explanation or any evidence – addition upheld – In favor of revenue Addition - unaccounted sales – Held that:- Assessee has already debited all the purchases and expenses in the regular books of account. Thus sales found outside the books of account are nothing but undisclosed income of the assessee and therefore cannot be given the credit for purchases and the expenses and therefore gross profit addition cannot be made – against assessee Addition - unaccounted sales – Held that:- Sales shown by the assessee in the regular books of account tallies with the sales determined by the Sales Tax Department in the sales tax assessment order. The sales declared in the books of account are higher than sales found noted in loose paper – addition deleted – in favor of assessee Addition - unaccounted sales to customers - addition has been made by the Assessing Officer on the basis of notings in various loose papers – Held that:- Assessee has not issued any bill for cash sales and no record except the total amount of sales made during the day is kept and that the bills are issued only for credit sales and the sales made to franchises - in the absence of any expenditure brought on record outside the books by the assessee, the assessee cannot be given the benefit for application of gross profit – In favor of revenue Unaccounted Investment in valuables – alleged that assets are in the name of Shri Meenu M Agarwal and have not attempted to verify the source of the income from which the investment have been made. It is also a fact that Shri Manoj D Agarwal has made a disclosure of Rs.90,000/- as household goods and valuables under VDIS filed by him – Held that:- Source of income in case of the Director is not in his individual capacity but the income shown by the assessee-company and accordingly keeping in view the totality of such circumstances - source of investment in the said assets would logically be the undisclosed income of the assessee-company - AO was directed to treat the investment in question of Rs.60,000/- as made out of undisclosed income of the assessee company and no separate addition was directed to be made – in favor of revenue Addition on account of expenditure incurred in cash – alleged that Shri Kumbharam Jhat could not properly explain how the papers on which details regarding cash payment are made in his handwriting were found and seized from the residential premises of the Director at Rasranjan Complex – Held that:- Shri Kumbharam Jhat in his statement given the name of the parties to whom he has supplied the labour to which the said notings are pertaining, addition cannot be made in the hands of the assessee-company as unaccounted expenditure. The Director of the assessee-company has also explained as to how by mistake the said loose paper has been carried to his residence from factory and as a result, it was found from his residence – addition deleted – In favor of assessee Addition - unaccounted salary to Shri Kiritkumar S Shah – Held that:- In the absence of any incriminating documents found during the course of search and also the Assessing Officer having not given any opportunity to the assessee for cross examination of the person concerned – addition deleted- in favor of assessee Interest u/s.158BFA(1) - assessee contended that Xerox copies of loose papers were made available to the assessee at a very later stage during the assessment proceedings and therefore there was a delay in filing of the return of income – Held that:- Provisos attached to Section 158BFA(2) of the Act have not been considered by the authorities - relief has been granted at the two stages of appeal, hence, that effect ought to have been given while redetermining the quantum of penalty u/s 158BFA(2) of the Act considering the applicable provisions of the said section involved - appeal of assessee is allowed for statistical purposes 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
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2012 (11) TMI 708
TDS u/s 194C - Desallowance u/s 40(a) - payment to contractor / sub contractor - held that:- The authorities below have not examined the terms and conditions under which the AOP had transferred the amount of Rs.55,24,769/- in the account of one of its member. - From the orders of the Revenue Authorities, it is not evident that whether they have examined the correct nature of the payment and that whether the nature of payment was from a contractor to a sub-contractor. First of all, this preliminary enquiry has to be satisfied so as to arrive at the applicability of the provisions of section 40(a)(ia) r.w.s. 194-C of IT Act. - matter remanded back. Invocation of section 40A(2)(b) – Held that:- For the purpose of invocation of this section one of the essential ingredient is that where an assessee incurs any expenditure and the AO is the opinion that such an expenditure is excessive, then the unreasonable amount is not to be allowed as a deduction - whether the impugned payment to its member was in the nature of an expenditure; has not been clearly established. To ascertain and determine the nature of payment the clauses of the agreement and the surrounding circumstances of the case are required to be examined by ld.CIT(A) in the light of the facts narrated by the AO - appeal of the Assessee is allowed but for statistical purposes
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2012 (11) TMI 707
Cancelation of registration under Section 12AA – 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”. - CIT directed not to cancel the registration u/s.12AA(3) of IT Act. - Decided in favor of assessee.
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2012 (11) TMI 706
Disallowance on account of Guarantee Commissions – guarantee commissions paid to directors on account of guarantee given by them to the bank. - Following the decision of court in CIT v. Metalizing Equipment Co. (P) Ltd. (2008) as reported 8 DTR 12 (Raj)Held that:- since no difference in facts could be pointed out by DR of the Revenue, there is no reason to take a contrary view in the present year and hence, by respectfully following the precedent, issue is decided in favour of assessee in this year also - assessee’s appeal is allowed. Interest Income and Service Charges – Interest income is to be assessable as income from business or income from other sources and whether neeting should be allowed or not - Following the decision of court in case of [CIT v. Shri Ram Honda Power Equip 2007 (1) TMI 86 - HIGH COURT, DELHI] held that:- even if interest is earned on fixed deposits for the purpose of availing of credit facilities from the bank, it does not have a nexus with the export business and therefore, has to necessarily be treated as income from other sources and not business income. They have also added a cavet as per which, if in a given case, the Assessing Officer has held that interest income is business income and this aspect has not been challenged by the Department, then that question can not to be permitted to be re-opened and then the only question will be if netting should be allowed. Since this aspect is squarely covered in favour of Revenue and against the assessee by the judgment of Hon’ble Delhi High Court, this aspect is decided against the assessee and Ground of netting off of the assessee is rejected because in the present case, AO has treated the interest income as income from other sources. On netting aspect,it is held by Hon’ble Delhi High Court in this very case that to the extent the assessee can establish the nexus between interest payment and interest income by showing that interest expense was incurred for the purpose of earning interest income then to that extent netting should be allowed and only such net interest income should be considered for exclusion to the extent 90% from business profit as per clause (baa) of the Explanation to u/s 80HHC.- Decided in favor of assessee. Processing charges - deduction u/s 80HHC - held that:- such processing charges are hit by clause (baa) of Explanation to Section 80HHC and therefore 90% of the same should be excluded from the business profit and such receipts should also be included in total turnover for the purpose of computing deduction allowable to the assessee u/s.80HHC. - decided against the assessee. Disallowance of Expenses – Gift to employees - Held that:- Expenditure incurred under the welfare scheme for its employees to promote employer – employee relationship is held to have been incurred in the interest of business promotion. The disallowance made is, therefore, cancelled. Disallowance on current repairs of machinery.- Held that:- repairs and overhauling of the machines is in the nature of current repairs aimed at preserving and maintaining the already existing machines. No new assets have come into existence nor is this the proposition of the Assessing Officer. Under the circumstances, the expenditure incurred by the appellant is held to be revenue in nature. The disallowance made is cancelled. The Assessing Officer is directed to withdraw depreciation already allowed while giving effect to this order. Deduction u/s 80HHC - Appellant is accounting income on account of credit for self generated power separately as income and not reducing it from the GEB bills since the GE shows it separately as a credit. Under the circumstances, this cannot be covered under any of the items in Explanation (baa). Under the circumstances, the exclusion of 90% of the said amount from the profits of the business for the purposes of deduction u/s.80HHC is cancelled. Similarly, the warranty provision written back as income is also held to be not covered under Explanation (baa) to sec. 80HHC. Under the circumstances, the action of the Assessing Officer in excluding the said amount from the profits of the business for the purposes deduction u/s.80HHC is also cancelled. The Assessing Officer is directed to re-compute the deduction u/s.80HHC accordingly - appeal of Revenue is dismissed - In combine result, appeal of assessee is partly allowed whereas Revenue’s appeal is dismissed.
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2012 (11) TMI 705
Payment made to the partners for hiring the tractors - excessive expenditure u/s 40A(2)(b) - held that:- A.O. should have called for the bills etc and might have examined the concerned partners and outsiders to unearth the truth before alleging that the payment made by the assessee to the partners is excessive and unreasonable. In the absence of any material being brought on record by the A.O. in support of this allegation that the amount paid by the assessee to the partners is unreasonable and excessive, disallowance made by him is not sustainable. - Decided in favor of assessee. Interest free advances – held that:- Regarding this contention that these advances are business advances, no satisfactory evidence could be brought on record by the Ld. A.R. and hence, this argument is also rejected. Hence, it is seen that no interest free fund is available with the assessee which can be used for giving interest free advances and hence, we are of the considered opinion that no interference is called for in the order of Ld. CIT(A) on this issue. - Payment of interest rightly disallowed - Decided in favor of revenue. Disallowance of Employees' contribution to Provident Fund – The same was paid as per the statutory obligation for this purpose of business and therefore, there is no justification for disallowing the same. Following the decision of court in case of [CIT Vs Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT] held that;-Payment of PF have been made before the due date of filing of return of income - no disallowance can be made regarding payment of employees’ contribution not PF – disallowance is deleted - Ground is allowed. Disallowance at 1% of the expenses out of diesel purchase, oil and grease, repairs and maintenance, octroi, freight and cartage expenses. - held that:- A.O. himself has considered the value of defective vouchers at 1.5% of the total expenses and on this basis, he confirmed the disallowance to the extent of 1%. We are of the considered opinion that if majority of vouchers are available and are proper and only 1.5% vouchers are defective, no disallowance should be made on ad-hoc basis without pointing out any specific item of inadmissible expenditure. Disallowance on account of vehicle running expenses and maintenance and telephone expenses. Held that:- 10% disallowance out of vehicle running expenses and maintenance and telephone expenses is reasonable and hence, order of CIT(A) on this issue is confirmed. Deduction u/s 40(a)(ia) – held that:- assessee is seeking direction for allowing deduction in the year of payment of TDS - no such direction is required because it is in the Act itself that if the TDS is paid in a subsequent year, deduction is allowable in that year as per the provisions of Section 40(a)(ia) of the Act and hence, no such direction is called for - This ground is also rejected. Interest on Interest free Advance – Held that:- Advances were given for the business purpose and hence no disallowance of interest at the rate of 15% was called for - without there being any nexus found with borrowed funds the disallowance be deleted. Allowance of Rs.17,470/- u/s 40A(3) - Held that;- On the facts of the case, disallowance of Rs.17,470/- is unjust and genuineness of expense having not been doubted the same be allowed - In the combined result, all the three appeals of the assessee are partly allowed and the appeal of the revenue is dismissed.
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2012 (11) TMI 704
Addition of ‘on money based on the seized papers of estimated sales - Addition was made by the A.O. for the assessment year 1998-99 to assessment year 2004-05 which was deleted by CIT(A). But there is no mention of the present assessment year in the seized material. In assessment year 2005-06, the tribunal has deleted similar addition in assessee’s own case by following the Tribunal order for assessment year 2004-05 in which, it was held that in the absence of any cogent evidence, there is no scope for extrapolation. Since, in the present year also, there is no evidence regarding receipt of any on money, addition cannot be made on the basis of seized material relating to earlier year. By respectfully following the Tribunal decision in assessee’s own case, issue is decided in favour of the assessee - revenue’s appeal is rejected. Deduction u/s. 80IB – Held that:- Assessee is not the legal owner of the land and was carrying on the activity of developing and building housing project on a land which is not owned by him There is a complete identity between the assessee referred to in Section 80IB(S) and the undertaken referred to in section 80IB(10) and this identity becomes further clear from rule 18BBB prescribing the Form No. 10CCB of audit report to be furnished by the assessee by virtue of Section 80IB(13) r.w.s. 80IA(7) - matter may be restored back to the file of CIT(A) for a fresh decision - In the result, appeal of the revenue stands partly allowed for statistical purpose.
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2012 (11) TMI 703
Dis allowance of account of payment of commission - The assessee claimed a sum of Rs.84,47,845/- as deduction towards Commission payments, out of which a sum of Rs.79,46,846/- was claimed to have been paid to Shri Sandeep Mehta, proprietor of M/s Safal Inc., Mumbai. - The AO also recorded a statement u/s 131 of the Act from Shri Sandeep Mehta and in the said statement also he averred that he has received only Rs.9,71,000/- from the assessee company. - AO made the additions but CIT(A) deleted the additions - held that:- The action of the AO in not affording the opportunity of cross examination to the assessee is against the principles of natural justice. In view of the above discussions, we are of the view that the impugned issue requires reconsideration at the end of the assessing officer, in which the AO should invariably provide opportunity of cross examination of Shri Sandeep Mehta to the assessee. Section 43B - Disallowance relating to the “Finance charges” claimed by the assessee - payment of scheduled bank - Held that:- the assessee did not file any evidence to show that the above cited Co-operative banks would not fall in the category of Scheduled Bank as defined in sec. 11(5)(iii) of the Act, more particularly the copy of Second Schedule to the Reserve Bank India Act, 1934. - matter remanded back. Share application money - held that:- here is no dispute with regard to the fact that the impugned amount of Rs.36.60 lakhs pertains to Share application money and the assessee has furnished the names and addresses of the share holders along with other details that were available with it. - Decided in favor of assessee.
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2012 (11) TMI 702
Interest income as income from other sources - disallowance of various expenses and depreciation - commencement of business – held that:- Activity of the company during the year was only of a pre-operative nature and commencement of business could be said to have started only when it started exploitation of the project. The object of the company was to set up growth centres and thereafter to exploit them. It was the second limb of activity which provided for regular business activity. Thereafter, building repairs, rewiring, installation of lift, etc., were carried on by the assessee company for the purpose of converting the residential accommodation to business and storage accommodation - order of the CIT(A)is confirmed and dismiss the appeals of the assessee - issue involved in these two appeals is squarely covered in favour of Revenue and against the assessee by the Tribunal decision in assessee’s own case for A.Ys 1998-99 to 2001-02 and no reason to take a contrary view in the present two years and hence, by respectfully following the precedent, issue is decided against the assessee in the present two years also - In the result, both the appeals of assessee are dismissed.
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2012 (11) TMI 701
Addition made on account of disallowance of Administrative & Other Expenses u/s.14A – Held that:- In the present appeal as well undisputed fact is that only one dividend warrant of Rs.4,55,829/- was received by the assessee. Indeed it was highly improbable and beyond rational view that in order to earn a dividend of Rs.4,55,829/-, that too by a single dividend warrant, the assessee had incurred a huge administrative expense as assessed by the AO. Newly inserted subsections to section 14A would be applicable from the Asst.Year 2007-08 and Rule 8D shall be effective from A.Y. 2008-09 because of the trite principle of law that the law which could apply to an Assessment Year is the law prevailing on the 1st day of April. Since the Respected Lower Authority has added only a trifle amount of Rs.60,000/- by disallowance u/s.14A, therefore without disturbing the same we hereby dismiss this ground of the Revenue.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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).
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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.
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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.
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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
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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
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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
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Customs
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2012 (11) TMI 736
Condonation of Delay and stay of Impugned order - held that:- As the Impugned order is an ex parte order and the appellant left for Dubai in the year 1997 and came back in 2003, therefore, they are not aware whether any show cause notice or notice of hearing was sent to their address or not, therefore, in the interest of justice, matter should go back to the adjudicating authority for fresh adjudication after giving a reasonable opportunity to the appellant to present their case - impugned order is set aside and sent the matter back to the adjudicating authority for fresh adjudication after giving a reasonable opportunity to the appellant to present their case - appellant directed to appear before the adjudicating authority personally on or before 15th November, 2012 to fix a date for personal hearing - appeal and applications are disposed of in the above terms.
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2012 (11) TMI 735
Valuation - appellant imported a consignment of perfumes, deodorant, cosmetics and toiletries - declared value was rejected - valuation was done as per Rule 8 of the Customs – Held that:- In this case, we have observed that neither the time prescribed in the IPR Rules have been followed nor the conditions laid down in Rule 3 has been complied with. Therefore, provisions of IPR Act or Rules are not applicable in this case On the same day, another Bill of Entry No. 713117 has been filed by the same CHA for another importer having identical goods, which were allowed to be released. Therefore, discrimination has been done with the appellant, which is in violation of the principle of natural justice Goods were assessed after loading the value and, thereafter, re-enhancement has been done. Section 14(1) of the Customs Act provides for determination of value of such goods or like goods ordinarily available for sale, at the time and place of importation - method of valuation and market survey is not proper and no opportunity to the appellant were given to cross-examine the persons who have given the data for the valuation - No reason has been cited as to why the value of the contemporaneous import is rejected and there was no reason cited doubting the value furnished - order set aside and appeal allowed
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2012 (11) TMI 734
Duty, penalty and interest - application under Section 129E of the Customs Act, 1962, seeking waiver of pre-deposit – Held that:- Petitioner has good case on merits - petitioner has already deposited a sum of Rs. 85,48,462.40 ps. towards pre-deposit. Since the petitioner is not liable to pay any amount as per the order at Annexure-F, the direction of the Appellate Tribunal to deposit the amount in a sum of Rs. 2.5 crores towards pre-deposit is unreasonable -respondent is directed not to recover the balance of the disputed tax
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2012 (11) TMI 730
Refund of Interest - claim of interest on refund of interest - adjudicating authority sanctioned interest at the rate of 6% - held that:- Order of Commissioner (Appeals), in terms of which interest of Rs.52,631/- was sanctioned to the respondents stand set aside by the Tribunal and inasmuch as the proceedings have been kept alive by the Revenue by filing the appeals before the Tribunal - impugned order of Commissioner (Appeals) is required to be set aside - appeal filed by Revenue is allowed.
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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.
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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
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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.
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Corporate Laws
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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.
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Service Tax
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2012 (11) TMI 742
Penalty u/s 76 & 78 - Commissioner (A) set aside the levy as both the penalties could not be simultaneously imposed - Held that:- As decided in Asstt. Cce & Ors.Versus V. Krishna Poduval & Ors. [2005 (10) TMI 279 - KERALA HIGH COURT] the provisions (Sections 76 and 78) are mutually exclusive and that, while Section 76 does not require mens rea, Section 78 involves evasion with guilty mind thereof. As the two penalties can be simultaneously imposed. Thus the conclusion reached by the Commissioner (Appeals) is inconsistent with his reasoning - in favour of revenue.
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2012 (11) TMI 741
Input services - Cenvat Credit - Manpower Supply Services, Booking Services, Pest Control Services utilised in residential colony, Guest House and Sport Complex or Services utilised for the persons who are not employees of the Company - held that:- There has to be nexus between manufacture and input service to avail Cenvat Credit - It is not admissible that manufacture was not feasible if residential colony for employees is not provided near the factory Extended period of limitation - held that:- demand for service tax for the period beyond one year cannot be sustained and has to be set-aside and demand for the period from March 2009 to June 2009 only can be sustained Interest is required to be paid. As regards the penalty, in view of the fact that issue involved is a pure question of interpretation of law, question of imposition of penalty does not arise. Accordingly, penalty is set-aside - Appeal is decided holding that appellant is eligible for consequential relief if any. Decision in [CCE Versus MANIKGARH CEMENT 2010 (10) TMI 10 - BOMBAY HIGH COURT] followed.
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2012 (11) TMI 740
Failure to file Return of Income - Recovery of service tax on GTA services prior to 2004 after validating the provisions post Laghu Udyog Bharati case (1999 (7) TMI 1 - SUPREME COURT OF INDIA) - Held that:- Assessee could not be faulted with for not having filed a return after getting himself registered. More particularly, when one considers the language employed in the Proviso below sub-section (1) of Section 68 and the provisions of Section 71A of the Finance Act, 1994, it is not possible to state that the language of the Statute is so clear that any default can be fastened on the respondent-assessee. further, as the matter has been decided by two High Courts in favour of assessees which are directly opposite to the decision given by the Larger Bench and since the Larger Bench has not considered the above decisions of the High Courts, the final order should be passed based on the decisions of the High Courts and not based on the decision of the Larger Bench of Tribunal - demands issued after 2004 or later in respect of the short levies in dispute in case filed by assessees are not maintainable - Consequently, appeals filed by the assessees are allowed. In this case Notice was issued after retrospective amendments made by Finance Act, 2001 but before the retrospective amendments by Finance Act, 2003 and Finance Act, 2004. But the question whether such notices issued after amendment made by Finance Act, 2001 was valid for recovery of taxes short paid during 16-11-97 to 02-06-98 was the issue before the Tribunal in the case of L.H. Sugar Factories Ltd (2004 (1) TMI 111 - CESTAT, NEW DELHI) and the Tribunal answered the question in the negative and the decision has been affirmed by the Hon. Apex Court. Further after amendment made by Finance Act 2004, Revenue issued a corrigendum to the notice dated 01-11-04 quoting the amendments made in Finance Act, 2004. This has to be essentially understood as a notice issued on 01-11-04 when the corrigendum was issued. The ratio of the decisions of the High Courts quoted in para 13 above is to the effect such notices issued in 2004 also cannot be enforced. Therefore in this case also the decision goes in favour of the assessee. So this appeal filed by Revenue is rejected.
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2012 (11) TMI 739
Service tax liability on the GTA services - recipient of the services - payment of service tax utilizing cenvat credit – Held that:- Appellant is not providing output services as categorized in Rule 2(p) of the Cenvat Credit Rules, 2004, debiting the said amount in the Cenvat account needs to be rectified by directing the appellant to debit or pay the entire amount invoked in both the appeals as service tax paid for receipt GTA services through PLA or by TR-6 challan - appellant is eligible to avail the Cenvat credit which he has debited during the relevant period, towards discharge of service tax liability. Interest liability – Held that:- No intention to run away from the service tax liability and having deposited the same through the Cenvat account, the appellant has not retained any part of the government dues with him with intention to evade the same. Accordingly, the interest liability as confirmed by the lower authorities does not arise at all Penalty – Held that:- Appellant having discharged the service tax liability through Cenvat account - penalties imposed by the lower authorities set aside
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2012 (11) TMI 729
Waiver of pre-deposit - denial of CENVAT Credit of duty paid on the products which were sent to job workers - appellant herein availed CENVAT Credit and utilized the goods for rendering the output services of ‘Repair & Maintenance’ and utilized said credit for discharge of Service Tax liability – Held that:- providing such service input or input services which go into provision of such output service, if any tax or duty is paid on such input services or inputs, the appellants are eligible to avail CENVAT Credit - waiver of pre-deposit allowed
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2012 (11) TMI 727
Club and Association Service – retrospective exemption - Denial of cenvat credit for common services - Export Promotion Council for Handicraft is engaged in arranging exhibitions etc. They have permanent members – alleged that membership fee collected from the Members is liable to service tax under the category of “Club and Association Service” – Held that:- Club and association service”, on which the demand of service tax stands confirmed by the Commissioner may become exempted services in view of the provisions of Section 96J, for which the matter is being remanded - there may be occasion to deny credit in respect of common cenvatable services used in both output services and club and association service. Commissioner is directed to look into the said aspect afresh, after dealing with the appellants’ contention that the denial of credit to the extent of 90% would be applicable only in respect of common cenvatable services and not in respect of services exclusively utilized for providing business exhibition service - provisions of Rule 6(5) are required to be taken into account for the purpose of denial of credit
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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.
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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.
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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
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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
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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
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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
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Central Excise
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2012 (11) TMI 733
Waiver of pre-deposit of duty, Interest and Penalty - In respect of Sugar Syrup captively consumed on the ground that the syrup is further used in the manufacture of exempted biscuits which are cleared nil rate of duty - held that:- Commissioner (Appeals) had not decided the appeal on merits and dismissed the appeal for non-compliance with the conditions of the stay order - waiving pre-deposit of dues the impugned order is set aside and matter is remanded back to the Commissioner (Appeals) to decide the appeal on merits after affording an opportunity of hearing to the appellant - appeal is disposed of by way of remand.
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2012 (11) TMI 732
CENVAT Credit on bought-out spares of the transformer - denial as applicants are trading the spare parts of the transformer - Held that:- The matter needs reconsideration by the adjudicating authority as the applicants in reply to the show-cause notice have categorically stated that the applicants are supplying the operational spares along with transformer as per the order received from their foreign customers. This aspect shall be taken into account while reconsidering the matter. Impugned order is set aside after waiving the pre-deposit of dues and the matter is remanded back for de novo adjudication.
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2012 (11) TMI 731
Cenvat credit on capital goods - duty paying documents - denial as invoices do not bear the pre-printed sl. Nos. and goods was received at the manufacturing unit at Bhopal rather than Head Office - Held that:- The goods covered under the invoices and the bills of entry were actually received at the appellant's factory at Bhopal and those goods were used for manufacture of capsule making machine. It is also undisputed that excise duty/ additional custom duty was paid on those goods which are subject matter of the invoices and bills of entry. As decided in CCE, Ahmedabad vs. Satyen Dyes [2001 (11) TMI 102 - CEGAT, NEW DELHI] when the sl. no. on the invoices have been stamped by the franking machine or typed by typewriter it is sufficient compliance of the statutory requirement of Rule 52A(6) of the Central Excise Rule and such invoices are valid document for modvat credit. When invoices clearly mentioned appellant factory Bhopal as the consignee that there is no justification for denial of modvat credit in relation to those goods. As decided in Gujarat Heavy Chemicals Ltd. vs. CCE, Rajkot [2005 (6) TMI 177 - CESTAT, MUMBAI] that when bills of entry show the address of the head office while the goods sent to the factory of the assessee, cenvat credit would be admissible. Thus Cenvat credit demand, interest and penalty is set aside - in favour of assessee.
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2012 (11) TMI 728
Export of goods – re-import after rejected by the importer - limitation of one year - benefit of the Notification No. 52/03-Cus., dated 31-3-03 and to release the goods without payment of duty – Held that:- When the goods were allowed for export, that date should be construed as date of export and that is 19-6-09. It is undisputed fact that goods came back to India on 11-6-10. That is 8 days before expiry of one year from the date of loading of the goods to the ships - there is no reason to deny the benefit of notification in question to the appellant since reimport within one year of export is duty free - appeal is allowed.
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2012 (11) TMI 726
100% EOU - imported inputs duty-free under Notification No. 52/2003-Cus. ibid and also on payment of duty without availing the benefit of this notification - they cleared inputs ‘as such’ to their sister unit in the Domestic Tariff Area (DTA) - department objected to above utilization of CENVAT credit for payment of duty on the imported inputs cleared ‘as such’ to the DTA, on the ground that the duty paid on the DTA clearances consisted of elements of customs duties and therefore no CENVAT credit could be utilized for such payment – Held that:- respondent was a DTA unit prior to December 2007. - In this case, they had procured inputs and capital goods by way of import and also from indigenous sources and had taken CENVAT credit of CVD/Central Excise duty paid thereon. - Respondent paid duty of excise on the imported inputs cleared ‘as such’ to their sister concern in DTA - respondent was entitled to pay such duty either wholly from PLA or partly from PLA and partly from CENVAT account. There is no law denying this right to a 100% EOU – in favor of assessee
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2012 (11) TMI 725
Exemption notification No. 2/2001, dated 27-1-2001 – The petitioner-manufacturer of excisable goods has filed this petition primarily praying for a direction to the State Government for issuing certificate showing that petitioner has manufactured goods namely, Tarpaulin for relief and rehabilitation work in earthquake affected areas in Gujarat through approved agency. - Held that:- Primarily stand of the Government is that the petitioner failed to demonstrate that Tarpaulin manufactured was donated by the petitioner. It is the case of the petitioner that such Tarpaulin was purchased by the agricultural department and thereafter in turn supplied to the earthquake affected people. According to the department, this would not fulfill the requirement of exemption notification. - Respondents District Magistrate, Palanpur, is directed to examine the factual aspects
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2012 (11) TMI 724
Waiver of the pre-deposit - denial of exemption Notification No. 75/84 – Notification No. 75/84 is for kerosene which is used as an illuminant in oil burning lamps – Held that:- Notification No. 75/84 under tariff heading exempts the goods falling under Chapter 22, 27 or 29 is subject to the condition enumerated in the said notification - serial No. 52 of the said notification, the product described is kerosene of Chapter 27 as partially exempted and there are no conditions attached to that - product manufactured by the appellants fall under Chapter 2710.29 which would prima facie get covered under the said notification at least for the purpose of stay - appellants have made out a prima facie case for complete waiver of the pre-deposit
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2012 (11) TMI 723
Abatement in case of non-production of goods - production / capacity based duty - packing machines were sealed on 31-1-2010 by the departmental officers. The machines were unsealed on 2-3-2010. The appellants claimed abatement from 1-2-2010 to 1-3-2010 which is a continuous period in excess of 15 days - whether the continuous period from 1-2-2010 to 1-3-2010 can be considered as one single continuous period or whether it consists of two periods namely from 1-2-2010 to 28-2-2010 and a separate period of one day namely 1-3-2010 – Held that:- There is nothing stated in Rule 10 to the effect that a continuous period falling under different calendar months should be split into periods falling under each month and abatement determined separately. The fact that duty liability is determined for each month separately cannot be reason to read extra words into the said Rule. So long as the days of closure are continuous, even if the days fall in different calendar months it will constitute one continuous period and the abatement under Rule 10 is to be determined accordingly - appeal succeeds
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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CST, VAT & Sales Tax
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2012 (11) TMI 743
Refund of input-tax credit - 100 per cent export oriented unit - zero rated sale under CST - sale in the course of export - Tamil Nadu Value Added Tax Act- Held that:- By virtue of section 18(1) of the TNVAT Act, 2006 the petitioner is entitled to input-tax credit or refund of tax if it is a sale specified under sub-sections (1) and (3) of section 5 of the CST Act, 1956, by treating it as zero rated sale - No provision of law has been shown as to how the sale to 100 per cent EOU cannot be termed as zero rated sales - petitioner has established that the sale was in the course of export supported by the bill of lading, export invoice, etc., (i.e) the documents in support of the export, the Department cannot contend that section 18 of the TNVAT Act, 2006, will not apply. The term 100 per cent EOU is self-explanatory and it has not been properly appreciated by the authority. All that section 18 of the TNVAT Act, 2006, provides for is that sale should be in the course of export. If the EOU has made the export and proof of export has already been brought on record, section 18 of the TNVAT Act, 2006, has to automatically apply. – refund claim allowed
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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.
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Indian Laws
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2012 (11) TMI 738
Workmen's Compensation Act - one Chellapandian, who was engaged for the construction of water treatment plant died in the course of accident arising out of his employment - compensation - contention raised by the petitioner that the first respondent-Deputy Commissioner of Labour II has no jurisdiction to straight away pass the award of compensation without adjudicating the issue by not only making them liable to pay the compensation but also fixing the liability of compensation- Held that:- Writ petition is disposed of with a direction to the Deputy Commissioner of Labour-II, Chennai-6 to receive objections from the petitioner and thereafter to adjudicate the liability issue regarding making payment, determine the same after giving opportunity to exercise power under Section 19 and 20 of the Workmen's Compensation Act, 1923 In terms of Section 10-B of the Act, in case of any fatal accident or serious bodily injuries, it requires the employer to give appropriate notice to the Commissioner and apart from the same, liability of the Principal employer in case of contractor failed to pay the same is also vested under the Act - Contractor is prohibited from the payment of liability under Section 17 of the Workmen's Compensation Act and it has been declared as null and void and any settlement of compensation in respect of fatal injuries must be in satisfactory to the authorities.
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2012 (11) TMI 737
Arbitration and Conciliation Act - Challenge to the award - whether the award is contrary to the public policy of India - held that:- With IFSL having withdrawn the anti-injunction suit filed by it in this court questioning the continuation of the confirmation proceedings, there was no restraint as far as those proceedings were concerned. In terms of the New York law as well as New York Convention, it was open to IFSL to point out to the New York Court in the confirmation proceedings that recognition ought not to be granted since the Award was opposed to the public policy of India. IFSL did not avail of such opportunity. Although there was no express exclusion of the jurisdiction of the Indian courts, the parties intended that the further proceedings concerning the challenge, if any, to the Award had to take place in the New York Courts and that the judgment concerning the recognition of the Award may be entered by “any state or federal court of competent jurisdiction. This Court is of the view that IFSL cannot invoke jurisdiction of this Court under Section 34 of the Act to challenge the impugned Award. Consequently, the Court does not consider it necessary to examine the question whether the Award is opposed to the public policy of India. It leaves the said contention to be decided at the appropriate stage as and when Amaprop seeks enforcement of the Award in India under the Act.
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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.
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