TMI Tax Updates - e-Newsletter
November 28, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Existence of an an oral agreement does not mean it is a concluded contract which could be enforced by law - HC

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• Deduction u/s 80O or 80HHE - one cannot make Section 80-O as an alternate to the deduction under Section 80HHE for the purpose of better tax deduction - HC

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• VAT -inputs used for generation of electrical energy in the Captive Thermal Plant which is used in manufacture of finished product -input tax credit allowed -HC

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• Constitutional validity of levy of entry tax on imported goods - Plant, brought in knock down condition, is a combination of machinery -liable for entry tax -HC

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Articles

1. Understanding service tax in education sector

   By: Meenu Garg

News

1. Third Meeting of the Advisory Council of ‘National Mission for Justice Delivery and Legal Reforms’ Focuses on issues that can help Reduce Pendency of Cases; Stresses need to Speed up Establishment of more Gram Nyayalayas

2. Review of the Prudential Guidelines on Restructuring of Advances by Banks/Financial Institutions

3. Ministry of I&B Approves Anti Piracy Initiative in the XII Plan

4. Focus on Increasing Rice Production in Eastern States gives Good Results

5. 100% FDI Permitted for Cold Storage Facilities

6. Auction for Sale (Re-issue) of ‘8.97 per cent Government Stock, 2030’

7. Auction for Sale (Re-issue) of ‘8.33 per cent Government Stock, 2026’

8. Auction for Sale (Re-issue) of ‘8.07 per cent Government Stock, 2017-JUL’

9. Additional information for grant of certificate of initial/permanent registration as Debenture Trustee (to be submitted along with Form - A)

10. Achievement in Food Processing Industries Sector

11. 62 Cold Chain Projects Approved by FPI Ministry

12. IMG on Coal Review 66 Coal Block

13. Price Pooling of Coal

14. Import of Coal

15. Auction of Government Stock

16. Developing a BUSINESS INDEX that will Reflect the Country’s Overall Corporate Environment

17. Expenditure on Corporate Social Responsibility

18. Time Taken to Open Business in India

19. Action Against Vanishing Companies

20. Government of India announce the sale of three dated securities for Rs. 13,000 crore on November 30, 2012

21. Setting up of a Special Cell for SCs /STs in Scheduled Commercial Banks

22. Praful Patel Calls for Growth of Capital Goods Industry in India

23. Export Duty on Iron Ore

24. Export of Iron Ore

25. Our Constitution has Stood the test of Time as it has Ensured Peaceful Reconstruction and National Renewal, Cooperative Federalism and inclusive Development - Dr. Ashwani Kumar The Law & Justice Minister Addresses The Law Day Function

26. Sourcing Norms for Single/Multi Brand Retail

27. FDI in Various Sectors

28. FDI Inflow

29. National Productivity Council

30. Cancellation of Coal Blocks

31. Allocation of Coal Blocks

32. Deduction of bank guarantees of coal companies

33. Restructuring of Textiles Sector

34. Textile Parks

35. Cotton Exports

36. Hank Yarn Obligation

37. Projects to Promote Textile Workers

38. Setting up of Steel Plants

39. Kelkar Committee's Recommendations to Prune Subsidy Bill

40. Spices Park at Guntur

41. FDI from Pakistan

42. Export of Dairy Products

43. Data Secure Status

44. Trade of Agricultural Products

45. Import of Cheap Chinese Goods

46. Trade of Generic Drugs

47. Rubber Production

48. Treaty Between Tea Board and European Tea Committee

Notifications

Customs

1. F. No. 437/72/ 2012 – Cus. IV - dated 27-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Ivax Paper Chemicals Limited, Ivax House, H.No. 6-3-248/B, Road No.1, Banjara Hills, Hyderabad

2. F. No. 437/65/2012- Cus. IV - dated 27-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s KK International, Thane, to the Commissioner of Customs (Imports), JNCH

3. F. No. 437/55/ 2012 – Cus. IV - dated 27-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Bhartia Sales Corporation, No.1001, Orchid Vasanth Road, Malad East, Mumbai

DGFT

4. 25 (RE – 2012)/2009-2014 - dated 22-11-2012 - FTP

Amendment in policy for export of Milk Powders including Whole Milk Powder, Dairy Whitener and Infant Milk Foods.

FEMA

5. 245/2012 - dated 12-11-2012 - FEMA

Amendment in Schedule I - Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)

Income Tax

6. 51/2012 - dated 23-11-2012 - IT

Rajiv Gandhi Equity Savings Scheme, 2012 - In This Scheme shall apply for claiming deduction in the computation of total income of the assessment year relevant to a previous year on account of investment in eligible securities under sub-section (1) of section 80CCG of the Income-tax Act, 1961.

7. 49/2012 - dated 7-11-2012 - IT

Amendment in DTAA - Agreement for avoidance of double of fiscal taxation and preventionevasion with foreign countries - Uzbekistan

Circulars / Instructions / Orders

Income Tax

1. F. No. HRD/CMD/123/2/2011-12/2301 - dated 23-11-2012

Providing adequate support staff to all the assessment units

FEMA

2. 55 - dated 26-11-2012

Liaison Office (LO)/Branch Office (BO) in India by Foreign Entities – Reporting to Income Tax Authorities.

3. 54 - dated 26-11-2012

External Commercial Borrowings (ECB) Policy for 2G spectrum allocation

Highlights / Catch Notes

Income Tax

• Individuals Can Claim Deductions for Investments in Eligible Securities u/s 80CCG of Income-tax Act, 1961.

  Notifications : Rajiv Gandhi Equity Savings Scheme, 2012 - In This Scheme shall apply for claiming deduction in the computation of total income of the assessment year relevant to a previous year on account of investment in eligible securities under sub-section (1) of section 80CCG of the Income-tax Act, 1961. - Notification
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• Taxpayer Can Retract Statement if AO Finds No Defects in Books and Surrender is Proven False During Survey.

  Case-Laws - AT : Once there is no defect in the books of account pointed out by the AO and the surrender made is proved to be false, then the assessee has right to retract from the statement made during the course of survey - AT
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• Excise duty refund classified as capital receipt for assessee, exempt from taxation under current rules.

  Case-Laws - AT : Capital Receipt vs Revenue Receipt - Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed - AT
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• Court Rules Section 80-O Cannot Substitute Section 80HHE for Tax Deductions; Highlights Distinct Purposes of Each Provision.

  Case-Laws - HC : Deduction u/s 80O or 80HHE - one cannot make Section 80-O as an alternate to an allowability of the deduction under Section 80HHE for the purpose of better tax deduction - HC
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• Court Rules 29-Year Gap in Trust Registration Not Grounds for Denial Under Income Tax Act Sections 12A, 12AA.

  Case-Laws - HC : Registration of Trust - gap of 29 years - non-filing of the returns for the last several years cannot be a ground for declining to grant registration u/s 12A / 12AA - HC
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• TDS Not Applicable on SIM Card Discounts u/s 194H; Discounts Don't Qualify as Commission, Court Rules.

  Case-Laws - AT : Commission versus Discount - TDS u/s 194H - discount on sale of SIM Cards and other BSNL products - Decisions in the matter of Vodafone Essar Cellular Ltd (2010 (8) TMI 691 - KERALA HIGH COURT) and Idea Cellular Ltd. (2010 (2) TMI 24 - DELHI HIGH COURT), Distinguished. - No TDS - AT
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Customs

• Appeal Not Maintainable: Tribunal Cannot Hear Cases on Provisional Release Orders u/s 110A, Customs Act 1962.

  Case-Laws - AT : The appeal is not maintainable before the Tribunal against the order under Section 110A of the Customs Act, 1962 of provisional release of goods pending the order of adjudication. - AT
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• Appeal Challenges Chartered Accountant's Role as Principal Officer in Customs, Stresses Need for Proper Authorization in Appeals.

  Case-Laws - AT : Appeal before commissioner (appeals) - without authorization - it would be unconscionable to hold that the chartered accountant fitted in the meaning of principal officer. - AT
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FEMA

• "Undue Hardship" Requires Excessive Difficulty Beyond Just Hardship for Waiver of Pre-Deposit Requests.

  Case-Laws - HC : Waiver of pre-deposit – undue hardship – The word undue adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. - HC
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• Foreign Liaison and Branch Offices in India Must Report to Income Tax Authorities for Compliance and Transparency.

  Circulars : Liaison Office (LO)/Branch Office (BO) in India by Foreign Entities – Reporting to Income Tax Authorities. - Circular
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• 2G Spectrum Auction Winners Allowed Foreign Currency Borrowings Under FEMA Guidelines; Financial Mechanisms Detailed.

  Notifications : Foreign currency borrowings by successful bidders of 2G spectrum re-auction - special arrangements - Notification
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Corporate Law

• Oral Agreements Alone Aren't Legally Binding Without Further Elements, Say Company Law Cases.

  Case-Laws - HC : Existence of an an oral agreement does not mean it is a concluded contract which could be enforced by law - HC
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Service Tax

• Service Tax Credit Allowed After Rectifying Missing Supplier Registration Numbers on Invoices.

  Case-Laws - AT : Denial of service tax credit - service tax registration numbers of the suppliers are not available on invoices – rectifiable mistake - credit allowed - AT
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• Court Grants Stay on Service Tax for VISA/Mastercard Promotions under Business Auxiliary Service; Export Classification Disputed.

  Case-Laws - AT : Business auxiliary service (BAS) - Export of service - VISA/Mastercard - payments received by the appellants for promoting the business of the brand name owners. - stay granted - AT
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• Cenvat Credit Granted for Security Services at Pump House Used in Manufacturing Coolant Operations.

  Case-Laws - AT : Cenvat credit on the security service - at assessee’s pump house for pumping water, which is required as a coolant in their manufacturing operations – credit allowed - AT
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• Court Rules No Extended Service Tax Demand on Travel and Accommodation Expenses Due to Good Faith Actions by Appellant.

  Case-Laws - AT : Taxability of reimbursable expenses on travel local accommodation - action of the appellant was bonafide and suppression cannot be alleged for invoking extended period of time for demanding such service tax - AT
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Central Excise

• Court Upholds 5% Excise Duty on Coal from Coal India Ltd., Rejecting Petitioner's Claim of 1.03% Under Notification No. 1/2011-C.E.

  Case-Laws - HC : Petitioner challenged the levying of 5% excise duty with cess on the coal purchased by them from the Coal India Ltd. claiming that levying of such 5% of excise duty is illegal and instead ought to have been levied only 1.03% duty in terms of the Government of India’s Notification No. 1/2011-C.E., dated 1-3-2011 - decided against the petitioner - HC
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• Job Worker Granted Stay After Missing Declaration Under Notification No. 50/2003-C.E., Avoiding Immediate Penalties and Duties.

  Case-Laws - AT : Duty and penalty – job worker - area based exemption - non filing of declaration - Notification No. 50/2003-C.E., dated 10-6-2003 - stay granted - AT
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VAT

• High Court Allows Input Tax Credit for Energy Produced in Captive Thermal Plants Used in Manufacturing Process.

  Case-Laws - HC : Input tax credit - inputs used for generation of electrical energy in the Captive Thermal Plant which is used in the process of manufacture of finished product - tax credit allowed - HC
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Case Laws:

• Income Tax

• 2012 (11) TMI 860
  Sanction of Authority u/s 151 before issue of Notice u/s 148 - held that:- No Notice can be issued after expiry of four years from the end of the relevant assessment year, unless the Chief Commissioner or the Commissioner is satisfied on the reasons supported by the assessing officer that it is a fit case for issuance of notice - no substantial question of law involved in this appeal for its admission Proviso to Section 151 empowers the Chief Commissioner or the Commissioner of the Income Tax Act to accord sanction and this power has not been vested to any other officer irrespective of fact as to whether the assessing officer is Assistant Commissioner or the Deputy Commissioner or any other officer.- appeal is dismissed. Decision in case of [Shashi Kant Garg vs. Commissioner of Income Tax & others 2005 (8) TMI 81 - ALLAHABAD HIGH COURT] followed.

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• 2012 (11) TMI 859
  Unexplained Loans u/s 68 and Disallowance of Interest thereon - held that:- It cannot be said that the assessee had not discharge his obligation in appearing in person to show/prove that amount credited to his account as loan or otherwise is justified when notices were issued to two companies from whom loan had been received by the assessee, AO did not pursue the same and proceeded with the assessment, on the basis of records produced before him and also on the basis of submissions made by the authorised agent of the assessee. The assessment order has been confirmed in appeal - question of law raised in this appeal is not a question of law but is on merits of the case - no justification to admit this appeal and is accordingly dismissed.

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• 2012 (11) TMI 858
  Imposition of Penalty u/s 271(1)(c) - Conscious and deliberate declaration of income under a wrong head - Whether change of opinion or concealment and furnishing of inaccurate particulars of Income - held that:- There was genuine difference of opinion between the assessee and the department regarding the taxing of a particular income ie rent received from letting out properties as to whether it was to be assessed under the head 'income of house property' or 'income from business' and therefore sec 271(1)(c) of the Act was not attracted - findings recorded by the Tribunal are based upon appreciation of evidence and material on record and do not suffer from any legal infirmity - appeal does not give rise to any substantial questions of law - appeal fails and is dismissed.

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• 2012 (11) TMI 857
  Registration of Trust - application for registration was filed by the assessee after 29 years of it being registered under the Society Registration Act, 1960 - held that:- Not providing information for the returns since inception is not fatal, because only inquiry which the Commissioner of Income Tax can make while granting registration is regarding genuineness of the Trust and as to whether the objects as mentioned in the Trust Deed are for charitable purpose or not. The matter was remanded by the Tribunal to the Commissioner to grant registration under Section 12-AA of the Act. However, in the penultimate paragraph of the order, the Tribunal has directed the Commissioner to afford an opportunity for filing explanation regarding delay in making the application - order passed by the Tribunal does not give rise to any substantial question of law, for the reason, that non-filing of the returns for the last several years cannot be a ground for declining to grant registration as the Commissioner is only enjoined to see as to whether the Trust is genuine and whether the object for which it has been formed is for charitable purpose or not - order passed by the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.

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• 2012 (11) TMI 856
  Share Application Money - Undisclosed Income u/s 68 - Agriculturist - Whether the bogus shareholders in whose hand only agricultural income has been shown can be accepted as "person" under the IT Act and the share capital introduced by such persons under the garb of share capital money can be accepted? - held that:- in case of capital contributed by a shareholder, the identity of the shareholder is only required to be proved. - order passed by the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed. Decision in the case [Commissioner Of Income Tax Versus Steller Investment Ltd.2000 (7) TMI 76 - SUPREME COURT] followed.

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• 2012 (11) TMI 855
  Exemption of Income u/s 80P - Interest on deposits of non-SLR funds - Income from Banking Business - held that:- Whether the business Income is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P (2) (a) (i) as the deposits of surplus idle money available from working capital, including reserves, excess collection of interest tax and other incomes are all attributable to the business of banking. The interest from such deposits cannot be said to be beyond the legitimate business activities of the bank - ITAT committed no error in arriving at findings that the interest are not deposits of non-SLR funds and the cooperative bank will qualify for exemption under Section 80P (2) (a) (i) of the Act - decided against the revenue and in favour of the respondent assessee.

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• 2012 (11) TMI 854
  Best Judgement Assessment - held that:- Rejection of the books of account and estimation of turn-over and profits by the best judgment assessment has been upheld by the Tribunal taking into consideration sales of Rs. 9.26 lakhs which was recorded outside the books of account - Tribunal has upheld the determination of turn-over at Rs. 2.30 crores as against Rs. 2.50 crores fixed by the Assessing Officer and reduced by CIT(Appeals). So far as the deletion of addition of Rs. 4,85,691/- in respect of M/s. Vikas Chappal House, Rs. 33,045/- in respect of Bani Footwear and Rs. 47,913/- in respect of Agarwal Shoe Store are concerned Tribunal in the impugned order has held that where best judgment assessment is made, there is no question of addition on the ground of sundry creditors. Moreover, while determining the gross profit, these additions have already been taken into consideration - order passed by the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.

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• 2012 (11) TMI 853
  Undisclosed Income u/s 68 - held that:- While examining creditworthiness and genuineness of the transactions u/s 68 of the IT Act what is to prove is the source of the assessee and not source of the source ignoring the circumstantial evidences, surrounding circumstances - Revenue submitted that CIT was not justified in deleting the additions made under Section 68 of the Act, as the depositors credit worthiness is not proved. The submission is wholly misconceived. CIT(A) has found that the companies are genuine and they are on the record. Copies of the audit report of the depositor companies have also been filed and merely because the names have been changed would not mean that they are not genuine. However the deposit made by the account payee cheque was from their own fund. The finding of CIT (appeal) is based on material on record - No Legal infirmity in the impugned order passed by the Tribunal - appeal fails and is dismissed.

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• 2012 (11) TMI 852
  Capitalization of Depreciation amount and setting off and carry forward against interest income - highway construction - A.O. held that the basic element for claim of depreciation is absent in the case of the assessee. The depreciation on equipment or assets used to construct the highway is itself a capital expenditure till the completion of the same and commencement of the commercial operation. - held that:- In Commissioner of Income Tax v. Sakthi Soyas Ltd. [2006 (2) TMI 87 - MADRAS HIGH COURT] it was held that - “Capitalisation of those expenditure in the books of account alone was not the decisive factor in examining an expenditure for the purpose of income-tax. The name given to an expenditure or a nomenclature given to an expenditure in the books of account of the assessee is not the litmus test to decide the exact nature of expenditure for the purpose of income-tax. The purpose of the Companies Act is different from the purpose of the Income-tax Act. Therefore, the classification of those expenses as capital in nature for the purpose of the Companies Act, does not ipso facto make that expenditure a capital expenditure for the purpose of the Income-tax Act.” Application of section 143(3) - held that:- sub-section (3) in this case has no manner of application as it is not a case here that the appellant has frequently shifting its accounting process and method. In this case the accounting system is uniform however, while filing returns the depreciation of those assets have been claimed under the provisions of the law in its return. It is not a case that the said assets and properties do not belong to the appellant, therefore depreciation in any assets and properties is a regular phenomenon and deduction on this account is allowable under Section 32 automatically. Tribunal while reading Section 32 of the Act has accepted the legal principle but unfortunately while granting relief as rightly pointed out by Mr. Khaitan has not allowed the setting off of the interest income as regard the aforesaid amount of depreciation. - A.O.is directed to work out again allowing the deduction and setting off of the amount of interest income and to allow carry forward - Decided in favor of assessee.

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• 2012 (11) TMI 851
  Dividend declared on the units of U.T.I. after purchase of the units by the assessee but before their registration in the name of the assessee as the transferee, accrued to the assessee though an unregistered purchaser - held that:- Units of the UTI not being shares, do not attract Sec 8 of the Act - decided in favour of Revenue. Disallowing the entirety of the expenditure of foreign tour of Rs. 83,54,857/-, overruling the allowance by the CIT (Appeals) of Rs. 41,92,429/- being 50% thereof and in disregard of its own order for such allowance under similar circumstances in the past - held that:- In regard to previous judgement in assessee's own case issue is decided in favour of Revenue - appeal dismissed against assessee. Decision in THE PEERLESS GENERAL FINANCE & INVESTMENT CO LTD Versus COMMISSIONER OF INCOME TAX, WB-I, KOLKATA [2012 (10) TMI 896 - CALCUTTA HIGH COURT] followed.

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• 2012 (11) TMI 850
  Capital Gain - Tripartite agreement for sale of land - purchase of land by the directors - person liable to tax against capital gains - reassessment proceedings - held that:- if the power of attorney holder is already having any interest in the property as per the deed dated 2.9.1991, then the deed of power of attorney must carry some reference to the first of the agreements to accept the contention of the assessees that they had divested their rights over the property in favour of the power of attorney holder and that they had handed over the property in part performance of the agreement and hence the sale consideration could not be assesseed to capital gains at the hands of the respective assessees. One and only agreement on which the assessee had divested its interest to atleast to the extent of 83.96% in favour of M/s.Sundsun Housing Development (I) Ltd. for which consideration of Rs.90 lakhs/- was fixed is the agreement dated 29.10.1994 and that Emerald Promoters Private Limited acted only as a power of attorney holder on behalf of the vendors. Tribunal has committed serious error in not analysing the documents in proper perspective, particularly, in the face of the power of attorney and the tripartite agreement not making any reference at all to the first of the agreements dated 23.10.1991 entered into by the assessee with M/s.Emerald Promoters Pvt. Ltd. to accept the contention of the assessee that possession was handed over to Emerald Promoters Pvt. Ltd. in November 1991 itself. - Decided in favor of revenue.

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• 2012 (11) TMI 849
  Reopening the assessment - loss by embezzlement of funds - To scrutinize claim for Bad debts – Held that:- Conditions precedent for exercise of powers under section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year have not been satisfied. Even if, Assessing Officer submits that the claim for bad debts had been erroneously allowed were to be accepted, even then in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts the reopening of assessment under section 147 of the Act is without jurisdiction. Consequently, the impugned notice issued under section 148 of the Act cannot be sustained - petition succeeds and is, accordingly, allowed. The impugned notice dated February 27, 2003, issued by the respondent seeking to reopen the assessment of the petitioner for the assessment year 1996-97 is hereby quashed and set aside.

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• 2012 (11) TMI 848
  Deduction u/s 80O or 80HHE - development or production of computer software - Manpower deputation to foreign customers – Export of software – Technical service rendered outside India - Also utilised for rendering services in computer software even in India – Held that:- When the specific provision u/s 80HHE is concerned about technical services rendered in connection with software development, we do not approve of the line of reasoning of the Tribunal. - one cannot make Section 80-O as an alternate to an allowability of the deduction under Section 80HHE for the purpose of better tax deduction. - Decided in favor of revenue.

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• 2012 (11) TMI 847
  Valuation of the Land – Held that:- Valuation done by the Valuation Officer taking note of the sale instances which are near to the date of sale merit acceptance is correct. As far as the land value of 23.60 grounds is concerned, the value arrived at by the District Valuation Officer at Rs.8,30,800/- does not call for any disturbance in determining what could be the value of the deemed gift for the purpose of assessment. Apart from that, the building portion value arrived at by the Gift Tax Act at Rs.24,46,711/- is to be considered with appropriate depreciation at Rs.1.125 per year to arrive at annual letting value at 9% return. Thus after arriving at the annual letting value, deducting the outgoings and adopting 8% capitalisation factor, the value has to be arrived at by Revenue which would be in the spirit of Schedule II of the Gift Tax Act - In the circumstances, Tax Case (Appeal) filed by the assessee is partly allowed only to the extent referred to above taking into consideration the matter of valuation done by the Assessing Authority by adopting the District Valuation Officer including the reversionery interest - valuation of the land as done by the valuation officer is upheld, however on the portion of the building accepting the valuation in calculating the annual letting value, the Officer shall take note of depreciation allowed on the building portion and adopt capitalisation factor at 8% to arrive at the valuation for the purpose of assessment - To the above stated extent, the order of the Tribunal stands modified.

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• 2012 (11) TMI 846
  Whether Explanation 1(iv) to Section 158BE is retrospective in nature – the period taken to approach the Settlement Commission and its rejection is to be excluded - Held that:- given the fact that the scope of Explanation is clarificatory in nature all that the insertion of the Explanation under the Finance Act 2002 does is to bring in is what was contemplated under Section 245HA since omitted with effect from 1.6.2002 under the Finance Act 2002. In other words what was provided for under Section 245HA is now brought in by way of Explanation 1(iv) under the Finance Act 2002 which by deleting 245HA substitutes Exp. 1 to 158 BE . Explanation, clause (iv) in Section 158BE is retrospective - if a statute deals merely with the matters of procedure and does not affect the rights of parties, the new procedure would prima facie apply to all pending as well as future actions Regarding the levy of interest under Section 158 BFA – Held that:- Contention of the assessee that the delay in furnishing the block return was due to non-supply of the copies of the seized materials to it by the Income Tax Authorities was devoid of merits as the assessee has not brought any positive evidence on record to show that it was in need of vital information without which it was not in a position to complete its block return - In the absence of any materials placed before the Tribunal, the said contention was rejected

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• 2012 (11) TMI 845
  Capital Receipt vs Revenue Receipt - Deduction u/s 80IB - Excise duty refund, interest subsidy and insurance subsidy – Held that :- Incentives provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional permanent source of employment to the unemployed in State of Jammu and Kashmir, were in fact, in the nature of creation of new assets of industrial atmosphere and environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone – Order of CIT(A) in holding that the Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed is confirmed – appeal by revenue is dismissed. Decisions in in the case of Shree Balaji Alloys v. CIT and Another [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] followed.

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• 2012 (11) TMI 844
  Capital Receipt vs Revenue Receipt - Deduction u/s 80IB - Excise duty refund, interest subsidy and insurance subsidy – Held that :- Incentives provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional permanent source of employment to the unemployed in State of Jammu and Kashmir, were in fact, in the nature of creation of new assets of industrial atmosphere and environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone – Order of CIT(A) in holding that the Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed is confirmed – appeal by revenue is dismissed. Decisions in in the case of Shree Balaji Alloys v. CIT and Another [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] followed.

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• 2012 (11) TMI 843
  Set off of Loss and Shortage of Stock – retraction of surrendered income - Held that:- the assessee having declared the sales of Rs.17.92 lacs in the trading account and inspite of the fact that shortage of stock amounting to Rs.17.92 lacs has not been explained will not make any effect on the profitability of the assessee. Once there is no defect in the books of account pointed out by the AO and the surrender made is proved to be false, then the assessee has right to retract from the statement made during the course of survey and declare the correct income as per books of account. In the present case, having not pointed out any defect by the AO in the accounts of the assessee, assessee has rightly declared the income by claiming the loss as per books of account. In such facts and circumstances of the case, even if the assessee accepts any invalid addition, he is at liberty to challenge the same - AO is not justified in making any addition either of loss or stock - order of CIT(A) is reversed - grounds of appeal of the assessee are allowed.

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• 2012 (11) TMI 842
  Payment of stipend - allowable expenditure - Sustaining 50% addition out of stipend account - Held that:- This is not a case where no details with regard to the payment of stipend is there with the assessee but the same were not filed by the assessee during the assessment proceedings, which were filed before CIT(A) but were appreciated for the reasons mentioned in his order. Therefore, keeping in view the facts and circumstances of the present case, CIT(A) has rightly allowed 50% of the claim made by the assessee and has rightly disallowed the balance of the claim - no infirmity in his order - ground of the Revenue are dismissed. Disallowance of various expenses - Held that:- Bills and vouchers were not produced during the assessment proceedings. It was argued that the assessee is having all the evidences of the expenditure so incurred and only vouchers were produced before the AO but the same were not admitted as additional evidence. The defects pointed out by the AO were few as compared to the total expenditure incurred by the assessee at Palwal Unit - no infirmity in order of CIT(A) in allowing for expenses as done by AO - In the result, the appeal of the assessee and the appeal of the Revenue are dismissed.

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• 2012 (11) TMI 841
  Disallowance of Business Promotion expenses – Held that:- Assessee had incurred expenses for the purpose of business and to maintain cordial relations with the suppliers and other persons and to maintain good business reputation and to meet the market competition. Also there is no dispute of having incurred expenditure which have been argued to have been incurred by making account payee cheques for purchasing the said gifts. No such expenditure, which has been prohibited by law, has been brought on record by the AO and in the facts and circumstances of the case, such expenses by taking the volume of the turnover and the income declared being second year operation of the assessee’s business, the expenditure incurred is reasonable - no infirmity in the order of CIT(A), who has rightly deleted the addition so made - this ground of the revenue is dismissed. Disallowance of Legal and Professional charges - Held that:- Amount has been paid through cheques after deducting tax at source. Copies of the bills and TDS certificate are on record. Moreover, the AO can not sit in the arms of the businessman and cannot decide how to run the business. This is a well settled legal proposition laid down by various courts of law. In the facts and circumstances of the case, no infirmity in the order of CIT(A), who has rightly deleted the addition so made - ground raised by Revenue is dismissed.

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• 2012 (11) TMI 840
  Adhoc disallowance - held that:- Ld. CIT(A) has confirmed an adhoc disallowance of Rs. 1,00,000/- after observing that assessee has not supported the claim with documentary evidence. We agree with Ld. CIT(A) that mere claim of deduction is not sufficient and it should be supported by some material. - Decided against the assessee. Head office expenses - Restrictions u/s 40C - Held that:- Expenses incurred on soliciting NRI deposits are in the nature of head office administration and supervision expenses, since they have been incurred entirely for the Indian operations and are not allocable to any other country in which the appellants have operations, the provisions of Sec. 44C are not applicable as the essential requirement of section 44C is that expenses are required to be allocated since they are for the supervision of all locations other than the head office - in favour of assessee Net loss on unmatured forward exchange contracts - anticipated loss - held that:- anticipated losses on account of existing obligation as on 31st March, determinable with reasonable currency, being in the nature of expenditure/accrued liability, have to be taken into account while preparing financial statement. - matter restored to AO to consider liability which has accrued as per Accounting Policy consistently followed by assessee as on 31.3.1998 and accordingly to allow said claim to that extent. TDS - payment to Master Card International - scope of Sec.9(1)(vi) and Article-12 of DTAA - held that:- after Mutual agreement entered into between India and USA, these two entities namely Visa International and Master Card International are deemed to be having Permanent Establishment in India; but in the relevant assessment year and at the time when assessee made payments to these two entities, said dispute was there - even if assessee bank failed to deduct TDS on the payments made to Visa International and Master Card International, same could not be disallowed as per provisions of Sec. 40A(i) of the I.T. Act - Decided in favor of assessee.

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• 2012 (11) TMI 839
  Rectification of mistake - held that:- It appears that this vital and material fact brought specifically to the notice of the Tribunal, however, appears to have escaped the attention of the Bench and the matter has been sent back to the AO for further examination after observing that it is not clear whether the expenses were claimed by the assessee in the earlier years and if so the result thereof. In our opinion, once the deduction u/s 35DD was allowed in the initial year i.e. assessment year 2002-03 after necessary verification/examination in the assessment completed u/s 143(3) when the total expenditure is eligible for the said deduction was actually incurred by the assessee, the same could not be disallowed in the subsequent years for want of relevant details or documentary evidence especially when the assessment for the initial year on this issue was not disturbed or modified. There is a mistake in the order of the Tribunal in deciding this issue overlooking the important and material aspect which has a direct bearing on the ultimate decision and the same being apparent from record - Para no. 28 of the order [2010 (1) TMI 908 - ITAT, MUMBAI] modified.

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• 2012 (11) TMI 838
  Validity of reopening of the assessment - assessee contended that he disclosed all the relevant particulars fully and truly and the facts of the property in question were also disclosed by the assessee – Held that:- Mere production of the balance-sheet, profit and loss account or account books will not necessarily amount to disclosure within the meaning of the proviso - Assessing Officer over-looked the aforestated item. That, he noticed it subsequently. That, at the time of passing the original order of assessment, he could not be said to have opined on the above item - there was no change of opinion – against assessee Natural justice – alleged that no reason has been given by the assessee for its failure to file the same before the authorities below, it is observed that the documents sought to be filed by the assessee as additional evidence have already been filed by it before the A.O. during the course of re-assessment proceedings for A.Y. 2002-03 and 2003-04 and the same have also been filed by the assessee during the course of appellate proceedings before the ld. CIT(A) for A.Y. 2004-05 wherein a similar issue is involved – matter remanded to AO Disallowance u/s 14A by applying Rule 8D of the I T Rules - alleged that assessee has no business during the year and it had invested in the shares including in the Group Companies for earning dividend income which has been claimed as exempt u/s 10(34) as well as long term capital gains claimed u/s 10(38) of the IT Act - expenditure is for earning the exempt income i.e. dividend and long term capital gain – Held that:- Assessee has closed its business; therefore, even if there is no business during the year under consideration the entire expenditure cannot be assigned to exempt income i.e. dividend and capital gain. As it is clear from the details of the expenses that these expenses are for general administration and for maintaining the status of the assessee as a company; therefore, these expenses are not directly related to the exempt income. Further, Rule 8D is not applicable for the Assessment Year under consideration – matter remanded to AO

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• 2012 (11) TMI 837
  Stay of recovery - penalty under section 271(1)(c) of the Income Tax Act – – Held that:- there was adequate disclosure of the facts in the notes to the return of income about the interest income of Rs. 8.10 crores receivable from MBPL and the Assessee’s action in not having been considered as income by the assessee. As to whether the stand of the assessee was correct or not is not relevant in the context of penalty proceedings. - there is a prima facie case made out by the assessee. The assessee has already wound up its business activities. - the bank balance of the assessee as on 31/12/2011 is only Rs. 3,95,471/-. - Keeping in view the existence of a prima facie case, balance of convenience and hardship, there should be a stay of recovery of outstanding demand pending disposal of the appeal of the assessee by the Tribunal or for a period of six months from to-day whichever is earlier. - Stay granted.

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• 2012 (11) TMI 836
  Addition under section 68 of the income tax act – Held that:- Loans which are not explainable, can be treated as income of the appellant – assessee submitted that loan creditors are minors and it was only the guardians, who could explain entries in the bank statement - AO, after examining the guardians of the minor children from whom the assessee stated to have been received the impugned loans, found that the said ladies could not explain the sources of cash deposits of Rs. 1,20,000/- in the bank account - AO treated the said amounts as unexplained and made addition of the same u/s 68 of the Act. We find no infirmity in the order of the CIT(A) in confirming the addition made by the AO and the same is hereby upheld – in favor of revenue

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• 2012 (11) TMI 815
  Loss on Purchase and Sale of Shares - Business loss vs Speculation loss - held that:- The transaction of purchase and sale of shares would be held as speculative business only if the company was hit by the explanation to section 73 of the Act. The implication of the explanation is that if a company incurs a speculation loss in a manner deemed in the explanation such loss shall not be set off except against profit and gains, if any, of another speculation business But, the explanation has provided two exceptions. The first exception is available in the case of a company whose gross total income consists mainly of income which is chargeable under the head “interest on securities”, “income from house property”, “capital gain” and “income from other sources”. The second exception is in the case of a company whose principal business is business of banking or granting loans and advances. As seen from the facts of the present case, though the assessee made a plea that the it is carrying on multiple business as principal business, but the facts do not support the plea of the assessee. - held as speculation loss - Decided against the assessee. Claim of bad debts in respect of certain sales made to foreign companies - held that:- Debt arising in the course of business activity is to be considered as bad debt if it is written off in the books of account as per the provisions of section 36(2)(iii) of the Act. In the present case the assessee submitted that it had obtained permission from RBI. The assessee is directed to adduce necessary evidence as the assessee has failed on earlier occasion to furnish necessary evidence. - matter remanded back.

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• 2012 (11) TMI 814
  Applicability of sec 172 vs sec 44B - Regular / Occasional Shipping Business – CIT(A) has decided that, Once a person claims that it is not engaged in occasional shipping business and wants to go out of the ambit of section 172, the recourse is provided in section 172(7) only and for that it has to opt for filling return u/s 139(1). Since, the appellant has opted for the option to be assessed u/s 172(7) by filing return of income u/s 139(1) even before 172(4) combined order was passed and also combined with the fact that they approached the AO at Mumbai to issue the 100% DTAA tax relief certificate showing their intent to be assessed under the regular provisions of the Act, that the appellant is in regular shipping business and liable to be assessed under other provisions of the Act including 44B, and not u/s 172(4). Held that:- M/s Balaji Shipping Lines FZCO, UAE has accepted the liability to be dealt with the provisions of section 172(7) of the Act. The jurisdictional AO may, therefore, verify the position and take such action as may be warranted in law in terms of section 172(7) to ensure that the income of the assessee from the 86 voyages does not escape assessment as per normal provisions of the Act. - Appeal of the revenue dismissed - Decided in favor of assessee.

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• 2012 (11) TMI 813
  Commission versus Discount - TDS u/s 194H - Disallowance u/s 40(a)(ia) - discount on sale of SIM Cards and other BSNL products - Franchiseeship Agreement - assessee contended taht as the TDS has already been deducted, U/s. 194H, on the commission given by the BSNL. Therefore, there should not be any further TDS on the same said amount while forgoing certain percentage of the original commission by allowing discount to the sub-franchisee/retailer. - held that:- The same income cannot be taxed again in the hands of different recipients which are a matter of business conducted being the fast network availability of BSNL products was not considered by the learned CIT(A) to establish that the discount available to the second and third tier franchisees was a matter of availability of products at its maximum retail price and not because they had made income from the service provider. - Decided in favor of assessee. Decisions in the matter of Vodafone Essar Cellular Ltd (2010 (8) TMI 691 - KERALA HIGH COURT) and Idea Cellular Ltd. (2010 (2) TMI 24 - DELHI HIGH COURT), Distinguished. TDS u/s 194I - rent - show room and go-down - Form 15G - Mistakes in the form 15G submitted by the land lady - held that:- Mistakes in the form submitted by the land lady as provided under the Act remains a mere technical formality when the assessee cannot be subjected to disallowance of expenditure claimed as rent for its shop and godown which together were to be considered under the provisions of Section 194-I r.w.s 197A of the I.T. Act. Obviously the disallowance u/s.40(a)(ia) comes after considering the collection and recovery of tax by deduction of tax at source which the assessee has satisfied for non-deduction cannot result in disallowance of expenditure for no fault of the assessee. The remedy lies elsewhere. - Decided in favor of assessee.

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• 2012 (11) TMI 812
  Disallowance u/s 14A – Expenditure incurred in relation to exempt income - CIT(A) has directed the AO to determine the quantum of disallowance with reference to the ratio of the total expenditure debited to P&L Account in proportion that the value of transaction in shares which has yielded exempt income bears to the value of total transaction in shares – Held that:- Matter should be go back to AO with a direction to readjudicate the issue as per the provisions of law by taking into consideration the decision in case of GODREJ AND BOYCE MFG. CO. LTD. (2010 (8) TMI 77 - BOMBAY HIGH COURT). Issue remand back to AO Disallowance u/s 40(a)(ia) – Held that:- Though for A.Y 2006-07 the issue has been restored back to the file of CIT(A) but it was the request of assessee that since the issue regarding disallowance under section 14A of the Act is being restored to the file of AO this matter may also be restored back to the file of AO with similar direction. Issue remand back to AO Capital or revenue expenditure – Disallow repairs and maintenance under various heads of accounts - aluminum patti work, net working charges, expenditure for administration department – Held that:- As concluding from the facts of the case that all these expenditure were incurred in the regular course of business, after hearing both the parties we see no justification in sustenance of such disallowance. Issue decides in favour of assessee Bad debts u/s 36 – Bad debts includes total debts amount or only brokerage in hand of share broker – Held that:- Following the decision in case of Shri Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) that bad debt relating to transaction of shares in the hands of share broker is allowable u/s 36(1)(vii) r.w.s. 36(2) as the same is an amount which could not be recovered by the share broker from his client as brokerage receivable from client was part of the debt which was taken into account while computing the income. Issue decides in favour of assessee Disallowance of penalty u/s 37 – Nature of payment made to stock exchange - Whether payment made to stock exchange for violation of trading beyond exposure limit, late submission of margin certificate and delay in marking delivery of shares due to deficiency is in nature of penalty – Held that:- Following the decision in case of PRASAD & CO (2012 (2) TMI 124 - DELHI HIGH COURT) & in case of GOLDCREST CAPITAL MARKETS LTD. (2009 (1) TMI 553 - ITAT, MUMBAI) that NSE was an independent body and the bye laws made by it for the regulation of its members did not have the force of the law. Such bye-law could be, at the best be seen as private contracts entered between assessee and stock exchange and any violation, therefore, cannot be, in our opinion, equated with an offence or with an act prohibited by law, in the nature of assessee’s business, as a member of NSE payments related to switching on the terminals, switched off for not abiding by the regulations of such exchange, or for delay in settlement or furnishing of data can only be considered as incidental. Issue decides in favour of assessee

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• 2012 (11) TMI 811
  Disallowance in respect of VSAT charges paid to Stock Exchange – For non-deduction of TDS u/s 40(a)(ia) – AO had disallowed the claim holding that the payment made were not for use of standard equipments but also involved technical services – Held that:- Following the decision in case of KOTAK SECURITIES LTD. (2008 (8) TMI 592 - ITAT MUMBAI) holding that VSAT, and leaseline charges, were reimbursement of expenses to the stock exchanges for use of standard facilities and transaction charges were not disallowable. Delete the addition. In favour of assessee Penalty u/s 37 - Addition on account of on account of short delivery charges, failure to raise requisite margin money, non-timely deposit of margin money paid to stock exchange – AO treat it as penalty - Held that:- Following the decision in case of Master Capital (2007 (2) TMI 241 - ITAT CHANDIGARH-A) that amount paid by the assessee, a share broker to the NSE for violation of trading beyond the exposer limit, late submission .of margin certificate and delay in making deliveries of shares due to deficiencies were deductible as a business expenditure, as the amount was paid during the course of business of the assessee’s business and there was no infraction of law. In favour of assessee Disallowance of Bad debts u/s 36 – Bad debts in relation to the value of shares transacted by the assessee as a stock broker on behalf of his clients – AO argued that bad debt can be allowed only to the extent brokerage earned on the transactions – Held that:- Following the decision in case of Shri Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) that the brokerage having been credited to the P&L of the assessee, it was evident that a part of the debt was taken into account in computing the income of the assessee. The fact that the liability to pay the brokerage may arise at a point in time anterior to the liability to pay the value of the shares transacted would not make any material difference to the position. Both constitute a part of the debt which arises from the very same transaction involving the sale or, as the case may be, purchase of shares. Since both form a component part of the debt, the requirements of Sec. 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee. Therefore, the assessee was entitled to deduction by way of bad debts under section 36(1)(vii) read with section 36(2) in respect of the amount which could not be recovered from its clients in respect of transactions effected by him on behalf of his clients. Issue decides in favour of assessee Cost of acquisition of share of BSE - Corporatisation and demutualization - Assessee claim depreciation on BSE Card till A.Y. 2005-06 – Claim original cost of the Card as the cost of acquisition for the purpose of calculating LTCG and cost indexation benefit which was claimed by taking the cost in 1999-2000 – AO argued that the assessee was not entitled to claim of double deduction on the same asset under two provisions of IT Act. - CIT(A) has held that cost of acquisition of shares should be taken only at Rs.7500/- in the year 2005-06 and the other cost which is WDV of the shares as on 1/04/2005 should not be added to the cost and thus he has computed the long term capital gain at Rs. 3,86,91,391/ – Held that:- Following the decision in case of Omniscient Securities (P) Ltd. (2011 (3) TMI 896 - ITAT, MUMBAI) that while computing capital gain on such transfer the AO has calculated its cost of acquisition on the basis of the written down value and Re.1 which had paid per share at the time of issue of shares by BSE Ltd. Therefore, we hold that the AO had rightly computed the capital gain and CIT(A) has wrongly calculated the long term capital gain in the hands of assessee. Appeal in favour of assessee

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• 2012 (11) TMI 810
  Interest on delayed refund – Period of for which interest granted - Assessee contended that the interest of refund should be allowed from the 1st of April of the F.Y. in which TDS was deducted, i.e. from 1-4-1984 and not from the date of regular assessment order - AO granted interest u/s 244(1)A on the refund from the date of regular assessment order till the date of granting of the refund - Held that:- As the contention of the assessee is not correct, that the judgment in case of Sandvik Asia Ltd. (2006 (1) TMI 55 - SUPREME COURT), has in any manner diluted the ratio and the proposition of law laid down in case of Modi Industries Ltd.( 1995 (9) TMI 324 - SUPREME COURT). In the case of Sandvik Asia Ltd. (supra), the Hon’ble Supreme Court, was besieged with the issue of withholding of refund without sanction of law. Issue decides in favour of assessee Interest on refund - Assessee contended that interest should be paid on the amount of refund delayed after the expiry of 3 months from date of ITAT’s order till the date of actual granting of refund – AO argued that the interest should have to be paid in after the expiry of three months from the date of ITAT order, till the date of passing of the order giving effect of the ITAT and further interest on balance amount of refund shall become payable from the date of issue of the refund - Held that:- As the view taken by some ITO that the date of the assessment order is to be taken as the “date of the order granting the refund” is not correct. Thus, in cases where interest is payable by the Central Government to assessee u/s 243, such interest is to be calculated upto the date of issue of the refund voucher. Therefore, assessee is entitled for interest for the amount of refund and interest withheld from the period after the expiry of 3 months from the date of order till the date of actual grant of refund voucher. Issue decides in favour of assessee.

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• 2012 (11) TMI 809
  Revision Order u/s 263 by DIT – DTAA between India and USA – DIT has observed that the AO has not examined the ‘Base Agreement’ and has not examined the exact nature of the services - the AO has taken a possible view that it was not in the nature of Fees for technical or fees for including services provide by assessee with reference to any technical services rendered in relation to any product or software developed – Held that:- We can safely presume on the basis of Tribunal’s findings in favour of one of the party in agreement in this case that finding and view taken by the AO in accepting the assessee’s explanation is a better possible view. Following the decision in case of Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME COURT) that on one of the two courses permissible by law has been adopted by the AO and it has resulted in loss of the revenue and where two views are possible and the AO has taken one view with which CIT does not agree, it cannot be treated as erroneous or prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law. Appeal decides in favour of assessee

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• 2012 (11) TMI 808
  Reopening of assessment u/s 147 - bogus purchases - Held that:- The contention of the appellant that the AO had no definite material or information before invoking provisions of section 147 is not tenable - It is an admitted fact that the original return of the appellant was processed u/s 143(1)(a) only at ministerial staff level and no finding had been or even can be recorded, by the AO during such processing, about the genuineness of purchase constituting the reasons for issue of notice u/s 148. The AO was therefore, fully justified in invoking provisions of section 147 considering the case of ACIT v Rajesh Jhaveri Stock Brokers P Ltd.(2007 (5) TMI 197 - SUPREME COURT) mentioning that failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) - against assessee. Estimation of profit at 6% of purchase price - Held that:- As decided in System India Castings Versus Commissioner Of Income-Tax [1996 (9) TMI 37 - MADHYA PRADESH HIGH COURT] that if the transaction of purchase was found to be sham the AO would be justified in disallowing not only the purchase price but also related transaction charges and it was held that such was a finding of fact and no question of law arose against such. Accordingly AO's action making disallowance of 6% of purchase price at Rs.14,49,190/- being justified and reasonable is hereby confirmed - against assessee. Addition made for unexplained peak investment - set off allowed by the CIT(A) in respect of 6 % of addition of profit out of peak credit - Held that:- Addition on account of disallowance of 6 % on purchases made from Kothari Group which was allowed as set off by CIT(A) against the addition of peak investment made in respect of alternative purchases made by the assessee, it is found that the AO has disallowed 6% of total purchases made during the entire year from Kothari group, whereas addition has been made with respect to peak unexplained investment worked out as on a particular date in respect of alternative purchases made by the assessee, and not in respect of entire alternate purchases made by assessee - Under these facts and circumstances & agreeing with the contention of DR that the order of CIT(A) is not correct to the extent of allowing setting off entire 6% of profit which was added in respect of entire purchases made from Kothari Group against peak unexplained investment worked out on a particular date, therefore the order of the CIT(A) is needed to be modified and direct the AO to recompute the addition made on account of purchases up till the date of working out unexplained investment on such purchases - partly in favour of revenue.

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• 2012 (11) TMI 807
  Disallowance of 25% of the total expenses u/s 144 - CIT(A)restricted it to 5% - Held that:- The assessee did not appear before the AO nor produced the relevant books of accounts or bi lls/vouchers before the AO or even before the ld. CIT(A). There is nothing to suggest as to whether or not the assessee preferred any appeal against the findings of the CIT(A) . . As under the scheme of s. 144 itself an assessment must be done only to the best of the officer's judgment and after taking into account all relevant materials which had been gathered , thus the proper thing for the CIT(A) to have done would have been to examine the relevant books and bills/vouchers and ascertain the relevancy and validity of the materials on the basis of which the AO added the amounts instead of deleting/reducing the additions - CIT(A) did not allow any opportunity to the AO before reducing the disallowances and concluding that completion of assessment u/s 144 was not proper. There is nothing to suggest that the CIT(A) undertook any independent enquiries or even called for any report from the AO in the light of his findings in the assessment order, even while being fully aware that assessment had been completed u/s 144 - set aside the order of the CIT(A) in order to enable him to decide the matter afresh - in favour of revenue by way of remand.

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• 2012 (11) TMI 806
  TDS on payment made for hiring of buses - Section 194-C OR Section 194-I - Held that:- The expression “carriage of goods and passengers by any mode of transport” finds place only in section 194 C and not in section 194-I. There is no direction that TDS on transport contracts will be made u/s 194-I instead of u/s 194C there is even no omission of clause © of Explanation III of subsection (2) of section 194C, after the aforesaid amendment in section 194-I in Explanatory Notes (Circular No. 1/2007 dated 17.04.2007). Thus according to well established rules of interpretation, specific provisions prevail over general provisions. Section 194C contains specific provisions for deduction of tax in the cases of transport contracts whereas Sec. 1941 contains general provisions for deduction of tax from rent in respect of hiring of machineries, plants etc. Therefore deduction was rightly made u/s 194C in this case As in this case the Transporters have not given the buses for exclusive use by the appellant the use is only for point to point transportation to students/staff to and from only for convenience sake & after the specified period of use, the buses are kept under the control of the operators and not of the appellant organization, thus it implies that the main object is transportation of passengers and not complete hiring of the particular vehicle, thus the payment made to the traveling agencies for vehicle hiring is covered by the provisions of section 194-C and not by the provision of section 194-I - in favour of assessee.

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• 2012 (11) TMI 805
  Disallowance u/s.40(a)(ia) - CIT(A) deleted the addition - Held that:- The CIT(A) has recorded that the assessee has incurred certain expenses for advertisement and publicity, which have been reimbursed by the principal company and that no part of the expenses have been claimed by the appellant in its P&L account, and therefore the provisions of section 40(a)(ia) are not applicable and no disallowance could be made while computing the income of the appellant - as revenue unable to produce any fatcs to contrary no disallowance is warranted - in favour of assessee. Disallowance on account of foreign travel expenses as non-business purposes - CIT(A) deleted the addition - Held that:- The assessee also could not justify how the travelling by the directors would have enhanced or bought value to its own business and these expenses have any relevance to the business of the assessee and in reply to a specific question from the Bench as to the date-wise details of foreign visit by two directors of the assessee-company, the same could not be produced on behalf of the assessee. Onus is on the assessee to prove the business purpose of the expenses to claim deduction, as the same is out of its taxable income, which in this case, the assessee has failed to discharge. The assessee was expected atleast to maintain a date-wise detailed programme of the directors during their foreign traveling as letters of the two directors during the relevant period addressed to the assessee-company mentioning the places where they have visited does not inspire confidence - in favour of Revenue. Disallowance u/s.40A(2)(b) - CIT (A) restricted the addition to Rs.2,00,000/- as against Rs.6,00,000/- - Held that:- CIT(A) after considering entire facts and circumstances of the case and qualification of the lady directors and their contribution to the assessee-company has allowed salary at Rs.2 lakhs per annum each of the lady directors and disallowance was restricted to Rs.2 lakhs - no interference in his order on this issue is called for - against Revenue.

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• 2012 (11) TMI 804
  Rejection of books – AO found discrepancies in gross receipts, non-payment of term loans and interest thereon, non-availability of inwards and outward register - Held that:- As concluding from the facts of the case assessee has not maintained books of account and other relevant documents, as are required under the Act. He has admitted that no in-ward or out-ward Stock Registers have been maintained for the storage. Therefore, no correct and true profits can be ascertained in absence of stock register. In favour of revenue Revenue on adhoc basis - 90% of net sanctioned capacity – Assessee earn income from hire charges of cold-storage - Cold Storage capacity being 3382.8 MT - AO, calculated the storage capacity of cold-storage at 67656 bags of 50kg each – Calculate revenue @ Rs. 40 per bag – Assessee contended that capacity utilization for such a plant was 34000 to 36000 bags, for which a storage rate of Rs.30/- to Rs.40/- per bag was received – Held that:- As concluding from the facts of the case it would be fair and reasonable to upheld the addition to the tune of Rs. 4,00,000/-, with a view to meet the ends of justice. Issue partly allowed in favour of assessee

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• 2012 (11) TMI 803
  Condonation of delay - Delay in filing appeal with Tribunal - Assessee not file the appeal because higher of litigation expense over tax payable – Subsequently AO increase the demand by passing order u/s 154 – Assessee file an appeal before Tribunal – Held that:- Subsequently increase in demand is reasonable and sufficient cause for filing the appeal late. Delay condoned. In favour of assessee Exemption u/s 10(10C) – VRS - Assessee received salary and pension (including exgratia) – Violation of conditions u/s 10(10C) r.w.r. 2BA – Held that:- Following the decision in case of Shri Bikram Jit Passi (2012 (11) TMI 214 - ITAT, CHANDIGARH) that if AO had any doubt about the scheme he could have enquired from the employer. Assessee cannot be penalized and tax will be levied on him on the assumption that the scheme framed by employer is not in accordance with rule 2BA. Provision of Sec. 10(10C) should be interpreted in a manner beneficial to the optee for voluntary retirement. In favour of assessee

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• 2012 (11) TMI 802
  Disallowance of salary u/s 40A(2)(b) - Reimbursements made to two sister concerns, who had deputed their employees for carrying out the work of the assessee – Held that:- As concluded from the facts of the case there is no whisper, much less any material on record, to suggest that the assessee has made payments for any consideration extraneous to the cost of the employees deputed to the assessee. It is quite apparent from the orders of the authorities below that there is no allegation to say that the assessee has paid to sister concerns anything over and above salaries due to the employees who were on assignment to the assessee company. Issue decides in favour of assessee Disallowance of salary for non-deduction of TDS u/s 40(a)(ia) - Held that:- Sec. 40(a)(ia) does not include expenditure on salaries. AO erred in invoking Sec 40(a)(ia) to disallow the impugned payment. Issue decides in favour of assessee Disallowance of interest – Interest expenditure in relation of giving interest free advances – Held that:- The AO has not pointed out to any instance of giving away interest free loan for non-business purpose either to relative or to sister concerns. Therefore, there cannot be any disallowance of interest u/s 36(1)(iii). Issue decides in favour of assessee

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• 2012 (11) TMI 801
  Addition on account of Unexplained cash credit u/s 68 - Assessee could not furnish the requisite confirmations from the two creditors before AO – Held that:- As the assessee had produced necessary confirmation along with pass book & ROI’s before CIT(A) and AO also submit remand report on the same. There is no material or cogent reasoning made out by the Revenue with regard to the material on the basis of which the addition has been deleted. Issue decides in favour of assessee Addition on account of promissory notes/hundi u/s 69D – AO argued that amount has been borrowed in cash on a hundi, which were found in the course of search u/s 132 – Held that:- As the CIT(A) has concluded that promissory note in question is in the same language and form, as was considered by the Tribunal in the case of Himalaya Distributors (2008 (12) TMI 272 - ITAT PUNE-B) and, therefore, he concluded that having regard to the material in question, Sec 69D could not be invoked, since the documents found were not ‘hundis’. The assessee representative has not referred to any material which would require us to depart from the aforesaid findings. Issue decides against revenue

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• 2012 (11) TMI 800
  Matter referring to TPO u/s 92CA – Opportunity to the assessee – Whether opportunity to assessee has to be given before referring matter for computation of arm's length price to the TPO – Held that:- There is no specific provisions for giving any opportunity to the assessee before reference to the TPO. It is for the AO when he considers it necessary or expedient so to do, he may refer the computation of arm's length price in relation to the said international transaction u/s 92C to the Transfer Pricing Officer. Issue decides in favour of revenue Disallowance of foreign travel expenditure – Held that:- Since the AO has not given any reason for disallowance of such expenses. What has been done by the AO is that he made a disallowance in the computational part without assigning any reason. Therefore, in the facts and circumstances of the case, disallowance made by the AO is not justified. Issue decides in favour of assessee

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• 2012 (11) TMI 799
  Disallowance of interest expenses – alleged that assesses has advanced Rs.12 lacs to M/s. Millenium and Rs.20,65,000/- to M/s. Bajaj Chemical Products. On these advances no interest has been charged. The assessee is giving interest bearing funds without charging any interest - appellant submits that the loan to M/s. Millennium was given for very short period during the year. However, the principal amount had not received within the stipulated time and accordingly it was not prudent to charge interest – Held that:- AO had calculated notional interest presuming that the loan was given on the first day of accounting year, which is not correct. As the loan was given during the year, interest even on notional basis can be calculated for the days of use only though under the facts and circumstances, the same was not required - AO has not shown any nexus between interest bearing funds and the amount advanced at a lesser rate of interest. Thus, basically the nexus itself is not established - addition deleted – In favor of assessee Disallowance on account of payment of PF and ESIC – alleged that same were not paid within the due date provided in the relevant statute - Held that:- Amount in question has been paid before the due date of filing of return – disallowance deleted – In favor of assessee

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• 2012 (11) TMI 798
  Addition on account of insurance premium paid under the “Keyman Insurance Scheme” on the life of its partner – AO observed that the assessee had claimed this amount as revenue expenditure which was not allowable since the benefit of the insurance is in the nature of capital receipt and so the expenditure would also be capital expenditure – Held that:- Premium paid for obtaining such insurance policy would be an expenditure allowable u/s 37(1) of the I.T. Act - as pet 1 Explanation to Section 10 (10D), "Keyman Insurance Policy means a Life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of first mentioned person - first mentioned person is the partnership firm while the policy has been taken on the life o! the partner who is the second mentioned person – addition deleted – In favor of assessee Disallowance on account of sales commission – alleged that the assessee was unable to provide the proof of services rendered – Held that:- Genuineness of the commission paid stands established and the AO has nowhere given a finding that the same was excessive or unreasonable - payment made to the parties is genuine, after verification from two persons to whom commission was paid. This finding of fact was not disputed by the Revenue – in favor of assessee Disallowance on account of salary payment – alleged that since the books of accounts were not produced having been destroyed in the floods, there was no way of verifying the genuineness of claim of salary which was mostly paid in cash – Held that:- Salary was being paid to staff and to the deliveryman and the salary was paid in cash since the staff normally did not have any Bank account - payment would be made by cash to the employees and there is no statutory requirement of salary to be paid by cheque, especially to lowly paid employees – addition deleted – in favor of assessee

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• 2012 (11) TMI 797
  Penalty u/s 271(l)(c) of the IT Act - appellant submitted that it had not committed any default of concealing particulars of is income or furnishing inaccurate particulars of income; the penalty with regard to concealment was not applicable as the deduction u/s. 80HHC was duly claimed in the return of income on the basis of export achieved during the year and the deduction has been claimed on the basis of the certificate issued by the Chartered Accountant, who had duly verified all the export turnover figures – As per Circular No.2/2006, in respect of addition u/s 80HHC with respect to DEPB, the AO in fact should not have imposed the penalty at all - no penalty shall be levied or interest shall be charged in respect of any fresh demand raised consequent to the enactment of Taxation Laws (Amendment) Act, 2005, on account of variation in the returned/assessed income attributable to profits on sale of DEPB credits or DFRC - matter restored back to the file of the CIT(A)

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• 2012 (11) TMI 796
  Disallowance u/s 40a(ia) – alleged that the appellant should have made deduction of TDS @ 2% as against 1% deducted by the appellant from freight payments – Held that:- Payment made by it to the truck operators was in the nature of sub contract and hence was rightly subjected to TDS @ 1% - assessee was required to deduct TDS at the rate of 1% only as in assessee’s case the provisions of section 194C(2) are attracted - there is no violation of section 40a(ia) on the part of the assessee. This ground of the assessee is allowed. Disallowance on account of amount paid towards Crossing Bhada [Secondary Freight] u/s 40a(ia) – alleged that no TDS has been deducted by the delivery agent to the trucks owners while making payment to them – Held that:- Full details/facts in respect of these two grounds are not on record - restore these issues to the file of the AO Disallowances u/s 40a(ia) on account of non-deduction of TDS on primary freight payment – Held that:- Payments related prior to 1s t October, 2004, are covered by the first proviso to section 194C(3) as it stood prior to substitution by the Finance (No.2) Act,2004 and were not therefore liable to deduction of tax at source - there is no violation of section 40a(ia) of the Act and therefore this ground of the assessee is also allowed

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• 2012 (11) TMI 795
  Valuation of closing stock – Held that:- Assessee was prevented to file the requisite details in support of its valuation of closing stock, to the AO - same were filed before the learned CIT(A) but it appears that he has also not properly appreciated the same. Since the details filed before the learned CIT(A) were such that required verification at the end of the AO, we deem it proper that the matter be restored to the file of the AO for fresh adjudication

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• 2012 (11) TMI 794
  Disallowance of transportation expenses – Held that:- Assessing Officer has also allowed the claim of above expenses, but by mistake in the computation of income added the above amount - addition of Rs.2,39,802 made on the above account delete Disallowance of telephone expenses – Held that:- Disallowance of 20% of telephone expenses made by AO on the ground that the payment was made in cash for which bills / vouchers were not available with the assessee. We, however, feel that the disallowance is on higher side and therefore, we restrict this disallowance to 10% of the expenses incurred by the assessee - appeal filed by the assessee is partly allowed for statistical purpose

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• 2012 (11) TMI 793
  Addition made on account of reduction in the Gross Profit rate – Held that:- AO did not find any defect in the books of account maintained by the assessee nor did he find false with the explanation furnished by the assessee with regard to the deduction in the gross profit - AO has reached the conclusions without taking into account the quantity details furnished by the assessee along with the Tax audit report - book results can be rejected only if it is shown that the books maintained by the assessee are not reliable for deducing correct income - AO has not given any such finding – addition deleted – in favor of assessee Taxability of Sales tax subsidy received by the assessee – Held that:- Subsidy has been received from the Government for expansion of running business - assessee treated it as “Capital subsidy”, where as the AO considered it as “Revenue subsidy” - it is an incentive granted to the assessee under 1993 Package Scheme. The incentive has been provided for making addition fixed capital investment in building and plant and machinery – claim of assessee allowed Disallowance of payment made to Sabarmati Gaushala for purchase of Semen doses – alleged that the assessee could not prove any business connection in incurring this expenditure – Held that:- Appellant has incurred legitimate expense towards purchase of semen doses, which is veterinary item. These semen is injected to get the best quality of breed of milk bearing cattle - expenditure incurred has direct nexus with the objectives of the appellant society – in favor of assessee Disallowance of legal expenses – alleged that assessee could not file confirmation letter and also the basis for charging such a high amount – Held that:- Claim of Rs.24.50 lakhs pertaining to legal expenses was disallowed, the disallowance of Rs.19.50 lakhs has led to double addition which is not permissible under the Act. The Ld. CIT (A) was convinced with the submissions of the assessee and accordingly deleted addition of Rs.19,50,000/-, as it has led to double addition of the same amount - DR, however, submitted that the said claim of double addition needs verification - matter set aside to the AO for verification Disallowance of consultancy expenses – Held that:- AO disallowed the above said claim for the reason that the assessee could not file confirmation letter from the payees and also the basis of the fee charged by M/s Chirayu Consultancy - assessee filed copies of bill, confirmation letter, copy of payment voucher and copy of acknowledgement of return filed by them. The assessee claims that the said professionals have directly sent these documents to the assessing officer - AO has made the impugned addition for want of confirmation letters, which means that the said documents might not have reached the AO in time – matter remanded to AO

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• 2012 (11) TMI 792
  Disallowance made from the expense claimed under the head Salary and Bonus – Held that:- Payments in cash were made to only casual and temporary workers. Hence on a conspectus of the matter, the Ld CIT (A) restricted the impugned addition to a lump sum figure of Rs.5.00 lakhs for the reason that there is a probability that a part of claim cannot be substantiated by the assessee - AO has doubted the genuineness of this expense for another reason, i.e., the assessee could produce 5 employees out of 10 persons called for by him - disallowance upheld Determination of GP Rate - held that:- There cannot be any dispute that the assessee cannot realize any profit when a particular item is replaced at free of cost during the warranty period. If such warranty claims are borne by the assessee, then it will certainly have impact on the rate of GP. - the non-maintenance of stock leads to certain other problems, like theft and pilferage and such incidents would also have impact on the rate of GP. - The AO has not factored in such kind of possibilities while working out the average rate of GP. Further the samples taken by the AO cannot be taken as representative samples, as he has not taken samples randomly over the entire year. - Thus, in our view, the rate of GP worked out by the AO also cannot be considered to be a perfect one. - the average rate of GP on sale of spare parts may be fixed at 9% and in our view the same would meet the ends of justice. Disallowance made from the expense claimed under the head Telephone expenses – assessee had disallowed 1/20th of the expenses claimed under this head towards personal use. The AO however enhanced the disallowance to 1/4th of the total claim – Held that:- Assessee himself had disallowed a part of telephone expenses towards personal use on ad-hoc basis. The said action of the assessee establishes the fact that the telephones were put to personal use also - 1/5th of the expenses claimed disallowed Disallowance made from the expense claimed under the head “Vehicle expenses” and also from depreciation claimed on Motor car towards personal use – Held that:- Assessee himself had disallowed a part of telephone expenses towards personal use on ad-hoc basis. The said action of the assessee establishes the fact that the telephones were put to personal use also - 1/5th of the expenses claimed disallowed Disallowance made from Discount and Rebate claim – alleged that the assessee has inflated the claim made under the head “Discount and Rebate” and accordingly disallowed 20% there of – Held that:- AO has failed to adduce the opportunity of cross examining the persons who have given contradictory statements - no merit in the impugned disallowance and accordingly deleted Disallowance made from the “Labour charges” claim - AO issued letters u/s 133(6) of the Act to four persons to whom an aggregate amount of Rs.10,66,468/- had been paid as labour charges. Since the said letters were returned back un-served, the AO disallowed the said claim – Held that:- Assessee is required to engage out side persons also, to carry out the repair works of vehicles - assessee had deducted tax at source u/s 194C of the Act on the above said payments - assessee had made majority portion of the impugned amount by way of Account Payee cheques. It was also noticed that out of four persons, one had expired, one of them had gone abroad and other two persons were not immediately traceable - AO was not justified in making the addition – addition deleted Disallowance of Employees’ share of PF – Held that:- Assessee submitted that a grace period of five more days are available under the PF Regulations and the impugned payments have been made within the grace period. It was also submitted that the payments made within the grace period are also considered as payments made within the due date - amounts paid beyond the grace period disallowed

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• 2012 (11) TMI 790
  Whether reference made by the Assessing Officer to the DVO u/s. 55A is bad - Held that:- reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on 1st April, 1981 shown by the assessee on the basis of approved valuers’s report being more than its fair market value, reference under S. 35A was not valid - reference made by the Assessing Officer to the DVO u/s. 55A in the peculiar facts and circumstances of the case is bad in law - in favour of the assessee Deduction of lawyer’s fee – Held that:- AO in the absence of any documentary proof has disallowed the claim of the assessee for the deduction of Lawyer fees of Rs.4,00,000/-, the assessee’s share being Rs.1,00,000/- from the sale proceeds of the property – matter remanded to AO

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• Customs

• 2012 (11) TMI 878
  Maintainability of Appeal u/s 129A of Customs Act – Third Member decision - Provisional release of goods under Section 110A of the Customs Act, 1962 - Release of Seized goods pending Adjudication - held that:- It is only the learned Single Member in the case of Dhananjay Kumar (2008 (2) TMI 348 - CESTAT MUMBAI) held that the appeal is maintainable against the provisional release of the goods under Section 129A of the Customs Act, 1962 whereas the Division Bench of the Tribunal in the case of Shanti Alloys Pvt Ltd (1999 (8) TMI 467 - CEGAT, MADRAS) and in the case of NavShakti Enterprises (2008 (2) TMI 668 - CESTAT, NEW DELHI) held that the order in respect of provisional release of the goods is an interim order pending order of the adjudicating authority and the appeal is not maintainable before the Tribunal. The judicial proprietary demands that the decisions of the Divisional Bench is to be followed in preference over the decision of the Single Member which is passed without taking into consideration the earlier decision passed by the Division Bench. The appeal is not maintainable before the Tribunal against the order under Section 110A of the Customs Act, 1962 of provisional release of goods pending the order of adjudication.

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• 2012 (11) TMI 877
  Target Plus Scheme - Notification No. 32/2005-Cus., dated 8-4-2005 - denial the benefit of the Notification and recovering duty on the imported item on the ground that the imported item did not have any nexus with the exported goods – Held that:- Input-Output Norms referred to by the learned counsel indicate nexus between the item (Palmolein) and the exported goods (Rice, Wheat etc.) which are within the same product group (viz. Food Products) - product group is mentioned in the condition sheet attached to the authorization letter issued by the DGFT to the appellant for utilizing duty credit - appellant has made out a case for waiver of pre-deposit - pre deposit waived.

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• 2012 (11) TMI 876
  Advance licence - Diversion of materials - Violation of the conditions of Notification No. 93/2004 – Held that:- Diversion of material to their own unit took place in June, 2008 and the Notification was amended on 16-7-2008 - diversion of materials by the appellant in the month of June, 2008 cannot be said to be a violation of the conditions of Notification No. 93/2004 since the amendment took place only in July, 2008 - it may be violation of Foreign Trade Policy but that would attract penal provisions under the relevant statute and not under the Customs Act.

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• 2012 (11) TMI 830
  Refund of Special Additional Duty denied - appeal rejected as appellant not authorized to file - Held that:- The appeal before the Commissioner (Appeals) was filed by a chartered accountant of the company without authorization as it would be unconscionable to hold that the chartered accountant fitted in the meaning of principal officer. - The very fact with the present appeal of the company has been filed by one of its directors would indicate that the appellant has become wiser after noting the relevant provisions of the CESTAT (Procedure) Rules 1982, which also require an appeal of any company to be filed by its principal officer . The appellant has not produced a copy of the memo of appeal filed with the Commissioner (Appeals) to prove that the subject appeal was filed by Shri Satish Kumar as authorized representative of the company - against assessee.

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• 2012 (11) TMI 829
  Refund - method of calculation of the refund - Notification No. 94/96-Cus. - exemption of the goods to the extent of drawback received. - Revenue has taken the stand that while sanctioning the refund, benefit of CENVAT credit that may be available to the appellant has to be deducted from the amount of refund payable to the appellant – Held that:- Deduction of CENVAT credit amount by sanctioning refund does not appear to be correct since no provision of law where the future CENVAT credit admissible can be taken into account while calculating the customs duty payable under Notification No. 94/96-Cus - appellant has made out a prima facie case in their favour - requirement of pre-deposit is waived

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• 2012 (11) TMI 828
  Writ Appeal - conversion from DEPB scheme to Duty drawback scheme - appellant/petitioner is an exporter of coir products and originally he sought to have the benefit under the DEPB scheme - earlier HC in a writ petition of the petitioner [2012 (9) TMI 347 - KERALA HIGH COURT] directed the department to consider the claim - Pursuant to the said verdict, the matter was considered by the competent authority, who passed order dated 20-9-2011 whereby the claim was rejected Held that:- there was no declaration that the writ petitioner was entitled to have the benefit though such a relief was prayed for in the said Writ Petition. According to the respondents, the writ petitioner is not entitled to have the benefit as sought for, which resulted in Ext. P7 order. If the writ petitioner/appellant is aggrieved of the said order, it is open to the party to have it challenged by way of availing the statutory remedy by way of appeal under Section 129A of the Customs Act.

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• Corporate Laws

• 2012 (11) TMI 875
  Winding up petition - Held that:- The statutory notice as well as the prayers prayed for in both petitions indicate that these are the petitions filed for the purpose of recovery of dues as envisaged under Section 433(e). Considering the ratio laid down in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. (1971 (10) TMI 49 - SUPREME COURT OF INDIA ) an order under Section 433(e) is discretionary. There must be a debt due and the company must be unable to pay it. It is further observed that, a debt under this section must be a determined or definite sum of money payable immediately. It is also held that if the debt is disputed and the defence is a substantial one, the court will not pass an order of winding up the company. If the debt is a disputed debt and the defence is substantial one order of winding up should not be passed. It is also note worthy that after the petitions were admitted no other persons have raised any claim and, therefore, this Court finds that the debt being disputed and there exists a bona fide dispute. The present petitions cannot be used as tool for recovery and, therefore, considering the aforesaid facts and circumstances of the case, when the debt itself is disputed the petition for winding up deserve to be dismissed. Hence, the petitions are hereby dismissed.

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• 2012 (11) TMI 874
  Sale of shares - performance of an oral agreement - concluded contract - plaintiff/ appellants had prepared four pay orders for an aggregate sum of Rs. 4.11 crores in favour of the respondent no. 3 - plaintiff/ appellant as made out in the application for injunction was that the respondents nos. 1 and 2 expressed their inability to complete the transaction on that date and the meeting was deferred to a future date – Held that:- In appeal the High Court after appreciating the entire evidence on record found that an oral agreement for sale had actually taken place. Here also the principle of law re-stated that an oral agreement is as much legal and valid as a written agreement for sale has to be understood in the context that the existence of an oral agreement was proved clearly. But in this case it cannot be said that the plaintiff could establish the existence of a concluded contract on the basis of the materials filed so far. In a suit based on an oral contract for sale the burden is on the plaintiff to prove by cogent evidence that such agreement took place between the parties. The stage of evidence had not yet arrived in the suit and it is for the plaintiff to thrash it by adducing evidence to establish the existence of a concluded contract. It cannot be held that the plaintiff has been able to prove the existence of an oral contract between the parties or to make out a prima facie case for the grant of an interim injunction - Trial Judge has rightly dismissed the application

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• 2012 (11) TMI 827
  Whether a secured creditor of a registered company enjoys equal rights as an unsecured of a company to have its winding-up petition - Held that:- A secured creditor of a company has the legislative mandate to present a winding-up petition on the several grounds recognised in Section 433 including on the basis of the company’s inability to pay its debts. The issue here is whether a secured creditor, which founds its petition only on Section 434(1)(a) to raise the presumption of the company’s inability to pay its debts, would be able to establish the legal fiction without demonstrating the inefficacy or inadequacy of its security that the expression “neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor” in the relevant provision envisages. The rules in insolvency were to apply to companies which had been wound up in the event the value of the assets of the company was insufficient to meet the claims of its creditors, but such rule applied only to cases of winding-up on the ground of insolvency. It is beyond question that most rules of insolvency apply in the assessment of the entitlement of the creditors of a company in liquidation. But that is of no relevance in the present case. The company has not been wound up; indeed, we are two steps removed from such a situation since the present assessment is as to whether this petition made by a secured creditor, relying exclusively on Section 434(1)(a) for the court to presume the inability of the company to pay its debts, should be admitted for being advertised in the absence of the petitioning creditor having asserted or established the inefficacy or the inadequacy of the securities that it enjoys. The rules in insolvency were to apply to companies which had been wound up in the event the value of the assets of the company was insufficient to meet the claims of its creditors, but such rule applied only to cases of winding-up on the ground of insolvency. It is beyond question that most rules of insolvency apply in the assessment of the entitlement of the creditors of a company in liquidation. But that is of no relevance in the present case. The company has not been wound up, indeed, we are two steps removed from such a situation since the present assessment is as to whether this petition made by a secured creditor, relying exclusively on Section 434(1)(a) of the Act for the court to presume the inability of the company to pay its debts, should be admitted for being advertised in the absence of the petitioning creditor having asserted or established the inefficacy or the inadequacy of the securities that it enjoys. The inevitable conclusion from the discussion herein that a secured creditor of a company which has not established the inefficacy or the inadequacy of the security held by it may maintain a petition for winding up the company but such petition, if founded solely on the legal fiction under Section 434(1)(a) of the Act, will not qualify either to be admitted or for any order of winding-up to be passed thereon. Since the petitioning creditor here has neither averred nor otherwise established that the security that it enjoys is inefficacious or inadequate to meet its claim against the company, the petition cannot be admitted. Petition is permanently stayed with liberty to the petitioner to launch fresh winding-up proceedings upon exhausting its remedies against the securities that it enjoys. As a consequence an application under Section 450 of the Companies Act, is dismissed. The interim order subsisting on such application is vacated with immediate effect and the official liquidator is discharged as the provisional liquidator of the company. There will no order as to costs in either case.

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• FEMA

• 2012 (11) TMI 879
  Waiver of pre-deposit – undue hardship – alleged that said to have received an amount from persons working in Kuwait in contravention of Section 9(1)(b) and are also said to have made payments in contravention of Section 9(1)(d) of Foreign Exchange Regulation Act, 1973 – Held that:- For a hardship to be undue it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. - The word undue adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. The other aspect relates to imposition of conditions to safeguard the realisation of penalty. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the realisation of penalty. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate conditions as required to safeguard the realisation of penalty. Undue hardship As per Section 50 of FERA, the penalty shall be upto five times of the alleged violation. Even though the alleged contravention by the appellant is to the extent of more than Rs.5 Crores, the adjudicating authority/Additional Commissioner imposed only a penalty of Rs.1.25 Crores. The Appellate Tribunal has directed the appellant to deposit 5% of the penalty amount - there is no improper exercise of discretion to entertain this appeal. It cannot be said that the impugned order has caused undue hardship to the appellant warranting interference with the order

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• 2012 (11) TMI 831
  Pre-arrest bail – Purchase of land by Non resident - Violation of provisions of FEMA (Foreign Exchange Management Act) - William Singh Sandhu is a citizen of United States of America and is not an Indian citizen. There are restrictions in law on his right to purchase agricultural land in India. He has purchased agricultural land in India by giving the address of Gurvinder Singh as his address. William Singh Sandhu has already been arrested in the case and is said to have been released on regular bail. - While Gurvinder Singh is the attorney of the vendor who has no grouse in the matter, the other petitioner is the attesting witness of the sale deed - custodial interrogation of the petitioners is required in this case - case is based on documentary evidence for its proof. When William Singh Sandhu, the main accused has already been arrested and released on bail, the petitioners appear to be entitled to pre-arrest bail - interim anticipatory bail to petitioner allowed

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• Service Tax

• 2012 (11) TMI 883
  CENVAT credit of Service Tax paid on GTA services - Input servcies - place of removal of goods - Held that:- the purchase orders are on FOR basis and it is the appellant who has to bear the freight and insurance by arranging transportation of the goods. It is also not the Revenue s case that anything more than what has been reflected in the invoices as the cost of goods, stands recovered by the appellant from their buyers in the name of freight and insurance. If that be so, all the expenses incurred up to the buyers premises, which are also reflected in the invoices and adopted by the appellant as an assessable value. It is also not the revenue’s case that freight and insurance is being charged/collected by the appellant separately. - appellants were the owners of the goods upto the place of delivery that is the buyers premises and as such the GTA services so availed by them are to be treated as inputs services. - Cenvat Credit allowed.

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• 2012 (11) TMI 882
  Cenvat credit of Service Tax on GTA services received on reverse charge basis - denial as assessee should have paid Service Tax in cash - Held that:- As decided in CCE, CHANDIGARH Versus M/s NAHAR INDUSTRIAL ENTERPRISES LTD and Others [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. If the payments already stand made from the Cenvat Credit account subsequent payment made through PLA shall be refunded - in favour of assessee.

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• 2012 (11) TMI 881
  Demand of service tax – retreading of old tyres of the customers - whether the value of material used for retreading is to be added to the assessable value of the service for the purpose of service tax - Notification No.12/03-ST – Held that:- In the case of Aggarwal Colour Advance Photo System ((2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)) - value of photographic material is to be added to the assessable value of the service – prima facie case against the assessee - stay granted partly.

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• 2012 (11) TMI 870
  Refund of Service Tax - export of goods by 100% EOU - service tax paid by the appellant for the inputs received by them- held that:- Appellant needs to produce necessary evidences in support of their claim in order to verify genuineness of the admissibility of the claim. Refund claim is rejected only for non-production of evidences before first appellate authority, without expressing any opinion on the merits of the case - impugned order is set aside and remand the matter back to first appellate authority to reconsider the appeal, after following the principles of natural justice and also considering the evidences that may be produced by ld. Counsel before him.

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• 2012 (11) TMI 868
  Refund of unutilised CENVAT credit of service tax - Rule 5 - Notification No. 5/2006-C.E. (N.T.), - input services which were said to have been used for export of their output service – Held that:- Clear nexus was found between the output service and each of the input services and accordingly refund of the CENVAT Credit taken on the input services was held to be admissible in principle. It is for the limited purpose of quantification of the amount for refund in terms of the Board’s Circular dated 19-1-2010 that the case was remitted to the original authority. This action of the appellate authority cannot be characterized as remand and therefore the contention raised by the appellant cannot be sustained - Revenue’s appeal dismissed. The findings recorded by the appellate authority in relation to renting of immovable property and maintenance or repair service are beyond the scope of the appeal considered by it and hence liable to be ignored. - Decided in favor of assessee.

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• 2012 (11) TMI 866
  Refund of service tax – unjust enrichment – Under the impression that he had to pay service tax, he made a remittance of Rs. 2,13,360 - But before filing the return, he realized that he was eligible for the exemption for the small service provider as provided under Notification No. 6/2005-S.T. – Held that:- Disputed amount has not been realized as service tax from the person to whom service is provided - appellant had not filed a service tax return and the amount deposited in the tax account of the Government becomes payment towards service tax only when return is filed - it is a strictly not a refund of service tax paid - neither tax has been passed on as tax nor the amount has been shown in return as paid towards tax. What has happened is only remittance of a higher amount to the bank for credit to service tax account - unjust enrichment is not involved in this case and the amount is to be refunded to the appellant. - refund allowed - decided in favor of assessee.

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• 2012 (11) TMI 834
  Taxability of reimbursable expenses on travel local accommodation, etc. incurred by a Consulting Engineer – Following the decision of court in case of [Malabar Pvt Services Vs CCE 2007 (10) TMI 135 – CESTAT] Held that:- Such expenses would not form part of assessable value of services rendered by Consulting Engineers. In view of the clarification issued by CBEC and the decisions relied by the appellants, action of the appellant was bonafide and suppression cannot be alleged for invoking extended period of time for demanding such service tax - appeal allowed on this ground.

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• 2012 (11) TMI 833
  Cenvat credit on the security service - at assessee’s pump house for pumping water, which is required as a coolant in their manufacturing operations – Held that:- Without water, the manufacturing operations cannot be carried out and the water has to be pumped from Kundalika river, which is situated away from their factory and there is a pump house for undertaking this activity. The security services provided there is integrally connected to the manufacturing activity at the appellant's factory - they are entitled for the credit

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• 2012 (11) TMI 832
  Waiver of pre-deposit - credit card business – business auxiliary service (BAS) - VISA/Mastercard - payments received by the appellants for promoting the business of the brand name owners. - held that:- the appellants were promoting the business of VISA/MasterCard and the impugned payments were for that. - So we are prima facie not in agreement with the first leg of the argument that the activity was only that of brand name promotion taxable from 1-07-2010. The service could qualify both as promoting the business of Visa/Mastercard and also as providing service on behalf of Visa/Mastercard. Export of services - held that:- this issue is presently under consideration in the case of Microsoft Coprn. (India) (P.) Ltd. v. CST [2011 (11) TMI 60 - CESTAT, NEW DELHI] before Delhi Bench. The matter stands referred to a third Member to resolve the difference in opinion between the Members of the Bench which heard the matter. - At this stage the benefit of the difference in views could go to the appellant. So at this stage we go by the location of the service provider and take a tentative conclusion that the services were exported. - Stay granted.

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• 2012 (11) TMI 818
  Denial of service tax credit on the ground - service tax registration numbers of the suppliers are not available on invoices – Duty paying document - Held that:- Non-mention of the registration number of the service providers can be rectified by obtaining certificates showing service tax registration number in respect of these invoices which can be duly authenticated by the concerned jurisdictional Central Excise officers and submitted by the appellants - order shall stand modified and the service tax credit in respect of these invoices will stand allowed

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• Central Excise

• 2012 (11) TMI 873
  Invocation of Extended Period of Limitation - Penalty - Suppression of Facts - held that:- It cannot be gainsaid that the classification of the goods was a vital fact to be disclosed by the assessee to the department in the context of claiming the benefit of exemption under Sl. No. 31 of Notification No. 6/2006-CE ibid. The Superintendent's letter dated 27.10.2006 clearly acknowledged the fact that the appellant cleared the power cords to M/s XL Telecom Ltd. at nil rate of duty on the basis of Annexure-45 issued by the said company. A copy of Annexure-45 had been supplied by the assessee to their Range officer in June 2006 which described the goods as parts, components and accessories of mobile handsets including cellular phones fixed wireless phones and specified the item as power cord. This shows that the fact that the appellant had cleared power cords as parts/components/accessories of mobile handsets/cellular phone/fixed wireless telephone to M/s XL Telecom Ltd. during June to October 2006 claiming nil rate of duty under Notification No. 6/2006-CE dated 1.3.2006 (Sl. No. 31) was very much disclosed by the assessee to the department as early as in June 2006 and this fact was clearly acknowledged by their Range officer in his letter dated 27.10.2006. The relevant monthly returns also described the goods as power cords in the relevant column. There was no justification for the department to allege in the show-cause notice dated 5.2.2010 that the appellant had suppressed that fact with intent to evade payment of duty. In other words, the extended period of limitation was not reasonably or justifiably invoked in this case. The plea of limitation succeeds, and so is the plea against the penalty imposed under Section 11AC of the Act - Demand of duty is set aside on the ground of limitation and penalty imposed under Section 11AC of the Central Excise Act is also set aside - appeal is allowed.

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• 2012 (11) TMI 872
  Reversal of CENVAT credit taken on capital goods when it is removed after use in the manufacture of excisable goods - held that:- Removal of used Capital goods should be accompanied by payment of duty on its transaction value. In the instant case, it is not in dispute that the subject capital goods was removed from the factory after use over a period of time. The assessee paid duty on its depreciated value at tariff rate. The show-cause notice did not object to this depreciation of value. Show-cause notice did not allege that the assessee reversed CENVAT credit while clearing such capital goods. What the notice alleges is that such capital goods had also been removed on payment of duty at tariff rate. May be, the assessee might not have claimed depreciation of value, but this is inconsequential insofar as the present dispute is concerned. Payment of duty on the subject capital goods is in accordance with the view expressed by binding judicial authorities and hence in order - demand of differential duty cannot be sustained - impugned order is, therefore, set aside and appeal of assessee is allowed.

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• 2012 (11) TMI 871
  Refund of Service Tax - Bank commission charges - export of goods - held that:- Bank commission charges are in respect of Manufacture and business of the appellant. If the goods are exported, refund of Service Tax on the services which are used in relation to the goods exported, needs to be refunded - decided in favour of the assessee - issue is no more res integra - appeal filed by Revenue is devoid of merits and is liable to be rejected - impugned order is correct, legal and does not suffer from any infirmity. Decision in the Case of JEANS KNIT P. LTD. Versus COMMISSIONER OF CUSTOMS, BANGALORE [2010 (11) TMI 123 - CESTAT, BANGALORE] followed.

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• 2012 (11) TMI 869
  Duty Liability - Validity of Proceedings due to demise of proprietor - held that:- Show Cause Notice has been issued after the death of the proprietor of the firm, wherein it is alleged that there was clandestine removal of the goods. It is undisputed that there was no reply to Show Cause Notice. it was a serious dispute between two individuals wherein their lordships have clearly recorded that the dispute is with respect to the extent of property of the deceased coming into hand of legal heirs, hence legal heir can be proceeded in appropriate court of law for recovery of any demands from the authorities. In the case in hand, it is seen from the record that the lower authorities has issued Show Cause Notice to the proprietary-ship firm which was not in existence at the time of issuance of Show Cause Notice due to demise of the proprietor - No demand - decided in favor of assessee.

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• 2012 (11) TMI 867
  Restoration of applications – Impact of order of BIFR on order of CESTAT directing to make pre-deposit - BIFR passed the order on reference under Section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 – Held that:- BIFR is not an appellate authority - direction contained in the said order are beyond their jurisdiction and power - CESTAT is not bound to follow the same - deposit stands made by the appellants after a gap of five years - From the date of passing the stay order, no efforts made to deposit any amount or to make restoration application so as to keep their interest alive - no justifiable reasons to recall the order of the dismissal

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• 2012 (11) TMI 865
  Waiver of pre-deposit - Classification - as ‘Plant Growth Regulators’ (PGRs) under SH 3808.20 or as ‘Other Fertilizers’ under heading 31.05 of the CETA Schedule attracting ‘nil’ rate of duty - According to the assessee, the impugned product(s) is a mixture of various inorganic substances whose essential constituent is nitrogen which makes it a fertilizer – Held that:- Chemicals, barring urea, potassium nitrate and calcium nitrate, are not recognized as fertilizers - appellant is yet to show as to why chemicals like zinc sulphate, manganese sulphate, ferrous sulphate and boric acid, were admixed with fertilizers to manufacture the so-called ‘other fertilizers’ - appellant was not showing the presence of Nitrogen at all prior to 2001 - they were not manufacturing and marketing the goods as fertilizers - it was added as a pretence for claiming classification of the products under heading 31.05 – product is classified as ‘Plant Growth Regulators’ (PGRs) under SH 3808.20 - no part of the demand of duty is beyond the normal period of limitation - appellant directed to pre-deposit

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• 2012 (11) TMI 864
  Cenvat credit of differential duty paid by the supplier based on the certificate issued by the superintendent of central excise – additional duty - procedure for availing benefit - Certificates issued by Superintendent under Rule 57E(3) Central Excise Rules, 1944 for taking credit - old MODVAT provisions (Rules 57A to 57U) were replaced by new provisions (Rules 57AA to 57AK) through amendment of the Central Excise Rules – alleged that certificates issued/revalidated by the Superintendent were not documents prescribed under Rule 9 for the purpose of availment of CENVAT credit – Held that:- Right which accrued under Rule 57A for taking MODVAT credit of the differential duty paid on inputs, on the basis of Rule 57E certificates, which were valid documents prescribed for the purpose under Rule 57G (3) prior to the repeal of Rule 57E was protected by Section 38A of the Central Excise Act - no dispute about satisfaction of conditions under Rule 57A ibid for claiming substantive benefit of Modvat credit; these were remained unchanged and new Rules only changed procedure, providing supplementary invoice instead of certificate of Superintendent - Department objection based on procedural change could not succeed as substantive right cannot be defeated on strict construction of procedural provisions. Effect of substitution of Modvat Rules - Validation provisiosn of section 38A - held that:- The dispute regarding Rule 57E certificates originated with the Superintendent’s letter dated 14-1-2000 and the same has remained alive since then. This very dispute is awaiting our decision. Therefore there is no substance in the submission made by the learned JCDR that there was no dispute with reference to Rule 57E when Rules 57A to 57U (including Rule 57E) were replaced by rules 57AA to Rules 57AK with effect from 1-4-2000 under Notification No. 11/2000-C.E. (N.T.), dated 1-3-2000 as modified by Notification No. 27/2000-C.E. (N.T.), dated 31-3-2000. The question whether IPCL was entitled to use the certificates for taking MODVAT credit of the differential duty paid by ONGC, apparently, originated in January 2000 and the same has ever remained alive till date. But this aspect is not significant insofar as clause (c) of Section 38A of the Act is concerned, though it might be relevant for clause (e) of the Section. In our considered view, it is not clause (e) (with reference to which the learned JCDR has argued) but clause (c) that is relevant to the context. By virtue of clause (c) of Section 38A of the Act, RIL can claim to enforce the right which accrued to them prior to the aforesaid amendment of Rules 57A to 57U (MODVAT Rules). Thus RIL has right to take MODVAT credit of the differential duty paid by ONGC as this right is saved by Section 38A of the Central Excise Act. Absence of supplementary Invoice - held that:- The new rules prescribed a supplementary invoice in lieu of such certificate. In the absence of a transitional provision enabling a manufacturer of final product, who obtained Rule 57E certificate prior to 1-4-2000, to use the certificate for taking MODVAT credit on his inputs after the said date, the principle of restitution embodied in Section 144 of the Code of Civil Procedure and applied by the Supreme Court in both customs and excise cases can, in our opinion, be invoked to dispense justice in the present case. - The revalidation and reissue of the certificates by the Superintendent in the wake of the Tribunal’s decision in favour of ONGC on the question whether they had indulged in any fraud, collusion or suppression or misstatement of facts or contravention of law with intent to evade payment of duty must be seen as restitution of their right to have such certificates under Rule 57E. It goes without saying that IPCL could also claim restitution of their right to take MODVAT credit on the strength of such certificates. Tribunal is empowered to safeguard the legal consequences of its own earlier order which was accepted by both the sides which cannot be termed “grant of equitable relief”. Reversal of cenvat credit - reversal of credit had been made under protest – Held that:- IPCL (RIL) promptly reversed the credit, although under protest, when they were directed to reverse it. Later on, when the certificates, which were issued by the Superintendent having jurisdiction over ONGC’s factory and subsequently cancelled by him, were revalidated by the Superintendent as ordered by the Assistant Commissioner, IPCL used the documents for restoring the credit in their MODVAT account. On these facts, no blameworthy conduct can be attributed to IPCL - in favour of the parties - Revenue’s appeal dismissed

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• 2012 (11) TMI 863
  Cenvat credit of CVD paid through DEPB - Revenue was of the view that since no duty is paid in cash, cenvat credit should not have been taken on the basis of such debit entry in certificates - Notification No. 53/03-Cus dated 1.4.03 – Held that:- no merit in the contention of Revenue that cenvat credit is not available in respect of duty debited in DFCE certificate in view of clause 7 incorporated in Notification No. 53/03 dated 1.4.03 with effect from 17.11.2004. - This position should be effective from the date of said clause has been introduced. – Cenvat credit allowed

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• 2012 (11) TMI 862
  Waiver of pre-deposit – manufacture of bodies of buses on the chassis received by them - complete vehicle was cleared by them claiming the benefit of Sl. No. 90 of Notification No. 6/2006-C.E. - In terms of the said Sl. No. of the Notification, all items of equipment including machinery and rolling stock procured by and on behalf of DMRC are exempted subject to condition No. 18 – Held that:- Buses cannot be considered to be either equipment or machinery or rolling stock procured by DMRC for use in various projects - value of the entire final product including the value of the parts, supplied by others is required to be taken into consideration. As the appellants have cleared the full and complete motor vehicles, they are under a legal obligation to pay duty on the entire value of the vehicle and not on the bus bodies being manufactured by them. - Appellant directed to make pre-deposit of Rs. 20 Lakhs

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• 2012 (11) TMI 861
  Clubbing the clearances of the units - SSI exemption - Held that:- One a proprietary unit and other a partnership unit cannot be clubbed unless it is shown that the work of one factory was being done in the another factory - both the factories were complete units and were capable of manufacturing goods independently - duty cannot be confirmed against the two assessees without arriving at a finding against whom the same is required to be confirmed - both the units cannot be held to be liable for duty demand - Commissioner is required to make his mind as against which unit the duty is required to be confirmed - order set aside and matter remanded to the Commissioner for de novo adjudication

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• 2012 (11) TMI 826
  Cenvat credit on the duty paid on PVC resin - denial of claim on clandestine removal - Held that:- The entire case of the Revenue is based upon the shortages detected at the time of visit of officers, and statement of Shri M K Jain, their authorized representative who was a new employee to the appellant and as such, was not aware of the Central Excise procedures. He in his statement has accepted the shortages only and has nowhere admitted any clandestine activity on the part of the appellant & was not aware of the reasons for such shortages. As Revenue has not further conducted any investigation so as to find out the alleged buyers of the said raw material or final product & no questions were put to Shri Jain as to what has happened to material found short. Thus admission on the part of assessee about the short found raw material by itself is no ground for arriving at an adverse finding against the assessee. As decided in Commissioner of Central Excise Kanpur vs. Minakshi Castings [2011 (8) TMI 896 - ALLAHABAD HIGH COURT] shortages of finished stock without evidence of clandestine removal cannot lead to inference of evasion of duty - in favour of assessee.

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• 2012 (11) TMI 825
  Refund of unutilized Cenvat credit - inputs used in manufacture of Polyester Staple Fiber (PSF) exported under Bond/Letter of Undertaking - Held that:- As examined in SHELL INDIA MARKETS PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE [2012 (10) TMI 34 - KARNATAKA HIGH COURT] it is necessary to verify not only that particular input service is consumed for providing particular output service but also that eligible service received under various invoices have actually gone into consumption for providing impugned exported output service and not utilized for other purposes. Though these observations of Hon’ble High Court are in respect of input services, these are squarely applicable to inputs also as under Rule 5 of the Cenvat Credit Rules inputs and input services are treated at equal footing. Thus refund of Cenvat credit in respect of inputs is admissible if those inputs have actually gone into consumption of exported goods. The matter needs to be remanded back to the original authority for adjudicating the matter afresh in view of the decision of the in the case of Shell India Markets Pvt. Ltd. (supra).

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• 2012 (11) TMI 824
  Notification No. 162/86-CE - bodies built on the motor vehicle chassis - benefit denied as available on goods classified under Chapter heading 87.02, 87.03 and 87.04 - assessee deemed to be covered under the heading 87.07 - Held that:- As decided in AMBALA COACH BUILDERS Versus COMMISSIONER OF C. EX., NEW DELHI [2000 (5) TMI 70 - CEGAT, COURT NO. II, NEW DELHI] a practice prevalent regarding levy of duty of excise on the bodies built by independent body builders on the motor vehicle chassis under Headings 87.02 to 87.04 instead of Heading 87.07 and that such bodies were liable to a higher amount of duty of excise than what was levied according to the said practice during the period from 1-5-1991 to 28-2-2001. The Central Government by the said Notification has directed that the duty payable in excess shall not be required to be paid in respect of bodies built by independent body builders on the motor vehicle chassis on which the duty of excise was short-levied during the aforesaid period in accordance with the said practice. As the demand in the present matter relates to the period specified in Section 11C. Notification and the appellants have paid duty under Headings 87.02/87.04 they are eligible to the benefit of the Notification. Accordingly, they are not liable to pay any duty - in favour of assessee.

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• 2012 (11) TMI 823
  Conodonation of delay - Waiver of pre-deposit of duty demand, interest and penalty - Delay of 20 days beyond the prescribed period of 60 days in filing Appeal - held that:- Proprietor of the appellant firm was indisposed due to illness and also that his counsel could not file appeal in time because of unfortunate demise of his relative. - delay is condoned in filing of appeal and set aside the impugned order passed by the Commissioner (Appeals) and remand the matter back to the Commissioner (Appeals) for de novo adjudication on merits after giving opportunity of being heard the appellant.

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• 2012 (11) TMI 822
  Demand and penalty – shortage of input – allegation of clandestine removal of goods – Held that:- Merely because the assessee chooses not to contest the demand on account of shortages, so as to avoid litigations, by itself, does not mean that allegation of clandestine removal stand established against him, especially in the absence of any corroborative evidence to that effect - no justifiable reasons to impose penalty upon the appellant

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• 2012 (11) TMI 821
  Duty and penalty – job worker - area based exemption - non filing of declaration - Notification No. 50/2003-C.E., dated 10-6-2003 read with Notification No. 76/2003-C.E. – Held that:- appellant having its factory in Himachal Pradesh which is covered by the notification should not be denied the benefit of notification on the said technical ground. - the appellant having a belief that the activity carried out by the appellant does not amount to manufacture, could not have filed a declaration for availing the benefit of said exemption notification. - the principal manufacturer i.e. M/s. Khaitan Electrical Ltd. located in that area is itself enjoying the benefit of notification in question, denial of the same to his job worker would not be in the interest of justice. Waiver of pre-deposit – Held that:- Appellants have pleaded financial hardship that their factory closed, the proprietor is without any job is dependent on his children for day to day requirement - factory is lying closed and no contrary has been brought on record as regards financial position of the proprietor - unconditional stay granted - pre-deposit of duty waived

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• 2012 (11) TMI 820
  Demand of duty - manufacture of excisable as well as exempted goods - common inputs and are used in both dutiable and exempted goods – Held that:- In the absence of non maintenance of separate accounts in respect of duty and exempted goods as per the provisions of Rule 6 of the Cenvat Credit Rules, 2002 lower authorities have held that the appellant is required to pay an amount equal to 8%/10% of the total value of the exempted goods - appellant was following the procedure even before the retrospective amendment came into picture - demands of an amount equivalent to 8%/10% of the value of the exempted goods is incorrect and unsustainable - order is set aside and the appeal is allowed

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• 2012 (11) TMI 819
  Benefit of Notification No. 56/95 - Power Driven Pump Sets – Held that:- Board’s Circular not only deals with classification but also underlines that I.C. Engine may be treated as an integral part of P.D. Pump. Moreover, diesel engine is an I.C. engine - Notification No. 56/95, dated 16-3-1995 exempts power-driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal or vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps - Revenue’s Appeals are dismissed.

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• 2012 (11) TMI 817
  Challenge to the levy of excise duty on coal - Petitioner challenged the levying of 5% excise duty with cess on the coal purchased by them from the Coal India Ltd. claiming that levying of such 5% of excise duty is illegal and instead ought to have been levied only 1.03% duty in terms of the Government of India’s Notification No. 1/2011-C.E., dated 1-3-2011. – Held that:- Coal attracts excise duty at the rate of 5% plus cess w.e.f. 1-3-2011. However, the aforesaid excise duty will be exempted and leviable only to the extent of 1% ad valorem plus cess, in the event credit of duty on inputs has not been taken under the provisions of CENVAT Credit Rules, 2004 as also provided under the Government of India’s Notification dated 1-3-2011. Since Coal India Ltd. as a manufacturer of “coal” has decided to avail credit of duty on inputs under the provisions of CENVAT Credit Rules, 2004, the exemption provided under Notification No. 1/2011-C.E, dated 1-3-2011 will not be applicable. Therefore, excise duty at the rate of 5% would be leviable on “coal”. The writ petitioners who are mere traders and not manufacturers, obviously, cannot claim CENVAT Credit under the CENVAT Credit Rules, 2004 and accordingly, has to pay the excise duty on coal at the rate of 5% plus cess on duty as a purchaser. - Decided against the petitioner.

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• 2012 (11) TMI 816
  Condonation of delay of 140 days in filing appeal - order-in-appeal was passed on 14-1-2011 - factory was taken over by the bank for recovery of certain dues and was in the possession of the bank as is clear from the documentary evidence produced on record – Held that:- Limitation period expired around 18-4-2011. Before the expiry of the said period, the appellant entered into correspondence with the office of Commissioner (Appeals) for supply of the copy of order - fact itself reflects upon the non-receipt of the order by the appellant - there was still a period of one month available to appellant to file the appeal and if the Commissioner (Appeals) would have served a copy of the order immediately to the appellant on 17-3-2011, the appellant could have filed appeal well in time - date of communication of the order should be taken as 19-7-2011 when the same was subsequently supplied by the office of Commissioner (Appeals) - COD allowed

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• CST, VAT & Sales Tax

• 2012 (11) TMI 884
  Liability to Tax after Closure of Business - recovery notices for recovering more than Rs.5 lakhs. - assessee submited that tax due for the period up to the cancellation was paid by him in its entirety - Held that:- quantification is necessary for the reason that according to the petitioner, the liability has been discharged in full - respondent is directed to quantify the balance liability, if any, that of the petitioner. For expediting such a quantification petitioner will appear before the first respondent between 10 and 11 A.M. on 15.11.2012 along with a copy of this judgment and then he shall quantify the liability of the petitioner after hearing the petitioner also in the matter - Writ petition is disposed of.

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• 2012 (11) TMI 835
  Input - Input tax credit - Whether tax paid on the inputs for generating power can be set off against the tax payable on sale of aluminum, aluminum ingot and sheet etc when electrical energy is necessary to produce/manufacture and sale of aluminum, aluminum ingot and sheet etc – Held that:- The process of manufacturing of aluminum reveals that energy is required in such process of manufacturing. Electrical energy which is generated with the use of coal and other materials is only an intermediate product which is used in the process of manufacturing of final product viz. aluminum, aluminum ingots and sheets etc. Coal, alum, caustic soda and other consumables purchased from market on payment of tax and used for generation of electrical energy in the Captive Thermal Plant of the petitioner which is used in the process of manufacture of finished product viz. aluminum, aluminum ingots and sheets etc. taxable under the OVAT Act. are input as defined under Section 2(25) of the OVAT Act and the tax which has been paid on such purchases can be claimed as input tax credit under Section 2(27) of the OVAT Act against the tax payable on sale of finished products i.e. aluminum, aluminum ingots and sheets etc. - Decided in favor of assessee. Whether imposition of penalty under Section 43(2) of the OVAT Act can only be levied if the escapement is without any reasonable cause - held that:- VAT is indirect tax on consumption of goods. It is the form of collecting sales tax under which tax is collected in each stage on the value added to the goods. The basic object of VAT Scheme is to provide voluntary and self-compliance. It goes without saying that to plug the leakage of revenue, the Legislature enacted law authorizing imposition of penalty for infraction of any statutory provision. penalty proceedings are quasi-judicial in nature. Quantification of penalty under Section 43 of the OVAT Act is dependent upon the tax assessed under that Section. Once the Assessing Officer comes to the conclusion that the dealer is indulged in fraudulent activities and assesses him under Section 43 of the OVAT Act, there is no need for the Assessing Officer to make further investigation to find out whether the escapement is without reasonable cause for the purpose of imposition of penalty under Section 43(2) of the OVAT Act. The Hon’ble Supreme Court in the case of [Union of India & Others vs Dharamendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT] held that wilful concealment is not an essential ingredient for attracting civil liability or penalty - In the result, writ petitions are allowed.

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• Indian Laws

• 2012 (11) TMI 880
  Condonation of Delay of 108 days in filing of Application - for setting aside of Contract - held that:- Time was the essence of the contract. The Railways were not prepared to deliver the goods(scrap).Hence it committed breach. Even then the learned arbitrator directed delivery of the goods within thirty days from the date of publication of the award simultaneously upon payment and in default thereof the sale would stand cancelled. There is no need to make any comment on the merits of the objection raised by the Railways in its application for setting aside. Section 34(3) of the 1996 Act was clear and unambiguous. It restricted the power of the court to consider an application for condonation of delay if it was filed within thirty days after expiry of the stipulated period and “not thereafter”. In the present case, from the pleadings no case made out by the Union of India, either before the arbitrator or this court. Mr. Chatterjee would seek leave from us to amend his application for setting aside - not to grant such leave at this belated stage that would cause immense prejudice to the respondent - Plea of fraud was conspicuously absent at all stages. It was nothing but an attempt made at the bar that would not inspire us to extend the scope of the appeal - dismissal of appeal would foreclose the opportunity to challenge the award - unable to accede to the prayer of the Union of India - appeal fails and is hereby dismissed.

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