TMI Tax Updates - e-Newsletter
November 7, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Reversal of cenvat credit -clearance of old & used capital goods -not required to reverse if removed after the ten years of its use - Tri

  ---

• 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

  ---

• 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)

  ---

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

  ---

• 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

  ---

• 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

  ---

Articles

1. DEDUCTION UNDER SECTION 80-IA OF INCOME TAX ACT, 1961 IS NOT ALLOWED IN RESPECT OF THE PROFITS DERIVED FROM BUSINESS OF TRADING GOODS

   By: DR.MARIAPPAN GOVINDARAJAN

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

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Second Quarter Review of Monetary Policy 2012-13 Press Statement by Dr. D. Subbarao, Governor, Reserve Bank of India

2. National Telecom Policy, 2012- Migration of current version of Internet Protocol IPv4 to IPv6

3. International Advisory Board of SEBI meets at Mumbai

4. CCI finds no contravention of Competition Act by Yash Raj Films

5. Auction for Sale of Government Stocks

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

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

8. 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

• Director Liability in Company Liquidation: No Evidence of Gross Negligence u/ss 179 and 156; No Recovery from Director.

  Case-Laws - HC : Liability of directors of private company in liquidation - Section 179 v/s 156 - Nothing came to be stated by him regarding the gross negligence on part of the petitioner due to which the tax dues from the company could not be recovered. - no recovery from the director - HC
  Visit to Get Source

  ---

• Excise Duty Refund Recognized as Non-Taxable Capital Receipt for Assessee.

  Case-Laws - AT : Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed. - AT
  Visit to Get Source

  ---

• Court Orders Revenue Department to Refund Excess Tax Deducted with 9% Interest to Taxpayer.

  Case-Laws - HC : Denial of Refund of excess tax deducted by source - Revenue directed to refund the excess amount with simple interest at the rate of 9% - HC
  Visit to Get Source

  ---

• Resale Price Method: Preferred Approach for Transfer Pricing in Distribution and Marketing Per OECD Guidelines.

  Case-Laws - AT : TP - ALP - RPM (resale price method) is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method - AT
  Visit to Get Source

  ---

• Section 80G(5)(vi) Exemption Renewal: Existing Approval Automatically Extended Indefinitely Unless Specifically Withdrawn Post-Expiry.

  Case-Laws - AT : Renewal of exemption u/s 80G(5)(vi) - existing approval shall be deemed to have been extended in perpetuity unless specifically withdrawn, after expiry - AT
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

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
  Visit to Get Source

  ---

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
  Visit to Get Source

  ---

Central Excise

• No Cenvat Credit Reversal Needed for Old Capital Goods Removed After 10 Years of Use.

  Case-Laws - AT : Reversal of cenvat credit - clearance of capital goods i.e. old and used forged hammer - not required to reverse if removed after the ten years of its use in his factory premises - AT
  Visit to Get Source

  ---

• 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
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (11) TMI 215
  Additional Depreciation on the windmill - disallowance as the assessee is not involved in manufacturing of any goods - Held that:- As decided in N.T.P.C. Limited, Versus Deputy Commissioner of I.T. [2012 (5) TMI 127 - ITAT DELHI] generation of electricity is akin to manufacturing of a new product. CST Vs. Madhya Pradesh Electricity Board [1968 (11) TMI 85 - SUPREME COURT OF INDIA] as held that electricity falls within the definition of goods under the provisions of Sale of Goods Act, 1930. Thus the assessee is involved in the manufacturing activity and fulfills the conditions as laid down under section 32(1)(iia). The Government vide Finance Act, 2012 has amended the provisions of section 32(1)(iia) to include the business of generation or generation and distribution of power, eligible for benefit under section 32(1)(iia). Although the said amendment is with effect from 1.4.2013 but it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefits under section 32(1)(iia) - in favour of assessee.

  ---

• 2012 (11) TMI 214
  Exemption u/s 10(10C) – Voluntary retirement scheme - Assessee received ex-gratia on VRS and claim exemption u/s 10(10C) on said amount – AO not allow the claim on basis of violation of condition laid down under rule 2BA – Held that:- Following the decision in case of Pandya Vinodchandra Bhogilal (2010 (7) TMI 796) that the provisions of section 10(10C) are to be interpreted liberally in a manner which is beneficial to retired employees. If AO had any doubt about the scheme he could have enquired from the employer. Assessee employee cannot be penalized and tax will be levied on him on the assumption that the scheme framed by employer is not in accordance with rule 2BA. In favour of assessee

  ---

• 2012 (11) TMI 194
  Deduction u/s. 80IC - rejection of claim - whether geographically assessee is located with the notified area contemplated in sub-clause (ii) of sec. 80IC(2)(a) or (2) (b)- CIT(A) deleted the addition - Held that:- AO while observing that more than 93% of manufacturing activities is carried out at Kannouj and at Bhimtal, a very negligible activity has been carried out has failed to appreciate the true nature of the controversy. If distilled oil is similar to that of fragrance, fragrant compound, attar and floral water then AO may be justified to say that major activities have been carried out at Kannouj but that is not the case. The end product manufactured by the assessee and sold is altogether different from distilled oil. Distilled oil is one of the raw material for producing fragrant, fragrant compound or attar. The main stress of the Assessing Officer is that it should boost economy of the State but in the present case, assessee had made purchases out of Uttrakhand State. Its major activities were carried out in UP. We find that this reference is altogether irrelevant. Assessing Officer was required to look into whether assessee has an industrial undertaking. It is situated within notified area as contemplated in section 80IC(2)(a)(ii) of the Act. Whether it is manufacturing any article or thing. Negligible expenses shown by the assessee - AO observed that by incurring a sum of Rs.7013 only, turnover of more than Rs. 3 crores cannot be achieved - Held that:- The assessee in the audited P & L account has shown fuel charges at Rs.1,56,320, freight Rs.52,663, manufacturing expenses Rs.15,132, water and electricity expenses Rs.7715 and packing material of Rs.50,853. Apart from these expenses, assessee has shown purchase of raw material at Rs.2.39 crores. Thus, it can be fairly concluded that AO has made this comparison in isolation. Assessee has placed on record the material exhibiting transportation of the raw material, purchase bills and Vat certificate. It is registered with the Central Excise Department w.e.f. Ist of September, 2006. Thus the assessee has demonstrated that it is engaged in the manufacturing of article and things fulfilling all the essential conditions for availing deduction under sec. 80IC - in favour of assessee.

  ---

• 2012 (11) TMI 193
  Unaccounted share application money - CIT(A) deleted the addition - Held that:- The AO did not leave any stone unturned to test and check the identity and creditworthiness of alleged share applicant’s office and the genuineness of the transaction but except the self contradictory confirmations in the form of affidavit wherein it has been stated that the amounts in question have been given as “unsecured loans”. The assessee did not furnish any document or evidence which could be submitted in the form of PAN No., Income tax returns, bank statement, share subscription application, share transfer register etc. thus, the findings of the AO for making addition of Rs. 15 lakh made u/s 68 was based on justified and reasonable grounds & CIT(A) was wrong in holding that the assessee has discharged the initial onus of establishing the identity of the subscribers and the genuineness of the transaction - in favour of revenue. Commission paid to the persons who arranged transaction - CIT(A) deleted the addition - Held that:- The AO had made this addition on hyper technical approach on the basis of presumption, therefore, its deletion by the impugned order is held justified - in favour of assessee.

  ---

• 2012 (11) TMI 192
  Power Purchase Price payable to UPPCL - Held that:- It is mentioned that the question of differential rate, that is the difference between the rate stipulated in the agreement and charged by UPSEB in the bills and the rate recommended by independent authority was in dispute and the said dispute was not resolved during the relevant year. Therefore, the contractual liability on account of such differential rate is not a liability in praesenti. There is a possibility of reduction or extinction of the liability, therefore, it cannot be regarded as an ascertained liability. In this view, the appeals were decided in favour of the revenue - The report was submitted by the Nair Committee much after the close of the previous year - in favour of revenue. Credit of advance tax and self assessment tax paid by the assessee company be allowed after due verification of tax deposit vouchers and tax levied on the assessee - restore this issue to the file of the AO - in favour of assessee for statistical purposes. Interest under sections 234B and 234C - Held that:- As decided in Jtc. I. T., Mumbai Versus M/s Rolta India Ltd [2011 (1) TMI 5 - SUPREME COURT OF INDIA ] for the purpose of levy of interest u/s 234B the term “assessed tax” means the assessed or regular assessment, thus what is applicable in respect of section 234B of the Act is also applicable in respect of Section 234C of the Act even when assessment is made u/s 115JA - in favour of revenue.

  ---

• 2012 (11) TMI 191
  Penalty u/s 271(1)(c) - disallowance of setting off of the loss of erstwhile partnership firm against the income of the assessee - Held that:- Having regard to the facts, the ultimate disallowance was on account of Section 170(1) which in fact is the applicable provision as regards the succession was not even reflected in the orders of the lower authorities as well as the Tribunal in either round of litigation, i.e. quantum and penalty. AO in this case, as also the CIT(A) was under the misapprehension that the assessee was not a successor but this Court has conclusively ruled that the assessee was in fact a successor but not entitled by virtue of Section 170(1) to lay claim to the adjustment of the loss of the erstwhile firm. Such being the case, lack of clarity by the income tax authorities right upto the ITAT itself, in the opinion of the Court. It is a justifiable ground for the assessee to say that the point was debatable. Such being the case, the upholding of the quantum proceedings by the Court could not have been the only basis for the imposing of the penalty - in favor of the assessee.

  ---

• 2012 (11) TMI 190
  Valuing of closing stock - exclusion or inclusion of excise duty - Held that:- As decided in Asstt. CIT v. Narmada Chematur Petrochemicals Ltd [2010 (8) TMI 263 - GUJARAT HIGH COURT] Excise duty not includible in valuation of closing stock of finished goods at end of accounting period. Excise duty payable estimated on finished goods held in factory are neither included in expenditure nor valued in such stocks but are accounted for on clearance of goods from factory this accounting treatment however has no impact on the profit for the year as decided in CIT v. Shri Ram Honda Power Equipment Ltd. [2012 (10) TMI 150 - SUPREME COURT] - in favour of assessee.

  ---

• 2012 (11) TMI 189
  Liability of directors of private company in liquidation - Section 179 v/s 156 - Penalty u/s 271(1)(c) - Held that:- Comparing the language used in section 179(1) with that of section 156 i.e. Notice of demand, it emerges that in section 179, the term used is 'tax due' where as in section 156 which is a recovery provision refers to a notice of demand which would specify the sum payable. The sum payable may as provided in the section itself include tax, interest, penalty fine or any other sum which is payable in consequence of any order under the Act. Section 220 pertains to "when tax payable and when assessee deemed to be in default". Section 220(2) provides that if the amount so specified is not paid within such time, the assessee shall be liable to pay interest. Such interest thus would be on the entire sum payable which may include the tax, interest and penalty or any other source found payable. It would therefore, not be possible to stretch the language of section 179(1) to include interest and penalty also in the expression 'tax due' as decided in Ratanlall Murarka And Others Versus Income-Tax Officer, 'a' Ward, Companies Circle, Ernakulam, And Others [1980 (7) TMI 60 - KERALA HIGH COURT]. Thus it can be stated here that authority completely failed to appreciate in proper perspective the requirement of section 179(1). Once it is shown that there is a private company whose tax dues have remained outstanding and same cannot be recovered, any person who was a director of such a company at the relevant time would be liable to pay such dues but in the present case the petitioner had putforth a strong representation to the proposal of recovery of tax from him under section 179. In such representation, he had detailed the steps taken by him and the circumstances due to which non recovery of tax cannot be attributed to his gross neglect. It was this representation and the factors which the petitioner had putforth before the Assistant Commissioner which had to be taken into account before the order could be passed. It is not even the case of the department that the petitioner paid the dues of other creditors of the company in preference to the tax dues of the department or petitioner negligently frittered away the assets of the company due to which the dues of the department could not be recovered. To suggest that the petitioner did not oppose the GSFC's auction sale is begging the question. GSFC had sold the property after several attempts through auction. It is not the case of the department that proper price was not fetched. Also the Assistant Commissioner has referred to several factors, dates and events which, according to him, established gross negligence on part of the petitioner without even putting the petitioner to notice about such factors and events. Therefore, quite apart from our conclusion that the Assistant Commissioner did not record that the petitioner failed to prove that non recovery of tax from the company could not be attributed to his gross neglect, misfeasance or breach of duty, such findings were also based on materials relied upon by the Assistant Commissioner without notice to the petitioner.

  ---

• 2012 (11) TMI 188
  Whether Provisions for Computation of deduction u/s 80HHC are also applicable u/s 80HHF -90% exclusion of net interest/rent or gross interest/rent Following the decision of Court in case of [M/s ACG Associated Capsules Pvt. Ltd. (Formerly M/s Associated Capsules Pvt. Ltd.) & Others Versus The Commissioner of Income Tax, Central-IV, Mumbai & Others2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Held that:- Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter referred to High Court to work out the deductions within a period of three months from today.

  ---

• 2012 (11) TMI 187
  Whether assessee would be entitled to any deduction u/s 80HHC on the mercantile basis in the year of export or in the current assessment year in respect of cash incentive and IPRS received by the assessee, even if assessee follow cash/receipt system – Held that:- Following the decision in case of B. Desraj (2008 (5) TMI 285) - SUPREME COURT) that assessee was maintaining his accounts under the cash system and had exported goods in the accounting year relevant to assessment year 1988-89 and 1989-90 and had received cash compensatory allowance and duty draw back therefor in the assessment year 1992-93. Though, the assessee had not done any export business during the assessment year 1992- 93, yet the assessee was held entitled to deduction u/s 80HHCin relation to those items during the assessment year 1992-93. Therefore the assessee is entitled to the deduction u/s 80HHC by taking the export turnover and the total turnover of the year in relation to which the export incentive has been received. Appeal decides in favour of assessee

  ---

• 2012 (11) TMI 186
  Taxability of amount received for providing amenities and facilities under separate agreement other than the rent agreement under 'Income from House Property' or 'Income from other sources - services being provided under the service agreement are in the nature of staircase of the building, lift, common entrance, main road leading to the building through the compound, drainage facilities, open space in/around the building, air condition facility etc - Held that:- It is found that there are concurrent findings of fact by the CIT(Appeals) as well as the Tribunal that no services are being provided by the respondent to the occupants of its property and that the service charges have to be included as a part of its rental income. The test to determine whether the service agreement was different from the rent agreement would be whether the service agreement could stand independently of the rent agreement. In this case the service agreement is dependent upon the rent agreement as in the absence of the rent agreement there could be no service agreement. Since, these services cannot be separately provided but go alongwith the occupation of the property, therefore, the amounts received as service charges are to be considered as a part of the rent received and subjected to tax under the head 'Income from House Property' - Decided in favor of assessee

  ---

• 2012 (11) TMI 185
  Refund of TDS u/s 195 - Whether any latter amendment in the instructions issued by the CBDT can be the ground for declining the claim of the assessee - Whereas grounds of the assessee’s case duly covered under the circular prior to amendment - Held that:- The petitioner had already made an application on 20.9.1999 giving details of the refund claim. The respondents did not respond to such an application for a considerable period of time despite reminders from the petitioner. More than six months passed before the application of the petitioner was even attended to. If later on the rule position changed by virtue of the subsequent circular issued by the Board, the petitioner can hardly be penalized by withholding the refund claim which was covered under the earlier circular dated 6.8.1998. Therefore revenue has erred in applying subsequent circular dated 20.4.2000 on this case. Appeal disposed accordingly – in favour of assessee

  ---

• 2012 (11) TMI 184
  Denial of Refund of excess tax deducted by source - the same payment of technical fees to the foreign company is made twice - Held that:- The petitioner at the time of making the provision for technical assessment fees, payable to the foreign company deducted an amount of Rs. 19,49,400/as TDS and also deposited such sum with the Government of India on 1.6.1998. When the fees for technical assistance were actually remitted, the petitioner once again deducted a sum of Rs. 21,82,500/- towards tax at source and also deposited the sum with the Government of India on 18.8.1998. Failure to see how the case of the petitioner was not covered under clause(i)(c) of para.(1) of circular no.769 dated 6.8.1998 i.e. the tax deducted at source is found to be in excess of tax deductible for any other reason. Said provision was sufficiently wide and would cover variety of cases of refund of excess tax deducted by source. The petitioner deposited the amount of tax twice for the same payment only due to oversight. Such overpayment was required to be refunded and the case of the petitioner was required to be considered under circular dated 6.8.1998 which was prevailing when the application was filed. Any subsequent change made long thereafter, could not be applied in case of the petitioner - The respondents shall refund sum of Rs. 19,49,400/with simple interest at the rate of 9% for the period after expiry of four months from the date of receipt of the application dated 2.11.1998 till actual payment - in favour of assessee.

  ---

• 2012 (11) TMI 183
  Disallowance u/s 14A r.w.r. 8D - Demand raised - CIT(A) rejecting the Petitioner's application for stay of demand - Held that:- As the officers are bound to apply Rule 8D for the purposes of arriving at expenditure to be disallowed u/s 14A . Therefore, no fault could be found with the order passed by the Authorities. As very fairly stated that the department will not commence any recovery proceedings against the Petitioner in respect of the present demand till the disposal of its appeal by the ITAT it would be appropriate for the Petitioner to pursue its remedy of appeal before the ITAT.

  ---

• 2012 (11) TMI 182
  Deduction u/s 80IB - Whether amount of excise refund and interest subsidy received by the appellants is a capital receipt and, thus, not liable to tax under the provisions of the Act, or revenue receipt and if revenue receipts whether eligible for deduction u/s 80IB – Held that:- Incentives provided to Industrial establishment are for the purpose of Eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construed as mere production and trade incentives, as held by the Tribunal. Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed. - In the result, both the appeals of the Revenue are dismissed.

  ---

• 2012 (11) TMI 181
  Diversion of income by overriding title - Whether interest income received by the assessee from investment of the share capital money received from the Government which was deposited in fixed deposit, can be treated to be the income of the assessee or that of the Government – Held that:- Government of Gujarat, as a promoter of the assessee company, had paid a sum of Rs.6 crores as contribution towards the share capital. Such sum was invested by the assessee in short term deposits earning interest thereon. Subsequently, pursuant to the directive issued by the Government, the assessee paid such interest earned by it to the Government. It was in this background that the Tribunal held that this was a case of diversion of income by overriding title. The Government was free to impose conditions regarding the payment of interest earned, until it gave permission for the issue of share capital, which was done later. The Tribunal held that the mere fact that the amount was shown in the balance sheet of the assessee was also not relevant. The interest earned could not, therefore, be considered to be the income of the assessee. Mere fact that in the earlier year, the assessee had treated such income differently, or that in the year under consideration, initially had paid advance tax on such basis, would not be conclusive of the nature of the income. Income was of the Government of Gujarat and not of assessee, therefore, it cannot be taxed in the hands of the assessee - In the result, the appeal is allowed. The judgement of the Tribunal dated 16.12.1999 is set aside to that extent - in favour of the assessee and against the revenue.

  ---

• 2012 (11) TMI 180
  Amalgamation - carry forward and set off of business loss/unabsorbed depreciation relating to earlier assessment years – alleged that sole idea of amalgamation was not the revival of the amalgamating company but was only to take the benefit of carry forward losses - returned income was shown Nil by the assessee company after setting off brought forward losses - A.O. held that such business loss was not eligible for carry forward and set off in subsequent years as the revised return i.e. return for merged entity was filed beyond the statutory limit, hence, violation of provisions of section 80 of the Act. Held that:- Assessee cannot be expected to do an impossible thing i.e. filing of return of amalgamated entity before it is coming into legal existence and, therefore, such return should relate back to the original returns filed by these companies individually. It is not in dispute that original returns have been filed within the time specified u/s 139(1) - there is no default of provisions of section 80 as held by the Assessing Officer - Once the scheme of amalgamation had been sanctioned with effect from a particular date, it is binding on every one including the statutory authorities and the only course open to the Revenue would be to act as per the scheme sanctioned, the tax authorities are bound to take note of the state of affairs of the applicant as on the effective date i.e. Ist Jan 2004 and a revised return filed reflecting the same cannot be ignored on the strength of s. 139(5) - appeals of the Revenue are dismissed-

  ---

• 2012 (11) TMI 179
  Sale of agricultural land – alleged that agricultural land sold by the assessee on 28.1.2005 was liable for capital gains in accordance with the provisions of section 2(14)(iii) of the Act as it was located within the municipal limits of Bommanahalli municipality – Held that:- In the view of Central Government Notification No.9447/F.No. 164/3/87/ITA-I dt.6.1.1994 in which it is seen that Bommanahalli Municipal Corporation is not a notified corporation and by the certificate dt.4.10.2010 issued by the Gram Panchayat which states that the distance from the village in which the agricultural land is situated is more than 8 kms from the BBMP limits - in favour of the assessee

  ---

• 2012 (11) TMI 178
  Penalty under section 271(1)(c) of the Income-tax Act - addition made to ‘book profits’ under Section 115JB of the Act – Held that:- Provision for bad and doubtful debts which has been disallowed by the Assessing Officer on the ground that the same was contingent in nature - assessee has pointed out that it was under bonafide belief that the Provision for bad and doubtful debts debited in the Profit and Loss Account is not a provision for liability but a diminution in the value of assets and therefore it was allowable while computing ‘book profits’ as per Section 115JB of the Act - no default within the meaning of 271(1)(c) of the Act can be attributed to the assessee - at the time of filing of return the issue in question was debatable where two view were possible and therefore such a claim made in return of income, though found untenable by the Assessing Officer, cannot be construed as furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act – in favor of assessee

  ---

• 2012 (11) TMI 177
  Sales Promotion Expenses – alleged that assessee could not furnish any details to prove the business expediency and could not discharge its onus to prove that it was incurred for business purposes, the expenses was disallowed – Held that:- Assessee is engaged in the business of advertising agency. The assessee has incurred the expenses is not in dispute - since the expenses have been incurred for the purpose of business the expenses should be allowed as deduction - for verification matter remitted back to the file of the A.O Disallowance of Prior Period Expenses for commission – alleged that the bills pertain to F.Y. 2006-07 – Held that:- liability for commission crystallized during the F.Y. 2007-08 - debit note issued by Mr. Ravindra Raja is dated 10-5-2007, the payment has been made in the current year and TDS thereof has also been deducted before making the payment - expenses pertains to the current year and are therefore, allowable. - addition deleted – In favor of assessee Disallowance of prior period expenses for commission out of commission paid to Shri S. Hussain – assessee submitted that due to clerical error at the time of making data entry the period mentioned in the ledger was F.Y. 2006-07 instead of F.Y. 2007-08 – Held that:- Payment was made during the current year and TDS was also deducted before making the payment - expenses pertains to the assessment year under consideration and the same should accordingly be allowed - addition deleted – In favor of assessee Disallowance of expenses - addition made on account of electricity charges, generator hire charges, maintenance charges for bus shelters and salary to staff of Hyderabad – Held that:- Method of accounting adopted by the assessee is undisputed and its acceptance by the department is also undisputed - assessee has been consistently following the method of accounting of debiting the expenses from March to February. It is not the case of the Revenue that by following this method the profits are understated. All these expenses are of routine in nature and is paid month after month - disallowance is not called for Disallowance of municipal taxes – alleged that expense was for the period upto July, 2008 – Held that:- Amount was paid towards Municipal taxes and was covered by the provisions of section 43B of the Act - Since the amount has been paid during the current F.Y. same be allowed - addition deleted Disallowance - payment for maintenance charges - contravention of the provision of Section 40A (3) – Held that:-As per section 40A (3), expenses are to be disallowed, if the payment over Rs.20,000/- is made in cash. In the present case, the payments comprises of various purchases from different parties and are in the nature of reimbursement. The only payment of Rs.18,520/- is to Mr. Shamim, Choudhary and Roy Associates that too is within the limits prescribed u/s. 40A(3) - no disallowance is called for

  ---

• 2012 (11) TMI 176
  Deduction under S.80IB of the Act - sale of flats at semi-finished condition of the flat – Held that:- Circular of the CBDT dated 30.6.2009 makes it very clear that deduction under S.80IB(10) of the Act can be claimed on year to year basis, where the assessee is showing the profits from partial completion of the project in each year - project was not completed within four years, the deduction granted to the assessee in earlier years shall be withdrawn - When the developer is offering profits under percentage completion method, the estimated profits that the developer will have on completion of the project is spread over the earlier years and offered every year a percentage of that profit based on percentage of project completed that years - except in the last year, the assessee will be offering income even though the project (and in the individual flats) would not have been completed. As clarified in the Circular such profits offered are also entitled relief u/s 80IB – matter remanded to the file of the AO Estimation of profits - AO considered 5% to be too low in this line of business – AO found that certain expenditure were not completely verifiable and not all details were available in respect of expenditure, therefore, adopted rate of 8% for estimating profit as against 5% adopted by the assessee – Held that:- Appellant has adopted the rate of profit at 5% without any basis - In respect of turnover of up to Rs. 40 lakhs net profit is presumed to be @ 8% u/s 44AD - profit to be estimated at 8% - appeal of the assessee is dismissed Business expenditure u/s 37(1) - construction of a temple in the housing project – Held that:- Construction of temple is for welfare of the employees to instill spirituality to lead peaceful life, therefore, the expenditure incurred towards construction of temple is a part of the housing project, which is allowable as capital expenditure – In favor of revenue Disallowance towards cost of lift – alleged that bill was raised on dated 23/03/2005 not related to the assessment year under consideration – Held that:- Assessee failed to substantiate its claim by producing the bills raised by the supplier in AY 2004-05 and other evidence to prove that the expenditure is relating to AY 2004-05 - matter remanded to AO

  ---

• 2012 (11) TMI 175
  Deduction u/s. 37(1) of the Income tax Act - expenditure incurred on advertisement under the head Media-Technical – Held that:- Expenditure was incurred in respect of promoting ongoing products of the assessee and, therefore, the expenditure is for promotion of the products of the assessee which is revenue in nature - expenditure has been incurred by the assessee for production of 'ad-films', advertisement in electronic and print media, in respect of promotion of its 'on-going products' - expenditure has rightly been treated as revenue in nature by CIT(A), which was incurred by the assessee wholly and exclusively for the purpose of its business – deduction allowed Determination of arm’s length prices - resale price method (RPM) – alleged that appellant is consistently incurring losses in India and hence the pricing policy is not at arm's length – whether to determine ALP in respect of business activity relating to distribution segment of the assessee with the AE is to be considered by RPM or TNMM. – Held that:- Order of TPO in the preceding assessment years substantiate that RPM is the most appropriate method to determine ALP - RPM is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method - the assessee buys products from its AEs and sells to unrelated parties without any further processing. - assessee has also produced certificates from its AEs that margin earned by AEs on supplies to the assessee is 2% to 4% or even less. - TPO's contention that AEs have earned higher profit is not based on facts - margin of profit earned by AEs themselves is also reasonable and, therefore, it could not be said that there is shift of profits by the assessee to its AEs at overseas – addition deleted Addition – assessee is in receipt of services and benefit from its Associative Enterprises in lieu of the marketing fee payments – Revenue submitted that ld CIT(A) has considered additional documents which were produced before him without seeking Remand Report from the Assessing Officer. He submitted that TPO has categorically stated that the assessee could not furnish evidence to justify that the assessee has received any benefit from the cost sharing arrangement and, therefore, in ALP study determined the same at Nil – Held that:- Fresh documents were submitted by the assessee before ld CIT(A) which were considered while allowing the claim of the assessee and deleting the disallowance made by the AO - matter remanded to the file of the AO to examine whether the assessee has received any benefit under cost sharing arrangement for which assessee made the said payment - appeal filed by the department is partly allowed for statistical purposes.

  ---

• 2012 (11) TMI 174
  Computation of arm's length price – ALP - working capital adjustment – selection of comparable - Held that:- Price charged by the assessee varies by more than 5% from the Arm's Length Price - adjustment is to be made to the income of the assessee, being the difference between the arm's length price and the price charged by the assessee from it's A.Es for export services - assessee has given the relevant details but these details have neither been looked into by the learned TPO nor by the Dispute Resolution Panel - TPO has not asked any further details after this letter otherwise assessee could have submitted any other details if required – matter remitted it to the Assessing Officer for a limited purpose i.e. learned Assessing Officer shall investigate the issue about granting working capital adjustment to the assessee - appeal of the assessee is partly allowed.

  ---

• 2012 (11) TMI 173
  Condonation of delay – penalty – Held that:- Manager (A/c) who has deposed that he had received the penalty order well in time but he put the order in his drawer and it slipped from his mind to take further action - there was some negligence on the part of Manager(A/c) in not making the arrangements for taking further action on the penalty order, can that negligence should cost the assessee a penalty - It will not gain anything by filing the appeal against a penalty order after expiry of limitation. There is no deliberate attempt at the end of assessee to make it appeal time barred - delay in filing the appeal condoned - remit the issue relating to penalty to the file of Learned First Appellate Authority for adjudication on merit - appeal filed by the assessee is allowed for statistical purposes.

  ---

• 2012 (11) TMI 172
  Application for renewal of exemption u/s 80G(5)(vi) of Income-tax Act - Indian Plumbing Association is a society registered under the Society Registration Act - association is registered u/s 12A of the Income Tax Act - Held that;- As assessee’s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn - there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn - approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn - appeal filed by the assessee is allowed. Decision in the case of Babu Hargovind Dayal Trust vs. ITAT [2011 (2) TMI 1199 - ALLAHABAD HIGH COURT] followed.

  ---

• 2012 (11) TMI 171
  Penalty u/s 271(1)(c) of the Income Tax Act - concealment of income – Held that:- Nothing has been brought on record to show that any expenditure had been incurred either directly or indirectly, for earning the exempted income - no details filed by the assessee have been found to be incorrect or erroneous or false. A mere making of a claim which is not sustainable in law, by itself, would not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to inaccurate particulars. Therefore, penalty on this aspect was also not leviable - explanation offered by the assessee has not been shown to be not a bona fide explanation. Such explanation, as observed, was neither found to be false nor incorrect nor unreasonable – in favor of assessee

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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

  ---

• 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.

  ---

• Customs

• 2012 (11) TMI 209
  Duty Free Import Authorization – inflation in CIF value - Import of Printing Ink-Intaglio - alleged that Optically Variable Ink (OVI) imported by the respondent was a distinct product, used exclusively for printing of the currency notes by the subsidiaries of Reserve Bank of India and the respondent had imported such highly valued item against DFIA issued for import of printing ink used for printing on bags/sacks used for export of rice, thereby evading huge amount of customs duty – allegation of the Revenue that the DFIAs have been obtained fraudulently – Held that:- Obviously, there appears to be a contradiction between the notification and the paragraph. Nevertheless, in such a situation what is required to be taken into account is the provisions in the exemption notification issued under Customs Act, 1962 and the Notification No. 40/2006 is very clear. Because the notification clearly says that in respect of resultant products specified in paragraph 4.55.3, the imported materials should be of the same quality, technical characteristics and specifications as the materials used in the resultant product. Having allowed export of motors with input specifications as bearing upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Fraud - in this case Shri. Lalit Jain, the broker, is seen to have used some forged letters for transferring the license from the exporter to the importer through the medium of shell firms, though the exporter does not appear to be complaining about it. The adjudicating authority has held that this issue is to be decided under laws other than Customs Act, it is not a matter to be adjudicated under the Customs Act. Such matter arises when agitated by any of the affected parties. He has held that the interest of Revenue has not been prejudiced by such impugned actions. We also note that DGFT which is concerned with the transfer of licenses has not taken cognizance of this matter. So we agree with the finding of the adjudicating officer. Revenue is directed to refund the amount and release the bank guarantee and bond to the respondents within four weeks of the communication of this order.

  ---

• 2012 (11) TMI 208
  EXIM Policy - door mats, floor mats - denial of benefit of DEPB Scheme – alleged that product did not satisfy the description of the Entry 547; ‘Rubber Compounded Sheets’ – Held that:- These products which are also manufactured out of compound rubber, are separately included in the Public Notice, whereas floor mats and doormats are not so included, demonstrates that it was never the intention of the policy makers to extend the DEPB benefits to floor mats, door mats etc., exported by the petitioners - DEPB benefits, being product specific, products such as floor mats, doormats etc., are not items covered by the entry “Rubber Compounded Sheets” and that to deny DEPB benefit to such products, an amendment of the Public Notice, requiring the issue of another Public Notice is unnecessary - door mats, floor mats, etc., are ineligible for DEPB benefits under the EXIM Policy

  ---

• 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,

  ---

• 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

  ---

• 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

  ---

• Corporate Laws

• 2012 (11) TMI 207
  Scheme of Arrangement - Held that:- As there are nil secured creditors of the Transferee Company, therefore, the requirement of convening the meeting of secured creditors does not arise. As only six unsecured creditors representing 26.33% of the total unsecured debt have given the Board Resolutions along with the said consents. Consequently the meeting of the unsecured creditors of the Transferee Company be held on December 07, 2012 at 10:30 AM at India Habitat Centre, Lodhi Road, New Delhi as headed by the appointed Chairperson & Alternate Chairperson - if the Quorum is not present in the meetings, the meetings would be adjourned for 30 minutes and thereafter, the persons present in the meetings would be treated as proper quorum & for the purpose of computing the quorum the valid proxies shall also be considered. Both the Companies will publish advance notice of the aforesaid proposed meetings in “Business Standard” (English Delhi Edition) and “Dainik Bhaskar” (Hindi Delhi Edition) minimum 21 days in advance before the Scheduled date of meeting & Individual notice too to be sent by ordinary post minimum 21 days in advance - The Chairpersons/Alternate Chairpersons shall file their reports within two weeks of the conclusion of the respective meetings.

  ---

• 2012 (11) TMI 205
  Writ petition - constitutional validity of the Tamil Nadu Protection of Interests of Depositors Act - appellant submitted that said Act is beyond the legislative competence of the State Legislature as it falls within entries 43, 44 and 45 of List I of the Seventh Schedule to the Constitution – Held that:- Tamil Nadu Act enacted by the State Legislature is not in pith and substance referable to the legislative heads contained in List I of the Seventh Schedule to the Constitution though there may be some overlapping - The doctrine of pith and substance means that an enactment which substantially falls within the powers expressly conferred by the Constitution upon a Legislature which enacted it cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature Tamil Nadu Act was enacted to find out a solution for the problem of the depositors who were deceived on a large scale by the fraudulent activities of certain financial establishments. There was a disastrous consequence both in the economic as well as social life of such depositors who were exploited by false promise of high return of interest - Reserve Bank of India Act, the Banking Regulation Act and the Companies Act do not occupy the field which the impugned Tamil Nadu Act occupies, though the latter may incidentally trench upon the former. The main object of the Tamil Nadu Act is to provide a solution to wipe out the tears of several lakhs of depositors to realize their dues effectively and speedily from the fraudulent financial establishments which duped them or their vendees, without dragging them in a legal battle from pillar to post - there is no merit in this petition -The impugned Tamil Nadu Act is constitutionally valid.

  ---

• 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.

  ---

• Service Tax

• 2012 (11) TMI 212
  Waiver of pre-deposit of Service tax liability,interest and Penalty - Renting out of Immovable Property - Benefit of SSI Exemption Notification No.6/2005-ST dated 01.3.2005 - Held that:- Assessee has not crossed the threshold limit of rupees ten lakhs about the aggregate value of the taxable services rendered in the preceding financial year and in this case individually all the appellants be considered as provider of such service - applications for waiver of pre-deposit of amounts are allowed and recoveries thereof stayed till disposal of appeals.

  ---

• 2012 (11) TMI 211
  Waiver of pre-deposit and stay of recovery of duty and penalty - Following the decision of Court in case of [JUBILANT LIFE SCIENCES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA 011 (11) TMI 421 - CESTAT, NEW DELHI] Held that:- Services of lead managers to the issue and underwritings and other banking & financial services had been received by the Appellant from offshore services provider - and, therefore, the appellants being service recipients are liable to pay service tax in respect of the same - The services provided by the underwriters is taxable under Section 65(105)(z) read with Section 65(116) & 65(117) of the Finance Act, 1994 as taxable services of Underwriter's Services and Merchant Banker' Services - applicant is therefore directed to deposit an amount of Rs. 50,00,000/- (Rupees fifty lakhs only) within a period of eight weeks and report compliance later on. On compliance there shall be stay of recovery of the balance amount of service tax, interest and penalty till disposal of the appeal.

  ---

• 2012 (11) TMI 199
  Demand of service tax - whether the services rendered by the foreign agents is classifiable as “Clearing and Forwarding Services” or as “Business Auxiliary Service” – Held that:- There is no responsibility cast on the foreign agents for promoting the sale of goods produced by the Appellants - no other activity mentioned in the contract which will fit into one of the entries at Sr. No. (i) to (vi) of the definition under Section 65(19). Therefore the mere fact that they are following up the payments will not prima facie make the service classifiable as Business Auxiliary Service - service is classifiable as Clearing and Forwarding Service - no liability on the Appellants to pay service tax on activity of this type performed entirely outside India - pre-deposit waived

  ---

• 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.

  ---

• 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

  ---

• 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

  ---

• 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.

  ---

• Central Excise

• 2012 (11) TMI 204
  Stay - as interim stay of recovery - quantification of demand - Held that:- Commissioner (Appeals) should have required the original authority to quantify the revised demand. - Range Superintendent appears to have, on his own accord, done the exercise of requantification of duty. The aforesaid letter was issued to demand such duty. After considering all aspects of this case, the demand worked out by the Superintendent without concurrence of the original authority should not be enforced during the pendency of this appeal. In this view of the matter, the prayer for interim stay of recovery is granted.

  ---

• 2012 (11) TMI 203
  Reversal of cenvat credit - clearance of capital goods i.e. old and used forged hammer having capacity of 3 ton without payment of duty - demand, interest thereon and penalty - Held that:- Second proviso to sub rule 5 of Rule 3 of the Cenvat Credit Rules, 2004 states that if the capital goods are removed after being used, manufacturer shall pay an amount equivalent to the cenvat credit taken on the capital goods after reducing the same by 2.5% every quarter of a year or part thereof. The said provisions has to be applied on the date of clearance of the capital goods. If the second proviso to sub rule 5 of Rule 3 of the Cenvat Credit Rules is brought in to play by 31.03.04, the entire cenvat credit taken by the appellant would be 'nil'. This would mean that the appellant is not required to reverse any cenvat credit, if the appellant removes the capital goods on which cenvat credit is taken and is in use, after the ten years of its use in his factory premises. Thus finding strong force on the contentions raised by the ld. counsel assessee and also find it from records that when the appellant cleared the said capital goods on 18.03.09, he had specifically mentioned that it is "old and used forged hammer, capacity 3 ton". If that be so, the question of reversal of cenvat credit taken on the said capital goods will not arise - in favour of assessee.

  ---

• 2012 (11) TMI 202
  Refund claim - Area based exemption by way of refund – industrial units situated in north-east area - Held that:- Notification No.32/99-CE dated 08.07.1999 is meant for encouraging industrial growth as well as expansion of existing industrial units in the north-eastern sector. Therefore, the Notification No.32/99-CE deserves to be interpreted liberally so as to give effect to its objective and purpose. For calculating the refund amount as per the said Notification No.32/99-CE dated 08.07.1999 the value of the complete tube is relevant but not the bare tube excluding the value of caps. - refund of the duty paid through PLA during the relevant period had not been disputed in the present case. - for the subsequent period, the adjudicating authority on de novo adjudication of order-in-original on a remand from this Tribunal had accepted the interpretation that for extending the benefit of Notification No.32/99-CE dated 08.07.1999, the value of caps ought to be included in the total value of Lamitubes. - refund to be allowed.

  ---

• 2012 (11) TMI 201
  Cenvat Credit on capital goods – Assessee has taken and utilised the Cenvat credit in respect of the structural items such as MS Plates, Channels, MR Coils, HR coils – Held that:- The said goods, fall within the definition of the 'capital goods'. The Tribunals have been consistently holding that the impugned items are entitled for Cenvat credit. In those circumstances, it is not correct to charge the assessee with suppression of facts, fraud, and collusion with intent to evade duty. Therefore, both on merit as well as on bar of limitation, the appeal filed by the Revenue came to be dismissed. No substantial question of law arises for consideration in this appeal. In favour of assessee

  ---

• 2012 (11) TMI 200
  Cenvat credit - MS Plates, Beams, Angles, Channels are used of fabrication of supporting structures in the sugar mill - Held that:- Cenvat credit in respect of these items used for fabrication of supporting structures is not admissible as Cenvat credit to the assessee Penalty under Section 11AC - prior to the issue of the Vandana Global decision, there were decisions in favour of the respondents under which the Cenvat credit on the inputs was admissible to the respondent and some of these decisions were relied upon by the C.C.E. (Appeals) in the impugned order - since the matter pertained to interpretation of the Cenvat Credit Rules, there is no reason for imposition of penalty even in respect of MS Plates, Beams, Angles, Channels used for fabrication of supporting - Revenue appeal in respect of imposition of penalty is rejected

  ---

• 2012 (11) TMI 198
  Time bar – Condonation of delay - condonation of delay application requesting to condone the delay of 25 days in filing the appeal – Held that:- Commissioner (Appeals) only indicate gross negligence on the part of the appellant and the reasons mentioned may not be accepted as sufficient and reasonable cause, declined to condone the delay of 25 days in filing the appeal and accordingly, rejected the appeal on time bar - Commissioner (Appeals) directed to condone the delay - order is set aside and the appeal is remanded to the Commissioner (Appeals)

  ---

• 2012 (11) TMI 197
  Restoration of appeal - non-compliance of stay order – Held that:- Appeal was dismissed for non-production of proof of deposit of penalty and it turned out in an application for restoration of such an appeal that the amount had already been deposited within the time granted but for some reason the same could not be reported or brought to the notice of the Tribunal before the appeal came to be dismissed - Such a construction would obviously defeat the ends of justice because it would amount to taking too technical a view of the matter just because there is absence of a positive provision authorising the Tribunal to restore such an appeal – appeal restored.

  ---

• 2012 (11) TMI 196
  Cenvat credit - empty chlorine cylinder - capital goods - cylinders was used for transport as well as storage tank – Held that:- Appellants cannot be found fault with if they entertain a bona fide belief that credit was admissible to them. Therefore extended period could not have been invoked - on limitation as well as on merits - denial of cenvat credit not justified. Penalty under Section 11AC - appellants had admitted their liability and did not contest the same before the Tribunal – Held that:- Appellants have paid the duty as well as the interest without dispute, I find that this is a fit case for invoking the provisions of Section 11A(2B) of Central Excise Act, 1944 - no penalty is imposable on the appellant

  ---

• 2012 (11) TMI 195
  Cenvat credit – input service Held that:- Sending samples to the customers and correspondence with head office from the factory are definitely activities relatable to manufacture and therefore clearly the courier service falls under the definition of category of input services - What is required is nexus with the manufacture and when the service is clearly identifiable to show that the same has not been received after the place of removal, credit cannot be denied

  ---

• 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.

  ---

• 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.

  ---

• 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.

  ---

• 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

  ---

• 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

  ---

• 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

  ---

• 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

  ---

• 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.

  ---

• CST, VAT & Sales Tax

• 2012 (11) TMI 213
  Kerala General Sales Tax Act - realising the sales tax at two different stages, that is at the first point of sale and the last point of sale - petitioner purchased rubber from the third respondent - case of the petitioner that he suffered a huge loss and had to sell the commodity for a lesser price - petitioner was not a registered dealer at the time of transaction – Held that:- Inspite of granting an opportunity to file objection, the said opportunity was not availed of by the petitioner. It was accordingly that order was finalised by the assessing authority which is not assailable under any circumstances, either on facts or in law. Order was passed by the concerned authority as early as on May 3, 2004, whereas the petitioner chose to approach this court nearly after two years. On this count also, interference is not possible. Under such circumstances, this court finds that the writ petition is devoid of any merit and the same is dismissed accordingly. The petitioner is permitted to clear the outstanding liability by way of "three" equal monthly instalments - if any default is committed by the petitioner in satisfying the liability as above, it will be open for the respondents to proceed with further steps for realising the due amounts in a lump.

  ---

• 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

  ---

• Indian Laws

• 2012 (11) TMI 206
  Attachment of properties acquired by Pondicherry Nidhi Ltd - challenge powers conferred under the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 - Held that:- Clause (1) of Article 254 provides that when there are two laws enacted by the Parliament and the State Legislature in which certain inconsistencies occur, then subject to the provisions of clause (2), the law made by the Parliament would prevail and the law made by the State Legislature to the extent it is repugnant to the Central law, shall be void. Clause (2), however, also provides that in a given situation where a law of a State is in conflict with the law made by Parliament, the law so made by the State Legislature shall, if it has received the assent of the President, prevail in that State. In the instant case, the Pondicherry Act had received the assent of the President attracting the provisions of Article 254(2) of the Constitution. The power to enact the Pondicherry Act could be traced to Entries 1, 8, 13 and 21 of the Concurrent List. Although, it has been argued by Mr. Ganguli (Advocate for Appellant) that the provisions of the Companies Act would not be attracted, cannot be overlooked that the amendment to the definition of financial establishment included in the Tamil Nadu Act and as defined in the Pondicherry Act. The definition of the expression financial establishment in Section 2(d) of the Pondicherry Act includes any person or group of individuals or a firm carrying on business of accepting deposits under any scheme or arrangement or in any other manner, but does not include a Corporation or a cooperative society owned or controlled by either the Central Government or the State Government or a banking company as defined under Section 5 of the Banking Regulation Act, 1949. Thus the expression any person is wide enough to cover both a natural person as also a juristic person, which would also include a Company incorporated under the Companies Act, 1956. In that view of the matter, the definition in Section 2(d) of the Pondicherry Act would also include a Company such as the Appellant Mill, which accepts deposits from investors, not as shareholders of such Company, but merely as investors for the purpose of making profit. In this regard, reference may also be made to Section 11 of the Indian Penal Code which defines a person to include a Company or Association or body of persons, whether incorporated or not. Accordingly, we are inclined to accept Mr. Venkataramani s submissions that the expression person in the Pondicherry Act includes both incorporated as well as unincorporated companies. As observed that in the instant case although an attempt has been made on behalf of the Appellant to state that it was not the Appellant Company which had accepted the deposits, but M/s PNL Nidhi Ltd., which had changed its name five times, such an argument is one of desperation and cannot prima facie be accepted. This appears to be one of such cases where funds have been collected from the gullible public to invest in projects other than those indicated by the front company. It is in fact the specific case of the Respondents that the funds collected by way of deposits were diverted to create the assets of the Appellant Mill. In such circumstances, the submissions made by Mr. Ganguli cannot be accepted as there is little difference between the provisions of the Tamil Nadu Act and the Pondicherry Act, which is to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by M/s PNL Nidhi Ltd. for the benefit of the Appellant Mill, which is privately owned by Shri V. Kannan and Shri V. Baskaran, who are also Directors of M/s PNL Nidhi Ltd - appeals dismissed with costs assessed at Rs. 1,00,000/-.

  ---

• 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.

  ---