TMI Tax Updates - e-Newsletter
November 30, 2012

Case Laws in this Newsletter:

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

TMI SMS

• When the charging Section itself is deleted without any saving clause, no recovery under the said Section can be made by resorting to Rule 96ZQ of the Rules -HC

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• Validity of Service of Notice in Block Assessment –the provisions of section 292B are not applicable in case no notice under section 143(2) has been issued -Tri

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• Levy of VAT on agreement for the building and construction of immovable property - constitutional validity upheld. - HC

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• Trade Mark is Goods - Royalty received by the petitioner is exigible to tax (VAT) under the KVAT Act. - introduction of Service Tax is inconsequential. - 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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• Launching of Zonal E-Helpline for Trade and Industry in Mumbai Central Excise and Service Tax Zone-I. - Trade Notice

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Articles

1. TAXATION OF FREE SERVICES AND GOODS

   By: Dr. Sanjiv Agarwal

2. EFFECTIVE HANDLING OF AUDIT

   By: Dr. Sanjiv Agarwal

News

1. Investment by Foreign Companies in SME

2. Consumption and Production of Steel

3. Export of Steel from Japan and Korea

4. Reduction in Profit of SAIL

5. Government Earmarks Rs 540 Crore as Subsidy Requirement for Electrification of Villages Where Grid Connectivity is Either Not Feasible

6. Extension of Subsidised Farm Loans to Farmers

7. SEBI Revises Norms with Regard to Exchange Traded Funds to bring Efficiency in Margining of Index Exchange Traded Funds (ETFS) and Facilitate Efficient use of Margin Capital by Market Participants

8. Achievements made under MGPSY

9. Problem of emigrants

10. To Address the Issue of Rise in NPAs and Restructured Advances of Banks, and to Improve Effective Information Sharing Among Banks on Credit, Derivatives and Unhedged Foreign Currency Exposures, Banks are Advised to Put in Place by End-December 2012 an Effective Mechanism for Information Sharing

11. Status of NPAs in Different Banks

12. Outstanding Dues of State Governments to Nationalised Banks

13. Circuit Filter Limit at NSE

14. Loss due to Frauds

15. Norms For Loan Securitization by NBFCs

16. Rules on Loan Recasts

17. Central Government is Considering to Develop A Producer Price Index (PPI) to Reflect Price Movement at the Producer’s Level

18. Enforcement Directorate (ED) Seizes Property of 103 Persons Worth Rs. 2406.28 Lacs under FEMA in Last Two Years

19. TRAI releases Consultation Paper on “Review of implementation of the Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulations, 2006 dated 21st March, 2006”

20. Meeting of the Cyber Regulation Advisory Committee Held Today

21. Open to the possibility of bringing Indian private banks in Pakistan: Anand Sharma Shri Sunil Munjal to Co-Chair Joint Business Council from India

22. Violation by Pharmaceutical Companies

23. Fresh Investments in Fertilizer Sector

24. General Anti-Avoidance Rules

25. CKP Co-operative Bank Ltd., Mumbai, Maharashtra - Penalised

Circulars / Instructions / Orders

Service Tax

1. F.No. IV/16-Tech-83/CCO/MCX-I/2012 - dated 28-9-2012

Launching of “Zonal E-Helpline” for Trade & Industry in Mumbai Central Excise & Service Tax Zone-I.

Income Tax

2. F.No. DIT(S)-III/CPC/2012-13 - 14161-78 - dated 5-11-2012

Clean-up of demand uploaded to CPC FAS before issue of refund in cases processing of e-returns of A.Y. 2012-13

FEMA

3. 56 - dated 27-11-2012

Exim Bank's Line of Credit of USD 13.095 million to the Government of the Republic of Togo

DGFT

4. 32 /2009-2014 (RE-2012) - dated 27-11-2012

Amendment in ANF 5B.

Central Excise

5. F.No.390/Review/2/2012-JC - dated 23-11-2012

Functioning of Review Committee of Commissioners – Regarding

Highlights / Catch Notes

Income Tax

• Taxpayer's Exemption u/s 54F for LTCG Deferment in 2006-07 Upheld; Tax Imposed in 2009-10.

  Case-Laws - AT : Exemption u/s 54F - Allegation of deferment of tax on LTCG - Capital gain arouse in AY 2006-07 - deposited in capital gain account scheme as on 30-10-2006 - offered to tax in AY 2009-10 - decided against revenue - AT
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• No additional depreciation for machinery used in milk standardization and pasteurization for ghee and curd production.

  Case-Laws - AT : Usage of pasteurised condensed milk is not necessary for the purpose of production of ghee and curd. Because the assessee used the standardised and pasteurised milk, we cannot grant the additional depreciation on the plant and machinery which are used for the purpose of standardisation and pasteurisation of milk. - AT
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• Society's 12AA registration denied; business activities and high fees questioned, affecting charitable status eligibility.

  Case-Laws - AT : Registration u/s 12AA - charitable activity - genuineness - The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. - registration refused. - AT
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• Section 292B Inapplicable: Lack of Notice u/s 143(2) Can Invalidate Tax Block Assessment Process.

  Case-Laws - AT : Validity of Service of Notice in Block Assessment – the provisions of section 292B are not applicable in the case no notice under section 143 (2) has been issued - AT
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• Assessee eligible for exemption u/s 10(23C)(iiiad) if annual receipts stay within prescribed limits.

  Case-Laws - AT : Exemption u/s10(23C)(iiiad) – when the assessee has been granted exemption u/s 10(22) with the same objectives, the assessee has to be granted exemption u/s 10(23C)(iiiad) if the annual receipt is within the limit prescribed - AT
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• Bandwidth Payments Not Classified as Royalties or Technical Fees Under Double Taxation Agreement with USA.

  Case-Laws - AT : 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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• Tax-Free Land Transfer: No Capital Gain or Tax on Enhanced Compensation for Inherited Property.

  Case-Laws - AT : 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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• Rental Income Taxable Once Commercial Surcharge Recovered, Agreement Provisions Irrelevant for House Property Income.

  Case-Laws - HC : 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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• High Court Stay Order Exempts Assessee from Default Status and Interest u/s 201(1A) for Late TDS Deduction.

  Case-Laws - SC : 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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Indian Laws

• High Court Dismisses Petition Against ICAI's Decision on Frivolous Complaint Against Chartered Accountant Ajay B. Garg.

  Case-Laws - HC : Petition against an Order of ICAI holding that the complaint filed by the Petitioner against Mr. Ajay B. Garg, a Chartered Accountant and the Member of the Institute of Chartered Accountants of India was frivolous - petition dismissed - HC
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Service Tax

• Service Tax Demand on Sponsorship Service Overturned Due to Exemption for Sports Events During Relevant Period.

  Case-Laws - AT : Service tax demand - sponsorship service - Activity is proved to be 'sponsored of the event service' but during the relevant time the 'sponsorship of the sports event' was fully exempt from service tax - AT
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• Court Upholds Extended 5-Year Limitation for Cenvat Credit on Exempted and Non-Exempted Services Misuse.

  Case-Laws - HC : Extended Period of limitation – utilization of Cenvat Credit for exempted and non exempted services - It was not a case of mere omission to give correct information - five years' period of limitation has been rightly invoked - HC
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• Mumbai Central Excise and Service Tax Zone-I Launches E-Helpline for Trade and Industry Support.

  Circulars : Launching of “Zonal E-Helpline” for Trade & Industry in Mumbai Central Excise & Service Tax Zone-I. - Trade Notice
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Central Excise

• Court Remands Case on MRP Valuation and Differential Duty Interest for Footwear Products for Further Review.

  Case-Laws - AT : MRP valuation – Interest on differential duty liability due to alternation of MRP at Depot - footwear – matter remanded back - AT
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• Court Grants Modvat/CENVAT Credit for Cement Production Inputs, Including Explosives, Refractories, and Steel Castings.

  Case-Laws - HC : Manufacture of cement - Modvat / CENVAT Credit allowed in respect of explosives, grinding media, cylpebs, refractories (fire bricks) steel castings, ball bearings, electrodes, refractory cement, rubber - HC
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• Court Says No Reversal of Cenvat Credit Needed When Final Product Becomes Exempt from Excise Duty.

  Case-Laws - HC : Reversal of Cenvat Credit - goods exempted after availing cenvat credit on Inputs - even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Cenvat credit already taken by him - HC
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• Deleted Charging Section Without Saving Clause Bars Recovery u/r 96ZQ; Previously Concluded Matters Cannot Be Reopened.

  Case-Laws - HC : When the charging Section itself is deleted without any saving clause, no recovery under the said Section can be made by resorting to Rule 96ZQ of the Rules. - Even concluded matters can not be concluded thereafter - HC
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• Court Confirms Central Excise Officer's Authority to Issue 2009 Show Cause Notice; "Or" in Section 2(b) Interpreted.

  Case-Laws - HC : Scope of the word “or“ in definition u/s 2(b) - jurisdiction of Central Excise Officer – Additional Director General/Commissioner, Central Excise had every jurisdiction to issue the show cause notice dated 01/10/2009 and no ground has been made out to quash the same. - HC
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VAT

• Court Upholds VAT on Building and Construction Agreements as Deemed Sales Under Tax Laws.

  Case-Laws - HC : Deemed sale – Levy of VAT on agreement for the building and construction of immovable property - constitutional validity upheld. - HC
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• Trademark Classified as "Goods," Subject to Tax Under KVAT Act; Service Tax Introduction Doesn't Change Tax Status.

  Case-Laws - HC : 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
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Case Laws:

• Income Tax

• 2012 (11) TMI 950
  Exemption u/s 54F - Allegation of deferment of tax on LTCG - Capital gain arouse in AY 2006-07 - deposited in capital gain account scheme as on 30-10-2006 - offered to tax in AY 2009-10 - argument of Revenue is that assessee had no intention to construct a house in the one acre property. Land was agricultural in nature and assessee would have been aware that a residential construction was not possible in an agricultural property. - held that:- if the assessee had no intention to construct a house, he would not have got a plan prepared by an architect and submitted it to the local authority for approval along with a site plan. May be it true that due to Coastal Zone Regulations, no construction was possible in the said land. But we cannot say that assessee, when purchasing the land, was aware that on account of the Coastal Zone Regulation, he could not construct a residential house therein. Even Coastal Zone Regulations by itself does not deny the right of construction, but places a number of constraints for such construction. Having not obtained approval for the plan within three years, assessee had offered the same to Capital Gain Account Scheme in Assessment Year 2009-10. Assessee here, having offered capital gains for tax in Assessment Year 2009-10 as stipulated in proviso-1 of section 54F of the Act, could not be saddled with the same liability for the impugned Assessment Year as well. Ld. CIT(A) was justified in directing the Assessing Officer to grant the assessee deduction under section 54F of the Act for impugned Assessment Year. - Decided in favor of assessee.

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• 2012 (11) TMI 949
  Reopening of Assessment - Additional depreciation on machinery installed at milk chilling plant/processing centre, sales outlet, etc - Held that:- Although milk is required for the purpose of manufacturing of curd and ghee, standardised and pasteurised milk for the purpose of production of curd and ghee is a step removed from the business of production of curd and ghee. The curd and ghee could have been produced by the assessee from the milk without standardisation and pasteurisation. Usage of pasteurised condensed milk is not necessary for the purpose of production of ghee and curd. Because the assessee used the standardised and pasteurised milk, we cannot grant the additional depreciation on the plant and machinery which are used for the purpose of standardisation and pasteurisation of milk. Accordingly, even on merit we decide the issue against the assessee. The various case-law relied on by the assessee-company are delivered on their own context and cannot be applied to the facts of the present case. - decided against the assessee. Levy of Interest - levy of interest u/s. 234B and 234C of the Act is consequential and mandatory in the nature - this ground is dismissed - Appeal of assessee is dismissed. Allowability of foreign travel expenditure - held that:- , the assessee not furnished bifurcation of expenditure as related to business and pleasure trips - Being so, the CIT(A) directed the Assessing Officer to disallow 2/3 of expenditure. Before us also nothing has been furnished. However, the AR made as plea that the assessee could furnish details of foreign travel as relating to business trips as well as pleasure trips. - matter remitted back - appeal of assessee is partly allowed for statistical purposes.

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• 2012 (11) TMI 948
  Initiation of Re-assessment proceedings u/s 147 - change of opinion - held that:- To bring a case within the ambit of change of opinion, it is essential that firstly, some opinion should be formed on a particular issue. Such an opinion can be formed only when assessment is taken up. In a case when no assessment has been framed, there can be no point to form an opinion on an issue concerning the assessment. - Decided against the assessee. Principle of mutuality - The survey divulged that the assessee was also entering into transactions with non-members. - Loss of Mutuality - held that:- in a case of a non-mutual organization, a few transactions with the members do not convert its non-mutual status to mutual. In the like manner, the otherwise status of mutuality of an organization cannot be destroyed because of a few transaction with the non-members. What extent of participation by non-members destroys the otherwise mutual status of an organization or what extent of participation by members changes the otherwise status of non-mutuality depends on the consideration of the totality of facts and circumstances of each case. The mere fact that a person at the time of resignation or retirement is not entitled to share in the reserves of the organization, would not damage the mutuality so long as the persons who are entitled to share such reserves continue to be the members as a class. TDS u/s 234B where no TDS was deducted by the deductor - held that:- when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B. - Decided in favor of assessee. Allocation of expend tire by Head office - application of section 40C - Estimation of income at 5% of the gross amount recovered from non-members - held that:- There can be no dispute about the fact that any amount received by way of reimbursement, not containing any element of profit, is not liable to tax. - if there is certain reimbursement of expenses as such, without there being any mark up included in such reimbursement, there cannot be any question of earning any income liable to tax from such reimbursement. - this principle is not applicable in the the instant case. - Not only the basis of allocation of expenses but also that of the revenue, as done by the HO is not known to the assessee. Under such circumstances, the contention that the assessee was only recovering costs from its non-members and there was no profit element in it, is not open for verification. Sec 44C only talks of HO expenses, which mean executive and general administrative expenditure incurred by the assessee outside India including expenditure in respect of rent, rates, repairs etc. It is only the allocation of general and administrative expenses which is covered within the purview of section 44C. In the present case the basis of allocation of expenses is not known, but the basis of allocation of income is equally unknown at India level i.e. where neither the income side nor the expenditure side of the assessee's Income and expenditure account is fully capable of verification. It is in such circumstances that Rule 10 of Income-tax Rules, 1962 comes to the rescue of the Revenue for determination of income in the case of non-residents. It is this very rule which has been invoked by the Assessing Officer and also applied by the learned CIT(A) in estimating the income of the assessee - CIT(A) was more than justified in estimating the income at 5% of the gross receipts from non-members - In the result Revenue's appeal and assessee's cross objection stand dismissed.

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• 2012 (11) TMI 947
  Registration u/s 12AA - charitable activity - genuineness of the activities of the assessee-society -Society receives application from the common citizen for various services on behalf of the departments of State Govt, forwards the same to the concerned department and deliver back the same to the citizen within a specified time frame. The Society is charging prescribed fee from the citizen for providing services. - Held that:- After going through the aforesaid balance sheets as well as Income & Expenditure accounts of the assessee for the last three yeas, we have not found any expenditure incurred by the Society on charitable as well as public utility work. Almost all the expenditure has been incurred by the Society on printing and stationery, salary to their employees, Bank expenditure, Computer repair, Audit fee, Electricity Bill, Telephone, Electric repair, traveling, misc. expenditure, postage etc. Merely, mentioning about various objects in the nature of charitable activities in the Memorandum of Association, does not mean that the Society is doing any charitable activities for the general public utility and is entitled for registration under section 12AA of the Act. According to section 12AA of the Act, the Commissioner on receipt of application for registration of a trust or institution has to satisfy himself about the genuineness of activities of the trust or institution. The activities of the assessee-society are not charitable in nature within the meaning of provisions of section 2(15) of the Act and it does not qualify to treat as charitable institution. Since the assessee has not established that its society is formed with objects of any charitable purpose, then the question of discussion of citations relied upon by the Society does not arise. The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because of this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart - Decided against the assessee.

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• 2012 (11) TMI 946
  Selection of case for scrutiny - held that:- procedure for selection of cases for scrutiny for noncorporate assessees is for the cases for taking into scrutiny during the financial year 2005-06 and selection in the financial year 2005-06 can only be taken for the preceding years to financial year 2005-06. Therefore, the Ld. CIT(A) is not justified in deciding the issue following the said procedure which is not available during the impugned financial year 2005-06 relevant to the assessment year 2006-07. - Decided in favor of assessee. Disallowance of Salary and Wages – genuineness of wages - Held that:- AO has treated the wages of one month as genuine and others as ingenuine. - In the absence of any explanation by the assessee, the authorities have to make best judgment assessment which should be honest and fair. - This view is fortified by the decision of the Hon’ble Supreme Court, in the case of Brij Bhushan Lal Praduman Kumar vs. CIT [1978 (10) TMI 2 - SUPREME COURT] Though arbitrariness cannot be avoided in such estimate, the same must not be capricious but should have a reasonable nexus to the available material and circumstances of the case - If the additions, as made by the AO are compared with the turnover of the assessee, the income of the assessee comes at 40.32% which is almost 4 to 5 times of the income shown in the past and also in the case of other contractors. Therefore, the assessment made by the AO is not based on the facts but an arbitrary assessment. - Deletion of addition by CIT(A) confirmed - Decided in favor of assessee. Addition made on account of bogus purchases of materiaL – Held that:- the AO was not justified in making specific addition without giving any opportunity to the assessee - no infirmity in the order of CIT(A) in this regard - C.O. of the assessee, the same is supportive in nature and therefore, did not require any adjudication and the same is dismissed accordingly - In the result, the appeal of the Revenue is partly allowed and C.O. of the assessee is dismissed.

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• 2012 (11) TMI 945
  Protective assessment – Held that:- No demand shall arise in consequence to the protective assessment, i.e., until the substantive assessment survives. In fact, if the amount was withdrawn by the assessee on 28/11/1996, while the amount recovered from VR is on 27/11/1996 , the question of ownership of Rs. 39 lacs and odd apart, the same possibly explain the cash found in search with VR - assessee shall co-operate with the A.O. in the matter, who shall finalise the assessment in a time bound manner. That is to say, save or except where the appeal in the case of VR is pending before the Hon'ble High Court, within six months from the end of the month of the receipt of this order by the Revenue. Determination and Adjudication - Held that:- Matter becoming infructuous in view of the finding of absence of jurisdiction- no merit in the Revenue’s challenge to the same inasmuch as there has been no decision of the said authority on merits - no infirmity in principle stands found in the impugned order, and which therefore stands endorsed to that extent - only order to which our attention was drawn, and which found on record, is dated 17/1/2005, so that the date mentioned has been considered to be on account of a mistake, and read as Rs.17/1/2005 in framing the present order - In the result, the Revenue’s appeal is dismissed.

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• 2012 (11) TMI 944
  Best Judgement Assessment u/s 144 – Held that:- Assessee is a habitual defaulter, not disclosing his correct turnover, year after year, he can be subject to assessment under the verification procedure. But that would not in any manner entitle the Revenue to proceed de hors the material on record or arbitrarily. There are other provisions under the Act, which is a complete code in itself, which can be applied to bring the assessee’s undisclosed income – which though has to be assessed reasonably, to tax. No doubt, each year is a separate and independent year. However, the Revenue having not brought on record any material to show any distinguishing feature for the current year vis-à-vis a preceding year, at any stage, including before us, viz., the nature of the work done; the cost of materials; the price realized, etc., or even a non-consideration of any of the relevant materials by the tribunal while determining the facts for AY 2005-06 - no basis for adopting a different measure, both qua the net profit rate and the working capital component involved, i.e., other than the corresponding accepted rates for that year - In the result, the Revenue’s appeal is dismissed.

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• 2012 (11) TMI 943
  Validity of Service of Notice in Block Assessment – held that:- Irregularity in proper service of notice which can be treated as curable under section 292B of the income tax act is only in the cases where the notice under section 143 (2) was issued properly and within the period of limitation and the assessee did not raise any objection regarding the service of the notice during the assessment proceedings and also participated in the assessment proceedings then at a later stage the assessee is precluded from raising such objection. Therefore, the provisions of section 292B are not applicable in the case where the Assessing Officer has not at all issued notice under section 143 (2) within the period as prescribed. Requirement of section 143 (2) cannot be dispensed with as it is mandatory and therefore, the notice under section 143 (2) issued after the expiry of prescribed period is an uncurable defect and consequently, the block assessment is erroneous and not sustainable - block assessment in the case in hand is without jurisdiction and consequently, the same is set aside. Undisclosed Income as per section 158 BB – Held that:- As Block assessment being invalid is set aside; therefore, no need to go into the merits of the issue of addition. Consequently the appeal filed by the revenue is liable to be dismissed - In the result appeal filed by the assessee is allowed whereas the appeal filed by the revenue is dismissed.

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• 2012 (11) TMI 942
  Evasion of Payment of Taxes – Prorective Assessment – Setting Aside Revision order of CIT(A) - Whether Capital gains should be taxed as a whole in one assessment year 2007-08 or the capital gains should be bifurcated and assessed to tax for two assessment years 2007-08 and 2008-09 on sale of Property through Sale of shares when sale is a comprehensive business deal - held that:- Assets, rights and privileges of the property ultimately being transferred through the sale of shares would be taking a final shape only in the previous year relevant to the assessment year 2009-10. It is in anticipation of the fulfillment of all these efforts that the assessees have entered into an agreement with WET as a business proposition. The agreement is not an agreement for sale simplicitor. It is a comprehensive business deal. Entire land and property was transferred by CHD to WET in the previous year relevant to the assessment year 2007-08. As already held by CIT(A), only 50% shares of CHD were sold by the assessees to WET. Capital gains arising out of the transfer of balance shares have also been offered by the assessees for the following assessment year 2008-09. Therefore, in these circumstances it is not proper on the part of the Assessing Officer to treat that the entire transaction was complete in the previous year relevant to the assessment year 2007-08 itself. In the present case, there is no attempt to evade payment of taxes, as the assessee have already offered capital gains for taxation in two assessment years 2007-08 and 2008-09.” - there is no necessity of making protective assessments on that ground for the assessment year 2008-09 - revision orders passed by the CIT(A) have become infructuous - orders are therefore, set aside - In result, appeals filed by Revenue are dismissed and appeals filed by assessee is allowed.

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• 2012 (11) TMI 941
  Exemption u/s10(23C)(iiiad) – Held that:- Assessee is carrying only the activity of education and training, even though other incidental objectives are mentioned in the trust deed. It is also not disputed that the assessee had been filing returns from assessment year 1991-92 onwards up to assessment year 2006- 07 and the claims made by the assessee u/s 10(23C)(iiiad) had been accepted by the department for assessment year 1996-97 u/s 143(3) of the Act. when the assessee has been granted exemption u/s 10(22) with the same objectives, the assessee has to be granted exemption u/s 10(23C)(iiiad) if the annual receipt is within the limit prescribed. further,if the assessee meets the requirement of imparting education which can be training of any nature and if only such activity is carried on, the institution should be held eligible for deduction u/s 10(23C)(iiiad) of the Act – there is no infirmity in the order of the first appellate authority in granting exemption u/s 10(23C)(iiiad) of the Act and same is confirmed. Disallowance u/s 11(1)(a) - Application of Income outside India – Held that: - issue is only academic – not dealing with the same as already granted exemption u/s 10(23C)(iiiad) of the Act - In the result, the revenue’s appeal is dismissed.

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• 2012 (11) TMI 940
  Ex-parte assessment made u/s.144 of the Income Tax Act - notice under section 142(1) of the Act – alleged that there was no compliance on behalf of the assessee to any of the notices issued by the AO – Held that:- Director of the Company was incharge of the company’s day to day affairs at Mumbai. The other directors were residing at Calcutta – he was diagnosed as suffering from cancer and, therefore, could not attend the proceedings before the AO. That is the reason why the final show cause notice dated 10/11/2008 was sent by the AO to the Kolkatta address of the other directors – said director ultimately died on 19/4/2010 and that was the time when the proceedings before CIT(A) had come up for hearing - direct the assessee to make proper compliance before the AO to enable the AO to decide the issue afresh - appeals allowed for statistical purposes

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• 2012 (11) TMI 939
  Validity of initiation of reassessment proceedings – Held that:- There is no allegation by the Assessing Officer that income has escaped assessment by reasons of failure of the assessee to disclose material facts fully and truly. Since, reassessment proceedings were being initiated after expiry of 4 years from the end of assessment year, this was condition precedent for valid initiation of reassessment proceedings - reopening of assessment beyond the period of four years could not be sustained Reopening on the ground of non deduction of TDS - Payments to foreign parties for licence to use of software - view taken by the Department that it is mandatory for the assessee to Deduct Tax at Source on such payments for licence to use software as they are in the nature “Royalty” - assesses has made payments to foreign parties for licence to use of software – Held that:- there could be no reassessment either on the basis of a subsequent decision of the Tribunal or on the Assessing Officer’s own interpretation. In either case, it would be a mere change of opinion, so that the notice was not valid. Disallowance under section 40(a) of the Act – Held that:- Since the initiation of reassessment proceedings have been held to be invalid and the orders of reassessment have been annulled - it is not necessary to deal with the appeals of the revenue on merits - appeals dismissed

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• 2012 (11) TMI 938
  Addition u/s 68 - creditworthiness of the parties who advanced the loans – Held that:- CIT(A) deleted the addition on the ground that genuineness is not doubted by the AO - it is not known as to why a housewife will take a loan from somebody or even from her brother, just in order to advance loan to the assessee and why she takes so much of risk when this investment is not safe - findings of the AO show that he has doubted the genuineness of the transactions, therefore, the observations of the CIT(A) that the AO has not doubted the genuineness of the transactions are not proper - CIT(A) without considering the issue properly, deleted the addition made by the AO – matter remanded to AO

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• 2012 (11) TMI 937
  Penalty u/s 271(1)( c) – diversion/shifting of expenses of sister concern to the assessee - travelling expenses and business promotion expenses – Held that:- Expenditure disallowed represents the expenses debited by the assessee company in its account books with regard to the tours undertaken by the directors of the group companies of the assessee and it is an admitted fact that the disallowed expenses were not incurred by the assessee company for its business purposes - assessee could not explain any valid reason for debiting the expenses incurred by the directors of the other companies for the business purpose of the group companies and which do not relate to the business of the assessee company - assessee has not controverted the facts of payments of the expenses by credit card of the persons, who are not the director of the assessee company - it is a case of diversion/shifting of expenses of sister concern to the assessee with a view to reduce the tax liability. The act of the assessee in claiming the said expenditure shows dis-honest motive and therefore, attracts the penal provisions of sec. 271(1)( c) of the IT Act

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• 2012 (11) TMI 936
  Levy of penalty u/s.271(1)(c) - bona fide mistake – Held that:- Penalty under section 271(1)(c) of the Income-tax Act, 1961, was imposed only when there was some element of deliberate default and not a mere mistake. The finding had been recorded on the facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax - simply because a mistake has been committed on the advise of the auditor, then such addition cannot lead to the action of imposition of penalty Addition of dividend – Held that:- Normal dividend was exempt u/s. 10[34] and it is very much possible that dividend from the co-operative bank was also treated as normal dividend. This also seems to be a case of bona fide belief and in such circumstances penalty is not attracted - when assessee is making some claim on bona fide basis or under the wrong advise of the counsel then penalty cannot be levied - assessee’s appeal is allowed.

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• 2012 (11) TMI 935
  Disallowance of warranty provision - The disallowance was made on the ground that the expenditure has not crystallized and hence provisions for performance guaranty amounted contingent liability. - held that:- Deduction allowed. Addition u/s 68 - one-timepayment paid by the customer for initial start up of the contract - held that:- As such, the Assessing Officer’s decision of holding it as revenue receipt was not arrived at after examining the relevant documents and agreements in this regard. The orders of both the Assessing Officer and learned CIT(A) in this regard do not speak of the basic facts as to the nature of arrangement/agreement between the assessee and client and relevant facts regarding payment of Rs. 8 lakhs in this regard. - matter remanded back. Liability of exchange loss – alleged that expenditure has not crystallized – Held that:- Foreign exchange loss is on the revenue items – assessee submits that this issue is covered in favour of the assessee by the decision of Woodward Governor India P. Ltd. (2009 (4) TMI 4 - SUPREME COURT ) – matter remanded to AO Claim of interest u/s. 244A on the refund of taxes due – Held that:- First appellate authority has not dealt with this issue – matter remanded to AO

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• 2012 (11) TMI 934
  Addition on account of unexplained cash deposit – Held that:- Partners of the assessee firm are also partners of the firm M/s Adarsh Octroi Services, Mumbai - amount of Rs.5,25,000/- each was withdrawn by Shri Rafique Shakur Shekhani and Shri Sayed Rasul Shaikh partners of the firm on 15.4.2005 from their partnership firm M/s M/s Adarsh Octroi Services, Mumbai as per copy of cash book filed and the same amount was deposited by both the partners with the assessee firm on the same date - Rs.2,500/- each was deposited by Shri Rafique Shakur Shekhani and Shri Sayed Rasul Shaikh on 23.2.2006 out of their previous withdrawals from the same firm - partners have proved the source of deposits and in the absence of any contrary material placed on record by the Revenue that there is no such corresponding withdrawals in the firm M/s M/s Adarsh Octroi Services or withdrawals made by the partners of the firm have been utilized for some other purpose and not for making deposits in the assessee’s firm - assessee is not required to prove the source of source – addition deleted Unexplained cash deposits – Held that:- CIT(A) after examining the regular cash book maintained by the assessee wherein the relevant entries are duly recorded, has accepted the above deposits in the banks accounts - it is not the case of the Revenue that the entries recorded in the cash book are not genuine or the AO has rejected the accounts maintained by the assessee, we hold that the ld. CIT(A) was fully justified in deleting the addition

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• 2012 (11) TMI 933
  Deduction u/s 80IB on disallowances made u/s 40(a)(ia) due to default in TDS – Held that:- AO has treated the disallowance u/s 40(a)(ia) as income from business and it is not the case of the Revenue that the income derived by the assessee is other than the business income from developing and building housing project - assessee is entitled to deduction u/s 80IB(10) in respect of total profits including the profits computed as business profits of the housing project for the year under appeal - Revenue’s appeal stands dismissed.

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• 2012 (11) TMI 932
  Disallowance u/s 14A of the Act – Held that:- When Rule 8D was not applicable, the Assessing Officer has to enforce the provisions of sub section (1) of section 14A. For that purpose, the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record - matter remanded to the file of the Assessing Officer

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• 2012 (11) TMI 931
  Cancellation of registration u/s.12A of the Income-tax Act – alleged that assessee Trust/institution is having mixed objects i.e. partly charitable and partly religious – Held that:- Following the case of Calicut Islamic Cultural Society vs. ACTI (2008 (7) TMI 621 - ITAT COCHIN) and Society of Presentation Sisters (2009 (9) TMI 75 - ITAT COCHIN ) - directed to grant registration to the assessee u/s.12AA – In favor of assessee

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• 2012 (11) TMI 930
  Capital gain - receipt of gain on sale of shares - business income or capital gains - held that:- The modus-operandi adopted by the joint bidders was to float three SPVs in the form of companies and to obtain the allotment of land in the name of these companies. Shares were allotted to them in these companies and within five days of allotment, the assessee along with its joint bidders i.e., Naman group sold their shares in SPVs entity NCPL to K. Raheja Corp. Pvt. Ltd. From the above facts, it is clear that what was undertaken by the assessee was a business activity and not an investment in a capital asset. - Held as taxable as business income - Decided in favor of assessee. Taxability of notional income on sale of shares - The Assessing Officer has notionally calculated the profits which the assessee, according to the Assessing Officer, ought to have earned in the sale of these shares and brought the same to tax. - held that:- When the assessee has not charged or earned any income during the impugned assessment year, in our considered opinion, it is not right on the part of the authorities to assume a particular income and then bring it to charge on the ground that certain income has accrued or arisen in the case of the assessee. Under sections 22 & 23 of the Income-tax Act when income is assessed under the head Income from house property”, the Act specifically provides for deeming of income No such parallel provision is available when income is assessed under other heads. The addition made by the A.O on account of short term capital gain of Rs. 2,31,47,564, is purely notional neither accrued nor received by appellant and not in accordance with the judicial precedents and the same is deleted - Decided in favor of assessee.

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• 2012 (11) TMI 929
  Addition - unexplained cash credit - search - duplicate books of accounts were found and seized during the course of search from an ex-employee of such group – Held that:- Explanation was that it was received from Dr. Devdut who was residing at USA who brought gold in India and sold to meet the social obligations - substantive addition was already made in the hands of L.T. Shroff Group which had accepted ownership of the amount and paid tax - Tribunal has, therefore, rightly deleted the amount added by the Assessing Officer on protective basis in wake of substantive addition Addition on account of unexplained income of the assessee being the amount lying in the name of minor daughter of the assessee – Held that:- This was declared cash of the wife of the assessee at the time of permanent settlement in India after their migration from Pakistan - explanation accepted and addition deleted

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• 2012 (11) TMI 928
  Penalty u/s.217(1)(c) of the Act on disclosure made by the assessee during the course of survey – Held that:- There was no variation in the returned income and therefore, there was no basis for levying of penalty - only reason why the Assessing Officer had justified in levying of penalty was the material found during the course of survey indicating unaccounted receivables - neither explanation 5 to section 271(1)(c) was applicable nor was it a case where the assessee had not declared the surrendered income in the returned income within the due date – penalty deleted

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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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• Customs

• 2012 (11) TMI 970
  Penalty – evasion of duty – anti-dumping duty – import of machine – invoice packing list and certificate of origin showed that they had imported the injection moulding machine of Malaysian origin – Held that:- On examination of the machine, it was found that the machine carried various marks indicating country of origin to be China - Notification 47/09 dated 12.5.09 which imposed anti-dumping duty @ 223% ad varolem on various goods including injection moulding machines imported from China - appellant has produced a false certificate of origin with an intent to evade payment of anti-dumping duty, the penalties on the appellants are justified Confiscation of the goods and also imposition of redemption fine of Rs.5 lakhs in lieu of confiscation upheld. A penalty of Rs.15 lakhs each has been imposed on the appellant firm and its partner, Mr.Ashok Jain, under the provisions of Section 112(a) read with Section 114AA of the Customs Act, 1962 - partner, Shri Ashok Jain is the main person behind the attempt to evade import duty. Therefore, he is also liable to penalty under the above provisions as the act has been committed with a deliberate intent to evade payment of duty

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• 2012 (11) TMI 969
  Duty on stores on the vessel - vessel in this case was converted from coastal run to foreign run and it has gone to Singapore for dry docking – Held that:- Department could not show any discrepancy pointed out by the Customs Officer Boarding the vessel, in case of store lists - duty is not demandable on stores of Indian origin. The Appellant did not press for issue relating to inclusion of freight and insurance in the assessable value of stores of foreign origin - demand of duty on ship stores of Indian origin set aside - appeal is allowed

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• 2012 (11) TMI 968
  Import under DEPB Scheme – import of non-calcined Petroleum Coke – denial of benefits of Notification No. 89/2005-Cus. – Held that:- Commodity “Coke” had been made a part of original public notice - Commissioner while exercising the powers, under the notification used the word ‘substituted’ and therefore it can be held that the newly added import commodity namely “Coke” had been a part of original Public Notice No. 1/2002-Cus., dated 27-11-2002 - Inevitably it was intended to rectify the mistake and thus have given a retrospective effect legitimizing all import of “Coke” including those affected prior to 27-7-2009 - duty debited/paid at the time of respective provisional assessment in DEPB/TRA/cash is held valid and the benefit of duty exemption under DEPB Scheme under Notification No. 89/2005-Cus., dated 4-10-2005 to be granted

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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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• Corporate Laws

• 2012 (11) TMI 967
  Scheme of Amalgamation - Scheme of Arrangement between Sports Station (India) Private Limited (hereinafter referred to as Transferor Company) with SSIPL Lifestyle Private Limited (hereinafter referred to as Transferee Company). - held that:- No Objection has been received from any other party.- In view of the approval accorded by the Shareholders and Creditors of the Petitioner companies; representation/reports filed by the Regional Director, Northern Region, Ministry of Corporate Affairs, to the proposed Scheme of Arrangement, there appears to be no impediment to the grant of sanction to the Scheme of Arrangement under sections 391 to 394 and sections 100 to 103 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law.- Upon the sanction becoming effective from the appointed date of Amalgamation, that is 1st April, 2012, the transferor company shall stand dissolved without undergoing the process of winding up.

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• 2012 (11) TMI 966
  Liquidation of company - auction - sale of the Company as a ‘going concern’ - marketability of the land - applicant in this application stated that purchaser requires necessary time for making further enquiries relating to the land of the Company. Accordingly a direction upon the Official Liquidator was prayed for, thereby directing him to make further inquiries with regard to the proceedings pending before the Sub-Divisional Land and Land Reforms Officer – Held that:- State Government have no power to resume the land in question, nor they get any right by way of adding explanation to the aforementioned section - Official Liquidator is authorised and empower to the sale land in question - there is no defect or any dispute about the marketability of the property in question which was sold in auction. However, the applicant is granted one week’s time to pay the balance dues

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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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• FEMA

• 2012 (11) TMI 971
  Whether appeals before the Tribunal against the order of the adjudicating authority had to be treated by the Tribunal under the provisions of FERA or FEMA – Held that:- Order has been passed in the adjudication proceeding on 11th October, 2007 under the FERA after cognizance had been taken under the provisions of FERA. In view of this, the correctness, legality and proprietary of the order passed by the adjudicating authority has to be challenged in continuation of the proceeding under the FERA and has to be adjudicated under the provisions of FERA - cognizance having been taken within the sunset period and the adjudication proceeding carried out under the provisions of FERA, substantive provisions of FERA would alone be applicable - appeal filed before it was to be governed under the provisions of FERA Whether Tribunal has power to condone the delay beyond the period of 90 days - provisions of Section 35 of the Central Excise Act - Held that:- Provision of law stipulates a period of 60 days for filing an appeal; under the proviso another 30 days can be added to this period; the delay in filing the appeal can be condoned after the expiry of the 60 days yet the period of delay could not be condoned beyond 90 days - there is a complete exclusion of Section 5 of the Limitation Act - Tribunal has no power to condone the delay beyond the period of 90 days while dealing appeals under the FERA - appeals are dismissed

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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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• Service Tax

• 2012 (11) TMI 979
  Waiver of pre-deposit - valuation - inclusion of electricity charges - Renting of Immovable Property Service - held that:- Supply of Electricity is ‘goods' and the same shall not form part of taxable service as clarified by the Notification no. 12/2003 - applicant has made out a prima facie case for 100% waiver of the service tax confirmed and penalty imposed - Requirement of pre-deposit of the service tax, interest and penalty is waived and stay recovery thereof during the pendency of the appeal.

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• 2012 (11) TMI 976
  Service tax demand - sponsorship service - applicants entered with an agreement with Board of Control for Cricket in India for organising the IPL tournament wherein the applicants are the sponsors for Umpire under a 'Sponsor Agreement' – Held that:- Activity is proved to be 'sponsored of the event service' but during the relevant time the 'sponsorship of the sports event' was fully exempt from service tax - in the case of DLF Ltd. (2012 (5) TMI 404 - CESTAT, NEW DELHI ) it was held that the IPL 20-20 tournament is a sports event, applicants are exempt from the levy of service tax as per Section 65(105)(zzzn) of the Finance Act, 1004 – pre-deposit waived

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• 2012 (11) TMI 975
  Demand of service tax – reimbursement of expenses - under the category of Manpower Recruitment & Supply Agency Service - denial of credit - separate Returns have not been filed as required under Rule 9(9) of CENVAT Credit Rules, 2004 – Held that:- the activities of the appellant may not deserve to be considered as 'supply of manpower' but as rendering of 'information technology software service' and in the light of the stay granted in the case of ASM Technologies Ltd. (2012 (11) TMI 974 - CESTAT, BANGALORE), the appellants are eligible for waiver of pre-deposit. As regards, the denial of CENVAT credit, we have not been shown that there is a requirement of filing separate Returns under Rule 9(9) of the CENVAT Credit Rules, 2004 and therefore, there is no warrant to order pre-deposit.-deposit As regards the reimbursable expenses relating to employees deputed to USA, undisputedly, the activities have taken place in USA and, therefore, the liability to service tax may not arise – stay allowed

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• 2012 (11) TMI 974
  Waiver of pre-deposit - Manpower Recruitment or Supply Agency Service – reimbursement of expenses - employees were deputed to the premises of the clients and they were working under the direct supervision of Project Managers working with the appellant and the intellectual property relating to the software developed continued to rest with them and if any right was to be passed on to the clients, the same was required to be specifically assigned to the clients subject to the conditions mentioned in the agreements. – held that:- the activities may fall under the category of ‘Information Technology Services' and may not be classifiable under the category of ‘Manpower Recruitment or Supply Agency Service'. – stay granted.

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• 2012 (11) TMI 955
  Extended Period of limitation – utilization of Cenvat Credit for exempted and non exempted services - The appellant was of the view that Rule 3(5) of the Rules of 2002 was not applicable to it because the appellant was not providing exempted service or non-taxable service. Thus, the appellant was utilizing the Service Tax Credit availed on various input services for payment of service tax on output telephone service without any restriction of 35% specified in Rule 3(5) of the Rules of 2002 – Held that:- Failure to make such disclosure in return or submitting entire fact by any letter accompanying its return appears to be a case of willful suppression - When the return contains a declaration as to the self assessment particulars stating that the assessee had paid service tax correctly in terms of provisions of the Act and Rules made thereunder such declaration becomes faulty in absence of bona fide statement either on the return or made through a letter accompanying the return. It was not a case of mere omission to give correct information; it was devised deliberately so to evade tax liability - limit of exemption was known and provisions of Rule 3(5) of the Rules of 2002 are clear. Thus, it was deliberate suppression of facts - five years' period of limitation has been rightly invoked

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• 2012 (11) TMI 952
  Application for condonation of delay – appeal against the order of CESTAT - Held that:- the first order dismissing the appeal is only as a sequel to dismissing the application for condonation of delay in preferring the appeal and the appellant though had filed application seeking for condonation, that application was not prosecuted with diligence and therefore the Tribunal was left with no choice but to dismiss the application for condonation of delay and as a consequence dismissed the appeal and also the application for stay etc. The order passed by the Tribunal is not per se one dismissing the main appeal for non prosecution but is only a dismissal of the appeal as a consequence of dismissal of the application for condonation of delay. There was no valid or tenable appeal of the appellant which was an appeal which required or deserved attention under section 35C of the Act. It would have become a valid appeal only if the appellant should have succeeded in its efforts to get the delay in preferring the appeal condoned - appeal dismissed

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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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• Central Excise

• 2012 (11) TMI 965
  Determination of Transaction value - Freight Charges on equalised basis are more than actual charges - Duty demand of Rs. 94,843/- with interest and penalty imposed by making addition of difference in freight charges on actual and equalised basis. Held that:- Transaction value being the value at point of removal (factory of assessee) being exclusive of freight charges the inclusion of differential freight charges in the transaction value is not sustainable in law - Appeal is accepted - in favour of assessee.

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• 2012 (11) TMI 964
  MRP valuation – Interest on differential duty liability due to alternation of MRP at Depot - footwear – submission of the appellants that alteration of MRP on the impugned goods amount to manufacture and therefore the liability to pay duty on the altered MRP arises only in the month of March 2006 – Held that:- Argument that alteration in the MRP would amount to manufacture, would also necessitate taking a new registration by the appellants for their depot and the duty payment has to be made on the impugned goods after taking credit in respect of the duty paid on the footwear bearing lesser MRP when earlier cleared from the factory - argument was not advanced earlier and the duty liability has to be worked out allowing credit on the duty paid earlier - matter remanded to the original authority for examination

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• 2012 (11) TMI 963
  Cenvat Crdit on bogus Invoice - alleged that appellant forged documents for availing cenvat credit – high value inputs i.e. Aluminium – Held that:- No goods were transported and on their request, supplier had only provided some blank GRs with registration number of some trucks owned by them - As regards the invoices issued by M/s. Aspen Online, a company controlled by Shri Rajesh Mahajan and his wife, on the basis of which cenvat credit of about Rs. 11 Lakhs has been taken by M/s. Alliance Alloys, inquiry with the owners of the trucks, whose registration number are mentioned on the invoices, revealed that those trucks had not been used for transportation All these grades of Aluminium could be manufactured directly from Aluminium scrap of the appropriate ISRI code without use of high value of Aluminium products like CR sheets/coils, rods, etc. - appellant has wrongly availed cenvat credit by forging and fabricating the documents – application for waiver of the duty demand, interest and penalty dismissed

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• 2012 (11) TMI 962
  Maintainability of Writ petition against the interim order of tribunal - Waiver of pre-deposit of Duty, Interest and Penalty - prima facie case and undue hardship - held that:- Section 35G of the Act, 1944 provides for an appeal against any order passed by the Appellate Tribunal. - Thus, the litigant cannot be permitted to seek redressal of his grievances by invoking the forum of judicial review under the writ jurisdiction on the ground that there may not be any question of law as required under section 35G of the Act. Sub section (5) and (6) of Section 35G deal with the substantial questions of law. In view of the availability of statutory appellate forum, this Court is of the view that the writ petition is not maintainable against the impugned order. - Writ petition dismissed.

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• 2012 (11) TMI 961
  MODVAT Credit - manufacture of cement - explosives, grinding media, cylpebs, refractories (fire bricks) steel castings, ball bearings, electrodes, refractory cement, rubber and articles - Following the decision of court in case of [Commissioner of Central Excise, Coimbatore & Others vs JAWAHAR MILLS LTD. 2001 (7) TMI 118 - SUPREME COURT OF INDIA] held that:- Goods for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be "capital goods", and, therefore, qualify for availing MODVAT credit. In the case on hand, on examining the above stated articles, it is found that all the articles – explosives are used for manufacture of cement and in absence of any of the above stated goods, manufacture of cement is not possible. Applying the 'user test' as laid down by the Supreme Court in the above referred case, the decision of the Tribunal is just, proper and legal - reference is answered accordingly.

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• 2012 (11) TMI 960
  Imposition of Penalty - held that:- Modvat credit of Welding Electrodes, as an input or as a capital good, is not permissible. In view of absence of evidence to the effect that Welding Electrodes were used for fabrication of capital goods and in view of the said larger Bench decision, the claim of the assessee in respect of allowance of modvat credit on such Welding Electrodes was rejected, but, at the same time, claim of the Department for penalty was rejected on the ground that the case was contentious and similar cases were being agitated before many forums Inasmuch as, the case was covered by Sub-Rule (1) of Rule 13 of the said Rules, in view of the finding recorded by the Tribunal to the effect that the assessee was not entitled to modvat credit on Welding Electrodes, it became obligatory on the part of the Tribunal to impose at least the minimum penalty of Rs.10,000/-, as prescribed in Sub-Rule (1) of Rule 13 of the said Rules, and that having not been done, we impose the same with a direction to pay the same within a period of three months from today.

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• 2012 (11) TMI 959
  Period of limitation - demand of duty as no manufacturing activity to bring into existence gauze fabrics - Held that:- it is true that in the show cause notice it was conveyed that the respondent had not registered itself with a view to evading duty and that therefore larger period of limitation would be invoked. It may be that such issue of allegation was not in so many words denied by the respondent. However, in the show cause notice and during personal hearing before the Commissioner, the central defence of the respondent was that the respondent undertook no manufacturing activity to bring into existence gauze fabrics. Further that before further process, such fabric could not be marketed. On such twin grounds, the assessee held a belief that no duty was required to be paid. It was also pointed out that the assessee did not avail of any Cenvat credit on the inputs used. Under the circumstances, the respondent had put up a case of bonafide belief. Also the Commissioner upheld such view of the assessee, larger period of limitation could not be applied - in favour of assessee.

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• 2012 (11) TMI 958
  Demand and penalty - gutkha - additional evidence before tribunal - revenue submitted that, it is well settled in law in terms of Section 32L of the Act that material placed before the Settlement Commission and an admission made by an assessee who could have the jurisdiction of the Settlement Commission can very well be used in any proceeding against the assessee under the Act and therefore when the very basis of the order for adjudication was such admission made by the very assessee before the Settlement Commission, it is not open to the assessee to go back on the same as it binds the assessee. - Alternatively, it is submitted that conduct of the assessee also does not behold acceptance as such material is sought to be placed more than three years after the event, that it was sought to be placed for the first time only before the Tribunal though proceeding was before the adjudicating authority and the appellate authority for more than three years etc. Tribunal has such power and jurisdiction and even assuming that it could have itself admitted the additional evidence and could have disposed of the appeal, but if the Tribunal thought it was proper for the adjudicating authority to examine the material, it is an order reserving full freedom for the adjudicating authority and therefore we are of the opinion that it does not call for interference in an appeal under Section 35G of the Act which can only be on a question of law erroneously decided by the Tribunal - Decided against the revenue. Held that:-

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• 2012 (11) TMI 957
  Reversal of Cenvat Credit - goods exempted after availing cenvat credit on Inputs - Held that:- Manufacturer is not required to reverse/pay the amount equivalent to the CENVAT credit taken by him in respect of inputs which are proved to have been used in the manufacture of goods which have been cleared under exemption from excise duty. - As decided by Court in case of [COMMISSIONER OF C. EX., CHANDIGARH Versus SABOO ALLOYS PVT. LTD. 2009 (12) TMI 125 - HIGH COURT OF HIMACHAL PRADESH] even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Cenvat credit already taken by him - Decided in favour of Assessee.

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• 2012 (11) TMI 956
  Condonation of Delay- Held that:- Delay is condoned subject to payment of cost assessed at 100 GMs to be paid by the appellant within a period of fortnight from the date of receipt of the copy of this order. If the cost is not paid as directed above then appropriate order shall be passed by Court.

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• 2012 (11) TMI 954
  Effect of omission of Section 3A - Whether any obligation or liability incurred under Section 3A of the Act is saved by Section 6 of the General Clauses Act - held that:- in view of the language contained in the notification dated 1st March, 2001, the same can only afford protection to action already taken while Rule 96ZQ was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. Any obligation or liability etc. acquired, accrued or incurred under Section 3A of the Act would not be saved by Section 6 of the General Clauses Act. When the charging Section itself is deleted without any saving clause, no recovery under the said Section can be made by resorting to Rule 96ZQ of the Rules. Action, if any, can be taken only under the regular provisions of the Act. Even in case of proceedings initiated prior to the omission of Rule 96ZQ, 96ZP and 96ZO of the Rules, if the same were not concluded prior to the omission of Section 3A of the Act, there was no power to proceed further and conclude the same. Under the circumstances, any action taken under Rules 96ZQ, 96ZO and 96ZP of the Rules after Section 3A of the Act came to be omitted from the statute book without any saving clause, would be without authority of law and as such any orders passed in respect thereof after the omission of Section 3A of the Act would be non est. Virus of penalty provision - held that:- manufacturers of goods specified under Section 3A of the Act are evidently subjected to harsh treatment of unreasonable penalty under Rule 96ZQ(5)(ii) compared to manufacturers of other excisable goods. Moreover, considering the nature of the penalty prescribed even for one day’s delay, it is apparent that the said provision would amount to imposition of an unreasonable restriction on the petitioners right to conduct business thereby rendering the said provision as violative of Article 19(1)(g) of the Constitution. - In the light of the above discussion, this court is of the view that clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as well as Section 37 of the Central Excise Act and is beyond the authority of the rule making power of the Central Government and as such, is required to be struck down.

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• 2012 (11) TMI 953
  Grant of bail - criminal case - Prevention of Corruption Act – alleged that Commissioner and Superintendent of Central Excise were involved in obtaining illegal gratification by corrupt and illegal means from the businessmen – Held that:- there was a clear well-designed and planed conspiracy to conduct illegal raid on the business premises of Aggarwals. This conspiracy was hatched by all the accused persons/petitioners. There is prima facie evidence on record in the shape of statements of Mr. S.K. Singh that the raid was illegal and unauthorized. Though the transcript of taped conversation cannot be used as a substantive piece of evidence, but having seen the transcript of the conversation that took place between the accused persons/petitioners before and after the raid, it would be prima facie seen that it was all planned to extort money from Aggarwals under the fear of raid The arrest of Srivastava would be nothing but extension of trap arrest. Prima facie Section 6A(2) was attracted and this being a non obstante section, provisions of sub-section (1) mandating approval of the Central Government were not applicable. The petitioners A.K. Srivastava and Lallan Ojha are senior officers of the Central Excise Department. Most of the witnesses who have been cited by the prosecution are officials of their department and some of the officials cited as witnesses are their juniors and subordinates. It is every likelihood that in case they are released on bail, they would be able to influence the witnesses. This is presumably because of this apprehension that the prosecution has chosen to get the statements of two drivers and one Superintendent recorded under Section 164 Cr.PC before the Magistrate. The apprehension of CBI in this regard seems to be well founded in the given facts and position of these two petitioners. The pleas that the petitioners are in custody for about three months now and the charge-sheet has been filed are also no ground to admit them on bail. - bail applications dismissed.

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• 2012 (11) TMI 951
  Writ petition - Central Excise Officer - scope of the word "or" in definition u/s 2(b) - jurisdiction – issue of show cause notice - proceedings for determining the liability under Section 11A – Held that:- In the present case, the issue which has been raised by the learned counsel for the petitioner is that Dr. Devender Singh, who was working as Additional Director General/Commissioner was not authorised to issue the show cause notice dated 01/10/2009, since he was not a Central Excise Officer because no notification having been issued and published in the Official Gazette as required under Rule 3(1) of the 2002, Rules. We have already considered the issue and held that Dr. Devender Singh, Additional Director General, Directorate General of Central Excise Intelligence having been authorised to act as a Commissioner, Central Excise was a Central Excise Officer, within the meaning of Section 2(b) of the Act, 1944 and was fully authorised to issue the show cause notice. Present is not a case, where there is any lack of jurisdiction in the Commissioner in issuing the show cause notice. The submission of the learned counsel for the petitioner that prior permission of the adjudicating authority is required before issuing the show cause notice dated 01/10/2009 is without any substance. Additional Director General/Commissioner, Central Excise had every jurisdiction to issue the show cause notice dated 01/10/2009 and no ground has been made out to quash the same.

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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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• CST, VAT & Sales Tax

• 2012 (11) TMI 978
  Deemed sale – Writ Petition - constitutional validity of section 2(24) of the Maharashtra Value Added Tax Act - challenge of the petitioners is that by Amending the provisions of section 2(24) the State Legislature has brought within the ambit and purview of the expression "sale", an agreement for the building and construction of immovable property which is not a works contract – Held that:- The effect of the amendment to section 2(24) is to clarify the legislative intent that a transfer of property in goods involved in the execution of works contract including agreement for building and construction of immovable property would fall within the description of a "sale of goods" within the meaning of the provision. - In order to meet the description contained in clause (b), State legislation must provide for a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Such a transfer shall be deemed to be a sale by a person making the transfer and a purchase of those goods by the person to whom the transfer is made. The amendment made by the State Legislature does not transgress the limitations which have been imposed by article 366(29A)(b) of the Constitution. The amended definition of the expression "sale" in clause (b)(ii) of the Explanation to section 2(24) brings, within the ambit of that expression transactions of that nature which are referable to article 366(29A)(b). The transactions which the Legislature had in mind involve works contracts. What the State Legislatures can tax under the expanded definition contained in clause (b) of article 366(29A) must meet the governing requirements of that clause. There must be a transfer of property in goods involved in the execution of a works contract. The relevant clause in section 2(24) is valid because it does not transgress the boundaries set out in article 366(29A). Whether there is a works contract in a given case is for assessing authorities to determine. As noted earlier, it is not possible to provide a comprehensive or all-encompassing list of what contracts constitute works contracts. Section 2(24) properly construed, even after its amendment, reaches out to those cases which-fall within the ambit of article 366(29A). Explanation (b)(ii) to section 2(24) in other words covers those transactions where there is a transfer of property in goods, whether as goods or in any other form, involved in the execution of a works contract. Regarding validity of composition scheme - held that:- A composition scheme is made available at the option of the registered dealer. There is no compulsion or obligation upon a registered dealer to settle. The court may in an extreme instance interfere in the exercise of its powers of judicial review only where the terms of a composition scheme are ex facie arbitrary and extraneous so as to be violative of article 14. That has not been established before the court in this case. There is no merit in the challenge to the Constitutional validity of the composition scheme. The definition of the expression "works contract" in section "2(ja) of the Central Sales Tax Act, 1956, which has been introduced by Act 18 of 2005 with effect from May 13, 2005 is only for the purposes of that Act. The State law in the present case does not infringe the provisions of clauses (a) and (b) of article 286(3), for the aforesaid reason. Constitution validity of levy of levy of VAT on transfer of goods involved in execution of building and construction of immovable property upheld.

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• 2012 (11) TMI 977
  Amnesty Scheme - settlement of the liabilities under the KGST Act - Held that:- Benefit of the Amnesty Scheme was in fact extended to the petitioner and that on account of his failure to comply with the conditions of the Amnesty, offer of amnesty was revoked on 9/10/09. If the amnesty has already been extended and the same was revoked for the default committed in complying with its conditions, this Court now cannot direct consideration of Ext.P4 application made by the petitioner for the same relief. Therefore, consideration of Ext.P4 also cannot be ordered - Writ petition is dismissed. Petitioner submits that subsequently yet another application was made and the application is pending consideration of the authorities. It is clarified that this judgment will not stand in the way of the authorities in considering the application, if any, made by the petitioner in accordance with law, if they are otherwise eligible for the same.

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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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• Indian Laws

• 2012 (11) TMI 973
  Writ petition - Essential Commodities Act – West Bengal Public Distribution System, (Maintenance and Control) Order 2003 - whether there was any manipulation by the writ petitioner in obtaining the licence under the 2003 Control Order, by suppressing the identity of the intervenor and Wahuda Rasul as partners of Damodar Enterprise. - Held that:- The Control Order prescribes that in relation to an allegation of violation of condition of licence, the SDC is required to issue the notice to show cause. This implies that there should be prima facie satisfaction on the part of the SDC that there has been such violation, and then only notice seeking explanation shall be issued. Explanation is also required to be given to the SDC. He is to apply his mind over the explanation, give his own comments. The DC must have comments of the SDC before deciding the issue finally, upon giving opportunity of hearing to the distributor. This is the prescription of the Control Order. Deviation from this course ex-facie would be without the authority of law, being contrary to the provisions of the statue. Any step taken in violation of the statutory provision, particularly where there is overtaking on the part of the authorities in the decision making hierarchy, cannot be protected as being mere irregularity. It would be impermissible to legitimize an action on the part of an authority in initiating a proceeding which the statute mandates another authority to initiate on the ground that such action would cause no prejudice to the person against whom such action is initiated. Such show cause notice has been issued by DC without having jurisdiction to do so, and no further step ought to be taken in pursuance of the same. - Notices quashed. Regarding intervenor - held that:- business of distribution never involved the intervenor, and he cannot compel the food and supplies department to allow him to act as a licencee - intervenor cannot implement a partnership agreement by making complaint before the food and supplies authorities - District Controller had no jurisdiction to issue such notice. The appropriate authority under the 2003 Control Order however shall be at liberty to institute a proceeding afresh, if such authority is of prima facie opinion that there has been any violation of the provisions of the Control Order or any condition stipulated therein - writ petition is allowed

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• 2012 (11) TMI 972
  Petition against an Order of ICAI holding that the complaint filed by the Petitioner against Mr. Ajay B. Garg, a Chartered Accountant and the Member of the Institute of Chartered Accountants of India was frivolous - Settlement of accounts of Firm - Principle of Natural Justice - According to the Petitioner, the Lucknow office of the Petitioner firm had prepared base accounts as on 30th November, 2004 and circulated amongst the partners for their comments. M/s. Atlanta Ltd. thereafter made the changes in the accounts without consent of the Petitioner which were detrimental to the interest of the Petitioner. It is the case of the Petitioner that the 1st Respondent did not take proper care while certifying the accounts of the said firm for the broken period of financial year 2004-05. Held that:- Dispute between the partners is in respect of the accounts of the firm was referred to the arbitrator who was an independent person and the said arbitrator looking to the entire evidence has accepted the balance-sheet audited by the 1st Respondent as correct,there is no reason to interfere with the prima facie view of the Institute on the complaint filed by the Petitioner. The fact that the Award made by the arbitratior has been set aside subsequently and restored to the file of the arbitrator for fresh Award, would not vitiate the prima facie view taken by the Institute during the period the Award was subsisting. In view thereof,there is no need to go into the issue raised by the Petitioner regarding the alleged violation of principles of natural justice and/or alleged procedure while conducting enquiry by the Institute in these proceedings - Award for a limited purpose so as to find out whether there was any substance in the complaint made by the Petitioner against the 1st Respondent and have not expressed our view on merits of the award - Rule is discharged.

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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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