TMI Tax Updates - e-Newsletter
November 9, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Examination of Balance Sheets by RoCs - Circular

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• Appointment of Cost Auditor by Companies - Circular

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Articles

1. REJECTION OF DRAFT OFFER DOCUMENTS BY SEBI

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Change in funding arrangement for the Universal Service Obligation Fund (USOF) schemes, including the funding of the scheme for creation of National Optical Fiber Network (NOFN) from Non-Plan to Plan allocation in Budget.

2. Third Phase of Small Development Projects (SDP-III) in Afghanistan

3. TRAI’s recommendations on “Spectrum Management and Licensing Framework” – Specific recommendation of EGoM on pricing of spectrum furnished as desired by the Cabinet

4. Gross Direct Tax Collections up by 6.59 Percent During April-October 2012-13 and Stood at Rs. 3,02,810 Crore as against Rs. 2,84,081 Crore in the Same Period Last Year

5. Status of compliance on scheme of Integrated Textile Parks

6. Disinvestment of 10 percent paid up equity of Hindustan Aeronautics Limited

7. Highlights on Telecom Subscription Data as on 30th September 2012

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

Notifications

Income Tax

1. 48/2012 - dated 6-11-2012 - IT

Deduction u/s 80-IA - Notifies M/s. India Land and Properties Pvt. Ltd. having its registered address at Plot No. 14, 3rd Main Road, Ambattur Industrial Estate, Chennai, has developed an Industrial Park at Indian Land Tech Park Tower AB and Tower C At Survey No. 195 part, 196 part, 197 part, 198 part, 199 part and 200 part of Mannurpet Village and 6 part, 7 part, 8 part and 10 part, of Athipet Village, Village Mannurpet and Athipet, Taluka Ambattur, District Thiruvallur, Tamil Nadu

2. 47/2012 - dated 6-11-2012 - IT

Deduction u/s 80-IA - Notifies M/s. Ferani Hotels Pvt. Ltd. having its registered address at B, 2nd Floor, 623 Linking Road, Khar (W), Mumbai, has developed an Industrial Park at Bldg. Nos. 1, 4, 11, 14 & 21, 827A/4A(pt.), Malad, Mumbai Suburban District, Maharashtra

3. 46/2012 - dated 6-11-2012 - IT

During The Financial Year 2012-13 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds

Circulars / Instructions / Orders

Service Tax

1. F.No.334/6/2012-TRU - dated 6-11-2012

Suggestions from the Industry and Trade Associations for Budget 2013-14 regarding changes in direct and indirect taxes.

FEMA

2. 49 - dated 7-11-2012

Money Transfer Service Scheme - List of Sub Agents

3. 50 - dated 7-11-2012

Memorandum of Instructions governing Money Changing Activities

4. 48 - dated 6-11-2012

External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI)

Companies Law

5. Order F. No. 52/26/CAB-2010 - dated 6-11-2012

Audit of cost accounts in - Product or Activity Group

6. 37/2012 - dated 6-11-2012

Examination of Balance Sheets by RoCs

7. 36/2012 - dated 6-11-2012

Appointment of Cost Auditor by Companies

Highlights / Catch Notes

Income Tax

• Tax-Free, Secured, Redeemable, Non-Convertible Bonds Issued in 2012-13 with Income Tax Benefits Highlighted in Notifications.

  Notifications : During The Financial Year 2012-13 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds - Notification
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• Amendment to Notification SO 1605(E) Alters Tax Deductions for Infrastructure Development Enterprises, Ensuring Policy Compliance and Clarity.

  Notifications : Amendment in Notification No. SO 1605(E), Dated 2-7-2008 - Deductions - In Respect of Profits and Gains From Industrial Undertakings, Or Enterprises Engaged In Infrastructure Development - Notification
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• Amendment to Notification SO 1605(E) clarifies income tax deductions for infrastructure businesses, affecting taxable income reporting.

  Notifications : Amendment In Notification No.SO 1605(E), Dated 2-7-2008 - Deductions - In Respect of Profits And Gains From Industrial Undertakings, Or Enterprises Engaged In Infrastructure Development - Notification
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• Carbon credits, specifically Certified Emission Reductions, are tax-exempt for the specified assessment year u/ss 2(24), 28, 45, and 56.

  Case-Laws - AT : Carbon Credits (Certified Emission Reductions) - It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. - AT
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• Assessment Order u/s 263 Not Erroneous Despite Missing Detailed Discussion on Specific Aspect.

  Case-Laws - AT : Revision u/s 263 - The order of assessment, no doubt does not contain a detailed discussion on this aspect, but that however would not render the order as erroneous - AT
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• CIT's Withdrawal of Section 80G Exemption Without Notice; Renewal Cannot Be Denied for Valid Approval Holder.

  Case-Laws - AT : Exemption u/s 80G of the Income-tax Act – CIT without issuing any such notice has withdrawn approval - renewal of exemption u/s 80G(5)(vi) cannot be denied to the assessee, having valid approval - AT
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• Rent and amenities payments not classified as technical services fees under Income Tax Act Sections 194-I or 194J.

  Case-Laws - AT : TDS u/s 194-I or 194J - Amount paid towards Rent and amenities would not fall in the category of Fee for technical services - AT
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• Sections 10AA and 80IAB classified as 'deduction provisions'; SEZ-related expenses excluded from section 14A disallowances.

  Case-Laws - AT : Since sections 10AA and 80IAB are 'deduction provisions' and not 'exemption provisions', the investment or expenses incurred to earn income from SEZ do not merit reckoning in computing disallowance u/s 14A - AT
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FEMA

• Guidelines for Money Exchange Compliance Under FEMA: Record-Keeping, Reporting, and Licensing Procedures Explained.

  Circulars : Memorandum of Instructions governing Money Changing Activities - Circular
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• Updated List of Authorized Sub-Agents for Money Transfer Service Scheme under FEMA Compliance Announced.

  Circulars : Money Transfer Service Scheme - List of Sub Agents - Circular
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• SIDBI Updates ECB Policy under FEMA to Help Small Industries Access Foreign Capital Efficiently and Compliantly.

  Circulars : External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI) - Circular
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Corporate Law

• Registrars to Scrutinize Company Balance Sheets for Compliance and Transparency Under Company Law, Highlighting Tax Implications

  Circulars : Examination of Balance Sheets by RoCs - Circular
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• Company Board Must Appoint Cost Auditor in 180 Days; Report Filing Required Within 30 Days After Completion.

  Circulars : Appointment of Cost Auditor by Companies - Circular
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Case Laws:

• Income Tax

• 2012 (11) TMI 288
  Carbon Credits (Certified Emission Reductions) - deduction u/s. 80IA disallowed - Held that:- Carbon credit is in the nature of "an entitlement" received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to "world concern". The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits cannot be considered as a bi-product. It is a credit given to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who have surplus carbon credits can sell them to other assessees to have capped emission commitment not as a result or incidence of one's business, as there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income. Relying CIT v. Maheshwari Devi Jute Mills Ltd. [1965 (4) TMI 10 - SUPREME COURT] in the present case the assessee transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. As per guidance note on accounting for Self-generated Certified Emission Reductions (CERs) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 CERs are intangible assets those should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognised as inventories, the generating assessee should apply AS-9 to recognise revenue in respect of sale of CERs - thus sale of carbon credits is to be considered as capital receipt - in favour of assessee.

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• 2012 (11) TMI 287
  Reassessment notice - Jurisdiction of ACIT 10(1) Mumbai to request the CIT-10, Mumbai to pass a corrigendum order - Held that:- Once the jurisdiction to assess the petitioner was transferred by the CIT-10 Mumbai from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune by order dated 22.11.2011 it was totally improper on the part of ACIT-10(1) Mumbai to request the CIT-10, Mumbai to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making such a request on the part of ACIT-10(1) Mumbai to the CIT-10 Mumbai was in gross abuse of the process of law. If there was any time barring issue, the ACIT-10(1) Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit ACIT-10(1) Mumbai to indulge in circumventing the provisions of law, thus strongly condemn the conduct of ACIT-10(1) Mumbai in that behalf. Instead of bringing to book the persons who circumvent the provisions of law, the ACIT-10(1) Mumbai has himself indulged in circumventing the provisions of law which is totally disgraceful - set aside the impugned notice dated 30.03.2012 issued by the ACIT-10(1) Mumbai based on the corrigendum order dated 27.03.2012 passed allegedly by the CIT-10 Mumbai at the behest of ACIT-10(1) Mumbai and in gross abuse of the process of law - in favour of assessee

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• 2012 (11) TMI 286
  Interest on advances - disallowance - Held that:- As own funds of the assessee as on 31.03.2005 was of Rs.254.25 lacs as per the audited balance sheet submitted and hence, the entire such advance were given out of interest free own funds and, therefore, disallowance of interest in respect of these three interest free advances is not justified - in favour of assessee. Incremental salary - disallowance being 50% - Held that:- A clear finding is given by CIT(A) that the assessee has not discharged its onus as no justifiable reason could be explained on such a sharp rise of almost 75% in salary hence, 50% of increase in salary disallowed by the A.O. is justified - against assessee. Disallowance of depreciation - Held that:- Assessee has not furnished the purchase bills in respect of the assets on which depreciation is claimed by it. As the assessee could not establish both of these aspects that it owned the asset in question which was used by it for its business purpose disallowance of depreciation is warranted - against Assessee.

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• 2012 (11) TMI 285
  Reopening the assessment - disallowance on account of unabsorbed depreciation - Held that:- There was no escapement of any income because unabsorbed depreciation allowance by operation of the provisions of section 32(2), as it stood prior to 1.4.1997, was deemed to be part of the allowance for the previous year relevant to A.Y. 1997-98 and for all intends and purposes the unabsorbed depreciation for A.Ys.1993-94 to 1996-97 was deemed to be the depreciation allowances for A.Y. 1997-98. Subsequently sub-section(2) of section 32 was substituted w.e.f.1.4.97, whereby the earlier years unabsorbed depreciation deemed to be the part of the depreciation of the following previous year was no longer continued and further that the unabsorbed depreciation was granted to be carried forward for the period of eight years, thus it can be said that AO had overlooked the fact that in the line of the operation of section 32(2) as it stood to prior to 1.4.1997, the unabsorbed depreciation of A.Ys.1993-94 to 1996-97 already formed part of the depreciation allowance for the previous year relevant to A.Y. 1997-98. Thus, it was concluded that the assumption of the jurisdiction by the AO u/s.147 was invalid - This although the reopening was made within four years from the end of the assessment year, but still that was nothing but simplistic change of opinion because in the first round the original assessment was made u/s.143(3) that too after duly considering the claim of depreciation as per the statement of income furnished by the assessee, hence on those very facts there did not exist any reason to believe for escapement of assessment - in favour of assessee. Claim of depreciation - Held that:- As decided in Karnataka Co-operative Milk Producers Federation Ltd. Versus Deputy Commissioner of Income-tax (Asst.), Special Range-5, Bangalore [2006 (5) TMI 423 - ITAT BANGALORE] that prior to the amendment introduced during 1996-97, it was permissible to carry forward the unabsorbed depreciation and from 1993-94 to 1996-97, the unabsorbed depreciation has been carried forward. The amendment introduced limiting the time for carrying forward for a period of eight years has to be reckoned not from 1993-94 but from 1996-97 and the same was carried forward and by the year 2006-07 since again there is an amendment introduced during 2002 making this period of eight years as unlimited, from 2002 onwards even till 2006-07, it is permissible to carry forward the unabsorbed depreciation in view of the change in position of law - thus assessee is eligible for the claim of depreciation as per law for the year under consideration - in favour of assessee. Non deduction of TDS - Held that:- The provisions of section 40(a)(ia) were wrongly invoked under the facts and circumstances of the case where it was proved that the payment was merely reimbursement of the petty expenses - in favour of assessee. Exclusion of excise duty in closing stock valuation - Held that:- As decided in CIT Versus PARRY CONFECTIONARY LTD [2007 (6) TMI 161 - MADRAS HIGH COURT] the excise duty being not depicted to Profit & Loss account, therefore not assessable in the hands of the assessee - in favour of assessee.

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• 2012 (11) TMI 284
  Revisionary powers used by CIT(A) - order of the A.O. was erroneous - non inclusion of unutilized MODVAT and VAT credit in valuing closing stock of Raw material and work in progress - Held that:- Assessee had made written submissions and submitted the details before A.O. whereby it was contended that the assessee has been consistently following exclusive method of accounting for sales, purchase and closing stock. It also demonstrated through the annexure of tax audit report certified by Chartered Accountant that whichever method of accounting is adopted (inclusive or exclusive method) by the assessee, there is no impact on the profit of the year. Similarly assessee also submitted before A.O. & CIT the method of accounting employed consistently followed by it for accounting of Excise duty and CENVAT and by following either of the method there is no impact on profit and loss account. The A.O. in the instant case had examined the issue of stock. The observation of the CIT that the A.O. overlooked the provisions of 145A also does not appear to be justified for the reason that the A.O. had examined the same. The order of assessment dated 4-12-2009, no doubt does not contain a detailed discussion on this aspect, but that however would not render the order as erroneous as decided in Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY HIGH COURT]. Thus as the A.O. had made necessary inquiries and the assessee had provided an explanation in that regard.Thus, it can be said the A.O. on being satisfied did not make any addition and disallowance relying on CIT vs. Indo Nippon Chemicals Co.[2003 (1) TMI 8 - SUPREME COURT] wherein held that hat no addition on account of modvat credit can be made - Therefore the order of the A.O. cannot be considered either to be erroneous or prejudicial to the interest of the Revenue - in favour of assessee.

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• 2012 (11) TMI 283
  Deduction u/s 80HHC – Revenue contesting direction of CIT(A) to A.O to re-work the deduction including the export proceeds realized up to the period 31st July, 2001 – AY 2000-01 - Rule 46A – Held that:- Nothing could be shown by the Revenue as to what was the additional evidence admitted by CIT(A) and considered by him to decide the issue in dispute. We find that this decision of CIT(A) is based on the extension granted by RBI for realization of export proceeds up to 31.07.2001, hence the same has to be considered for the purpose of computation of deduction allowable to the assessee u/s 80HHC. Therefore, there is no violation of Rule 46A - Decided against Revenue Dis-allowance of long term capital loss - sale of shares originally acquired and held by amalgamating company - appellant became owner of the shares on amalgamation of that company with the appellant – dis-allowance on ground that transactions of capital asset in amalgamation of companies are not regarded as transfer as per sec.47(vi) – Held that:- Section 47(vi) is in respect of transfer of asset by amalgamating company to amalgamated company and on such transfer, there cannot be any capital gain or capital loss because there is no transfer as per Section 47(vi). But in the present case, the loss was claimed by the assessee on subsequent sale by the amalgamated company, and shares received by it from the amalgamating company. The transaction of sale of shares is found to be genuine, therefore, the dis-allowance of long term capital loss is held to be not proper and the same is deleted. Dis-allowance of commission expenses as not genuine – Held that:- It is noted by CIT(A) that there is an agreement regarding payment of commission to this party and the sale of the assessee has increased considerably. Also, payment of commission has been approved by the Board of Directors and the agent has shown the commission income in its return of income. Commission had been paid on the basis of orders procured as per clause (3)(d) of the agreement. In view of aforesaid, CIT(A) rightly deleted the addition Addition on account of unaccounted investment – difference in purchase figure - Held that:- CIT(A) decided this issue on the basis of credit note for rate difference. Since relevant credit notes were never produced before the A.O., hence we restore the matter back to the file of the A.O. for fresh decision. Addition u/s 41(1) made on account of writing back of loan liability – Held that:- Loan has been taken by the assessee for the purpose of business but this does not mean that taking and giving loan is the business of the assessee and hence, it cannot be said that Section 41(1) can be attracted for remission in respect of loan liability when admittedly, no deduction was allowed to the assessee in respect of such loan liability in the present year or in any earlier year – Decided against Revenue Dis-allowance of interest expenses – Revenue contended diversion of interest bearing funds to sister concerns, wherefrom no interest was received – Held that:- CI(A) observed that as per balance sheet, there are no bank loans and there is a bank overdraft only which has been stated to have been invested in trading business of the appellant and it has been stated that on unsecured loans no interest has been paid . The interest expenses pertain to trading business of the appellant on account of various services rendered by the bank for realization of export proceeds. Considering the said facts the dis-allowance of interest made by the A.O. is rightly deleted by CIT(A). Addition on account of interest on Fixed Deposit – no interest income shown by assessee - Held that:- It is found that the appellant has already offered interest income of Rs.1.03 crores as interest on fixed deposit and out of the said interest income the amount of Rs.66.77 lakhs has not been received so the same has been shown as accrued interest in the Schedule-5 in the balance sheet. As the said income has been offered, no further addition is required to be made and therefore, the addition is deleted. Dis-allowance of trading loss – transaction with related party – non-maintenance of office or warehousing facilities nor paying any rent - Held that:- Merely because the assessee has incurred loss in the present year, it cannot be said that such loss is bogus merely because the transaction of purchase and sales are with related parties without bringing any adverse material on record to show that either the purchase prices are inflated or the sales prices are deflated or that the transaction is bogus. On similar transaction in the preceding year huge profit was declared by the assessee and the allegation of the A.O. and the Ld. D.R. that the assessee is not maintaining any office and warehousing facility and absence of evidence of movement of goods are not conclusive because the situations are the same in the preceding year also in which assessee has declared huge profits in similar transactions with similarly related parties. Books are not rejected by the A.O. and no defect has been pointed out by the A.O. in purchase price or sales price of the goods traded by the assessee, hence, dis-allowance stands deleted Dis-allowance u/s 14A – Held that:- A.O. has made dis-allowance in respect of interest expenditure and other expenses. Since no interest expenditure is attributable for these investments out of total interest expenditure, dis-allowance should not include any amount in respect of interest expenditure and hence, the dis-allowance can be of balance administrative expenditure

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• 2012 (11) TMI 282
  Addition of Rs 25 lacs made on account of on-money paid for purchase of land on basis of seized paper - AY 2001-02 - Held that:- Addition was deleted by CIT(A) on the basis that on the basis of the seized paper, an amount of Rs.60 lacs was taxed in the A.Y.2000-2001 and on the same paper, the investment of Rs.25 lacs was mentioned. No reason found to interfere with the order of the CIT(A) on this issue, because admittedly, when the income has been taxed, no separate addition can be made in respect of application of the same income in making investment, unless some material is brought on record to show that income taxed in the earlier year was utilised somewhere else and the investment in question is not by way of utilisation of that income - Decided against Revenue Addition made on account of income from house property - assessee engaged in the business of construction activity - shops constructed in complex held as stock-in-trade - property lying vacant - Held that:- Assessee is in the business of construction, it cannot be said that the shops in question were not held by the assessee as stock-in-trade without bringing any adverse material on record. CIT(A) deleted the addition placing reliance on decision in case of Neha Builders Pvt Ltd (2006 (8) TMI 105 - GUJARAT HIGH COURT). Nothing could be brought on record by Revenue that aforesaid judgment is not applicable to the present case Addition on account of low household withdrawals - Held that:- There is no basis of estimating household expenditure of the present year of Rs.2,00,000/-. If the AO is depending on the statement of the wife of the assessee, then annual expenditure comes to only Rs.1.44 lakhs, even if it is calculated at the rate of Rs.12,000/- per month. The assessee has declared household expenses at Rs.1.54 lakhs and hence, no addition on this count is called for. Partial addition for alleged income from house property - Held that:- Annual value of this property was estimated by the AO at Rs.5,000/- per month. The claim of the assessee is that for the purpose of computing the annual value of property, which was not actually let out, the municipal valuation should be the basis of determining the annual value. AO directed to compute the municipal value of this property as annual value and then compute the income assessable under the head “income from house property”. Addition for alleged on money paid for purchase of land - assessee contended that on the basis of the seized paper, an amount of Rs.60 lacs was taxed in the A.Y.2000-2001 and investments were out of income declared by the assessee - Held that:- Claim of the assessee should be accepted in the interest of justice because three noting on the seized paper of Rs.7 lakhs, Rs.10.25 lakhs and Rs.9.7 lakhs are not in the nature of long term investment, and therefore, it appears to be acceptable that atleast Rs.15 lakhs were also received back out of this total amount of Rs.26.42 lakhs. We, therefore, delete this addition on the basis that this investment is also out of income declared by the assessee of Rs.60.20 lakhs in A.Y.2000-2001. Dis-allowance of depreciation of motor car on ground that assessee did not debit expenses on running and maintenance of vehicle in the profit and loss account - Held that:- CIT(A) deleted the addition on finding that an amount of Rs.1,779/- has been debited by the assessee as vehicle expenditure in the profit & loss account. Finding of the CIT(A) could not be controverted by the Revenue - Decided against Revenue

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• 2012 (11) TMI 281
  Addition on account of 'sundry creditors' and 'advance from customers' as deemed income u/s. 41(1) - Held that:- There is no dispute on this aspect that the total amount was shown as liability in the balance sheet and there is no credit in current year. In the light of these facts, we find that the provisions of Section 41(1) are not applicable because nothing has been brought on record to show that the liability in question has ceased to exist. Addition is therefore deleted - Decided in favor of assessee Addition u/s 68 treating cash sales as unexplained cash credits - cash sale is only on three dates in the year and not on other dates - Held that:- Claim of the assessee regarding cash sales under peculiar conditions that the assessee was discontinuing its business and therefore some sales were made in cash cannot be summarily rejected. It cannot be said that in the case of cash sales, the assessee is bound to keep record of the names and addresses of the buyers. Under these facts, ground of the assessee is allowed and addition made is deleted - Decided in favor of assessee

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• 2012 (11) TMI 280
  Disallowance of Purchases – Held that:- Assessee has not maintained proper books of accounts for his business and his business expenditure are not supported by proper bills and vouchers. AO has considered the purchases as supported by documents and considered the entire sales for determining the income of the assessee. - Assessee submits that his books of accounts can be rejected and income may estimated at 6 to 8% on sales. It is well established fact that every business has associated with expenditure. The percentage of net profit may very from business to business. The real estate sector may have net profit percentage between 5% to 20%. Considering the assessee nature and size of business net profit of 15% would be appropriate and accordingly AO is directed to adopt 15% net profit on sales and compute the profit from business - this ground is allowed in favour of assessee. Disallowance of Expenses – Held that:- Every business has its own ratio of expenses associated with sales. As the assessee has not substantiated business expenditure even at the time of appellate proceedings, thereby restricted the disallowances of expenses to 30%. Sale of agricultural land - Agricultural incomes chargeable as Income from other sources – Held that:- Assessee has not furnished details such as proof of agricultural operations carried out, details of purchases and expenditure incurred for agricultural operations, details of sale bills etc. just because he hold agricultural land it cannot be assumed that he is earning agricultural income as declared by the assessee - considering the facts of the case, Assessing Officer is directed to disallow only Rs. 5 lakhs out of the agricultural income claimed by the assessee instead of Rs. 10 lakhs disallowed by the Assessing Officer - assessee’s appeal is partly allowed. Disallowance of Expenses – Held that:- Rs. 7,34,654/- being 20% of Rs. 18,36,635/- which has been disallowed by the Assessing Officer on the ground that not even a single voucher in respect of this expenditure was produced before the Assessing Officer. CIT(A) Hyderabad ought to have confirmed the disallowance of Rs. 18,36,635/- grounds raised by the department is not sustainable - In the result, assessee’s appeal is partly allowed and Revenue appeal is dismissed.

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• 2012 (11) TMI 279
  Re-assessment - Omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts - Deduction u/s 80HHE - Following the decision of court in case of [Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT OF INDIA ] held that:- post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open - The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then,in the garb of re-opening the assessment, review would take place - to reopen an assessment tangible material should be there. In the present case, it is a fact that that the reassessment was completed on 03/07/2006 and subsequently, another notice u/s 148 was issued 17/03/2008. The reassessment was completed on 28/11/2008 denying the deduction u/s 80HHE to the assessee for the reason that she was not engaged in the business of export of software and that she was merely a software consultant providing services to the overseas client. In earlier reassessment completed on 03/07/2006, the Assessing Officer had thoroughly examined the material available on record and the agreement was available, hence, the subsequent reassessment was merely a change of opinion - Reassessment made by the Assessing Officer u/s 147 is without jurisdiction and, therefore, the same invalid - In the result, appeal of the assessee is allowed.

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• 2012 (11) TMI 278
  Expenses in relation to exempt Income u/s 14A - Assessee submits that it had not incurred any direct expenditure. Assessee had earned dividend income, therefore, provision of sec. 14A is squarely applicable - CIT (A) is not correct in by directing the AO to recalculate the disallowance by following Rule 8D - AO is directed to compute the disallowance @ 2% of the exempt income instead of 04.6% which should meet the ends of justice. Business Income vs. Capital Gain – Following the decision of court in case of [C.I.T. Versus GOPAL PUROHIT 2010 (11) TMI 222 - SUPREME COURT OF INDIA] held that:- Delivery based transactions should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short term or, as the case may be, long term capital gain,depending upon the period of the holding. – Further, the principle of res -judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee - assessee’s investments leading to earning of profit in hand could not be termed as business income - issue is decided in assessee’s favour.

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• 2012 (11) TMI 277
  Transaction charges paid to the stock exchanges - fees for technical services TDS u/s 194J – Following the decision of court in case of [Commissioner of Income-tax - 4(3) Versus Kotak Securities Ltd. 2011 (10) TMI 24 - BOMBAY HIGH COURT] Held that:- Transaction charges paid by the assessee to the stock exchange constitute 'fees for technical services' covered under Section 194J of the Act and, therefore, the assessee was liable to deduct tax at source while crediting the transaction charges to the account of the stock exchange. As regard quantification of interest, matter is restored back to the Assessing Officer, who will carry out necessary verification and quantify the interest. Thus, ground of appeal raised by the department stands allowed, subject to quantification of interest - In the result, appeal for assessment years 2005-06, 2006-07, 2007-08 & 2008-09 stands allowed subject to verification and quantification of interest by the Assessing Officer.

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• 2012 (11) TMI 276
  Penalty u/s 271(1) (c) - Business Loss vs. Speculation Loss – Following the decision of court in case of [COMMISSIONER OF INCOME-TAX Versus AURIC INVESTMENT AND SECURITIES LTD. 2007 (7) TMI 276 - DELHI HIGH COURT] held that :- There is no mens rea to conceal the Income - Assessee had not furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against normal income – since assessee filed full details of the sale of shares, he did not conceal any particulars of income – mere treatment of the business loss as speculation loss by the Assessing Officer does not automatically warrant inference of concealment of income – penalty not imposable - Other grounds and the issues raised by the assessee is not being decided as the same has become academic in view of the findings given above - In the result, appeal filed by the assessee is treated as allowed.

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• 2012 (11) TMI 275
  Bifurcation of Income as income from house property and PGBP – Rental vs.Service receipts - Following the decision of Supreme court in case of [Sultan Brothers vs CIT 1963 (12) TMI 4 - SUPREME COURT] Held that:- If a business premises or factory is let out by the assessee for a temporary period, then let out of the factory premises become essential for letting out the machinery and plant and furniture of the factory. Only in such an exceptional case, whether the primary purpose and intention was to let out the machinery, plant or furniture and not the building - the rent received for the building is to be assessed as income from other sources. None of the parties have disputed the correctness of the ratio of 60:40 for bifurcating the receipts for rental and service charges by the Commissioner of Income Tax (Appeals). Since the income has been bifurcated under two heads as income from house property and income from business and profession and accordingly only 40% of the expenses claimed by the assessee were allowed against the income from business. As such, expenditure on temporary shed was not allowable as per the order of the Commissioner of Income Tax(Appeals). The assessee is entitled for cost of temporary shed to be treated as cost of the project carried by the assessee.

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• 2012 (11) TMI 274
  Interest on REC Bonds – Held that:- REC Bonds were purchased by the assessee firm for availing the exemption on capital gain in the earlier years, it is clear that the REC bonds were purchased by the assessee for specific purpose of availing the exemption on capital gain and not as business activity of the assessee. This, being the fact, then the interest earned on the REC bonds cannot partake the character of business income - interest on REC bonds to be treated as income from other sources. Writing back of Sundry Creditors u/s 41(1) – Held that:- Sundry Creditors are related to the business of the assessee and it is not the case of the revenue that the assessee has discontinue the business or close down the business activity - then the income on account of written back of the sundry creditors falls under the head ‘business and profession’ and not as ‘income from other sources’. Electricity expenditure – Held that:- In absence of documentary evidence, expenses were disallowed. Bank charges expenses and staff welfare expenses are allowable as business expenditure against the business income. Therefore, once the amount of sundry creditors is treated as business income consequently the claim of bank charges and staff welfare are allowed. Interest on capital of partners - Once the interest @ 12% p.a on partners capital is allowable, then to the extent of the amount which could not be set off against the business income would be setting off against the income from other heads and carry forward business loss as provided u/s 71 & 72 of the I T Act - accordingly, the Assessing Officer is directed to take appropriate steps in this regard - grounds are partly allowed. Bad Debts – Following the decision of court in case of [T. R. F. LTD. v. Commissioner of Income-tax, 2010 (2) TMI 211 - SUPREME COURT] Held that:- Once the assessee has written off the debt as unrecoverable debts, the same is allowable and there is no need to prove that the debts actually gone bad - In the interest of justice, this issue is set aside to the record of the Assessing Officer for the limited purposes to examine whether the assessee has complied with the conditions as enumerated u/s 36(2) being the amount has already offered as income and then decide the issue - In the result, appeal filed by the assessee is partly allowed.

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• 2012 (11) TMI 273
  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

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• 2012 (11) TMI 272
  Disallowance u/s 14A – alleged that assessee made investment in mutual funds, yielding dividend income exempt u/s 10 of the Act - Assessing Officer has made the disallowance u/s 14A holding it is expenditure on financial charges directly related to the earning of exempt income from dividends – Held that:- There is nothing to suggest that any fresh investment was made in mutual funds or shares, yielding exempt income; rather investment in mutual funds came down to Rs.7,66,56,044/- as against Rs.12,00,45,300/- in the preceding year - Since no fresh investment has been made in the year under consideration, the ld. CIT(A), following the basis adopted in the preceding year - Revenue have not placed any evidence, controverting these findings of facts recorded by the ld. CIT(A) nor brought to our notice any material suggesting that borrowed funds were indeed utilized in making investment in the year under consideration, yielding tax free income Ad hoc disallowance - repair and maintenance expenses on plant, machinery and building and disallowance of 5% of miscellaneous and travel expenses – alleged that assessee did not produce a majority of the vouchers – assessee submitted that these were to be called from various units located in different places – Held that:- Matter remitted to the file of the AO with the directions to allow another opportunity to the assessee to produce all the bills and vouchers in relation to the aforesaid expenses on account of repairs to building and plant & machinery as also of miscellaneous and travel expenses and thereafter, pass appropriate orders in accordance with law - appeal is partly allowed for statistical purposes.

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• 2012 (11) TMI 271
  Depreciation - ownership - held that:- Merely because the property has not been registered in the name of the assessee, disallowance of depreciation cannot be made. Application of section 14A - held that:- disallowance confirmed to that extent especially when the assessee admitted in his submissions dated 2.12.2010 before the ld. CIT(A) to the fact of part of such expenses have been incurred for earning exempt income and accordingly, provided its own working of such expenses relating to Head office at Ansal Plaza, Delhi Addition on account of valuation of closing stock of sugar – undervaluation – alleged that the assessee is following the method of valuation of stock of sugar on the basis of cost or market price whichever is lower – Held that:- the method of valuation adopted by the assessee was accepted.- in favour of the assessee Taxation of interest on Income Tax refund - assessee in the original return offered interest on Income Tax refund to tax, in the revised return filed, assessee reduced the aforesaid interest on the ground that the receipt was inchoate – Held that:- assessee filed revised computation to exclude interest on refund, which was originally granted by taking the loss on export as ‘Nil’ - there is not even a whisper regarding method of accounting regularly followed by the assessee in accounting interest on refund granted by the Department - matter remanded Interest u/s 234D of the Act – Held that:- CIT(A) did not pass a speaking order on the issue and merely observed that levy of interest u/s 234D is only consequential in nature. Since subsequently refund has been granted to the assessee - matter remanded back to the file of the ld. CIT with the directions to pass a speaking order

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• 2012 (11) TMI 270
  Exemption u/s 80G of the Income-tax Act – Held that:- Even if any Income-tax Authority wants to withdraw approval, he shall issue a show cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so - in the present case no such show cause notice has been issued to the assessee - CIT without issuing any such notice has withdrawn approval - renewal of exemption u/s 80G(5)(vi) cannot be denied to the assessee, having valid approval - DIT(E) was not justified in denying renewal of approval u/s 80G(5)(vi) of the Act

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• 2012 (11) TMI 269
  Disallowance of Business expenses – Held that:- AO has allowed the assessee’s similar claims of expenditure and no such disallowances have been made - expenditure has been disallowed on surmises and suspicion. In preceding and subsequent years similar expenditure has been allowed by AO in assessments u/s 143(3) on same business – disallowance deleted - in favour of assessee Regarding claim of finance charges on the leased property – Held that:- Fact about incurring of finance charges was mentioned in assessee’s books of accounts - Revised return filed by the assessee was not to make a fresh claim but was correcting its claim in respect of business income and house property income - earning of lease rent is not disputed which is taxed under the head income from house property. Similarly, the interest has been paid in relation to acquisition of lease property - unless there is material change in the facts and circumstances of a case, the principle of consistency should ordinarily be followed. No extra ordinary reason has been put forth by the department to deviate from the principle of consistency – in favor of assessee

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• 2012 (11) TMI 268
  Disallowance – allege that assessee has paid interest @ 9% per annum on the loan taken by it whereas it has charged interest @ 6.5% to 7% from M/s. PT Minda Asian Automotive Ltd., Indonesia. i.e. joint venture company – alleged that loan was given by the assessee without any business exigencies - explanation given by the assessee that it will get return in future – Held that:- Assessee is a 50% shareholder of the joint venture exploring the business possibility and made the investment in the joint venture - loan was given in foreign currency to an Indonesian company. Assessing Officer ought to have compared the libor rates prevalent in the international market at that point of time - assessee has demonstrated that such rate was in between 4% to 5%. It has charged the rate in between 6.5% to 7%. Thus, in such situation, even on this count also, no disallowance can be made - disallowance deleted Disallowance under sec. 14A - CIT(Appeals) has observed that Rule 8D will not be applicable in the present case in view of the decision of Hon'ble Bombay High Court in the case of Godrej Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ) wherein it was held that Rule 8D has been brought on the statute book w.e.f. 24.3.2008 and it will be applicable from assessment year 2008-09 – Held that:- Disallowance has to be worked out after taking into consideration the surrounding circumstances. From the order of Learned CIT(Appeals), it does not reveal that Learned CIT(Appeals) has considered the relevant details before restricting the disallowance to Rs.1 lacs on an estimate basis - matter reamanded back to Assessing Officer for readjudication

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• 2012 (11) TMI 235
  Entitlement to exemption under section 11 - construction activity of World Trade Center, Centre 1 and IDBI Centre - denial of claim as the transaction was one of sale of lease-hold rights of use of space and not of leasing - Held that:- The Department sought and received from the assessee particulars of the expenditure incurred by the assessee towards scientific research & the details furnished in the table speak for themselves - hardly any expenditure worth mentioning was incurred on research and development. The assessee's reliance upon section 2(15) is of no assistance to it. The only object of general public utility that can be claimed by the assessee is on account of its main object in the Memorandum of Association. The assessee never engaged itself in any activity connected to the main object viz. to organize, sponsor, promote, establish, conduct or undertake the scientific research in any way or by any means whatsoever and in any area or field. Mr. Andhyarujina fairly stated that the lease transactions were the only business of the assessee. The income therefore, was entirely from the assessee's business unrelated to any charitable purposes whatsoever. An assessee that engages itself only or predominantly in activities relating to its ancillary or incidental objects which do not relate to any charitable purpose and does not carry on any activity relating to its main object which pertains to a charitable purpose is not entitled to an exemption under Section 11. The assessee's claim for exemption fails the first test viz. in establishing that its income was derived from the property held under trust wholly for the alleged charitable purposes. The assessee's claim for exemption under section 11 also fails the second test under section 11(1)(a). It has not been able to establish that such income was applied to such purposes viz. charitable or religious purposes. The assessee's claim is also not maintainable as it has not been established that the work in connection with the assessee's business is mainly carried on by the beneficiaries of the institution - against assessee. Whether only 1/60th of the advance can be assessed as its income for the year as the tribunal had rightly held it as transaction of lease and not of sale ? - Held that:- In the agreements, where the rent was divided into three components, the basis rent and parking space rent were to be paid in advance before execution of the lease in installments similar to those under the first set of agreements. Thus under both the agreements, substantial "rent" was payable in advance - the doctrine of diversion of income by over-riding title does not operate in the assessee's favour. The mere use of the term 'sinking fund' and the manner in which the assessee treats the same in its accounts is not decisive of the matter. The assessee is not a co-operative society in which case the question may well be answered entirely differently depending upon the facts of the case. The fact that depreciation has been claimed by the assessee in respect of the plant and machinery and other equipment required for extending the facilities indicates that the sinking fund was utilized for acquiring and maintaining the same for the benefit of the assessee. The income was, therefore, used by the assessee and for the assessee and the assessee retained the benefit arising therefrom - against assessee. Standard rent fixed by the Municipal Authorities as the annual value v/s - actual rent realized by the assessee - Held that:- The additional question for the assessment year 1990-91 is, accordingly, answered in favour of the assessee viz. that the Tribunal has itself held that the said income is to be taxed as income from "Profits and gains of business or profession". The issue of consideration received in respect of the transactions for the assessment year 1990-91 under the head "income from property" does not survive in view of the remand report made by the Tribunal in which it is expressly held that the same has to be assessed under the head "Profits and gains of business or profession" - in favour of assessee.

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• 2012 (11) TMI 234
  Deduction u/s 80IB - Disallowance on non fulfillment of prescribed conditions - CIT(A) alloowed the claim - Held that:- On consideration of the relevant documents & development agreements it can be fairly concluded that the assessee had acquired dominance over the land and the land was under the possession of the assessee. The assessee firm was de-facto land owner for all practical purposes and has also developed housing project by incurring all the expenses and taking all the risk involved therein. Thus, the assessee firm was not merely contractor of the land owner for fixed remuneration. He further found that land owners were to get only the price of land fixed by the development agreement and not to get any profit of the project. Therefore, the assessee had fulfilled all the conditions as laid down u/s 80IB(10) - in favour of assessee.

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• 2012 (11) TMI 233
  Unexplained cash credit - CIT(A) deleted the addition relying on additional evidence u/r 46A - Held that:- The appellant had filed confirmation report before the A.O. during the course of assessment proceeding as evident from the remand report. The CIT(A) also given fresh opportunity to the A.O. which has been availed by the A.O thus no point of violation of rule 46A arises - As the appellant had discharged her burden of prove by filing the confirmation, PAN No., copy of return and explanation of source of cash creditors, the order of the CIT(A) is hereby confirmed - The loans were advanced for business acquisition, advances were given from own interest free borrowings/fund and during the year no loan was advanced by the appellant.The interests were paid on bank loan, which was utilized for business purposes. No interference in the order of the CIT(A) is warranted - in favour of assessee. Depreciation on electrical installation and fitting in the hotel building - @ 25% OR 15% allowable as per IT Rules - Held that:- As per appellant this was the depreciation on telephone, Air Conditioner, Television and Water Heater & further disallowance made from the telephone expenses was claimed to be on higher side. As these facts had not been made out by the A.O. in assessment order, it is required to be re-adjudicated by the A.O - in favour of assessee for statistical purposes.

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• 2012 (11) TMI 232
  G. P. Addition - gross profit of 26.73% in this year as against the gross profit of 30.28% in the immediately preceding assessment year - CIT(A) deleted the addition - Held that:- The gross profit of the assessee in last 5 years was in the range of 25% to 27% with the exception of assessment year 2005-06 where the gross profit was 30.28% followed by a reason on account of order of a particular item which had higher margin and the same was not repeated in the year under consideration. This factual aspect has not been controverted by the revenue by bringing any contrary material on record. Further, during the year under consideration, increase in diesel price and power also contributed to fall in gross profit. The learned CIT(A) has given a finding that the assessee has declared process loss of 10% to 11% consistently - CIT(A) has given a finding that the assessee had maintained day to day stock registers as found during the course of survey proceedings. These factual aspects have also not been controverted by the revenue by bringing any contrary material on record - decided against revenue. Addition on freight and octroi charges - CIT(A) deleted the addition - Held that:- As decided in assessee's own case wherein CIT(A) has distinguished the nature of expenditure with the nature of expenditure which was covered by the agreement with the holding company & the findings given by the CIT(A) that the freight and octroi expenditure claimed by the assessee were incurred on purchase of consumables and stores materials cannot be disturbed - in favour of assessee. Suppressed conversion charges - CIT(A) deleted the addition - Held that:- The issue cannot be decided without complete data as the parties have not furnished the industry-wise loss or the history of the loss for last 4/5 years, the loss incurred during various process, percentage of loss in each process, comparison of such loss in difference processes industrywise and various assessment year-wise & other comparative instances and factors like type of machinery used, claim of manufacturer of machines as to the amount of loss likely to occur when work is done on their machines - restored the matter to the file of the Assessing Officer to affirm the correctness of the assessee’s claim of loss - in favour of revenue for statistical purposes.

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• 2012 (11) TMI 231
  Deduction u/s. 80IB - disallowance as activity cannot be considered to be manufacturing - Held that:- The business of assessee relates to cutting and polishing of marbles stone who procures rough marble blocks, which is first cut or chiseled using a hammer and a chisel. Thereafter the block is cut into the form of slabs. Thereafter, these slabs are placed under a polishing machine to make the surfaces smooth. Then edges of the tiles are cut using saw blades, therefore, for this purpose the assessee is entitled to deduction under section 80IB following the judgment in the case of ITO vs. Arihant Tiles and Marbles Pvt. Ltd.[2007 (5) TMI 132 - HIGH COURT, RAJASTHAN]. As in earlier year the matter was restored to the file of A.O. for the verification of calculation. In the current year also the A.O. had disallowed the deduction u/s. 80IB at initial point and had not checked the calculation of deduction - restore the matter to the file of AO with a direction to verify the working of calculation and allow the deduction.

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• 2012 (11) TMI 230
  Disallowance u/s. 14A - CIT(A) allowed the claim - Held that:- No dispute to the fact that the assessee has raised the loan of Rs.297.75 crores up to 97-98 and majority of investment has been made before 97-98 and the assessee had been claimed deduction u/s. 80M. The A.O. in this year had made a disallowance of the interest expenses incurred for the earning the dividend. Whereas the CIT (A) and the Tribunal in particular up to 1996-97 had deleted the disallowance so made along with the deduction u/s.80M on the gross dividend receipt - Though in such a situation, the interest bearing fund are bound to merge that the assessee in capital which is non interest bearing fund. There is no dispute to the fact that the assessee having non interest bearing fund. As decided in Maruti Udhyog Ltd. Vs. DCIT [2004 (10) TMI 278 - ITAT DELHI-A] Nexus between the borrowed funds and investments can be said to be established only where it is shown that interest free funds are not available with the assessee. In the present case, there is no nexus of such kind proved by the A.O. thus as per the past history of the assessee, the Department has been taking the view that no expenses including the interest had been attributed to dividend for computing the deduction u/s. 80M - the assessee having non interest bearing fund as mentioned hereinabove and no nexus between borrowed fund and the investment having been established by the Department cannot help the Revenue - in favour of assessee. Long Term Capital gain - share transaction not routed through stock exchange - CIT(A) deleted the addition - Held that:- The A.O. had not brought on record any evidence or instruction which prohibits the off market transaction of shares. The assessee has routed these transactions from demat account. There is no prohibition in Income Tax law on such transfers of share. The shares were transferred at the market price on the date of transaction. There was no objection from the transferee that off market transaction is prohibited by the law. It is immaterial whether assessee has paid STT on these transactions or not but capital gain has to be calculated as per the provisions of Income Tax Act. The appellant had sold shares of GSFC to GSIL as per the agreement dated 07th March, 2005. Therefore, the transfer of capital assets had taken place on account of sale - The appellant had received consideration of Rs.69,51,87,840/- & further, the shares were transferred to the depository UTI Security to the buyer. These shares were reflected in the demat account of the buyer. The appellant sold these shares to GSIL which is not a subsidiary company of the appellant. The common factor is that both the appellant as well as GSIL are owned by the Gujarat Government. But as per Company law, both the companies are having legal status under the Companies Act - CIT(A) was correct to delete the addition - in favour of assessee. Inclusion of service charges to income - Held that:- While filing the return of income for the assessment year 05-06, the appellant suo moto disallowed the amount towards reversal of service charges income. The claim for deduction of such sum had already been placed for A.Y.04-05. In A.Y. 05-06, this claim has been rejected by the A.O., which was confirmed by the CIT(A) in A.Y. 05-06 because the adjustments have been made in the books for the period of pertaining for A.Y. 05-06 - as similar income has been allowed to be reduced on the basis of real income theory, thus the order of the CIT(A) is confirmed - against assessee. Application of Rule 8D - Held that:- As decided in Godrej and Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] Rule 8D is not retrospective and applies from A.Y. 08- 09 and investment in question has not been changed during the year. The A.O. has not brought on record any material / evidence which shows that the investment position has been changed in case of appellant during the year from A.Y. 97-98, when during the year no investment has been made by the appellant - in favour of assessee.

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• 2012 (11) TMI 229
  Non deduction of TDS - disallowance of freight charges - Held that:- The provisos of sub-section 3 under clause (i) of 194C is to be fulfilled by the assessee i.e. he has to obtain 15-I form from the sub-contractor while making the payments to them, form no.15-J is to file before the concern Commissioner on or before 30th June of following financial year and payment above Rs.50,000/- is made to the single sub-contractor in full year to deduct the TDS. But it was held when the appellant has obtained 15-I form then second proviso would be applicable. Therefore, it is not required to deduct tax. It was held that when form no.15-I had been obtained from the sub-contractor whose contents were not disputed or whose genuineness was not doubted then the assessee is not liable to deduct tax from the payment made to sub-contractor. Once, the assessee is not liable to deduct tax u/s.194C then the addition u/s. 40(a)(ia) cannot be made - in favour of assessee.

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• 2012 (11) TMI 228
  Non deduction of TDS - disallowance u/s 40(a)(ia) - Held that:- For the part amount of Rs.32,18,58,199/- TDS was deposited by the assessee in the Government account latest by 24.08.2005 which is before the due date for filing the return of income and as per the judgment of COMMISSIONER OF INCOME TAX, KOL-XI, KOL Versus VIRGIN CREATIONS (2011 (11) TMI 348 - CALCUTTA HIGH COURT) amendment in section 40(a)(ia) was held as retrospective and therefore, no disallowance is called for TDS deposited by the assessee in the government account before the due date for filing of return of income - in favour of assessee. For the rest part as decided in Merilyn Shipping & Transports Versus ACIT, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source – Decided in favor of assessee - confirm the disallowance of only Rs.2,30,59,781/- being the amount payable by the assessee to the creditors for labour work as on 31.03.2005 - partly in favour of assessee.

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• 2012 (11) TMI 227
  Unaccounted income - excess stock - surrender of income of 14 lacs however retracted the same during assessment proceedings - Held that:- Assessee has claimed that the total stock found at the time of survey was Rs. 38,33,000/-. Against this figure the value of closing stock computing as per the trading account at the time of survey was amounting to Rs. 24,35,000/-. Remaining amount of Rs. 14 lacs was surrendered. Statement of account for the period 12.12.98 to 31.3.1999 was prepared by taking the opening stock Rs. 38,35,000/- and according to this statement assessee suffered a gross loss of Rs. 3,85,193/-. As per the assessee he has earned gross profit for the period 1.4.98 to 11.12.98 amounting to Rs. 1875712/- Assessee has further suffered gross loss for the period 12.12.98 to 31.3.1999 amounting to Rs. 385193/-. As a result of the above, the gross profit during the entire period came to Rs. 1490519/-. This aspect of the assessee, suffering of loss during a part of the financial year has not been discussed and examined by the authorities below. Therefore, matter is remitted to the file of the AO - Appeal of assessee allowed for statistical purposes.

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• 2012 (11) TMI 226
  Penalty levied u/s 271(1)(c) against income from undisclosed sources as bogus gift – assessee before CIT(A) has surrendered the above amounts on the condition that no penalty should be imposed. – Held that:- assessee has submitted various documents in support of the gifts. It is not the case of the Revenue that the documents submitted in this regard are false. It is also a fact that during the appellate proceedings the assessee has himself agreed to surrender the above amounts. Under the circumstances, in our considered opinion, when the Revenue has not been able to find any fault in the documents submitted by the assessee in this regard, in our considered opinion, the penalty u/s. 271(1)(c) is not justified. - Decision in favour of assessee.

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• 2012 (11) TMI 225
  Validity of reopening of assessment u/s 147/148, earlier framed u/s 143(3), after expiry of four years from end of relevant AY – alleged that investment in land was not disclosed in balance sheet based on incriminating document found during search – assessee contended that fact of purchase of plot was disclosed in return on Income and reasons has been selectively recorded so as to increase the time limit from 4 years to 6 years – Held that:- When the assessee has recorded a transaction in its books of accounts as evident from balance sheet at year end of 2000 and 2001 and the assessment is completed u/s 143(3), the assessee has disclosed primary facts relating to the transaction. The assessee’s original assessment having been completed u/s 143(3), no action of reassessment can be taken after the expiry of 4 years from the end of the relevant AY unless any income chargeable to tax has escaped on the part of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. Assessing Officer has recorded the reasons in a manner to attract time limit of 6 years by recording an erroneous reason that this transaction has been kept outside the books of accounts by the assessee. It implies that the reasons recorded lack bona fide in terms of recording the correct facts. Since the reasons have been recorded without application of mind and proper bona fides, they are not tenable. Thus, the reassessment proceedings initiated on the basis of untenable reasons are ab initio void and are quashed accordingly – Decided in favor of assessee.

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• 2012 (11) TMI 224
  Addition on account of capital gain u/s 45 - Can assessee holds two portfolios for investment & trading for dealing in shares – Book business income from trading portfolio & capital gains from investment portfolio – AO treat capital gain as business income – Held that:- As per CBDT stated in circular and confirm possibility for a tax payer to have two separate portfolios. Where an appellant has two portfolios and have income under both heads i.e. capital gains as well as business income. Whereas assessee’s separate activities in share are further supported and endorsed by the fact that separate demat accounts, bank accounts are being maintained and separate trading account and investment accounts are maintained in the books. The department has earlier accepted the assessee’s practice and treatment under heads of capital gains and business. Appeal decides in favour of assessee.

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• 2012 (11) TMI 223
  Discrepancy and Duplication in the stock – at time of survey and the closing stock as recorded in the books of accounts - Held that:- except stating that the valuation of stock is arbitrary, the assessee has not produced any evidence to substantiate its claim. - As valuation has been done in the premises of the assessee with the assistance of the staff of the assessee and the assessee has never raised any objections about the valuation till the assessment stage - difference in the valuation is not properly explained by the assessee – no infirmity in order of the CIT(A) in confirming the addition on account of excess stock made but however gave relief to the extent of Rs.11,48,950/- on account of duplication of the stock at pages 5 and 8 of the inventory of stock made at the time of survey - In the result, the appeal filed by the Revenue as well as the assessee are dismissed.

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• 2012 (11) TMI 222
  Disallowance u/s. 40(a)(ia) of the Act for non-deduction of TDS - Held that:- Amount paid towards “Rent and amenities” would not fall in the category of “Fee for technical services - in the interest of natural justice, issue of determining the market value of “Rent and amenities” is set aside to the file of the AO subject to the provisions of sec.194-I, and exclude the same from the purview of sec. 194J of the Act - In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

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• 2012 (11) TMI 221
  Penalty u/s 271(1)(c) – Concealment of Income - Following the decision of court in case of [CIT vs Reliance Petroproducts Ltd, 2010 (3) TMI 80 - SUPREME COURT ] held that:- Assessee cannot be held guilty of furnishing inaccurate particulars – making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars- Merely because the assessee claimed deduction u/s 80IB which has not been accepted by the Revenue, penalty under s.271(1)(c) is not attracted – If the contention of the revenue is accepted, the assessee would be liable for penalty under s.271(1)(c) in every case where the claim made by the assessee is not accepted by the AO for any reason – That is clearly not the intendment of the legislature - no infirmity in the orders of ld. CIT(A) - In the result the appeal of the revenue is dismissed.

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• 2012 (11) TMI 220
  Recalculation of Tax and Interest u/s 201(1A) – assessee in default - Held that:- Following the decision of court in case of [R. Giridhar Vs. CIT, 1981 (4) TMI 58 - KARNATAKA HIGH COURT] It would be appropriate if the ITO affixes his signature after the computation of tax is made and below such computation also if it is made separately- Assessing Officer’s order is not a speaking order and the CIT(A) has merely directed the Assessing Officer to recalculate the tax payable u/s 201(1) without considering the fact that the order of the Assessing Officer is cryptic - order of the CIT(A) is set aside and restore the issue to the file of the Assessing Officer directing him to pass a speaking order - In the result, appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 219
  Addition on account of expenditure under the head Discount - No Books of account and supporting documents had been produced by the assessee during the assessment proceedings – Held that:- Discount is an expenditure, which can either be reduced from sales or it can be charged to Profit & Loss Account - Evidence and details filed by the assessee, has not been confronted to the AO, within the meaning of Rule 46A of the Income Tax Rules, 1962 - issue is restored to the file of the AO, to adjudicate the issue afresh, as per law, after affording reasonable opportunity to the assessee - ground of appeal of the revenue is allowed for statistical purposes. Addition made by the AO in trade account - Held that:- No books of account and supporting details were produced – AO applied 11% GP and made the impugned addition - Held that:- end of justice would be served,if GP is taken at 10% - ground of appeal of the revenue is partly allowed. Addition as income from Undisclosed sources – Held that:- AO has made addition on certain misconception, which needs to be reconciled, at his level. Therefore, the issue is restored back to AO to adjudicate the issue properly, in accordance with provisions of law and in terms of established accounting norms - grounds of appeal of the revenue are allowed for statistical purposes. Assessee's appeal for assessment year 2006-07 Disallowance of Interest – Held that:- Since these advances are for non-business activity and no supporting evidence has been furnished - interest @ 12% on these advances making addition of Rs.1,26,000 is disallowed - AO should afford reasonable and proper opportunity to the assessee, while adjudicating the issue afresh and the assessee is also directed to render necessary cooperation in the matter - ground of appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 218
  Disallowance u/s 14A - held that:- Disallowance u/s 14A is contemplated in respect of exempt income and not which is eligible for deduction under any relevant provision. It is impermissible to mix both the deduction and exemption provisions and then take them in one stride for computing disallowance u/s 14A. Therefore, the authorities below were not justified in placing the exemption provision and deduction provision on one platform for the purpose of making disallowance under this section. Since sections 10AA and 80IAB are 'deduction provisions' and not 'exemption provisions', the investment or expenses incurred to earn income from SEZ do not merit reckoning in computing disallowance u/s 14A - Impugned order on this count is set aside and remit the matter to the file of A.O. for making disallowance u/s 14A on some reasonable basis - In the result, the appeal is partly allowed for statistical purposes.

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• 2012 (11) TMI 217
  Cancelation of Registration u/s. 12AA – Held that:- Condition precedent to cancellation of registration u/s. 12AA(3) of the Act are not satisfied because once registration is granted, Ld. CIT can cancel registration only if he satisfies that the activities of such Trust or institution are not genuine or are not been carried out in accordance with the objects of the Trust or institution - Merely because some amount has been spent by assessee society which is not in accordance with its aims and objects, at the time of giving exemption u/s. 11 & 12 of the Act, benefit of exemption could be denied to assessee for the said claim but it could not be the basis for cancellation of registration of assessee society - reasons given by Ld. CIT in the impugned order for cancellation of registration is not in accordance with law - cancellation of registration of assessee set aside.

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• 2012 (11) TMI 216
  Addition made to the arm's length price - alleged that value of assessee's international transactions with Associated Enterprises (AE) was in excess of Rs. 5 Crores - Assessee's submission was that Comparable Uncontrolled Price (CUP) method could not be applied since materials purchased from AE and from unrelated entities were technically different – Held that:- Assessee has to be given an opportunity to explain what adjustments it would like to carry out to the prices determined under CUP method so as to adjust such differences and make it fit for comparison as stipulated in sub-rule (2) of rule 10B - matter requires re-visit by the TPO for correctly assessing the prices that could be adopted under CUP method for comparison after carrying out the adjustment required - TNM method could not have been adopted in the circumstances of the case, we remit the matter back to TPO and Assessing Officer for determining the arm's length price under CUP method after making required adjustment stipulated in law. Assessee has to substantiate with sufficient evidence the adjustments that are reasonably required to be made for rendering the prices comparable - ground taken by the assessee relating to determination of arm's length price, is allowed for statistical purposes.

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• Customs

• 2012 (11) TMI 267
  Waiver of Penalty - Held that:- Applicant who was Superintendent of Central Excise gave a false certificate that the goods in question were stuffed in his presence. The evidence on record to show that containers were not at the given place at the time when the applicant gave certificate in respect of the goods export. The exports were made on the basis of certificate given by the applicant, and the exporters were entitled for the export benefit of approximately Rs. 4 Crores (Rupees four crores only). Therefore, prima facie it is not a case for total waiver - taking into consideration the facts and circumstances of the case and the financial hardship as pleaded, the applicant is directed to deposit Rs.50,000/- (Rupees fifty thousand only) within eight weeks. On deposit of the above mentioned amount, pre-deposit of the remaining amount of penalty is waived and recovery of the same is stayed during the pendency of the appeal.

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• 2012 (11) TMI 266
  Demand of duty - forged DEPB scrip – Held that:- Unless it is proved that the respondent in this case, who obtained the licence on transfer/purchase basis from M/s. ATM International, had knowledge about licence having been obtained by M/s. ATM by fraud, the duty cannot be demanded from them, when at the time of import, the licence was a valid licence and had not been cancelled - there is neither allegation nor any evidence to show that the appellant had knowledge about the fraudulent mis-representation of M/s. ATM International in obtaining the DEPB scrips – demand set aside

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• 2012 (11) TMI 265
  Refund – Held that:- Claimant have to submit the Chartered Accountant’s certificate certifying that the burden of SAD (4%) has not been passed on by the importer to customers to fulfil the requirement of unjust enrichment - certificate from a Chartered Accountant is sufficient - appellant is eligible for refund - application for modification of stay applications are allowed, pre-deposit is waived

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• 2012 (11) TMI 249
  Goods cleared from SEZ to DTA - Whether testing, packing and checking would amount to manufacture – Held that:- Definition in the SEZ Act of manufacture has to be construed widely and not narrowly. Instead of dwelling into the merits of the case, the matter can be disposed on the point of limitation itself. Therefore no reason to conclude that the imports were not to be subjected to or are not subjected to manufacture and are thus imports of Complete Consumer Goods, not permissible to be imported. there was no mis-declaration as applicant had filed bills of entry with officers, who after assessing the said bills of entry allowed the appellant to clear the goods from SEZ. It is also his submission that the officers were fully aware as to the process undertaken by the appellant The process (A) the bland allegations of deodorant cans to be finished goods would not be sufficient to hold so. Invoking Extended period of Limtation - It is the submission that the entire show-cause notice is hit by limitation as the show-cause notice is issued on 21/06/2010, while the demands are for the period from February, 2006 to December, 2009. It is his submission that the extended time beyond the period of 6 months cannot be invoked in this case as the appellant has made out a case on limitation; we hold that show-cause notice demanding of duty in this case being beyond the period of 6 months, and there being no act of suppression of facts or mis-declaration etc., with intent to evade duty, the adjudication order confirming such demand with interest, and imposing penalties on both the appellants is in-sustainable and is liable to be set-aside and we do so - Both the appeals are allowed and the impugned order is set-aside.

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• 2012 (11) TMI 248
  Confiscation and penalty - Mis-declaration - clearance of the imported goods declared as “Old & Used Electrical Transformer without Oil” - bill of entry covered four containers - container was found to be “Secondary/Defective CRGO Electrical Grade Steel Strips in regular Shape & Size” - appellant wrote a letter to the customs indicating that as per their information one container was interchanged with the container of another importer M/s. Dynamo Stamping Industries at Bombay – Held that:- Interchange of containers has taken place at the hands of the supplier, without any involvement of the appellant. The mis-declaration of the goods, if at all is only a technical lapse on the part of the importer, who without even knowing about such interchange has declared the goods as per the orders placed by him - He cannot be held guilty of any mala fide mis-declaration so as to attract confiscation or penalty

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• 2012 (11) TMI 247
  Rejection of rebate claim - exports made under DEEC Advance License for annual requirement under Notification No. 94/2004-Cus., - Held that:- Since non-availment of rebate under Rule 18 of the Central Excise Rules, 2002 is mentioned as condition under Customs Notification, the appellate authority has rightly rejected the rebate claim as per law in view of the exclusion of rebate under Rule 18 of Central Excise Rules, 2002 vide condition No. ‘8’ of Notification, 94/04-Cus., - no infirmity in the orders-in-appeal – appeal dismissed

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• Corporate Laws

• 2012 (11) TMI 264
  Scheme of Arrangement - Held that:- The Official Liquidator in his report has stated that the authorized share capital of the Transferor Companies shall be merged and added to the authorized share capital of the Transferee Company. Also that no complaint has been received against the proposed Scheme from any person/party interested in the Scheme in any manner and that the affairs of the Transferor Company No. 1 & 2 do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest as per the second proviso of Section 394(1) of the Companies Act, 1956. MCA has filed his Affidavit that all the employees of the Transferor Companies shall become the employees of the Transferee Company without any break or interruption in their services upon sanctioning of the Scheme by the Court. The Scheme provide the Accounting Treatment in detail, which is in accordance with Accounting Standard issued by the Institute of Chartered Accountants of India. As the Transferor Company is a non-banking finance company and registered with the Reserve Bank of India it needs to inform Reserve Bank of India within 1(one) month from the date of order of court about amalgamation. No objection has been received to the, Scheme from any other party,thus sanction is hereby granted to the Scheme under Sections 391 and 394 of the Act with a direction to comply with all the statutory instructions as directed - this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law.

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• 2012 (11) TMI 246
  Revival of the company in liquidation - Recall the order of winding up - Held that:- In the commercial matters monetary claims can be settled at any stage. The dues of the Creditors and/or Workers of the Respondent if paid and settled, there is no question to continue with the order of winding up. The Court, in such a situation, can dispose off the Petition as it is settled out of the Court The Applicant is willing to settle the matter claims and dues in all respects and accordingly filed an additional affidavit and also brought in the Court the requisite Demand Drafts to be paid to the concerned. The report so filed on record is in no way sufficient to deny the case of recalling the order of winding up as they are concerned with the requisite payments to be made and/or paid to cover the liability and/or due/claim as recorded in the Official Liquidator's report. The Applicants, as recorded above, are willing to fulfill the same. The learned Counsel and all the parties concerned have accepted the Cheque and/or Demand Draft and have no objection of any kind, as the matter is settled. So far claim of Security Guard is concerned, as raised by the Official Liquidator, pursuance to the demand made by the concerned Agency at the relevant time, has been settled out of the Court. An Affidavit is filed accordingly. Thus a case is made out to recall the order of winding up as passed in the year 1999

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• Service Tax

• 2012 (11) TMI 291
  Erection, commissioning and installation services - demand confirmed by invoking the extended period of limitation - Held that:- The demand for the period 2005-06 to 2009-10 is confirmed by invoking the extended period by issuing a Show Cause Notice dated 18.10.2010. The audit was conducted in the year 2009 and the audit raised issue in respect of Goods Transport Service and the applicants paid tax as per the objection raised by the audit. In view of this prima facie the applicants have a strong case on the issue of time bar - in favour of assessee. Claim of Notification No. 12/2003-ST - Demand for the period 2009-10 is within the normal period of limitation and the benefit of the Notification No. 12/2003-ST is not available to applicants as he had not produced evidence by way of invoices under which the goods were sold to the service recipient - against assessee. Claim of Notification No. 1/2006-ST - The applicants availed credit of service tax in respect of the input service to the extent of about Rs. 30 lakhs, in these circumstances, the applicants have not made out a prima facie case for total waiver of the dues, thus the applicants are directed to deposit Rs One crore within eight weeks and report compliance on 03.12.2012.

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• 2012 (11) TMI 290
  Whether value of SIM cards would form value of service rendered - Appellants are engaged in the business of providing mobile telephone services – Held that:- This is not a case where the extended period of time could have been invoked for demanding service tax not paid on value of SIM cards sold - period of demand in this case is Dec. 1997 to March 2000 when the law involved in the matter was still evolving - in 2003, the GOI issued exemption Notification No. 12/2003-S.T. for value of goods sold in the course of providing service - demands time-barred

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• 2012 (11) TMI 289
  Cenvat credit - CHA services - Whether by quoting the service tax registration number in the payment challan, has the appellant committed a irreparable mistake or has the department not received the amount which they demanded – Held that:- Department has received the amount due from the appellant quoting of wrong registration number in the concerned challans is only a technical error which can be rectified at the department's end itself. Such demand by the department is perverse and unsustainable in law

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• 2012 (11) TMI 252
  Renting out of Immovable Property Services - assessee claimed benefit of SSI exemption Notification No 6/2005-ST dated 01.3.2005 - application for waiver of predeposit - Held that:- Notification No 6/2005-ST as amended vide Notification No 8/2008-ST dated 01.3.2008, grants the benefit of exemption of service tax per year, provided that the assessee has not crossed the threshold limit of rupees ten lakhs in the preceding financial year - the aggregate value of the taxable services rendered should be considered for the purpose of exemption and in the present case if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. the appellants have made out a case for waiver of pre-deposit of amounts involved and recoveries thereof stayed till disposal of appeals - in favour of assessee.

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• 2012 (11) TMI 251
  Demand of Service Tax with Interest and Penalty - Held that:- Supply of ordinary buses (not tourist vehicles) to other tour operators as well as commercial or non-commercial concerns on rent basis i.e. activity under BRA appellants are liable to service tax on that activity but providing their buses on rent to ITDC who is a tour operator and discharging service tax liability under the category of tour operator service tax cannot be levied - In absence of clarity, the issue being interpretative in nature Penalty imposed on the appellants are waived - in favour of appellant.

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• 2012 (11) TMI 250
  Demand under the Head Scientific and Technical Consultancy Services - extended period of limitation – Held that:- Appellant was engaged in the Breeding and Development, in India, of the crop seeds received from the German Company and supplying the results to the said company, for which the appellant was receiving consideration in foreign currency - activity involves export of services, and therefore the appellant was not liable to pay service tax by virtue of the exemption available to export of services under the Export of Services Rules 2005 - technology owned by the German company might have been imported by the appellant into India, but that was an independent transaction - appellant paid Service tax on the royalty connected with the import of the technology in the reverse charge mechanism - stay granted

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• Central Excise

• 2012 (11) TMI 263
  Cenvat Credit - Waiver of pre-deposit, interest thereof and penalties - Held that:- the current appellant is on the same footings, as other vendors and there cannot be any proceeding against the appellant for availing CENVAT Credit only on the ground that there was suppression of facts by Manufacturer while paying the amount through supplementary invoices - application for waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

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• 2012 (11) TMI 262
  Whether delay in issue of review order u/s 35E(1) can be condoned by Tribunal - Review order is being issue by the Committee of Chief Commissioners against the order of Commissioner within 3 months from the date of communication of order – Held that:- Following the decision in case of M.M. Rubber Co. (1991 (9) TMI 71 - SUPREME COURT OF INDIA) that power u/s 35E is a power of superintendence conferred on a superior authority to ensure that the subordinate officers exercise their powers under the Act correctly and properly and when a time limit is prescribed for exercise of this power, the same has be exercised within time limit and an order passed beyond the period prescribed u/s 35 E(3) would be invalid and ineffective. Therefore order passed u/s 35(1) held to be invalid then no question of Condonation of delay against invalid and ineffective order. Appeal decides in favour of assessee.

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• 2012 (11) TMI 261
  Waiver of pre-deposit of duty of Rs. 36,89,995/-, interest and penalty - Held that:- The applicants are manufacturing the goods having a solar module which can charge two lanterns at a time, benefit of notification no. 6/2002-CE dated 02.03.2002 can not be denied as it does not provide any condition that the exemption is available in respect of one lantern only - waived the requirement of pre-deposit for hearing the appeal and stay recovery thereof during pendency of the appeal.

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• 2012 (11) TMI 260
  Demand along with interest and penalty - Confiscation of goods – alleged that shortage of transformers were lying in the factory which was not accounted anywhere – alleged that transformers which were not accounted for in the records, were intended for clearance without payment of duty – argument of assessee is that they account these goods only when the goods are fully ready for dispatch - Held that:- Three transformers produced on 14-12-2009 may not be lead to the conclusion that there was no shortage on the date of visit - argument of assessee is that they account these goods only when the goods are fully ready for dispatch - they are not able to locate three of the 15 transformers accounted just before despatch shows that the goods have been despatched without payment of duty - time consumed in counting the 537 transformers in semi-finished stage cannot be a reason for not being able to show the 15 transformers which were accounted as finished transformers - it is justified to demand excise duty on goods found short vis-a-vis accounted stock - appeal is allowed partially by setting aside the confiscation of goods

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• 2012 (11) TMI 259
  assessable value of the goods - manufacturers were selling a part of their final products at the factory gate - such goods they were collecting a percentage of the sale price of the goods as freight and insurance - whether the amounts collected as freight and insurance is to be taken to form part of the assessable value – Held that:- A simple approach of confirming the duty on the entire amount realized towards freight stating the reason that it is on equalized basis cannot prima facie succeed - Since excise duty cannot be charged on freight collected whether charged on equalized basis or otherwise - application for waiver of pre-deposit allowed

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• 2012 (11) TMI 258
  Refund by way of credit – alleged that though the assessee was entitled to refund but there should have been an application in terms of Section 11-B of the Central Excise Act, 1944 – Held that:- Cash refund has been distinguished from the refund by way of credit. In the instant case, cash refund has not been ordered as contemplated under Section 11-B - refund by way of cenvat credit allowed

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• 2012 (11) TMI 257
  Waiver of pre-deposit - Cenvat credit - Duty demanded on the ground that at the time of removal of old and used capital goods, the appellant is required to reverse the total Cenvat credit availed by them at the time of receipt of the said capital goods – Held that:- In the case of Raghav Alloys (P) Ltd. (2009 (4) TMI 184 - CESTAT, NEW DELHI ) it was held that words "as such" in the Rule 3(4) of Cenvat Credit Rules, 2002 means that capital goods removed without putting them to use and that when the capital goods are removed after use for a period of 7 to 8 years, they cannot be said to have been removed as such – waiver of pre-deposit allowed

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• 2012 (11) TMI 256
  Whether interest on refund amount granted consequent to an order passed by Appellate Tribunal is payable to the opposite party after three months from the date of such order – Held that:- interest on delayed refunds under Section 11BB on the duty ordered to be refunded under sub-section (2) of Section 11B - on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty- refund has already been made to the assessee. The interest on refund will be made by the Assistant Commissioner accordingly - in favour of the assessee

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• 2012 (11) TMI 255
  Extended period of limitation - fraud, collusion, wilful mis-statement, suppression of facts or contravention of the provisions of the Act or the Rules made thereunder with intention to evade payment of duty – Held that:- Once the assessee availed credit under Rule 2(k) of the Rules of 2004 without entitlement it amounts to contravention of the rule with the intention of evading payment and the extended period of limitation would be available to the Revenue – In favor of Revenue

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• 2012 (11) TMI 254
  Demand of duty – extended period of limitation – alleged that valuation of the “physician samples” has to be done on the basis of pro-rata value of such goods sold by the assessee i.e. on pro rata basis of MRP of the said products as per the provisions of Rule 4 of Central Excise Valuation Rules – Held that:- It is not for the assessee to declare in their monthly returns whether the duty on such clearances of physician samples was being paid on prorata basis of value of MRP of the identical goods or otherwise but it was for the assessee to indicate the assessable value of the said goods - assessable value which has been worked out by him was correct. Having filed the monthly returns regularly with the authorities and the authorities having not raised any question on the issue of assessable value, appellant has not suppressed any material facts or vital information from the department - appeal filed by the assessee allowed - order set aside.

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• 2012 (11) TMI 245
  Removal of scrap and waste - denial of benefit of Rule 4 (5) (a) of the Cenvat Credit Rules, 2004 - application seeking waiver of pre-deposit with interest and equal amount of penalty - Held that:- The issue raised in this appeal is interpretation of Cenvat Credit Rule 4 (5) (a) of the Cenvat Credit Rules, 2004, which requires serious consideration. Otherwise also even if the argument of the respondent department is accepted, the entire exercise is Revenue neutral as the job worker would have been entitled to avail Cenvat credit of the duty paid by him and the appellant would also be entitled to Cenvat credit of duty paid on the brass wire manufactured by the job worker and returned to the appellant. Thus appellant has a prima facie case for waiver of condition of pre-deposit. Stay application is, therefore, allowed and condition of pre-deposit of duty demands, interest and penalty is waived, for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - in favour of assessee.

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• 2012 (11) TMI 244
  CENVAT credit on Special Additional Duty of Customs - Held that:- The object and purpose of levy of special additional duty under section 3(5) of the Customs Tariff Act was to provide a level playing field for domestic units. That objective will be completely negative, if the said duty is not available as credit for procurement from EOUs vis-à-vis imports. The Cenvat Credit scheme is not intended to create distortions in the market place and the law also should not be interpreted in such a way so as to create a distortion. Under sub-section (1), an additional duty of customs is levied which is equal to the excise duty levied on like articles produced in India. Under sub-section (5), another additional duty of customs is levied at a rate not exceeding four per cent of the value of the imported article so as to counterbalance the sales tax/value added tax or any other charges on a like article on its sale, purchase or transportation in India. Both the levies are “additional duty of customs” and therefore, there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub section (5) thereof - in favour of assessee.

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• 2012 (11) TMI 243
  Application for waiver of pre-deposit – Duty, interest & penalty – Credit of service tax has been taken on rent paid of the premises of the job worker – Held that:- As the job worker is not paying duty and he is working under the Notification and hence we find prima facie the applicant has not made out a case of waiver of total duty. The activity relating which the assessee wants to take credit was in relation to the business and in respect of the premises of the manufacturer. The present case as the rent is in respect of the premises of the job worker, who is an independent manufacturer and not paying duty, therefore, ratio of the decision are not applicable to the facts of the present case. In view of the above applicant failed to make out a case for total waiver of duty. Directed to deposit 25% of the duty - Stay Granted

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• 2012 (11) TMI 242
  Condonation of delay in filing of appeal u/s 35 E(4) – Delay of 63 days – Whether there is a provision to condone the delay in filing of appeal u/s 35E(4) with Tribunal - The review order u/s 35E(1) passed on 31/5/2011 was within the limitation period of 3 months u/s 35 E(3) – There was delay in filing of appeal on the basis of review order u/s 35 E(4) – Held that:- Following the decision in case of AZO DYE CHEM (2000 (7) TMI 107 - CEGAT, COURT NO. III, NEW DELHI) that Revenue's application having been filed u/s 35 E(4) after expiry of period of one month from the date of communication of the review order, is not maintainable and can not be admitted as an appeal as there is no provision for condoning the delay in filing of this review appeal u/s 35 E(4). Issue decides in favour of assessee

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• 2012 (11) TMI 241
  Waiver of pre-deposit – cenvat credit - credit in respect of the service tax paid on maintenance and repairs of windmill which is situated outside the factory – Held that:- Applicants are entitled for credit in respect of the service tax paid for maintenance and repairs of the windmill situated outside the factory as the electricity produced is used in the factory of production - applicants' own case held in favour of the applicants - requirement of pre-deposit waived – in favor of assessee

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• 2012 (11) TMI 240
  Penalty under Rule 96ZQ(5)(ii) of Central Excise Rules - Compounded Levy Scheme for man made fabrics - clandestine removal and delayed payment of duty – Held that:- Rule 96ZQ(5)(ii) was not invoked in the Show Cause Notice - if the nature of offence and the liability to penalty is explained, mere quoting of a wrong rule does not vitiate the proceedings - Respondents cannot be found fault with, if they presume that they are not being penalized for delayed payment of Excise duty in the month of July 2009, in the absence of proposal for penalty under Rule 96ZQ(5)(ii) - In the absence’ of specific charge, original adjudicating authority could not have and should not have imposed said penalty - appeal filed by the Revenue is rejected

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• 2012 (11) TMI 239
  Recall of stay - appellant submits that subsequently the order was received by them on 18-9-2009 vide which the appeals itself were disposed of. Inasmuch as the hearing was concluded on the stay petition, and the appellants were not informed about the disposal of the appeals, at the time of hearing on 15/17-7-2009, they challenged the said final order – Held that:- Since the Final order dated 4-9-2009 is a combined order waiving pre-deposit and rejecting the appeals, and since even according to the applicants only stay petitions were heard and no orders were passed on the same - with the recall of the order dated 4-9-2009, the stay petitions are required to be disposed of first as the order waiving the requirement of pre-deposit also stands recalled

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• 2012 (11) TMI 238
  Demand of duty - 100% EOU - exemption under Notification No. 4/97-C.E., - exemption was available if such yarn was for use on handlooms - alleged that they had sold such yarn for use in powerloom units and the said exemption was misused – Held that:- Duty amount demanded from them was in full discharge of the duty due from them. Demand for the balance amount was dropped and also penalty imposed on them was set aside

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• 2012 (11) TMI 237
  Cash refund of the accumulated cenvat credit – appellant’s clearances of Tannin were only for the export, they were not in a position to utilize the cenvat credit in respect of the drums - Held that:- Since the definition of ‘input’ as given in Rule 2(k) of the Cenvat Credit Rules cover the goods used as packing material, there is no doubt about the admissibility of cenvat credit in respect of HDPE drums used for packing of the final products - appellant were eligible for cash refund of the accumulated cenvat credit under the provisions of Rule 5 of the Cenvat Credit Rules

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• 2012 (11) TMI 236
  Cenvat credit - defective CPTs - earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules - department was of the view that since in the re-making of the CPTs some Cenvat credit availed parts/inputs are used and since re-making does not amount to manufacture, they would not be entitled to Cenvat credit in respect of the fresh parts used for re-making of the CPTs - Held that:- Fresh CPTs made had been cleared on payment of duty - appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods - pre-deposit waived - stay application is allowed.

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• CST, VAT & Sales Tax

• 2012 (11) TMI 292
  Reopening of Assessment under section 17D of the Kerala General Sales Tax Act – complaint of petitioner was that the assessment was completed without affording him adequate opportunity to file his objections or giving him an opportunity of hearing – Held that:- When a person complains that principles of natural justice has been violated it is also incumbent on the part of the said person to show that by such violation prejudice has been caused. Section 17D(2)(d) of the KGST Act, 1963, permits reopening of assessment completed provided fresh materials pertaining to tax have been received. Section also contemplates that such reopening shall be only with the prior permission of the Commissioner - this is a case where fresh materials were received justifying reopening as contemplated under section 17D(2)(d) of the KGST Act. In such situation the petitioner cannot complain that any prejudice has been caused to him - re-opening also should be conducted in the manner as in section 17D

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• 2012 (11) TMI 253
  A. P. General Sales Tax Act - Interest under section 33F – Held that:- Principal amount of the tax deferment benefit availed of by the petitioner was deposited - No steps were taken thereafter by the Revenue to recover the amount of interest allegedly due from the petitioner on the belated payment of the sales tax deferment liability - Such discovery was not made even when the principal amount was refunded to the petitioner on February 28, 2012 and after the filing of the writ petition. It is only when the petitioner was pleading for payment of the interest enjoined by section 33F of the 1957 Act that the Revenue appear to have discovered that the petitioner was liable to pay interest in respect of another transaction - conduct of the respondent was unfair and arbitrary - writ petition is allowed

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