Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 29, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Customs
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F. No. 437/72/ 2012 – Cus. IV - dated
27-11-2012
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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
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F. No. 437/65/2012- Cus. IV - dated
27-11-2012
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s KK International, Thane, to the Commissioner of Customs (Imports), JNCH
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F. No. 437/55/ 2012 – Cus. IV - dated
27-11-2012
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s Bhartia Sales Corporation, No.1001, Orchid Vasanth Road, Malad East, Mumbai
Income Tax
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51/2012 - dated
23-11-2012
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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.
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49/2012 - dated
7-11-2012
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IT
Amendment in DTAA - Agreement for avoidance of double of fiscal taxation and preventionevasion with foreign countries - Uzbekistan
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Payment for bandwidth would constitute neither royalties nor fees for technical services either under the Act or under the agreement for Avoidance of Double Taxation with USA. - AT
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Chargeability to Capital gain - the land in question was acquired by father of the assessee free of cost. Therefore, there is no question of capital gain on transfer of such land and enhanced compensation reeived is not chargeable to tax - AT
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Income from house property - moment the commercial surcharge is recovered irrespective of the provisions of the agreement entered into by and between the landlord and tenant it immediately become exigible to tax as rental income - HC
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Interest on late deduction of TDS due to stay order passed by High Court - Assessee not to be treated in default - for the stay period no Interest u/s 201(1A) - SC
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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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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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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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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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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
Customs
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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
FEMA
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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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Liaison Office (LO)/Branch Office (BO) in India by Foreign Entities – Reporting to Income Tax Authorities. - Circular
Corporate Law
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Existence of an an oral agreement does not mean it is a concluded contract which could be enforced by law - HC
Service Tax
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Launching of “Zonal E-Helpline” for Trade & Industry in Mumbai Central Excise & Service Tax Zone-I. - Trade Notice
VAT
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Trade Mark is "Goods" as defined in the Act - Royalty received by the petitioner is exigible to tax under the KVAT Act. - introduction of Service Tax is inconsequential. - HC
Case Laws:
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Income Tax
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2012 (11) TMI 907
Deduction u/s 54F - investment in old house property - dis-allowance on ground that assessee has not constructed the new residential building within the stipulated time and it is in semi finished condition - Held that:- Assessee having constructed the building and invested the capital gain, the assessee is entitled for deduction u/s. 54F if other conditions stipulated in Section 54F are satisfied. Other objection of the AO that the amount of capital gain is invested in capital gain deposit scheme as prescribed u/s 54(2), assessee submitted that the assessee originally given advance to purchase the flat and it was not materialised. The assessee took back the advance and started construction of a building but the assessee's return of income was not accompanied by any evidence in support of this claim. Being so, AO is directed to examine the fact whether the amount so paid is for acquisition of flat or not and decide the issue in the light of the order of Tribunal in the case of Jagan Nath Singh Lodha (2004 (6) TMI 309 - ITAT JODHPUR) - Appeal of the assessee is partly allowed for statistical purposes
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2012 (11) TMI 906
Addition made on account of cessation of liability u/s 41(1) - non-filing of confirmations of Creditors by assessee - lapse of more than 3 years - no transaction - Revenue contended that right to recover the said amount has become barred by limitation, therefore, the provisions of Section 41(1) are invoked - Held that:- The assessee’s consistent stand has been that he had not made any entry in the profits and loss accounts during the year under appeal and there was no remission or cessation of liability during the year under appeal, this shows the intention of the assessee for making payments to these parties. Further, A.O. has not been able to demonstrate any cogent reason and has not brought any material on record to show that these liabilities have ceased in the year under appeal. Simply because assessee was not able to produce any confirmation regarding the creditors, the conclusion cannot be arrived that the liability has ceased to exist. Therefore, CIT(A) rightly deleted the addition - Decided in favor of assessee. Dis-allowance of interest expenditure on borrowed funds on account of interest free advances being provided to other parties - assessee contended that it was having interest free fund of Rs.6.94 crores against interest free advance of Rs.1.06 crores and therefore, dis-allowance on interest was uncalled for. Held that:- Aforesaid contention of assessee requires verification at the end of the A.O. and for this purpose the matter is restored to the file of the A.O. Dis-allowance u/s 40(a)(ia) - payment to labour contractor - seasonal business - assessee contended that assessee engaged labour on piecemeal basis without any type of written or oral contract - Held that:- Provision of section 40(a)(ia) could not be invoked where tax u/s 194C was not deducted from labour charges paid to labour sardars as there was no agreement between the assessee and the labour sardars to supply labour. CIT(A) rightly deleted the addition Dis-allowance made on account of repairing and maintenance for want of bills - assessee contended before CIT(A) that the expenditure was fully supported by vouchers and supporting evidence was also available - Held that:- Amount that has been spent by self made vouchers is less than 10% of the total repair expenses incurred by the assessee during the year under appeal which appears to be quite reasonable as it is some times not possible to obtain bills for each and every expenditure incurred as repairing expenses are paid to different persons which may not have the bills with them. In light of aforesaid, CIT(A) rightly deleted the dis-allowance.
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2012 (11) TMI 905
Taxability of retention money - assessee contended that same cannot be treated as Revenue since retention money has not accrued to the assessee and same shall be realized only on satisfactory completion of the contract - Held that:- It is undisputed that assessee has not received any money out of the amount retained as retention money by the contractee, Therefore, CIT(A) was justified in holding that monies retained by the principal as per provisions of contracts as “retention money” can not be included in the total income - Decided against Revenue
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2012 (11) TMI 904
Deduction u/s 80-O - held that:- Supply of man power is one of the services rendered by the assessee and otherwise, mainly the assessee does the supply of comprehensive technical services for designing and development - assessee is entitled to relief as given by CIT (A) and is eligible for claiming deduction u/s. 80-O - ground raised by Revenue is dismissed. Deduction u/s 40(a)(iii)- Employer-Employee relationship - salary payble outside India - held that:- Seconded personnel who is deputed by a foreign company to an Indian Companywere not employees of the assessee company foreign allowance paid to them by the assessee company cannot be considered as part of salary and so provisions of section 40(a)(iii) are not applicable as there is no Employer-Employee relation. overseas allowances is not chargeable under the head “Salary”. Therefore, section 40(a)(iii) does not apply. Similar view is also endorsed by the Hon’ble Kerala High Court in the case of [CIT vs. G. Eroppino Giovanni 1991 (7) TMI 36 - KERALA HIGH COURT] - CIT (A) is correct in holding that there is no employee-employer relationship so as to consider the disallowance under section 40(a)(iii) of the Act - impugned payments made cannot be taxed under the head “Salaries” - in favour of assessee and ground raised by Revenue is dismissed. Relief u/s 91(1)- held that:- Word “paid” in Sec.91(1) of the Act means constructive payment of tax and the onus is on the assessee to lead evidence that the taxes had in fact being paid in any country with which there is no agreement u/s 90 for avoidance of double taxation. Assessee made the payment of taxes in Kuwait and the dates and amounts of the said payments of taxes were made available before the CIT (A) - Original documents were also filed evidencing the same for relief in respect of the said taxes paid in Kuwait u/s 91(1) of the Act - assessee is entitled to said relief - ground raised by Revenue is dismissed. Taxability of Income ie gain in foreign exchange fluctuation - “Business Income”vs “Income from Other Sources” - held that:- If Exchange fluctuation is on the export proceeds itself, then it has to be treated as gain in business and if the gains on exchange fluctuation occurs on the funds lying parked in EEFC account, then in that case, the case of [CIT vs Shah Originals 2010 (4) TMI 216 - BOMBAY HIGH COURT] is to be applied and treat that gain as income from other sources - ground raised stands covered by the said decision of the Tribunal in the assessee’s own case - In the result, appeal of the Revenue is allowed in part. Condonation of delay of 1529 days in filing C.O. - held that:- Expalnation of assessee which revolves around the ‘oversight’ and assessee’s conference with his counsel after expiry of four years, in our opinion does not constitute ‘sufficient cause’ within the meaning of section 253(5) of the Act. It is not in the normal course that the assessee has not met his counsel for all these four years. As such there is no confirmation from the said Counsel by way of any affidavit that the assessee had impugned conference to advise for filing the impugned CO. In the present case, there is a negligence on part of the appellant and it is a case of absence of due diligence. Further also, the assessee has not demonstrated that it was beyond his control that the Cross Objection could not be filed before the expiry of the limitation period of 30 days specified in section 253(4) of the Act. Therefore, delay in filing the Cross Objection remains unexplained - no sufficient cause for condonation of delay of 1529 days - impugned application for condonation of delay by the Cross Objector, Respondent is dismissed - In the result, Revenue appeal is allowed in part and the Cross Objection is dismissed.
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2012 (11) TMI 903
Deduction u/s 10A, 10B - Setting off losses and unabsorbed Depreciation - Either in the case of non-STP units or in the case of the very same undertaking - held that:- Respectfully following the dictum laid down by the Hon'ble jurisdictional High Court in the case of [CIT vs Yokogawa India Ltd. 2011 (8) TMI 845 - KARNATAKA HIGH COURT] deduction u/s 10A/10B of the Act is to be calculated without setting off of the carried forward business loss of the assessee in respect of the earlier assessment years. Invoking provisions of sec40a(i)- Payment of TDS u/s 195 - royalties or fees for technical services. - Telecom voice service received by non-resident on account of business connection mentioned in s. 9(1)(i) not having any permanent establishment in India - held that:- Payment made to a non-resident in respect of telecom voice services availed outside India cannot be termed as 'fees for technical services'. payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider in other words, to fit into terminology 'making available', the technical knowledge, skills etc., must remain with the person receiving the service even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider has gone into it. - The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Payment for bandwidth would constitute neither royalties nor fees for technical services either under the Act or under the agreement for Avoidance of Double Taxation with USA. - the assessee had no obligation whatsoever to deduct tax at source when the payments made to Novatel and as such, no disallowance u/s 40(a)(i) of the Act was called for. - Decided in favor of assessee.
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2012 (11) TMI 902
Chargeability to Capital gain - Whether Land situated at Village Kharghar was a capital asset and enhanced compensation received is chargeable to tax - Held that:- Land in dispute is not an agricultural land as it is situated with in municipal limits within the meaning of section 2(14)(iii) as claimed by the assessee and is a capital asset - in favour of revenue. The liability to tax on capital gain would arise in respect of only those capital assets in the acquisition of which, an element of cost is either actually present or is capable of being reckoned and not in respect of those assets in the acquisition of which, the element of cost is altogether inconceivable. - CIT v. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT] As the land in question was not having cost because the same was allotted to father of the assessee being refugee from Pakistan by Government of India at relevant point of time which is not in dispute. So the land in question was acquired by father of the assessee free of cost. Therefore, there is no question of capital gain on transfer of such land and enhanced compensation reeived is not chargeable to tax - in favour of assessee.
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2012 (11) TMI 901
Return of Income u/s 153 – Whether ROI filed in response to notice u/s 148 is a voluntary return if it filed before the expiry of the time limit u/s 153 – Held that:- Even if the return has been filed within the time prescribed u/s 153 is not a voluntary return. Explanation to Sec.148 makes it clear that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section. Therefore, the assessee cannot say that the return filed was voluntary return as it was filed before the expiry of the time limit as specified in section 153. In favour of revenue Penalty u/s 271(1)(c) - Difference in income as TDS statement and ROI u/s 153 – Concealment of income – Assessee filed return u/s 153 in response to notice u/s 148 – AO made addition on said amount & levy penalty u/s 271(1)(c) – Assessee contended that it was not deliberate concealment and it was on account of oversight – Held that:- The plea of the assessee that error was on account of oversight is not tenable. The assessee had filed return of income in pursuance to notice issued u/s 148 and claimed benefit of TDS on the commission earned. The assessee has shown in his ROI, the exact amount of TDS whereas he has shown Rs. 5,00,000/- less in the commission earned. This cannot be said to be an inadvertent or a bonafide mistake. It is clearly a deliberate attempt on the part of the assessee to conceal the income. Issue decides in favour of revenue Since the assessee had filed return for the first time, it would be too harsh to impose penalty on the entire amount of tax. We, therefore, reduce the penalty only to be levied on the income escaped i.e. Rs.5,00,000/- the amount not shown in the return of income. Ground of assessee partly allowed
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2012 (11) TMI 900
Validity of Order u/s 263 - Taxability of Foreign Exchange Fluctuation Reserve - CIT found that this issue was not reflected in the assessment order by AO - Order passed by the AO as far as the issue is concerned, is erroneous and prejudicial to the interests of the Revenue – Held that:- It is necessary, to examine the components of the assets and holdings re-stated by the assessee in terms of Indian rupee so as to see whether any revenue item is re-stated and if so, whether the gains would be eligible to tax. AO has not at all discussed anything in his order on this important issue. Therefore, it is not possible to hold at present that whether the AO had in fact examined this aspect of the case. Hence, the assessment order is erroneous and prejudicial to the interests of the Revenue as far as the addition to the foreign currency fluctuation reserve account is concerned. Appeal decides in favour of revenue
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2012 (11) TMI 899
Addition on account of opening as cash in hand – Assessee contended that the same is represented out of income earned prior to the block period - This is reflected in the cash flow statement filed by the assessee – Held that:- The assessee comes from an affluent family. She has her own properties and businesses at different places. She has different sources of income including agricultural income. In these circumstances it is not possible to hold that the assessee could not have an amount of Rs. 60,000/- as opening cash capital in her hands. The assessee has offered a plausible explanation that the amount was appropriated from her past income. This explanation is just and reasonable, which has been allowed. Addition on account of commission income – Assessee has not maintain books & estimated income by way of commission at 10% of the annual turnover – AO after allowing an expenditure of 40%, treated 60% as commission income of the assessee – Held that:- Non-maintenance of accounts is not so crucial, because the total turnover is always available. The AO has to compute the undisclosed income falling within the block period. He does not estimate or appraise the undisclosed income. Therefore, this addition made by the AO, purely on estimate basis, cannot be sustained in law. Hence deleted In favour of assessee Addition on account of sale proceeds of thorn trees as undisclosed income – AO treated it as incidental income - the assessee has credited a sum of Rs. 20,000/- each year as income from sale of thorn trees but the same was not offered for taxation – Held that:- The assessee as a real estate developer has been developing properties by incurring expenditure. It is in the course of that developing that thorn trees were removed and they were sold for nominal amounts. The sale of thorn trees is not a regular activity of the assessee and the income therefrom does not constitute an independent source of income. As a matter of fact, it goes to reduce the expenses of the assessee in developing the land. Hence no justification in treating the amount as undisclosed income. In favour of assessee Disallowance of depreciation – Air Conditioner – Held that:- The air conditioner was installed at the residence of the assessee and, therefore, the same cannot be considered as a business asset and therefore depreciation should be disallowed. We agree with the argument of the Revenue and this disallowance of Rs. 8,750/- is confirmed. In favour of revenue Income from property – Assessee has a guest house due to litigation, the property could not be registered in the name of the assessee – AO argues that the assessee has been running the guest house since 1993-94 and income therefrom has been returned so also the assessee has not maintained any books of account – Held that:- As the guest house property was not fully operational, there cannot be a case that the assessee was earning regular income by way of its commercial operation. The argument of the assessee that the operation of the guest house was only on a nominal level is to be accepted. Therefore, naturally, the receipts also would be very nominal. Anyhow, the assessee has to keep the property in a good condition. Therefore, it is necessary to see that whatever income the assessee had received from the operation of the guest house was in fact spent for the upkeep and maintenance of the guest house property. Therefore, it is obvious that the assessee had not received any taxable income from the said property. Delete the addition. In favour of assessee Addition on account of unexplained creditors/investment - A set of loans received from 42 persons - The amount of loan ranged from Rs. 16,000/- to Rs. 4 lakhs - The assessee could produce some creditors and could not produce the remaining creditors - AO found that many of the creditors did not have enough creditworthiness so as to advance amounts to the assessee – Held that:- As regarding big amounts from creditors, the assessee has proved the genuineness upto a reasonable level. The details of particulars were available with the department even before the search and even in the course of such. Therefore, unless they are rebutted with strong evidence, the genuineness of the credits cannot be doubted by citing general deficiencies in the conduct of the assessee. Hence addition deleted. In favour of assessee Addition on account of bogus claim of agricultural income – AO’s ground was that no evidence of doing agricultural operations was furnished by the assessee – Assessee has not incurred any expense in relation to such income – Held that:- When the assessee is having agricultural property and offering agricultural income, the normal presumption is that the assessee is carrying on agricultural operations. It is to be seen that the assessee has offered net agricultural income on an estimate basis. Therefore, it is obvious that no separate expenditure account would be reflected in the particulars filed by the assessee. Hence delete the addition. In favour of assessee. Addition on account of undisclosed income – Assessee receive certain sums from a firm where assessee is a partner - AO added this amount to the assessee’s undisclosed income on the ground that no evidence was produced – Held that:- As rightly argued by the assessee, the disallowance could at best be applicable to the firm and not to the assessee. It is for the firm to prove the nature of income, whether agricultural income or not, in its hands. Firm and the assessee are different persons. Therefore, if there is a doubt in the source, it is for the firm to explain it. There is no justification in making an addition of in the hands of the assessee. It is accordingly deleted. In favour of assessee Addition on account of gifts received from relatives – AO made addition for want of evidence – Held that:- This matter has been discussed in detail by the Tribunal in its earlier order. The situation has not so far improved by the arguments of the assessee. Therefore, we find that the addition is justified. It is accordingly confirmed. In favour of revenue Capital Gain – On sale of small agricultural plot – AO rejected the claim for want of evidence – Assessee contended that land was agricultural in nature and therefore there cannot be levy of capital gains - Held that:- Since no evidence produced by assessee. Addition confirms. In favour of revenue Addition on account of undisclosed income – Cash in hand found during search u/s 132 – AO added same as undisclosed income - Held that:- In view of the total financial inflow and outflow of the assessee during the block period, it is very absurd to presume that the assessee could not have an amount of Rs. 30,000/- in her hands out of legitimate source of income. Therefore, we delete this addition of Rs. 30,000/-. In favour of assessee
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2012 (11) TMI 898
Validity of re-assessment proceedings on the basis of audit objection – under valuation of stock of rough diamonds and stock of cut and polished diamonds – average method of valuation - Held that:- If the closing stock is disturbed then corresponding adjustment has to be made to the opening stock - closing stock balance of this year becomes the opening stock balance of next year and therefore it becomes revenue neutral. Since the method followed by the assessee is an accepted method of valuation of closing stock and since the Revenue in the past as well as subsequent year has accepted the method followed by the assessee without disturbing the method of valuation of closing stock of rough diamonds and cut and polished diamonds and since the A.O. has not made corresponding adjustments for valuing the opening stock of rough diamonds and cut and polished diamonds, therefore average method of valuation followed by the A.O. in the instant case is erroneous and not in accordance with law - assessee succeeds on merit as per ground of appeal No. 2, the first ground of appeal challenging the validity of reassessment proceedings on account of audit objection becomes academic in nature – in favor of assessee
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2012 (11) TMI 897
Payment of ESI, PF u/s 43B - held that:- Revenue has to accept the payment of ESI, PF etc., paid by the assessee and give the deductions of that amount in favour of the assesses as claimed by it in its return - appeal dismissed. Decision in CIT v. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] followed.
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2012 (11) TMI 896
Whether in the case of Government securities, interest accrues on day to day basis or only on the coupon dates – Held that:- Interest accrues only on the specified coupon dates and not on day to day basis - in favour of the assessee Disallowance of loss on unmatured foreign exchange contracts – Held that:- If the date of maturity of the contract falls within the same financial year then the difference between the exchange rate as prevailing on the balance sheet date and contracted rate is an allowable deduction - forward foreign exchange contract creates a continuing binding obligation on the date of contract against the assessee to fulfill the same on the date of maturity and it is in the nature of hedging contract because it is a contract entered into against possible financial losses - where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract - loss on unmatured foreign exchange contract have to be allowed as deduction Disallowance u/s. 43B of interest accrued but not due on subordinated debts – Held that:- Interest can only be allowable when the same is actually paid and not merely because the same is due as per the method of accounting adopted by the assessee - Assessee cannot on the one hand say that interest liability has accrued under the mercantile system of accounting and on the other hand say that for the purposes of Sec. 43B(d) of the Act, the interest is not payable - in favour of the Revenue
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2012 (11) TMI 895
Validity of Reassessment proceedings - reason to believe – additions on account of unexplained share capital - assessee had accepted the accommodation entries in the garb of share capital – Held that:- the reasons which persuaded the AO to reopen the reassessment proceedings and on the basis of which additions were made were not found valid or justifiable as those additions were deleted by the Tribunal. Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. - Decided in favor of assessee.
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2012 (11) TMI 894
Loss on Trading of Shares - Speculation Loss or not - Whether explanation to Section 73 of the Income Tax Act, 1961 in the facts and circumstances of this case has been applied properly by all the authorities below or not? - held that:- All the authorities below had concurrently found that major portion of the gross total income of the assessee consist mainly on income not in relation to the granting of loans and advances but consisting of the purchase and sales of shares of other companies. Even fund and income generation theories both have been considered by all authorities below. All the authorities below have held that it is not an income from any other source but from purchase and sale of shares consequently loss of same nature and as such explanation has been applied rightly. When the fact is clear, law automatically follows. - Decided against the assessee.
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2012 (11) TMI 893
Maintainability of appeal before High Court - doctrine of merger and also estoppel - Incentives - Capital Receipt vs Revenue Receipt - Addition on account of notional interest on investment - held that:- From year 2003 till 2008 no action was taken to challenge the other portion of the impugned judgment and order. The matter was pending before the learned Tribunal till 2004. By the act and conduct held that the impugned judgment and order dated 28th November, 2003 has been merged with the final order dated 20th of December 2004 as rightly argued by Mr. Som - petitioner is estopped from challenging the same when it was not challenged on any other grounds within the period of limitation - even if the appeal is admitted by the order of the Court the question of entertain ability will arise. Thus applying the doctrine of merger and also estoppel this appeal is not maintainable. Under the circumstances other arguments advanced on the merit of the case should be considered by this Court - appeal dismissed.
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2012 (11) TMI 892
Capital receipts vs Revenue Receipts - Sale of trees/timber of spontaneous growth - held that:- Assessee was held to be an agriculturist and not found engaged in any business activity. Secondly, the cutting and selling of the trees was made after obtaining prior permission from the competent authority (Collector) under the M.P. Land Revenue Code read with Rules and sale of the trees was made to the State. further both cutting and selling was governed by the provisions of the Code and Rules framed thereunder which inter alia provided that no one could either cut or/and sell any tree without obtaining prior permission of the competent authority. Price of trees was determined by the State authorities in which the assessee had no role to play. In other words, it was not a private sale between the two parties and hence, there was no scope for any price negotiations. Rules provided that the trees had to be cut in a particular manner and the same was also done by the assessee accordingly. certificate given by the Tahsildar (which was not disputed) in clear terms stipulated that so far as the trees in question are concerned, they would not regenerate in near future because they do not belong to the categories of a species which have a spontaneous growth and land was put to use for cultivation by the assessee after cutting the trees. looking to the nature of trees (Sagon) which were cut above the root, it did not result in its spontaneous growth. - held as capital receipt - not chargeable to tax - Decided in favor of assessee. Unexplained Investment - held that:- It is essentially a question of fact involving no issue relating to law much less substantial question of law. When the explanation given by the assessee of the investment made in the transaction found acceptance to the authority concern including to the Tribunal, then, this Court in its appellate jurisdiction cannot again probe in to sufficiency of factual explanation given. It will amount to examining the factual appreciation of issues which is not permissible - answered against the appellant as not arising in the case being question of fact and not of law - once we answer the main question in assessee's favour and against the revenue (appellant) then it is not necessary to examine the second question framed because the said question then becomes academic for its answer - once it is held that the assessee was not liable to pay any tax on the income earned out of sale of trees in question then the question of payment of any interest etc would not arise - Decided in favor of assessee.
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2012 (11) TMI 891
Exemption u/s 10(23C) - Charitable activity u/s 2(15) - 'advancement of object of general public utility - held that:- BIS is a statutory body established under the BIS Act and was brought into existence "for the harmonious development of the activities of standardisation, marking and quality certification of goods". This was, and has been, its primary and pre-dominant object. Even though it does take license fee for granting marks/certification, the same cannot be said to be done for the purpose of profit. If any profit/revenue is earned, it is purely incidental. The BIS performs sovereign and regulatory function, in its capacity of an instrumentality of the state. Therefore, this Court has no doubt in holding that it is not involved in carrying any activity in the nature of trade, commerce or business. It seems that the exception (the first proviso) is intended to catch with its ambit any and all commercial activity, except what falls within the second proviso (which bars application of the exception in cases where the aggregate value of the receipts from the activities mentioned therein is less than ten lakh rupees in the relevant previous year). In these circumstances, "rendering any service in relation to trade, commerce or business" cannot, in the opinion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc, cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, "involves" the carrying on of trade or commercial activity. - Revenue directed to grant exemption u/s 10(23C)(iv).
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2012 (11) TMI 890
Writ Petition - challenging the reference made under section 92CA(1) - computation of arm's length price – alleged that no approval of the Commissioner of the Income Tax was obtained for making a reference u/s. 92CA(1) by the first respondent and proper opportunity was not given to the petitioner Company by the Transfer Pricing Officer and documents demanded by the Company were also not given to the petitioner Company by the Transfer Pricing Officer - Held that:- Reference was made correctly after obtaining approval from the Commissioner and after verifying the details furnished by the assessee in Auditor's Report in Form No. 3CEB with respect to the international transactions with associate enterprises. There was no breach of the principles of natural justice by the Transfer Pricing Officer. Under sub-section (3) of section 92CA the Transfer Pricing Officer is required to comply with the principles of natural justice and to render a determination of the Arm's Length Price in relation to the international transaction in accordance with section 92C(3) - petitioner was on notice of the nature of the enquiry which was being persued by the Transfer Pricing Officer - reasonable opportunity was granted to the petitioner which is evident from the affidavit filed by the Department - order has been passed by an authority competent to pass such an order - writ petition is accordingly dismissed. No order as to costs
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2012 (11) TMI 889
Determination of annual value - income from house property - Whether surcharge of the Municipal Tax was part of the question and/or annual value for the purpose of Section 23(1) of the Income Tax Act – Held that:- When commercial surcharge collected is by the owner assessee of the house it becomes part of rent - moment the commercial surcharge is recovered irrespective of the provisions of the agreement entered into by and between the landlord and tenant it immediately become exigible to tax as rental income from house property for agreement binds the parties thereto and it becomes irrelevant the moment it is found to be in conflict with legal provision on the subject -If the argument of Mr. Khaitan is accepted that Commercial surcharge cannot be treated as receipt by way of rent as income from house property, and if it is withheld and not deposited then the very object of imposition of Commercial surcharge under KMC Act will be frustrated until the same is recovered - surcharge of the Municipal Tax was part of annual value for the purpose of Section 23(1) of the Income Tax Act
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2012 (11) TMI 888
Interest Tax Act, 1974 – whether assessee is financial company or a credit institution in terms of Section 2(5B), 2(5A) of the Interest Tax Act, 1974 – principal business of the assessee - whether the interest earned under the three heads namely, lease charges, hire purchase charges and bill discounting charges were chargeable to tax under Interest Tax Act, 1974. In the Present case, leasing transactions of the assessee constitutes only 29 per cent of the business activity of the assessee – company. Therefore, the assessee company cannot passibly be brought within the scope of section 2(5B) clause(iv) of the Act and is not fulfilling the condition that it is carrying on two or more such financial activities to qualify under clauses (i) to (va) of Section 2(5B) of the Act being the exclusive activity of the assessee-company. This is obvious on perusal of the assessment order, which indicates that different activities from which, the assessee has earned income - In such circumstances Tribunal is not in error in concluding that the respondent - company is not liable to tax under the Act as it does not fit into the definition of a financial Company within the scope of any of the clauses of sub-section (5B) of Section 2 of the Act - against revenue. Validity of reopening of the assessment – Held that:- As the main matter itself has been decided against the revenue, the question relating to reopening of assessments becomes academic and does not survive for an independent answer – appeal dismissed answering the substantial question of law in favour of the respondent assessee and against the appellants revenue.
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2012 (11) TMI 887
Valuation of Perquisites - method of fixation of the value of 'perquisites' under Section 17(2) - Rule 3 of the Income Tax Rules, 1962 - TDS u/s 192 - 10% of the salary of employees of the ONGC in cities having population exceeding four lakhs as per 1991 census was not included in the 'salary' by the employees for the purpose of computing the tax that is deductible from the income of the employees for making payment to the Income Tax Department. - assessee in default. The interim order of the High Court passed on 20th February, 1996 in the writ petition, the ONGC was prevented to deduct the tax on 10% of the salary and to pay the same to the Central Government. In the interim order dated 20th February, 1996, the High Court had not held that the ONGC was not liable to deduct the tax under Section 192(1) of the Act. Thus, when the writ petition was dismissed on 15th March, 2010 by the High Court, the interim order passed by the High Court on 20th February, 1996 had to be vacated and the parties were required to be put back in the same position as they would have been before the interim order was passed by the High Court on 20th February, 1996 in accordance with provisions of Section 144 of the Code of Civil Procedure. Hence, during the period from 20th February, 1996 to 15th March, 2010, the ONGC cannot be deemed to be an assessee in default under the provisions of the Act. Consequently, the provisions of sub-section (1A) of Section 201 of the Act for payment of interest by an assessee in default under the provisions of the Act will not be applicable to the payments not made by the ONGC because of the interim order passed by the High Court which was in force from 20th February, 1996 to 15th March, 2010. The respondent shall grant to the ONGC time upto 28th February, 2013 to make the payment of the tax on 10% of the salary and interest calculated with effect from 16th November, 2010. - Decided in favor of assessee.
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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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Customs
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2012 (11) TMI 923
Condonation of Delay of 933 days - held that:- In cases involving the Sate and its agencies/instrumentalities, the Court can take note of the fact that sufficient time is taken in the decision making process but no premium can be given for total lethargy or utter negligence on the part of the officers of the State and/or its agencies/instrumentalities and the applications filed by them for condonation of delay cannot be allowed as a matter of course by accepting the plea that dismissal of the matter will cause injury to the public interest. As decided by court in case of [Post master General v. Living Media India Ltd.2012 (4) TMI 341 - SUPREME COURT OF INDIA] while not condoning the delay of 427 days by the Postal Department in filing the Special Leave Petition, it was observed that it is the right time to inform all the Government bodies, their agencies and instrumentalities that unless they have reasonable and acceptable explanation for the delay and there was bonafide effort, there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red-tape in the process - As no satisfactory explanation for inordinate delay of 933 days is tendered by the applicant and the applicant has failed to make out sufficient cause for condoning the delay - present application is dismissed. Rule is discharged.
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2012 (11) TMI 920
Suspension of Custom House Agents License - held that:- Issue of a show cause notice is not usually contemplated when the orders passed are of an interim nature pending investigation or enquiry. It is always open to the petitioner either to prefer an appeal to the Appellate Authority or make an adequate representation to the respondents, who passed the impugned orders and if such a representation is made,a post decisional opportunity can be given to the petitioner to satisfy the principles of natural justice. The petitioner being an aggrieved party can make an appropriate representation seeking a review of the impugned order and asking the concerned respondent to rescind or modify the order and if such a representation is made by the petitioner the concerned respondent in the above writ petitions shall consider such representation in accordance with law and pass orders on merits within a period of two weeks from the date of the representation after giving an opportunity of hearing to the petitioner, if the petitioner chooses to file any appeal against the impugned orders it is open to the petitioner to file the appeals within a period two weeks from the date of receipt of a copy of this order and if the petitioner files the appeals, the Appellate Authority shall entertain the appeals without reference to the period of limitation prescribed under the CHALR 2004, read with the provisions of the Customs Act. It is open to the petitioner to seek appropriate interim orders before the Appellate Authority - impugned orders shall remain suspended till the filing of the appeals by the petitioner within the above said stipulated time - writ Petitions are disposed of. Consequently, the connected Miscellaneous Petition is closed.
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2012 (11) TMI 919
Denial of refund on the ground of non-filing of appeal - export of rice to foreign buyer - amount of duty/cess was paid - cess was paid under protest - shipping bills were accepted and there was no assessment order – Held that:- if the assessment order itself enables refund, the law does not expect nor it would be logical to hold - the person to file appeal - that it would be inferred an empty formality. In the case of self-assessment if the declaration made by the person liable to duty is accepted and such return also mentions about the refund of duty to be made, there would not be any necessity to file appeal before the departmental appellate authority or the statutory Tribunal. A feeble submission is sought to be made by the Revenue that the shipping bill itself is an assessment order. The same cannot be accepted. Section 2(2) of the Act defines “assessment” as to include provisional assessment, reassessment or any order of assessment in which duty assessed is ‘nil’. In these cases the department has not placed before us any assessment order. Therefore we cannot countenance the submission. We hold that the appellants cannot be denied refund on the ground that they have not availed the remedy of appeal and further appeal to CESTAT New Ground before the Tribunal - held that:- Tribunal did err in refusing to hear the appellant only on the ground that the ground had not been raised earlier. Rule 10 was sufficiently widely framed to allow the Tribunal to do so. Having regard to the fact that the Tribunal was itself considering the issue on a contested (sic connected) hearing there was no reason why the appellant should have been shut out from pleading its case on the same basis. - CESTAT was not precluded from hearing and considering a new ground which related to the subject matter of the dispute before them. The question whether a refund claim under Section 27 of the Act would lie when the assessee did not file appeal against the speaking/assessment order is certainly a question relating to subject matter of the suit and therefore the CESTAT cannot be denied jurisdiction to consider the question raised by the Revenue during the course of the arguments. Unjust enrichment - held that:- There is no dispute that they are the official rules of International Chamber of Commerce of trade terms intended to facilitate conduct of international trade and are binding on all those who are engaged in International trade. After perusing these as well as the shipping bills we are convinced that FOB value (invoice) does not and could not have included the cess paid by the appellants and that the appellants did not pass on incidence of duty to the buyer. In the absence of any such material, the equitable principle of unjust enrichment does not bar refund claims under Section 27 of the Act. - Decided in favor of assessee.
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2012 (11) TMI 918
Period of limitation – reasoned order - purported speaking order has been passed more than 5 months from the date of assessment. – allegation of undervaluation - misdeclaration - on the basis of new facts discovered in the course of enquiry by DRI a show cause notice under Section 28 of the Customs Act has been issued upon the appellant/importer and the same is pending consideration. Subsequently, the file was sent back to the Adjudicating Authority and the Adjudicating Authority appears to have passed a speaking order of assessment on 16-2-2009 which is claimed to have been communicated to the Commissioner on 24-2-2009. Thereafter, the Commissioner sought to exercise his powers under Section 129D of the Customs Act and by order dated 20-5-2009 passed an order authorizing appropriate officer to apply for review the aforesaid order of assessment dated 8-9-2008. Held that:- Since the earlier order dated 8-9-2008 had already been placed before the Commissioner and the Commissioner had acted upon it, it cannot be said that the subsequent communication of reasons in support of such order should be taken to be the starting point for the period of limitation. There is no provision in Section 129D of the Customs Act, which provides for enlargement of the period of limitation in respect of fraud. In this respect one may make a comparative analysis of Section 28 of the Customs Act and that of Section 129D of the said Act. the plea of existence of a departmental practice of subsequently passing a reasoned order and the claim that the subsequent communication of such reasoned order ought to be starting point of limitation in respect of Section 129D of the Customs Act is wholly untenable. Allegations of fraud cannot alter the period of limitation specified in subsection (3) of Section 129D of the Customs Act and that question is also answered in the affirmative
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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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Corporate Laws
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2012 (11) TMI 917
Amalgamation - Share Premium - Money laundering - held that:- Share premia accounts could be mere book entries without actual money passing from the transferor companies to the transferee company. In other cases, the position could be the other way round. Of late, schemes, particularly of amalgamation, are being filed for the purpose of providing book entries to enable persons to convert black money into white. It is a settled principle of law that the proposed scheme should only be sanctioned if it is found to be not violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme, the court can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the scheme. Where the court finds that the scheme is fraudulent and is intended for a purpose other than what it professes to be, it may be rejected even at the outset without calling a meeting of the creditors. The court does not function as a rubber stamp or post office, and it is incumbent upon the court to be satisfied that the scheme is genuine, bona fide and in the interest of creditors of the company. If the Registrar of Companies would require further investigation through any agency they might conduct such independent examination that would be within their power to do so in accordance with law. Court's blessings was not required. - appeal disposed of.
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2012 (11) TMI 916
SARFAESI Act - bank or a financial institution has enormous powers to sell the assets of a defaulting borrower and realise their debt without recourse to a court of law - first defendant allegedly entered into an agreement with the plaintiff for sale of those properties in their favour - According to this agreement this defendant was required to issue a sale certificate in favour of the plaintiff - plaintiff thought that it had performed its obligations under the agreement, that the first defendant was obliged to issue the sale certificate and that they were wilfully not doing the same - defendant sold the above properties to the fourth defendant - application was filed by the plaintiff to restrain the fourth defendant from selling, transferring, encumbering or otherwise dealing with the said properties – Held that:- Plaintiff has been able to show that the fourth defendant had notice and knowledge of the agreement between the plaintiff and the first defendant, notice to the fourth defendant or absence thereof or the fourth defendant being a bona fide purchaser for value or not being so, will be fully established at the trial - order of injunction has to be passed restraining the fourth defendant from transferring, encumbering or otherwise dealing with the property till disposal of the suit if the plaintiff succeeds in the suit the property has to be transferred to them, by any transferee - suit has to be expedited and the above order of injunction should be restricted in its operation to six months from date
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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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FEMA
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2012 (11) TMI 921
Writ petition – maintainability of appeal – penalty under Section 13 (1) of the FEMA - contravention of the provisions under Section 6 (3)(j) of the Act – alleged that petitioners offered personal guarantee for a loan amount of US$ 13.5 Million to a resident outside India without obtaining prior permission from the Reserve Bank of India – Held that:- Liability of the appellant is not created under any common law principle but, it is clearly a statutory liability and for which the statutory remedy is an appeal under Section 35 of FEMA, subject to the limitations contained therein - writ jurisdiction under Article 226 should not have been invoked without availing the alternative remedy provided under Section 128 and 129A of the Customs Act for the reason that the appellate authority under the statute is vested with the power to appreciate the factual aspects and the petitioner can very well establish his right before the said authority - in fiscal matters, there should not be short-circuiting of the statutory remedies- writ petition is not maintainable and accordingly, the same is dismissed
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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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Service Tax
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2012 (11) TMI 926
Business Auxiliary Services - demanding tax along with interest and penalty - assessee contested as he was a proprietorship firm - Held that:- Considering Ministry's clarification Circular No. 80/10/2004-S.T., dated 17-9-2004, the contention of the assessee that during the relevant period there was no intention to levy tax on proprietary ship concern under the category of "Business Auxiliary Service" is acceptable. Thus setting aside the demand under this category & penalty u/s 77 also not maintainable because it is imposed for not taking registration under Business Auxiliary Service. Short payment of service tax under the category of Stock Broker Service due to a human error - Held that:- Not in agreement with the argument that there was no suppression of information because in a computerized environment there is no scope of making a mistake of the type claimed and it is obvious that the value was mis -declared for paying tax. As decided in CCE vs. City Motors (2010 (2) TMI 297 - PUNJAB & HARYANA HIGH COURT) there is no case for imposing penalty under section 76 and section 78 in this type of cases. Thus appeal is partially allowed by setting aside demand to the extent of Rs.5601/- and also setting aside penalty under section 76 and 77 and reducing the penalty under section 78 to Rs.19153/-.
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2012 (11) TMI 925
Remedy u/s 86 of Finance Act - Writ petition against the Order in original passed by the Commissioner - It has been stated that, in respect of the business auxiliary services, business support services, the members of club or association services, no service had been rendered in respect of the said accounts. However, a substantial amount of credit, on account of Central Value Added Tax, is available for set off against the liability said to be arising in respect of the said services. Held that:- An appellate remedy is available to the petitioner to challenge the impugned order passed by the third respondent. It would be open to the petitioner to raise all the grounds available to it, as per law, including the grounds raised in the present writ petition. - Petition dismissed, as infructuous. No costs.
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2012 (11) TMI 924
Refund - unjust enrichment - service tax wrongly paid under the category of Business Auxiliary Service - contract entered between the appellants and M/s. Alcock Ashdown specifically stipulates that the price is inclusive of all the taxes, levies, etc. - Held that:- Once the M/s. Alcock Ashdown (Gujarat) themselves issued certificate that the amount of service tax was not received by the respondent from their customers then there was no question of undue enrichment by the respondent taking the view that the refund was liable to be paid to the present respondents as service tax was not passed on to the buyers/customers - in favour of the assessee
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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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Central Excise
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2012 (11) TMI 915
Summons under Section 14 of the Central Excise Act – alleged that summon has been issued without there being any reason and in spite of the fact that the authorized officer of the company and who is General Manager (F & A), who has full knowledge of the facts of the case and who is dealing with the subject of taxation matters, appeared before the authority and gave his statements – Held that:- Statements of the witness has already been recorded by the Enquiry Officer and he is also the person who is the General Manager (F&A) of the company and the reason has been disclosed in the counter-affidavit by the respondents for summoning the petitioner and therefore, for the purpose of deciding of a larger issue to examine the scope and power of the Assessing Officer under section 14 of the Act of 1944 - it is not necessary for the Assessing Officer to record reasons for summoning of witnesses in each and every case At this stage of inquiry, the evidence of the Managing Director may be dispensed with, with permission to the Assessing Officer to take a decision subsequently and if necessary, then to summon the Managing Director himself. It is also made clear that in case, the Assessing Officer proceeds to summon any of the witnesses of the company, he need not to record any reason and may summon any witness.
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2012 (11) TMI 914
Condonation of Delay of 156 days - Held that:- After deleting the names of the other appellants from the common appeal, Memorandum of appeal and the application for condonation of delay be amended accordingly - Sufficient cause has been made out for not preferring the appeal within the period of limitation - Delay condoned by 156 days in preferring the appeal.
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2012 (11) TMI 913
Penalty imposed under Section 11AC of the Central Excise Act – alleged that assessee has clandestinely removed the finished goods – Held that:- Assessing Officer straightway proceeded to pass the order of imposition of penalty under Section 11AC of the Act of 1944 without recording any reasons and finding with respect to the intention of the assessee which entails the assessee for the penalty under Section 11AC of the Act of 1944 - violation must be with intent to evade payment of duty and that is the question of fact which alone could have been the foundational fact for imposition of penalty. Such finding is not recorded by the Assessing Officer nor an inference can be drawn from the reasons given in the order impugned of the Assessing Officer so as to draw inference that the action of the assessee was intentional – in favor of assessee
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2012 (11) TMI 912
Interest due to wrong availment of Cenvat Credit – Held that:- As decided in BILL FORGE PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE [2011 (4) TMI 969 - KARNATAKA HIGH COURT] interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is on the actual amount, which is withheld and the extent of delay in paying the tax from the due date. The interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly. - in favour of assessee.
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2012 (11) TMI 911
Petitioner questioning vacant positions of CESTAT in Public Interest - Held that :- Appointment of President is already done - Interviews had been fixed for the post of Members (Technical)- Request for fixing date of interview for the post of Members (Technical) has been made - Post of Vice - resident proposed to be abolished - For appointment of Deputy Registrar proposal is forwarded to UPSC to fill the post within four months - Status report will be filed to the petitioner.
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2012 (11) TMI 910
Complete waiver of pre-deposit – CESTAT by a considered order, held prima facie case was satisfied that the entire payment was barred by time - They made it clear that the stay order will continue in force even after 180 days – Held that:- When complete waiver is granted, there is an obligation cast on the Tribunal to dispose of the appeal within 180 days - If the entire claim is barred by time and if the assessee is made to deposit the entire amount, certainly it would cause great hardship. - The proper course would be to remit the matter to the Tribunal with a direction to dispose of the appeal within four months from the date of receipt of copy of this order - Writ petition is rejected
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2012 (11) TMI 909
Whether adjudication is called for before raising demand of interest under Section 11AA of the Central Excise Act and also under Section 75 of the Finance Act, 1994 – Held that:- If duty is paid against demand with delay other than through adjustment of credit available, interest is automatic and it is a matter of voluntary payment of interest by the assessee or payment on demand by the adjudicating officer which does not require any adjudication except the arithmetical calculation for which no adjudication is called for Adjudication is called for in this case, where additional excise duty demand was fully settled through adjustment of duty credit available - adjudicating authority directed to decide the matter through proper adjudication
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2012 (11) TMI 908
Determination of capacity - appellant wrote to the Department vide their letter dated 8-3-98 intimating that they have carried out certain changes in the parameters of their mill and the capacity should be accordingly re-determined - intimation was received in the office of Commissioner on 2-1-1998 since the capacity was required to be intimated to the Commissioner in his office for which the changed capacity will be available – Held that:- If the re-determination of capacity is on deeming basis then it should be effective from one month from a 8-3-1998. - in the present case the action was taken approximately after 7 months. - Therefore, the case law cited by the Department is not relevant to this case. The deeming effect should have been one month from the date of initial intimation by the appellant i.e. 8-3-1998 which we accordingly hold.
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2012 (11) TMI 886
Failure to make pre-deposit - dismissal of appeal - held that:- the appellant was duty bound to deposit the amount of excise duty determined by CESTAT within a period of three months from the 25.04.2011, if it was interested in pursuing the present appeals. Since the appellant has failed to do so, the inevitably result of such failure is the dismissal of these appeals. - Decided against the assessee.
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2012 (11) TMI 885
Valuation - power of High Court to admit appeal involving an issue of valuation - petition under article 226 of constitution of India - inclusion of freight and insurance charges in the assessable value - Held that:- The Excise Law is a complete code in order to seek redress in excise matters and hence may not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution. Therefore, the learned Single Judge was justified in observing that since the assessee has a remedy in the form of a right of appeal under the statute, that remedy must be exhausted first, the order passed by the learned Single Judge, in our opinion, ought not to have been interfered with by the Division Bench of the High Court in the appeal filed by the respondent/assessee. - Decided in favor of revenue.
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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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CST, VAT & Sales Tax
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2012 (11) TMI 927
Royalty for use of Trade Mark – held that:- petitioner themselves concede that their trademark has been transferred for the use of their franchisees and that as consideration thereof, they have received royalty. - Decision of BSNL v. Union of India [2006 (3) TMI 1 - SUPREME COURT]. distinguished. As far as the requirement that transfer of trademark to the transferee should be to the exclusion of the transferor is concerned, if the petitioner had a case that the franchisee has no exclusive right within the territory allotted to it, it was for them to plead and prove this contention. There is no such plea and copy of the agreements have not even been produced by them. - Further, the specimen franchisee agreement made available by the counsel for the petitioner shows that the franchisee has undertaken not to use the showroom for any purpose or activity other than that are provided in the agreement and to stock only products authorised by the petitioner. The second requirement to be satisfied is that what is transferred for use should be "Goods" as defined in the Act to come within "sale" as defined in the Act. Since the statutory provisions of the KVAT Act are similarly worded, this court is entitled to place reliance on these principles, which are also binding on this Court. For this reason, introduction of Service Tax is inconsequential. Trade Mark is "Goods" as defined in the Act - Royalty received by the petitioner is exigible to tax under the KVAT Act. Faced with this situation, counsel for the petitioner relied on the Apex Court judgment in Imagic Creative (2008 (1) TMI 2 - SUPREME COURT OF INDIA) and contended that Service Tax and VAT being mutually exclusive, since the petitioner is paying service tax on royalty received, the impugned demand for tax and penalty are illegal. - In this judgment, I have already held that royalty received is liable to be taxed under the Act and this Court is not called upon to decide the legality of the levy of service tax on the royalty received by the petitioner. Therefore, if the petitioner has a case that levy of service tax is illegal for any reason, it is upto them to challenge the levy in appropriate proceedings. - Decided against the assessee.
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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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Indian Laws
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2012 (11) TMI 922
Challenging vires of RTI Act - Public Interest - held that:- "Public interest" is an expression which has found its way in several legislations and has been repeatedly and elaborately interpreted by the Courts and the ground of "public interest' being an amorphous, nebulous or vague and indefinite concept held to be not available for assailing the provision. It thus cannot be said that the use of the words "public interest" in the 'proviso' vests unguided discretion in the Competent Authority. The challenge to the vires of Sections 8(1)(d) and 8(1)(e) of the RTI Act is rejected. As far as the challenge to the order dated 06.11.2012 of the CIC on merits is concerned, the same as aforesaid is to be considered by the learned Single Judge. The senior counsel for the petitioner states that the time granted by the CIC to SEBI for providing information is expiring tomorrow and unless operation of the order of the CIC is stayed, the writ petition may become infructuous. On this submission, the writ petition be listed before the learned Single Judge as per Roster for consideration, on 22nd November, 2012.
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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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