TMI Tax Updates - e-Newsletter
November 6, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Refund claim - same duty paid twice - period of limitation u/s 11AB not applicable - refund allowed with interest even if claimed after one year - HC

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• Once amount disallowed u/s 40(a)(i) for non TDS, the same amount cannot be subject to TDS u/s 194C to 194J -No demand u/s 201 & no Interest u/s 201(1A)

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• Income Tax - Sec.14A is applicable only in respect of expenditure incurred - Losses cannot be construed to be expenditure.

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• Deduction u/s 80-O if the services are rendered from India, mere fact that client has utilized services in India would not debar assessee from deduction

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• Retail trade - income below 5% - Since the books of account as maintained duly audited u/s.44AB, there is no scope for invoking provisions of Sec. 44AF

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Articles

1. AN ORDINARY CITIZEN CANNOT BE EXPECTED TO KEEP TRACK OF THE JUDGMENT OF VARIOUS COURTS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. India Signs Agreements with World Bank for US$ 320 Million AID for “Assam State Roads Project”

2. India Signs Loan Agreement with World Bank for US$ 106 Million for “ICDS Systems Strengthening and Nutrition Improvement Project”

3. Anand Sharma invites Canadian Pension Funds to invest in Indian Infrastructure projects

Notifications

FEMA

1. 242/2012-RB - dated 19-10-2012 - FEMA

FEMA (Transfer or Issue Of Security By A Person Resident Outside India) - Sixth Amendment – Amendment In Regulations 2, 5, 10, 12 And Schedules 1, 2, 5, 6 & 7

Circulars / Instructions / Orders

Companies Law

1. 35/2012 - dated 5-11-2012

Default by the Cost Auditors in filing Form 23D against the corresponding Form 23C.

Highlights / Catch Notes

Income Tax

• Income disallowed under Sec 40(a)(i) not subject to Secs 194C-194J; no demand or interest under Sec 201.

  Case-Laws - AT : In view of the actual disallowance u/s 40(a)(i) for non TDS, the same amount cannot be subject to provisions of section 194C to 194J - No demand u/s 201 and no Interest u/s 201(1A) - AT
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• Revised Returns Validity u/s 139(5) Challenged; AO and CIT(A) Criticized for Taxing Hypothetical Income Ignoring Revisions.

  Case-Laws - AT : Validity of revised returns u/s 139(5) - condition no. (ii) of sec. 139(5) - AO and CIT(A) was not justified in bringing to tax such hypothetical income in the hands of the assessee company on the basis of original return of income ignoring the revised return filed by the assesse - AT
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• Sec. 14A: Only Covers Expenditures for Non-Income, Not Losses. Losses Aren't Expenditures Under This Rule.

  Case-Laws - AT : Sec.14A is applicable only in respect of “expenditure incurred” in respect of income which is not includible in total income and does not deal with the losses. Losses cannot be construed to be expenditure. - AT
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• Retail Trade Case: Section 44AF Inapplicable Due to Audited Books u/s 44AB Despite Low Income Reported.

  Case-Laws - AT : Retail trade u/s 44AF - Income below the rate of 5% as prescribed u/s 44AF - Since the assessee maintained books of account duly audited u/s.44AB, there is no scope for application of the provisions of Section 44AF - AT
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• Section 80-O Tax Deduction: Benefits for Services from India to Foreign Firms; Location of Use Irrelevant for Eligibility.

  Case-Laws - AT : Deduction u/s 80-O – if the services are rendered by assessee from India, the mere fact that foreign enterprises has utilized these services in India would not disentitle it from claiming deduction u/s 80-0, but if the services are rendered in India and not from India, assessee's claim for entitlement u/s 80-0 will not be allowed - AT
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FEMA

• FEMA Regulation Amendment: Key Changes to Securities Transactions for Foreign Residents Under Regulations 2, 5, 10, 12 & Schedules 1-7.

  Notifications : FEMA (Transfer or Issue Of Security By A Person Resident Outside India) - Sixth Amendment – Amendment In Regulations 2, 5, 10, 12 And Schedules 1, 2, 5, 6 & 7 - Notification
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Corporate Law

• New Circular Urges Cost Auditors to File Form 23D After Form 23C Submission to Avoid Penalties.

  Circulars : Default by the Cost Auditors in filing Form 23D against the corresponding Form 23C. - Circular
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Central Excise

• Court Grants Refund for Double Duty Payment; Section 11AB Limitation Period Not Applicable, Interest Awarded Despite Late Claim.

  Case-Laws - HC : Refund claim - same duty paid twice - period of limitation u/s 11AB not applicable - refund allowed with interest even after one year - HC
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Case Laws:

• Income Tax

• 2012 (11) TMI 165
  Transfer pricing adjustment - Rejection of TNMM approach - assessee carried the dispute before DRP - Held that:- TPO has determined the ALP at nil keeping in view the factual position as to whether in a comparable case, similar payments would have been made or not in terms of the agreements. This is a case where the assessee has not determined the ALP. The burden is initially on the assessee to determine the ALP. Thus, the argument of the assessee that the TPO has exceeded his jurisdiction by disallowing certain expenditure, is against the facts. The TPO has not disallowed any expenditure. Only the ALP was determined. It was the Assessing Officer who computed the income by adopting the ALP decided by the TPO at nil . TNMM v/s CUP approach - Held that:- The appellant in the present case also did not demonstrate as to how the transaction by transaction approach in his case is not possible. It has also not been shown as to whether there has been any real or tangible benefit by carrying such international transactions with the AEs. The comparable uncontrolled price method ( CUP method), for the subject transactions being most direct method for determining arm s length price and chosen as most appropriate method in this case by TPO, therefore, cannot be faulted with. We, therefore, do not find any error in rejecting the TNMM method applied by the assessee and determination of ALP by applying CUP method for Benchmarking international transactions in a case like this. The DRP also cannot be said to have erred in approving the CUP method adopted by the TPO for Benchmarking international transactions with the AE. Professional Consultancy Management fee for support services - Held that:- The impugned transactions are found to be distinguishable and separate international transactions, carried by the assessee with its Associate Enterprise. Each and every transaction was required to be bench marked separately. The appellant did not compute net profit margin realized from each such transaction nor laid any material on record to show that the available data of comparable transactions, if any, is unreliable or inadequate. These transactions are also not shown to be closely linked with each other. In fact in India no guidance is provided regarding criteria for choosing a particular method and the law also does not provide for priority of any particular method to be applied - Rule 10D(1) of the I.T. Rules, 1962 also mandates the maintainability of record of uncontrolled transactions to be taken into account in analyzing the comparability of the international functions entered into by the assessee. It, therefore, is obligatory on part of the appellant to maintain such record and produce the same before the TPO to show that it has bench marked the international transaction at ALP. This obligation, however, has not been discharged by the assessee. SAP license and MS office - Held that:- DRP reached a finding that these two have been purchased at a lower rate and has gone to benefit the assessee requiring assessee to be allowed benefit on that account, but it was neither proper nor justified to uphold the conclusion of the TPO for making addition in his income on that account. Since the onus that lay upon the appellant that the international transaction has been Benchmarked at ALP in respect of payment for SAP stands discharged and that also is found to have passed the benefit test, the addition so made, therefore, is unjust and uncalled for. Accordingly, assessing authority is directed to delete the addition on that account and allow the ground raised in appeal by the assessee accordingly - appeal partly in favour of assessee.

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• 2012 (11) TMI 164
  Non deduction of TDS - levy of tax u/s 201(1) and interest u/s 201(1A) - Held that:- The entire provision has been disallowed under section 40(a)(ia) and section 40(a)(i). Once the amount has been disallowed under the provisions of section 40(a)(i) on the reason that tax has not been deducted, it is surprising that AO holds that the said amounts are subject to TDS provisions again so as to demand the tax under the provisions of section 201 and also levy interest under section 201(1A). Unable to understand the logic of AO in considering the same as covered by the provisions of section 194C to 194J. Once an amount was disallowed under section 40(a)(i)/(ia) on the basis of the audit report of the Chartered Accountant, the same amount cannot be subject to the provisions of TDS under section 201(1) on the reason that assessee should have deducted the tax. Therefore, assessee’s ground on this issue are to be allowed as the entire amount has been disallowed under the provisions of section 40(a)(i)/(ia) in the computation of income on the reason that TDS was not made - in favour of assessee. Finished/Traded Goods - Held that:- After going through the agreement and its various clauses it is concluded that the contract with the various parties are contract for purchases of traded goods and not of the works contract - as decided in Glenmark Pharmaceuticals Ltd. Versus Income-tax Officer (TDS)-1(3), Mumbai [2009 (3) TMI 648 - ITAT MUMBAI] on identical facts that TDS is not required to be deducted on purchase of traded goods - in favour of assessee. Purchase of Packing Material - Held that:- As decided in BDA Ltd vs. Income Tax Officer (TDS) [2004 (3) TMI 11 - BOMBAY HIGH COURT] TDS is not required to be deducted under section 194C on purchase of packing material - in favour of assessee. Clinical Trials - Held that:- In order to carry out clinic trial, the person who carries out the trial must possess medical qualification and the person should be highly qualified and should possess technical expertise. Therefore, payment made in this respect is nothing but fees for professional/technical services. According the above payment of Rs. 7,68,21,907/- is a payment to professional fees, therefore, tax should have been deducted as per provisions of section 194J. AO is directed to calculate TDS liability under section 194J. Whatever TDS liability comes under section 194J credit for taxes paid of Rs. 42,45,914/- is to be allowed and balance amount needs to be recovered from the appellant.

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• 2012 (11) TMI 163
  Validity of revised returns u/s 139(5) - condition no. (ii) of sec. 139(5) discovery of any omission or any wrong statement - whether there was any wrong statement made in the original return of which the assessee was not aware at the time of filing the same. - Held that:- such examination of the assessee's claim on merit only will reveal as to whether the condition No. (ii) was satisfied in the present case in order to enable the assessee to furnish the revised return u/s 139(5). No income can be said to have really accrued to the assessee as a result of the five relevant transactions in the immovable properties which is chargeable to tax in its hands for the year under consideration. The declaration of such income, which was not accrued to the assessee in the real sense in the original return thus represented a wrong statement which was corrected by the assessee by filing the revised return and the AO as well as the learned CIT(Appeals), in our opinion, was not justified in bringing to tax such hypothetical income in the hands of the assessee company on the basis of original return of income ignoring the revised return filed by the assesse It is well settled that when a revised return is filed by the assessee, the original return is totally substituted and the revised return alone has to be taken into consideration in completing the assessment. The earlier return, after a revised return has been furnished, cannot form the basis of assessment. - In favor of assessee. Deemed income u/s 41(1) - Principal amount under Scheme of OTS waived - addition to income - Held that:- As decided in Solid Containers Ltd. vs. DCIT [2008 (8) TMI 156 - BOMBAY HIGH COURT] that although the loan was taken by the assessee for trading activity but upon waiver, the said loan was returned by the assessee in the business and the same, therefore, was taxable in its hands as income - against assessee.

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• 2012 (11) TMI 162
  Deduction u/s 80HHC in respects of DEPB entitlement - Held that:- As decided in M/s Topman Exports Versus CIT, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] only the profit on sale of DEPB is to be excluded from business profit for the purpose of computation of deduction allowable to the assessee u/s 80HHC and for the purpose of this computation of profit on sale of DEPB, face value of DEPB should be considered as costs of DEPB – Decided in favor of assessee.

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• 2012 (11) TMI 161
  Depreciation on machines purchased under TUF scheme of the Govt - Disallowance on account of higher depreciation claimed - @50% v/s 25% - Held that:- As decided in assessee's own case for A.Y. 2005-06 relying on Agarwal Rayons Pvt. Ltd. vs. ITO (2010 (7) TMI 808 - ITAT, AHMEDABAD) that in respect of same machinery claim of depreciation at 50% has to be granted - in favour of assessee. Low oil gain - addition to income - Held that:- There is no constant percentage of oil gain which can be said to be uniformly obtained by the manufacturers of texturised yarn. The comparable cases have a variation and in some cases it was noted that on account of better overall performance and profits and due to the maintenance of authentic books of account, no further addition was called for. However, in this case, keeping the various percentages of oil gain in this line of business in the various comparable cases an adhoc addition of Rs.2 lacs as against Rs.4,23,037/- done by AO shall serve the purpose to cover up any leakage as also the gap between the two percentage of oil gain noted by the AO - partly in favour of assessee. Disallowance of credit balance of NCCD (CENVAT) being written off - Held that:- The assessee had maintained exclusive system of accounting, therefore the duty paid was not debited as a part of the purchases but a separate account was maintained and carried to the balance-sheet. The AED and NCCD were applicable on POY, i.e. raw material. When the finished goods, i.e. texturised yarn is manufactured, the excise is levied in the form of basic duty. The assessee has adopted exclusive method of accounting, therefore debited the net purchases and those were separately recorded in the books of accounts. Thus finding force in assessee's argument because while maintaining the exclusive method of accounting the assessee had a choice to increase the value of the purchases in respect of the duty paid in the form of AED & NCCD, the amount which is now written off being part of the business expenditure, hence allowable under the provisions of the Act - in favour of assessee.

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• 2012 (11) TMI 160
  In genuine commission payment - Held that:- The two ingredients that the payment was made on contractual basis and the arrangement was found to be & bona fide one are yet to be established in this case - the final conclusion of the AO was not based upon this provision rather the impugned disallowance was based upon the provisions of section 37(1). From the side of the assessee, few case laws have also been cited for the legal proposition that in a case where there is no saving of tax, then the transaction should not be disallowed - an individual has certain standard deductions, specially a lady and also avail the benefit of the limit of non-taxable income along with statutory deductions prescribed in the statute for an individual. Therefore, case laws as cited by assessee is applicable when all these factors are also taken into account to consider the argument of “Revenue Neutral”, therefore to conclude that the CIT(A)/AO has not examined some of the basic reasons for disallowance it proper to restore this issue back to the file of AO to arrive at the correct judicial decision - in favour of assessee for statistical purposes. Disallowance of rent on DG set - high lease-rent being paid by the assessee-company to an interested party - Held that:- If an expenditure is not wholly for the purpose of the business, but partly for the purpose of the business, then only that part is allowable. The words “wholly and exclusively”, thus refer to the motive and the object behind the expenditure. The object has to be exclusively as also solely for running of the business - AO has decided the percentage of disallowance on the basis of the expected annual return on such investment no circumstance the disallowance as made by the AO should be enhanced while we are restoring this ground back to the stage of the AO with the direction that the assessee shall place on record the basic requirement of business necessity for taking on hire the impugned DG set - in favour of assessee for statistical purposes. Disallowance of miscellaneous expenses - Held that:- As an amount of Rs.10,352/- could not be explained by the assessee even at the appellate stage, thus upto that extent, the addition was confirmed - against assessee.

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• 2012 (11) TMI 159
  Depreciation on electrical installation - excess claim - CIT (A) allowed the claim - Held that:- The items on which the assessee has claimed depreciation at 25% have been attached to plant and machinery and not building and therefore it formed part of plant and machinery, thus depreciation @ 15% will not be applicable. Further, in earlier years depreciation has been allowed at 25% to the assessee & could not controvert these facts, thus no reason to interfere to the order of CIT (A) - against revenue. Cessation of liability - Addition u/s.41(1) - CIT(A) deleted the addition - Held that:- As decided in CIT vs. Nitin Garg [2012 (5) TMI 30 - GUJARAT HIGH COURT] the assessee had continued to show the amounts as liabilities in its balance sheet the same cannot be treated as cessation of liabilities and merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have ceased to exist - in the present case also the assessee has made payments in subsequent years and in cases where the amounts are still outstanding, the provisions of section 41(1) cannot be applied. The assessee acknowledges its liability to pay. The Revenue has not been in a position to controvert the findings of CIT (A). Further the Revenue has not brought anything on record to prove the creditors to be non existent or the creditors appearing in Balance Sheet to be of bogus in nature - in favour of assessee.

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• 2012 (11) TMI 158
  Setoff of business loss against house property income and income from other sources - CIT(A) allowed the claim - Held that:- The records indicate that assessee had been claiming deduction u/s. 10A in the past and the assessee had carried forward losses of business from it. In the year under appeal assessee set off the brought forward business loss from Income from house property and income from other sources. As per provisions of Sec. 10A, the assessee is allowed deduction in respect of profits derived from the undertaking eligible under the section from the total income of the assessee which means that total income of the assessee could include the profits/losses derived from such unit and if there is any profit, then the eligible amount will be deducted in computing total income. Thus it can be seen that provisions of Sec. 10A are in the nature of deduction and not exemption. Sec.14A is applicable only in respect of “expenditure incurred” in respect of income which is not includible in total income and does not deal with the losses. Losses cannot be construed to be expenditure. Therefore, all the provisions of the Act would be applicable for the purpose of computing the total income of the assessee, unless expressly by the Legislature - in favour of assessee.

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• 2012 (11) TMI 157
  Penalty u/s. 271(1)(c) - unexplained expenditure on purchase of goods - Held that:- In the quantum appeal, the Hon’ble ITAT on the basis of quantitative details of stock submitted by the assessee held that the contention of the assessee that the goods were in fact purchased cannot be discarded but might have been purchased from some other party than from those shown in the books. In view of these facts, the Hon’ble Tribunal restricted the addition to 15% of the purchases. Thus the addition has been made on the basis of estimate. As decided in CIT Versus SANGRUR VANASPATI MILLS LTD. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] provisions of Sec. 271(1)(c) are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein, thus in the present case also no penalty will be levied - in favour of assessee.

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• 2012 (11) TMI 156
  Penalty u/s.271(1)(c) - CIT(A) restricted the levy only to the extent of Rs.5,600/- - Held that:- The undisputed facts that during the course of survey the assessee declared income of Rs.7,15,000/- and the same was included in the return of income filed by the assessee u/s. 139(1). The additions made by the A.O. during the course of assessment proceedings were substantially deleted by the appellate authorities except to the extent of Rs.16,642/- that was sustained. Penalty levied on the additions made by the A.O. were deleted by CIT (A) except for the penalty of Rs.5,600/- on the addition of Rs.16,642/-. The reason for levy of the penalty was that the assessee had included in the return of income the additional income only on account of survey u/s. 133A. Thus in the present case, it is not furnishing of inaccurate particulars of income as in the income tax return the particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the income tax return and therefore it cannot be said that the assessee has furnished inaccurate particulars of income - there cannot be any penalty only on surmises and possibilities - in favour of assessee.

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• 2012 (11) TMI 142
  Disallowance of depreciation on the leased assets - Finance lease vs Operating lease - Held that:- As it appears that the assessee is not interested in pursuing the appeal. It has been held by the Hon’ble Supreme Court in the case of B.N. Bhattachargee and Anr. (1979 (5) TMI 4 - SUPREME COURT) that appeal does not mean only filing of memo of appeal but also pursuing it effectively. In cases where the assessee does not want to pursue the appeal, Court/Tribunal have inherent power to dismiss the appeal for non prosecution - against assessee. It is not a case of operating lease and hence no granting of depreciation - Held that:- As decided in M/s.IndusInd Bank Limited Versus ADCIT [2012 (3) TMI 212 - ITAT MUMBAI] Only the lessee can be treated as owner of the asset in case of a finance lease and is entitled to claim depreciation as per law. No depreciation can be allowed to the lessor in case of a genuine finance lease - Finance lease is for a fixed period & non-cancellable. Lessee uses the asset for its entire economic life & all risks and rewards incidental to ownership are transferred to the lessee even though title may or may not be eventually transferred to him. There is a fixed obligation on the lessee for payment of lease money. As no distinguishing feature brought on record, it is fair and reasonable that the matter should go back to the file of the A.O. to decided afresh - in favour of revenue by way of remand.

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• 2012 (11) TMI 141
  Delay in filing appeal - refusal of condonation of delay - Held that:- As decided in Mahaveerprasad Jain Versus CIT [1988 (1) TMI 21 - MADHYA PRADESH HIGH COURT] where an applicant engages a counsel, he would be justified in presuming that the counsel would attend to the case. The applicant cannot be made to suffer for the negligence of the counsel. An appeal cannot be dismissed because the counsel failed to appear when the case was posted for hearing - the delay is hereby condoned - in favour of assessee. Penalty u/s 271(1)(c) - Disallowance of foreign traveling expenses - Held that:- Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - As it is not the case of the Revenue that the claim made by the assessee was found to be false or untrue based on no material or bonafide belief, we are of the view that there is no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) - in favour of assessee.

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• 2012 (11) TMI 140
  Deduction u/s 80IB(10) - the commercial area i.e. shops in the phases XI and XI-A of the project of the assessee was in excess of what has been prescribed - CIT(A) allowed the claim - Held that:- As decided in CIT-II, Pune Versus M/s. Brahma Associates [2011 (2) TMI 373 - BOMBAY HIGH COURT] up to March 31, 2005 deduction under section 80-IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the Development Control Rules/ Regulations framed by the respective local authority. As in the present case the A.O. has allowed the deduction u/s 80IB(10) in respect of other phases of the property known as ‘Golden Nest’ & also that the housing project of ‘Golden Nest’ phase VII and X are approved by the local authority on 25-1-2001 and phase XI and XIA on 14-1-2004 i.e prior to 1-4-2005 inserted under Clause (d) to section 80IB(10) w.e.f. 1-4-2005 which is prospective in nature and not retrospective - As the percentage of commercial area in phase VII, X and combined phase XI and XIA of the property known as ‘Golden Nest’ are at 6.59%, 4.99%, and 5.48% respectively was not controverted by the Revenue even at this stage - in favour of assessee. On the issue of area of row houses exceeding 1000 sq. ft. the CIT(A) held that the deduction u/s 80IB(10) has to be allowed on proportionate basis as decided by the CIT(A) – II, Thane in the case of the assessee for assessment years 2003-04, 2004-05 and 2005-06. After considering the assesse’s submission that the A.O. while giving effect to the order of the Tribunal has considered the same and disallowed Rs. 6,70,464/- in the assessment year 2004-05. Thus no interference with the order passed by the CIT(A) on this account required - against revenue.

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• 2012 (11) TMI 139
  Invoking of Sec 115JB, 263 of the Act - banking company - CIT, under 263 notice, proposed to make addition on account of provision for bad and doubtful debts and provision for depreciation on investments and thus proposed to revise the assessment on that score. - Held that:- Provisions of sec.115JB are not applicable to the assessee being a banking company - invoking of sec.263 is not correct and accordingly quash the action u/s 263 of the Act - In the result, the assessee’s appeal is allowed

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• 2012 (11) TMI 138
  Addition of Rs.10,61,294/- on account of estimated sales – Held that:- As Books of accounts of assessee are not rejected u/s 145(3) of the IT Act and the sales tax authorities have also assessed the sales as recorded by assessee - estimated addition made by AO is not sustainable in the eyes of law - ground raised by assessee is allowed. Disallowance made on account of car maintenance as well as depreciation on car – Held that:- Held that:- there is no infirmity in the orders of revenue authorities in disallowing the same as car was not used for the purpose of business - expenditure not incurred wholly and exclusively for the business of the assessee is disallowed - ground raised by assessee is dismissed. Disallowance of addition on account of advertisement expenses – Held that:- Assessee is not able to substantiate the said expenditure by producing the evidence either before the AO or before CIT(A) or even before this Tribunal - No infirmity in the orders of the revenue authorities – ground raised by assessee is dismissed. Disallowance made u/s 40A(3) of the IT Act – Held that:- No disallowance u/s 40A(3) is required on account of meat, chicken and egg purchases in cash in excess of Rs. 20,000/- as they are daily expenses. However, the rent is not exempted under this rule - disallowance on account of the rent made in excess of Rs.20,000/- on particular dates as recorded in the assessment order is confirmed - ground raised by assessee is allowed in part. Disallowance from Bazar purchase Rs.55,246/- was not taken in original grounds of appeal, although it was the day to day business expenses and so never disallowed in any earlier assessment - Additional ground is dismissed since it is not arising out of the impugned order - In the result the appeal of assessee is allowed in part.

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• 2012 (11) TMI 137
  Retail trade u/s 44AF - Income below the rate of 5% as prescribed u/s 44AF - Penalty u/s 271(1)(b) for non-compliance and u/s.271(1)(c) holding a view the addition was the result of submission of inaccurate particulars of income in violation to the provisions of Section 44AF - Held that:- CIT(A) can do what the ITO can do and also direct him to do what he has failed to do, as held in Jute Corpn. of India Ltd. v. CIT [1990 (9) TMI 6 - SUPREME COURT] Since the assessee maintained books of account duly audited u/s.44AB, there is no scope for application of the provisions of Section 44AF, as rightly contended by the learned Counsel for the assessee. The benchmark of 5% therefore was not the basis for the assessee who filed returns according to the audit report u/s.44AB. Therefore, the initiation of proceedings u/s.147 having been initiated by the Assessing Officer for the reason the assessee having violated the provisions of Section 44AF was not at all correct in view of the audit report furnished by the assessee, in our considered view the assessment orders and also the consequential penalty orders for both the AYs under consideration cannot be sustained.

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• 2012 (11) TMI 136
  Refusal to grant registration u/s 12AA of the Act - Following the decision of court in case of [CIT vs. Manav Mangal Society 2009 (8) TMI 43 - PUNJAB AND HARYANA HIGH COURT] - Held that:- Income of the Trust has been applied for revenue and capital expenditure only for charitable purposes and none of expenditure is there for any personal purposes or non-charitable purposes - CIT is directed to grant registration to the assessee as applied by the assessee - In the result, appeal of the assessee is allowed.

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• 2012 (11) TMI 135
  Deletion of Disallowance due to devaluation of Indian currency - foreign exchange fluctuation – Held that:- The liability, is on revenue account being stated to be against raw material purchase and not on capital account. Claim to the assessee be allowed on payment basis – in favour of assessee. Interest u/s. 244A – Held that:- No refund by way of a banking instrument having been received, it is the date of the passing of the order of adjustment / set off of the refund amount against outstanding demand that the refund and, thus, the interest can be said to have been allowed to the assessee. – a separate and distinct proceedings, and to that extent, much in the same manner as where a debt in relation to an income assessed is written off or a credit in respect of a liability allowed as an expenditure is written back - matter is restored back to the file of the AO for fresh adjudication – appeal partly allowed. Deletion of disallowance of security expenses – Held that:- Expenditure incurred on the provision of security at the residence of the Managing Director, could not be considered as his personal obligation, and having been incurred for and in the interest of the assessee, is, therefore, allowable u/s. 37(1) of the Act and same could at best be considered as a perquisite allowed by the assessee - in favour of revenue. Travelling Expenses – Held that:- Bill is for a group package, comprising lunch, rent, dinner, breakfast etc., and which would not by itself evidence or clarify the purpose for which the said expenditure was incurred, nor would the dates of arrival/departure of the group - matter be restored back to the file of the AO to allow an opportunity to the assessee to press this issue before him, furnishing all the relevant details and materials. Bad and doubtful debts written off – substantiation of its claim by the assessee - Held that:- There can be no double claim, i.e., both in the year of provision as well as in the reversal thereof when the debtor’s account stands obliterated from its account by the assessee - restore the matter back to the file of the ld. CIT(A) for clarifying the details which were available on the file of the AO. Deletion of sum for the relevant year - on the basis of the findings by the tribunal in the case of the assessee for the assessment year 2001-02 – Held that:- Same did not pertain to the relevant year but to the subsequent year, i.e. relevant to the assessment year 2002-03 - CIT(A) directed the AO to consider the assessee's claim for the current year, and allow it subject to verification - no infirmity in the impugned order - In the result, the Revenue’s appeal is partly allowed and partly allowed for statistical purposes.

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• 2012 (11) TMI 134
  Deduction u/s 80-O – services rendered from India or Services rendered in India - services rendered outside India - held that:- the finding of CIT(A) in the instant case was that assessee has rendered services to the ONGC in India. Insofar as services were rendered in India, the assessee is not entitled for deduction u/s 80-0 irrespective of the utilization of such services by the foreign enterprise either in India or outside India. Meaning thereby if the services are rendered by assessee from India, the mere fact that foreign enterprises has utilized these services in India would not disentitle it from claiming deduction u/s 80-0, but if the services are rendered in India and not from India, assessee's claim for entitlement u/s 80-0 will not be allowed. In the instant case no clear finding has been recorded by CIT(A) that services rendered by the assessee from India to the foreign enterprise and the foreign enterprise after receipt of such services outside India had utilized it in India and it is not a case of rendering of services by the assessee at ONGC platform in India so as to bring it within the ambit of Circular No. 700 dated 23.3.95.

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• 2012 (11) TMI 133
  Reopening - notice u/s. 148 - it was argued that the AO could not go into any question regarding computation of capital gain because the only reason for doubting the computation of capital gain was that the relief u/s.54EC of the Act could not be allowed to the Assessee as the investment in specified long term capital assets were made in the succeeding assessment year. – Held that:- the provisions of Sec.54EC do not make any reference to the Assessment year in which the investment is to be made but only lay down a condition of 6 months period of time after the date of transfer of the capital asset. The belief entertained by the AO regarding escapement of income cannot therefore be said to be a bona fide belief. Therefore initiation of reassessment proceedings on the basis of the aforesaid reason cannot be sustained. AO concluded that it is an arrangement done to facilitate the developer to load TDR on the plot of land hence not a transfer falling within the provisions of section 45 of the I.T. Act and was a case the Assessee getting a compensation for loading and developing TDR by new structure and therefore the proceeds received by the Assessee are in the nature of income from other sources - what was transferred by the Assessee was Development Rights in respect of the property. On the plot of land owned by the Assessee which was subject-matter of development right, a certain area of construction was permissible, which was the normal FSI permissible as per the Development Control Rules - consideration received by the Assessee is for transfer of rights over such capital asset. The fact that a third party purchaser has no interest over the land is not relevant. The permission to load TDR on the FSI permissible allowed by the owner of the land is by itself a transfer of right in or over immovable property and would therefore clearly fall within the provisions of Sec. 45 of the Act - belief entertained by the AO in the reasons recorded that the third party does not own any interest in land and therefore there is no transfer of capital asset cannot be said to be a honest belief based on reasonable grounds - initiation of reassessment proceedings on the basis of the reasons recorded by the AO cannot be sustained – in favor of assessee

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• 2012 (11) TMI 132
  Deduction u/s. 10A of the Income Tax Act - 100% EOU – application against the order of rectification of mistake u/s 154 passed by CIT(A) - Held that:- Whether the assessee is eligible for deduction u/s. 10A involves examination of facts, business activity carried on and the relevant provisions of the Act. It is a matter which requires a long drawn out process of reasoning or examining arguments on points where there may conceivably be two opinions or views - issue as to whether the assessee is involved in exports and is eligible for deduction u/s. 10A of the Act cannot be considered as 'mistake apparent from records' within the meaning of section 154 - CIT(A) was not correct in unilaterally denying the assessee deduction u/s. 10A in the 'Order on miscellaneous petition' and pursuant to the rectification application filed by the Assessing Officer u/s. 154 of the Act - no opportunity of hearing was provided to the assessee before passing the order on the miscellaneous petition - assessee should, in the interest of natural justice, have been allowed reasonable opportunity of being heard before concluding so and before passing the order on the miscellaneous petition - order passed on the miscellaneous petition by the CIT(A) is bad in law and liable to be quashed

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• 2012 (11) TMI 131
  Penalty u/s 271 (1)(C) – additions u/s 68 - negative cash balance and advance receipts – alleged that cash introduced in the books by way of advances amounting to Rs. 16.25 lakh was only one component of unaccounted cash available with the assessee – Held that:- addition made by the AO had the effect of reducing loss to the extent the additions have been confirmed by the Tribunal. It may be mentioned that the explanation does not use the words "returned loss" or "assessed loss" but uses the word "has the effect of reducing loss". - Explanation 4 to section 271(1)(c). - Decided against the assessee. Validity of notice issued u/s 271(1)(c) - concealment of income - held that:- it is clear that the notice was issued for concealing particulars of income. The notice is not a stand alone document. It is based on the assessment order. Without finding regarding one or the other charge, the notice cannot be issued. However, if two are read together, it is clear that the notice has been issued in respect of concealment of particulars of income. In view of these observations, it is held that the notice is not vague. Intoroduction of cash - held that:- assessee failed to adduce any evidence regarding receipt of such advance or the job work actually done - assessee firm was in possession of unaccounted income by way of cash which was utilized in the course of business without paying tax thereon. Quantum of penalty - AO had made additions and initiated penalty on two grounds- (i) deficiency of cash of Rs. 8,79,204/- in the cash book, and (ii) advances for job work of Rs. 16.25 lakh. - CIT(A) combined the two additions and reduced the amount from Rs. 25,04,209/- to Rs. 18,48,039/-. - held that:- the levy of penalty should be levied on the amount of Rs. 16.25 lakh.

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• Customs

• 2012 (11) TMI 155
  Customs House Agent written examination and the oral examination - held that:- There is no dispute that the petitioner had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984, which were existing prior to the coming into force of the new regulations in the year, 2004. - Authorities directed to issue the necessary certificate granting the Customs House Agents Licence to the petitioner,

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• 2012 (11) TMI 154
  Refund - principle of unjust enrichment – Held that:- Provisions of unjust enrichment will not apply to the refund claims arising out of finalisation of provisional assessment under Section 18 of the Customs Act, 1962, prior to 13-7-2006 - finalisation of the provisional assessment took place prior to 13-7-2006 and letters claiming the amounts were also filed prior to 13-7-2006 – refund allowed – in favor of assessee

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• 2012 (11) TMI 153
  Condonation of delay in filing the appeal – Held that:- No explanation has been given for this delay. In fact the delay of 147 days has been explained in one sentence that the delay has been occurred due to unavoidable co-ordination gaps between different Sections or units of the Department - delay has not been properly explained - application for condonation of delay rejected

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• Corporate Laws

• 2012 (11) TMI 152
  Petitioner seeking initiation of proceedings under Sections 11 submission of the respondent that the petitioner has learnt about the one time settlement arrived at by the respondent with the Bank; and it was only then that he approached the CLB this is clear from the fact that he had filed the contempt application before the CLB on 01.03.2007 but he did not choose to mention it before the Board till more than two months later; i.e. on 03.05.2007; it appears that only when the petitioner learnt about the aforenoted settlement that he chose to approach the Court. His approach does not appear to be honest; he appears to be nursing some personal vendetta/grievance which cannot be addressed under the provisions of Sections 11 & 12 of the Contempt of Courts Act - In this background, it can in no manner be said that the impugned order suffers from any infirmity - Appeal is without any merit, Hence is Dismissed.

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• Service Tax

• 2012 (11) TMI 169
  Whether liability to pay Service tax determined after issue of show-cause notice was proper or not - Held that:- Impugned order is set aside and matter is remanded to the Commissioner (Appeals) for fresh decision after taking note of the grounds of appeal by revenue in appeals filed before the Tribunal and after giving reasonable opportunity to the respondents to present their case if they desire to do so.

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• 2012 (11) TMI 168
  Demand under the head "maintenance or repair service" for the period up to 30.4.2006 - Extended period of limitation - appellant engaged in the business of reconditioning engines and parts thereof and repairs of other parts of vehicles of all brands - appellant contended that they were in bona fide believed that they had no tax liability in respect of the activities in question and hence did not include the relevant particulars in their returns – Held that:- Activity of rebuilding, reconditioning, restoration and servicing of IC engines and other parts (of motor vehicles), received from authorised service stations and workshops were not disclosed by the appellant in their ST-3 returns - there was suppression of relevant information by the appellant with intent to evade payment of service tax. Some of the relevant facts were first disclosed to the department only on 5.9.2007, the date on which the appellant submitted a letter to the Superintendent (Audit) - this disclosure of information was not voluntarily made as it was made in the face of audit objections. In the result, the invocation of extended period of limitation requires to be upheld Services provided by the appellant to authorised service stations and workshops during the period of dispute are classifiable as "maintenance or repair service" up to 30.4.2006 and "management, maintenance or repair service" from 1.5.2006 and, consequently, the appellant is liable to pay service tax on these services. But they are not liable to pay service tax on maintenance or repair of motor vehicles directly brought to them by the vehicle owners as this activity is covered by the exclusion clause incorporated in the definitions of "maintenance or repair" and "management, maintenance or repair" Demand of service tax on the services rendered by the appellant to authorised service stations and workshops in respect of IC engines and other parts of motor vehicles is upheld Demand of service tax on the services rendered by the appellant directly to the vehicle owners in respect of whole motor vehicles is set aside Appellant shall pay interest under Section 75 and under Section 78 of the Finance Act, 1994 on the amount of service tax and education cess to be requantified

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• 2012 (11) TMI 167
  Waiver of pre-deposit - alleged that appellant has not discharged the Service tax liability on job works undertaken by them, is violation of Notification No. 8/2005-S.T. – Held that:- Appellant for discharge of service tax liability, as a job worker - appellant had produced the certificates issued by the principal manufacturers, wherein it has been indicated that they have discharged the excise duty liability on the products received from the appellant as a job worker - appellant has purchased powder for coating but raised the bills for such purchases of powder to principal manufacturers while raising the bills for job working - appellant has prima facie complied with the conditions of Notification No. 8/2005 - waiver of pre-deposit allowed

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• 2012 (11) TMI 150
  CENVAT Credit availed on GTA Service - Held that:- The issue regarding CENVAT Credit availed on outward freight for the period till 01.04.2008 has been settled by the Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others [2011 (3) TMI 248 - KARNATAKA HIGH COURT] in favour of the assessee. Also there is no stay against the same - in favour of assessee.

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• Central Excise

• 2012 (11) TMI 151
  Waiver of pre deposit - Rectification Application rejected - seeking recall and modification of the previous order directing payment of Rs.6 Crores as pre deposit - Held that:- Section-3A imposes liability on the basis of the assumptions which can be drawn. However, the assumptions have to be linked to or based upon some objective materials based upon the available evidence. No doubt, the data in the pen drive indicated certain figures and the person from whom it was seized suggested that these reflected the sales figures of the assessee. At the same time, the Commissioner was also alive to the fact that the production capacity of the Unit was 75 MT per month which would have worked out to maximum of 600 MT. In the eventuality, the duty liability would have been in the range of Rs. 74-75 Lakhs. Then there is absolutely no discussion on this aspect in the Order in Original. Though this appears to have been urged before the Tribunal, the latter did not give sufficient weightage to this aspect and appears to have adopted a rough and ready rule while directing pre-deposit of Rs. 6 Crores which it refused to alter when the rectification application was made. The Tribunal’s order does not reflect any discussion on the relative hardship which would be visited upon the appellant in the light the latter is constrained to make the deposit, thus having regard to the above factors, the directions of the Tribunal are required to be altered. Instead of Rs. 6 Crores, the appellant shall deposit a sum of Rs. 1.5 Crores. The balance of the demand shall be secured through bond to the satisfaction of the excise authorities. The appellant is permitted to make the deposit of Rs. 1.5 Crores in two instalments provided the entire amount is deposited on or before 31.12.2012.

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• 2012 (11) TMI 149
  Refund claim - same duty paid twice - Held that:- When the petitioners paid the duty of Rs. 91,128/- at the time of clearance of goods, they discharged their excise duty liability on such clearances. Thereafter, the petitioners had no further excise duty liability on such goods. If by mistake or a pure clerical error or an oversight, the petitioners also thereafter debited the same amount in the Personal Ledger Account and deposited a sum of Rs. 91,128/- all over again, such deposit cannot take the character of duty paid. Such deposit was purely an error and the amount deposited cannot be co-related with the petitioners' responsibility to discharge excise liability. Such payment of Rs. 91,128/- made second time, therefore cannot be seen as a duty deposited or paid. Under the circumstances, the claim of the petitioners seeking repayment of such amount cannot be seen as a refund claim made under section 11B of the Act. Merely because there is no specific statutory provision pertaining to return of amount deposited under a mistake, per se, should not deter from directing the respondents to return such amount. Admittedly, there is no prohibition under the Act from returning such an amount - directed to the respondents to pay petitioners a sum of Rs. 91,128/- with simple interest at the rate of 9% per annum after a period of three months from the date of the application dated 1-11-2003 till actual payment - in favour of assessee.

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• 2012 (11) TMI 148
  Cenvat credit – SSI - respondents are manufacturing lay flat tubings and captively using the same for making plastic bags - alleged that applicable Notification No. 16/97, lay flat tubings are entitled to small scale exemption subject to the conditions specified thereunder whereas the plastic bags are fully exempt under Notification No. 4/97 subject to the condition that no credit of duty paid on the inputs is taken – Held that:- An amendment was made to the small scale exemption Notification on 3-12-97 introducing paragraph 5(f) which clarified that if the finished goods were exempt under any other notification (as in this case, the plastic bags were exempted under Notification No. 4/97), the inputs namely lay flat tubings cannot be deemed to be exempt under paragraph 3(c) - even though the authorities below have granted relief to the respondents applying the decision of the Hon’ble Supreme Court in respect of unamended provisions of small scale exemption, there is no duty liability on the respondents once the amendment is given prospective effect from 3-12-97.

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• 2012 (11) TMI 147
  SCN – Held that:- Commissioner of Central Excise could not have passed the order upon points not arising out of the decision or order of the subordinate adjudicating authority and could not have relied on new material - Commissioner (Appeal) has gone beyond the show-cause notice and the relief sought from him. Therefore, the impugned order is not legal and proper, accordingly, is set aside - appeal is allowed

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• 2012 (11) TMI 146
  SCN – alleged that most relied upon documents listed in the Annexure to the Show Cause Notice other than the statements were not given to the appellants – Held that:- Show cause notice records that legible copies of the relied upon documents enclosed herewith. However, in the next breath, the show cause notice states that if the noticee desires to take copies of the said relied upon documents, they may do so at the adjudication section of the office of the Commissioner - It is therefore, doubtful whether all the relied upon documents which were voluminous were actually supplied along with the show cause notice - without the relied upon documents and quantification of the demand, the appellants are not in a position to defend their case properly - appeals are allowed by way of remand

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• 2012 (11) TMI 145
  Clandestine removal of goods - allegation of the department was that the party had clandestinely manufactured and removed excisable goods without payment of duty – Held that:- Demand of any amount of duty must have necessarily a quantitative basis, for which mathematical precision is required - This attribute is missing in this case - In this case no investigation whatsoever has been conducted as regards the duplicate set of invoices – in favor of assessee

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• 2012 (11) TMI 144
  Refund of pre-deposit under Section 35F of Central Excise Act, 1944 – unjust enrichment – Held that:- Amount is not passed on to others - unjust enrichment clause did not apply to such a refund since deposited amount is not passed on to the others - principle of unjust enrichment could not apply in this case – refund allowed

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• 2012 (11) TMI 143
  Cenvat credit – alleged that appellant has taken credit of duty paid on corrugated boxes twice – Held that:- when Revenue proposes to deny the credit on duty paid on corrugated boxes, on the ground that the value of corrugated boxes included in the value of pet bottles thereby the appellant can be said to have availed credit twice on corrugated boxes, in reality what is being done is to reassess the goods at the end of receiver, by proposing to reduce the value of pet bottles to the extent of value of corrugated boxes. There is no finding that the credit of duty taken by the appellant was not paid by them to the suppliers or suppliers had not paid duty, which was shown as duty in their invoice. If the credit has been taken twice, first time on the corrugated boxes themselves and second time as part of pet bottles being the packing materials, it cannot be said that appellants have benefited in any manner and further, as already stated, it cannot be said that credit has been taken twice. - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2012 (11) TMI 170
  Arrears of tax assessed under the Kerala General Sales Tax Act and Central Sales Tax Act (CST) - According to the petitioner, before issuing the prohibitory orders the petitioner was not given any notice nor there was any information to the petitioner about the coercive steps of recovery – Held that:- The matter is pending disposal before this court and arguments were already heard. Regarding arrears pertaining to Central sales tax assessment for the year 2003-04 and 2004-05 contention of the petitioner is that the statutory appeals stands already heard by the appellate authority and the matter is now in seizing of the appellate authority. The respondents (revenue) directed to keep in abeyance the recovery steps initiated subject to condition of the petitioner remitting 15 per cent of the amount under demand with respect to assessment under the Kerala General Sales Tax Act and the Central Sales Tax Act

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• Indian Laws

• 2012 (11) TMI 166
  Maintainability of Special Leave Petition - application for substitution of a respondent who was dead when the SPL was filed - Held that:- Where a party has been impleaded as respondent in an appeal but such respondent was dead before filing of the appeal, the remedy of the appellant is not to file an application for substitution of legal representatives of such respondent, but to file an application for an amendment of the appeal memorandum and in a case where such application for amendment is filed beyond the limitation prescribed for filing the appeal, the appellant must also file an application under Section 5 of the Limitation Act for condonation of delay in filing the application for amendment and if the Court is satisfied with the explanation given by the appellant for the delay, the Court can condone the delay and allow the amendment of the appeal memorandum - provisions of Order XVI Rules 8 and 9 will apply at the time of filing of the SLP the respondent was alive and after the filing of the Special Leave Petition his legal representatives are sought to be substituted & not where the respondent was dead when SLP filed. I.A. No. 2 of 2011, an application for substitution of legal representatives of deceased respondent No.1. is to be treated as an application for amendment of the Special Leave Petition and as the delay in filing the application for amendment of the Special Leave Petition has been satisfactorily explained in I.A. No.3 of 2011, the delay is condoned and in the interests of justice, I.A. Nos. 2 and 3 of 2011 are allowed.

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