TMI Tax Updates - e-Newsletter
November 9, 2013

Case Laws in this Newsletter:

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

Articles

1. OFFENCES AND PENALTIES UNDER TAMIL NADU VALUE ADDED TAX ACT, 2006

   By: DR.MARIAPPAN GOVINDARAJAN

Notifications

Central Excise

1. 07/2013 - dated 1-11-2013 - CE

Creation of six additional benches of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT)

Circulars / Instructions / Orders

FEMA

1. 69 - dated 8-11-2013

Amendment to the “Issue of Foreign Currency Convertible Bonds and Ordinary shares (Through Depository Receipt Mechanism) Scheme, 1993”

2. 70 - dated 8-11-2013

Third party payments for export / import transactions

3. 71 - dated 8-11-2013

Advance Category – I Authorised Dealer Banks

Customs

4. 43/2013 - dated 8-11-2013

Exemption from payment of SAD to parts, components and accessories etc. of Mobile Handsets under Notification No. 21/2012-Cus, dated 17/03/2012-reg.

Highlights / Catch Notes

Income Tax

• High Court Orders AO to Issue Nil TDS Certificate u/s 197 Despite Missing MAP Request for FY 2010-11.

  Case-Laws - HC : Issuance of Certificate for Nill Rate of TDS u/s 197 - AO refused to issue the certificate on the ground that the FTD of CBDT had informed that no request for inclusion of Assessment Year 201112 i.e. financial Year 201011 had been received for MAP - AO directed to issue certificate - HC
  Visit to Get Source

  ---

• Section 147 reassessment can't be used to revisit Section 10A deduction if initially ignored by the Assessing Officer.

  Case-Laws - AT : Re-opening of assessment u/s 147 of the Income Tax Act – Having failed to look into a different dimension on which the deduction u/s. 10A could be disallowed to the assessee, the AO cannot be permitted to take recourse to reassessment proceedings u/s. 147 of the Act - AT
  Visit to Get Source

  ---

• Cash Payment Rule in Section 40A(3) Doesn't Apply to Capital Item Purchases.

  Case-Laws - AT : Disallowance u/s 40A(3) - cash payment - There is no case of addition of section 40A(3) with regard to purchases that were made on account of capital items - AT
  Visit to Get Source

  ---

• Forward Contracts: Hedging or Forward Transaction for Tax Purposes If Not Exceeding Export Limits.

  Case-Laws - AT : Forward contract a ‘hedging transaction’ or a ‘Forward transaction’ - So long as the total FCs does not exceed the exports of the year plus outstanding export receivable, the FCs can constitute 'hedging transaction' - AT
  Visit to Get Source

  ---

• Tax Exemption Denied: Board's Profit Motive u/s 10(23C) Disqualifies Educational Activity Claim.

  Case-Laws - AT : Deduction u/s 10(23C) – activities of the Board for educational purposes - profit motive - huge profits and surplus income - benefit of exemption denied - AT
  Visit to Get Source

  ---

• Service tax receipts included in trading receipts but not treated as such; not part of assessee's total income.

  Case-Laws - AT : Service tax to be included as part of the trading receipts – Service tax receipt cannot be treated as a trading receipt. Hence, reimbursement of service tax cannot form part of total income of the assessee - AT
  Visit to Get Source

  ---

• Service Tax on Technical Services Fees Not Part of Total Fee, Clarifies Court Decision.

  Case-Laws - AT : Fee for technical services is for the services rendered by the assessee and service tax collected by the assessee from the recipient of services on such fee would not form part of fee for technical services - AT
  Visit to Get Source

  ---

• Service Tax on Fees Collected by Assessee: Section 44D Provisions Apply, Not Sections 28 to 44C Benefits.

  Case-Laws - AT : Treatment of service tax collected – The assessee has collected service tax on fees received - Benefit of section 28 to 44C would not be available to the assessee and the provisions of section 44D would apply - AT
  Visit to Get Source

  ---

• Court Rules TPO Cannot Use External Comparables if Internal Ones Are Available for Arm's Length Price.

  Case-Laws - AT : Transfer pricing adjustments - selection of internal comparables - TPO had no mandate to have recourse to external comparables when in the present case, internal comparables were available, which could be applied for determining the ALP - AT
  Visit to Get Source

  ---

• Assessee qualifies for tax exemption u/s 54EC by investing in a long-term specified asset within six months.

  Case-Laws - AT : Exemption under section 54EC - e assessee having invested the money within six months in long term specified asset, the benefit of exemption under section 54EC deserves to be extended to the assessee in the instant case - AT
  Visit to Get Source

  ---

• Assessee Must Prove Investment Date and Amount for Section 54F Tax Exemption on Residential Property Purchase.

  Case-Laws - AT : Exemption u/s 54F - the assessee is required to prove the actual date of investment and the amount invested towards purchase/construction of the residential house with supporting evidence - AT
  Visit to Get Source

  ---

• Deduction u/s 48 Challenged: Unusually High 30% Development Expenditure Lacks Justification in Sale Deed.

  Case-Laws - AT : Deduction u/s 48 - Development expenditure - the expenditure claimed to have been incurred by the assessees herein is about 30% and no business man would ordinarily spend such amount voluntarily unless they are compelled to do so and such compulsion should be reflected in the sale deed. - AT
  Visit to Get Source

  ---

• Truck Hire Payments Excluded from Section 194C: Not Considered Contractual Payments, No Disallowance Under Income Tax Act.

  Case-Laws - AT : Disallowance u/s 194C - Trucks taken on hire - the payment made to the outside parties do not come or fall within the purview of section 194C - AT
  Visit to Get Source

  ---

• Undisclosed Property Investments Lead to Penalty u/ss 271(1)(c) and 271AAA for Concealed Income.

  Case-Laws - AT : Penalty u/s 271(1)(c) / 271AAA - Concealed income - There was a search in assessee's case when investments in immovable properties were detected - levy of penalty u/s 271(1)(c) confirmed - AT
  Visit to Get Source

  ---

• Court Validates Revenue-Sharing Agreement: 78% to Developer, 22% to Partner; No Overriding Title Found.

  Case-Laws - AT : Sharing of rental income with the developer of land / property - transfer of income by overriding title or not - AO himself has accepted the revenue sharing basis of 78% and 22% - claim allowed - AT
  Visit to Get Source

  ---

• Court Rules Forex Losses on Debtors and Creditors Not Speculative Under Tax Law.

  Case-Laws - AT : Market to market loss - loss on account of Exchange rate fluctuation - of outstanding debtors and creditors for sale and purchase of foreign currency - speculative transaction or not - decided against the assessee - AT
  Visit to Get Source

  ---

Customs

• High Court Upholds Tribunal's Decision: Refund of Deposit u/s 27 of Customs Act 1962 is Permissible.

  Case-Laws - HC : Refund of deposit - Applicability of Section 27 of the Customs Act, 1962 - Unjust enrichment - The factual finding of the tribunal is correct - refund allowed - HC
  Visit to Get Source

  ---

• Appellant's Delay Condonation Denied Due to Evasion of COFEPOSA Detention Order and Summons Service.

  Case-Laws - HC : Condonation of delay - the appellant was absconding in view of the COFEPOSA detention order and the proclamation made for his appearance. The appellant was evading the service of summons. No case for condonation of delay is made out - HC
  Visit to Get Source

  ---

• Refund Granted for SAD Despite Invoice Error Due to Software Mislabeling LLDPE as LDPE.

  Case-Laws - AT : Refund of SAD paid - description in the sales invoices for the purpose of VAT was shown as LDPE whereas the product imported was LLDPE - mistake was due to software - grant of refund not stayed - AT
  Visit to Get Source

  ---

Service Tax

• Service Tax Implications Stayed for Vocational Training in Export-Import, Merchandising, and Retail Management Fields.

  Case-Laws - AT : Commercial Training and Coaching service - training in field of Export-Import, Merchandising and Retail Management - prima facie this activity is Vocational in nature - stay granted - AT
  Visit to Get Source

  ---

• Service Valuation Case Highlights Compliance with Notification No. 12/2003 on VAT-Paid Goods and Separate Billing Practices.

  Case-Laws - AT : Valuation - benefit of notification no. 12/2003 - goods sold - Erection, installation and maintenance services - VAT has been paid and separate bills have been raised - prima facie case is in favor of assessee - AT
  Visit to Get Source

  ---

• Appellant Claims Compliance with Service Tax After Abatement Under Notification No.1/2006-ST; Tribunal Partially Grants Stay.

  Case-Laws - AT : Abatement - works contract - appellant is claiming the bonafide belief having discharged Service Tax liability after availing the abatement under Notification No.1/2006-ST - stay granted partly - AT
  Visit to Get Source

  ---

• Court Stays Proceedings on Service Tax Implications for Advertising Payments u/s 67 Valuation Rules.

  Case-Laws - AT : Valuation - inclusion u/s 67 - amount is simply a consideration paid to the print or electronic media, as the case may be, for providing /flashing advertisements through that medium - stay granted - AT
  Visit to Get Source

  ---

Central Excise

• Compounded Levy Scheme's Advance Duty Due Date Under Scrutiny; No Revenue Loss Reported, Stay Granted on Central Excise Matter.

  Case-Laws - AT : Due Date to Submit Advance Duty - Compounded Levy Scheme – The entire issue is technical in nature, and there is no loss of Revenue - stay granted - AT
  Visit to Get Source

  ---

• CENVAT Credit Allowed for Invoices Before Input Service Distributor Registration u/r 7; No Penalty for Delays.

  Case-Laws - AT : Cenvat credit - Input Service Distributor – Under the rule 7 of CENVAT credit rules there is no bar denying the credit in respect of the invoices of the period prior to date of the registration - AT
  Visit to Get Source

  ---

• Court Allows Rebate on Automobile Education Cess Despite Exclusion in Notification; Clarifies Central Excise Rules.

  Case-Laws - HC : Automobile Excise Cess – while interpreting the education cess levied under the excisable goods allowed rebate on cess though not covered under the notification for the relevant period - HC
  Visit to Get Source

  ---

• Rebate Denied for Free Goods Justified u/r 18 of Central Excise Rules and Notification 19/2004.

  Case-Laws - CGOVT : Rebate will not be admissible since the goods are free and therefore rebate on such goods is rightly denied under Rule 18 of Central Excise Rules, read with Notification 19/2004. - CGOVT
  Visit to Get Source

  ---

• Rebate Claims u/r 18: Transportation Costs Only Up to Port of Export Are Eligible for Inclusion.

  Case-Laws - CGOVT : Rebate claim - Rule 18 - place of removal cannot be beyond the port of export - So the transportation cost, at the most up to port of export (the place of removal) can be included in the value - CGOVT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2013 (11) TMI 429
  TDS u/s 195 - Issuance of Certificate of No TDS or Nill Rate of TDS u/s 197 - DTAA between USA and India - AO refused to issue the certificate on the ground that the FTD of CBDT had informed that no request for inclusion of Assessment Year 201112 i.e. financial Year 201011 had been received for MAP - CIT refused to revise the order u/s 264 - Mutual Agreement Procedure (MAP) to approach to competent authority for resolving tax issues - taxability of income under an agreement from its overseas customers in respect of parcels/documents to be delivered in India. Held that:- it is contended that unless the application made to the Competent Authority under the MAP has been admitted, the MOU does not become operational so as to suspend the Assessment and collection of taxes. The word admitted by Indian Competent Authority only means that the Competent Authority in India has to admit i.e. acknowledge that the MAP proceedings have been invoked by tax payers through the Competent Authority in USA. It does not mean that the invocation of the MAP proceedings by Competent Authority by the tax payer has been admitted for the future consideration by the authorities. Order of CIT rejecting revision application u/s 264 is not sustainable in law as it is in the face of Article 27 of the DTAA entered into between USA and India and clause 6 (iii) of MOU entered into between Competent Authority in USA and India in respect of application made to any of them under the MAP proceedings. - Decided in favor of assessee.

  ---

• 2013 (11) TMI 428
  Whether net conversion charges' has to be included under clause (baa) of explanation to Section 80 HHC of the Act in the adjusted business profits for computation of deduction – Held that:- Reliance has been placed on the judgments in the cases of ACG Associated Capsules Pvt.Ltd. vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] and CIT vs. K.Ravindranathan Nair (2007) [2007 (11) TMI 10 - Supreme Court of India], wherein it was held that the processing charges formed part of the gross total income as an independent income like Rent, Commission, brokerage, etc. Consequently, 90% of the said sum has to be reduced from the gross total income, to arrive at the business profits – Thus, Net conversion charges included for computation of deduction u/s 80HHC – Decided against the Revenue.

  ---

• 2013 (11) TMI 427
  Re-opening of assessment u/s 147 of the Income Tax Act – Reasons to believe to be mentioned in Notice issued u/s 148 of the Income Tax Act – Held that:- While completing the assessment u/s. 143(3) of the Act, the AO has gone into the question of excluding the sum of Rs.38,51,45,781 from the export turnover on the ground that it was expenditure incurred in foreign exchange for providing technical services outside India - Stand taken by the AO in the reasons recorded before issuing notice u/s. 148 of the Act is a different facet of allowing deduction under section 10A of the Act, yet it cannot be disputed that this is a stand which the AO ought to have taken while he completed the assessment proceedings u/s. 143(3) of the Act initially. Having failed to look into a different dimension on which the deduction u/s. 10A could be disallowed to the assessee, the AO cannot be permitted to take recourse to reassessment proceedings u/s. 147 of the Act - Assuming there was a failure on the part of the AO in this regard, the appropriate action can only be under section 263 of the Act - Initiation of reassessment proceedings is not valid – Decided in favor of Assessee.

  ---

• 2013 (11) TMI 426
  Disallowance u/s 40A(3) of the Income tax act - Sweeping statements have been made that most of these payments are exceeding Rs. 20,000/- - Held that:- Authorities below have not identified the payments which were exceeding Rs. 20,000/- which have been said to be incurred in contravention of section 40A(3) - As regards, the other expenditure on electric items & air conditioners, considerable cogency in the assessee’s counsel submission that these related to capital purchase and hence, cannot be treated as payments in violation of section 40A(3) - There is no case of addition of section 40A(3) with regard to purchases that were made on account of capital items. However, for making any addition in this regard it was incumbent upon the lower authorities to make out the detailed list of expenditure which was found to be in violation of section 40A(3) – Issue remanded to the file of AO for fresh examination whether the cash payments were made out of the books of accounts. Rejection of books of accounts u/s 145(3) of the Income Tax Act – Addition of Rs.1.5 Crores – Held that:- Assessee has given detailed explanation regarding the books of accounts and stocks records maintained. Assessee has asserted that AO never asked about the books of accounts. These submissions were before the LD. CIT(A) but were not verified by the LD. CIT(A). Without considering these submissions, LD. CIT(A) has accepted the AO’s finding that books of accounts were not properly maintained - Tribunal in the order for A.Y. 2008-09 has also noted that assessee has maintained proper books of accounts and the system of accounting was under the ERP system - Assertions by the AO that books of accounts and stocks were not properly maintained is not sustainable and hence, this reason for rejection of books of accounts is accordingly not sustainable. AO has rejected the books of accounts u/s. 145(3) of the I.T. Act which is without any basis or justification or even without examination of the books of accounts. While making the lumpsum addition of Rs. 1.5 crore, the AO has not given the basis or justification of the same - No valid basis for addition of Rs. 1.5 crore has been pointed out. It is a pure guess work without any calculation. AO has observed that addition of Rs. 1.5 crore was made to cover up all possible leakages and hence, lumpsum addition of Rs. 1.5 crore was made. Thus, no basis or justification to arrive at the amount of addition – Decided in favor of Assessee.

  ---

• 2013 (11) TMI 425
  Deduction u/s 80IB of the Income Tax Act Disallowance u/s 80IB for not obtaining the OC /CC before a particular date Held that:- First sanction to construct the project was received on 26.12.2003 i.e. before 1.4.2004.Therefore, amendment brought in the section was not applicable to the facts of the present case - Secondly, sub-section, nowhere stipulates that 20% area should to increased for computing the built up area of a residential unit Decided in favor of Assessee. Reliance has been placed on the decision of Karnataka High Court in the case of G.R. Developers [2012 (7) TMI 91 - KARNATAKA HIGH COURT ],wherein it was held that a valid approval is obtained and the building is constructed in all respects prior to 1-4-2005 and the substituted provision of built up area inserted in sub-section (14) of the section 80IB is held to be applicable retrospectively, the assessee would not be entitled to the benefit of tax exemption, as the assessee effects sales subsequent to 1-4-2005.Such an interpretation not only would be absurd but would have disastrous consequences so far as the assessee is concerned. Therefore, it cannot be said that such was the intention of the legislature while bringing in the substitution. So, one should keep in mind the object behind enacting this provision, namely, to bring in investments and to encourage the infrastructure development of middle income housing projects. If the aforesaid provision is held to be retrospective in nature, it would negative the object of the said provision. It is settled law that the Courts have to harmonize these provisions and interpret the same in a manner to achieve the object of the legislature than to distress the said object. In that view of the matter, the definition of built-up area as inserted in sub-section (14) of section 80-IB by Finance (No.2) Act of 2004, which came into effect from 1-4-2005, cannot be held to be retrospective; It applies only to such housing projects, which are approved subsequent to 1-4-2005 Decided against the Revenue. Disallowance of entire deduction under section 80IB of the Act because area of 10 flats was more than the area prescribed by the Act Held that:- Reliance has been placed on the judgment of the Madras High Court in the case of Viswas Promoters (P) Ltd [ 2012 (11) TMI 1117 - MADRAS HIGH COURT] , wherein it was held that within a composite housing project, where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area - Considering the above even if claim was to disallowed it should have been restricted to ten flats only Decided against the Revenue. Deduction u/s 80IB - If the size of the flats was more than 1000 Sq.ft., assessee was entitled to claim the deduction because the housing-project-in-question was 25 Kilometers away from the City of Mumbai Held that:- Bombay Municipal Corporation Act defines certain words used in the Act. Similarly, Bombay General Clause Act, 1904, The Greater Bombay Laws and Bombay High Court (Declaration of limits) Act 1945, and Maharashtra Land Revenue Code 1966 have also defined the word City of Mumbai - Words City of Bombay do not convey the same meaning as the words Greater Mumbai or Greater Mumbai Municipal Corporation. If the distance between City of Mumbai and location of the project was more than 25 Kms by road, the limit of size of the residential unit will change. If the distance is held to be more than 25 Kms., permissible size of the flats would be 1500 sq ft. Therefore, in the interest of justice, matter should be remitted back to the file of the FAA for fresh adjudication.

  ---

• 2013 (11) TMI 424
  Forward contract a ‘hedging transaction’ or a ‘Forward transaction’ - Assessee is engaged in the business of trading and manufacturing of rough and polished diamonds and filed the return of income declaring the total income of Rs. 35,29,042/- - Assessing Officer made addition of Rs. 4,69,42,680/- - Assessee being an exporter, made export of diamonds and outstanding receivable in foreign currency and entered into forward contracts with the Banks to hedge the exchange loss if any - The total gain on account exchange difference on exports is Rs. 679.75 lacs on account of both actual realization and revaluation of outstanding receivables. The loss incurred on account of forward contracts to safeguard the outstanding receivables is Rs. 469.43 lacs. Accordingly, assessee set off the loss against the said gain and credited the net amount/ profit of Rs. 210.14 lacs to the profit and loss account – Held that:- These FCs are integral part or incidental to the core business of export of diamonds or the outstanding receivables of export proceeds, in principle, the impugned FCs constitute 'hedging transaction' and not the 'speculative contracts' - Banks do not entertain FCs of speculative nature with the customers like the assessee, the exporter - So long as the total FCs does not exceed the exports of the year plus outstanding export receivable, the FCs can constitute 'hedging transaction' Disallowance of forward exchange loss of Rs. 4,69,42,680/- claimed by the appellant in the course of business incurred due to fluctuation in foreign exchange for which the appellant had booked forward contracts with the bank against their export receivables treating the same as speculation transaction & not hedging transactions - Three subdivisions of the impugned losses based on the timing of the cancellation of the FCs – Held that:- Loss on Cancellation of Matured FCs amounting to Rs 4,14,88,805/-relates to the FCs cancelled or terminated on or after the due date. In other words, the FCs booked as integral part of the export invoices lived its booking period in full and they were either terminated by the Bank on or after due date of maturity date of the contract as the actual realization were not received in time. These are not premature cancellations by the assessee and therefore, the said loss of Rs 4,14,88,805/-, being related to the FCs which are integral or incidental to the exports of the diamonds, should be allowed as business loss in view of the binding High Court or Tribunal decisions/judgments in the case of D Kishore kumar and Co [2005 (3) TMI 699 - ITAT MUMBAI ]. Loss on Cancellation of Pre-matured FCs is the other segment of loss relates to the FCs cancelled prior to the date of maturity - It is a settled issue that the assessee has to discharge the onus on why he had to resort to premature cancellation. In this case, the explanation of the assessee revolves around the fact that the maturity of date of some of such premature cancelled FCs fell during the week-end days and therefore, the assessee cancelled such FCs three days prior to the due date. Related loss is quantified at Rs 42,18,940/- - This part of the ground of the assessee is allowed as above without going into the alternate arguments relating to "damages" – Decided in favor of Assessee. Loss of premature cancellation of FCs relates to the FCs cancelled prior to longer than three days - Held that:- Assessee needs to answer as to why it went for premature termination and the onus is on the assessee as per the ratio of the SC judgment in the case of Joseph John (1967 (5) TMI 9 - SUPREME Court). Further, during the proceedings before us, on this issue, Ld Counsel for the assessee put forwarded various new arguments describing the impugned loss as 'damages' payable to the Banks for breach of contracts or settlement of the contracts. These aspects are not emanating from the orders of the lower authorities. - matter remanded back on this issue.

  ---

• 2013 (11) TMI 423
  Deduction u/s 10(23C) – activities of the Board for educational purposes - profit motive - huge profits and surplus income - gross receipts of the assessee for the assessment year under appeal was more than Rs. 1 crores – Held that:- Assessee had never been financed by the Government during the assessment year in appeal and other years. It was also found that assessee has been generating its own income from sale of books and on account of registration fees - Aid from the State Government to the assessee is nil and it was wrongly mentioned by the Assessing Officer in the assessment order that the assessee Board is financed and controlled by the state government - In the assessment year under appeal, the assessee Board has transferred and amount of Rs. 5 crores to the Himachal Pradesh Government from its own income. It was also noted from the record that assessee Board is not directly controlled by the State Govt. but is governed under the Separate Himachal Pradesh Board of School Education Act, 1968 - Assessee does not exist solely for educational purposes. It is in fact earning huge profits and has surplus income and profits - Assessee did not have fulfill the terms and conditions of section 10(23C)(iiiab) of the I.T. Act - No evidence or material has been filed on record to contradict the above finding of fact – Decided against the Assessee.

  ---

• 2013 (11) TMI 422
  Selection of companies as comparables by the TPO – Held that:- The issue of comparability of Infosys to companies which are merely captive service provider is no longer RES INTEGRA as different benches of the Tribunal have held that Infosys being a giant company and into diversified activities cannot be treated as comparable - The fact that Avani Cimcon Technologies Ltd. is earning revenue from product development - The aforesaid company since is involved in software product development cannot be treated as comparable with companies which are providing only software development services and directed exclusion of the said company – As regards, Ishir Infotech Pvt. Ltd., is not a comparable company as it has failed both on account of employee cost filter as well as related party transaction filter – As regards, Lucid Software Ltd. and Megasoft Ltd., relying upon the order passed by the coordinate bench in case of Intoto Software India (P.) Ltd. [2013 (10) TMI 599 - ITAT HYDERABAD], it has been denied as being considered as comparables – As regards, Tata Elxi Ltd., relying upon the judgment of Mumbai Tribunal in the case of Telcordia Technologies India (P.) Ltd. [2012 (6) TMI 388 - ITAT MUMBAI], it was held that Tata Elxsi is engaged in development of niche product and development services, which is entirely different from the assessee company. Deduction u/s 10A of the Income Tax Act - Chennai and Hyderabad units should be considered as two distinct and separate units for benefit u/s 10A - It was submitted that benefit u/s 10A has to be granted separately for both the units as each of the unit has separate source of income – Held that:- Reliance has been placed on the assessee’ own case [2013 (11) TMI 1311 - ITAT HYDERABAD] - Chennai Unit is not formed by reconstruction of the Hyderabad unit, but, they ultimately held that Chennai Unit and Hyderabad Unit are not two distinct and independent units - Following the decision of the coordinate bench, allowed the ground of the assessee and direct the AO to allow benefit u/s 10A of the Act to the Chennai Unit – Decided in favor of Assessee. Whether there should be rejection of reimbursement of expenses to Virtusa Corporation, USA of an amount of Rs. 62,71,942/- from the export turnover while computing deduction u/s 10A of the Act – Held that:- Reliance has been placed on the decision of the Hon'ble Mumbai High Court in case of CIT v. Gem Plus Jewellery (India) Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT], wherein it has been held that if communication charges, insurance charges and reimbursement of expenses attributable to the delivery of computer software outside India, are to be reduced from the export turnover then the same should as well be reduced from total turnover while computing deduction u/s 10A of the Act - Following the aforesaid ratio laid down in the said decisions, AO directed to reduce the amount of Rs. 62,71,942/- both from the export turnover as well as total turnover while computing deduction u/s 10A of the Act – Decided in favor of Assessee.

  ---

• 2013 (11) TMI 421
  Service tax to be included as part of the trading receipts – Held that:- Reliance has been placed upon the judgment in the case of ADIT v Haldor Topsoe A/c 2013 (11) TMI 419 - ITAT MUMBAI], wherein it was held that reimbursement of service tax could not form part of taxable income of the assessee. Fee for technical services is for the services rendered by the assessee and service tax would not form part of fee for technical services. That service tax is not expenditure incurred by the assessee and it is a statutory levy on the person who avail services from the assessee – Service tax receipt cannot be treated as a trading receipt. Hence, reimbursement of service tax cannot form part of total income of the assessee – Relying upon the above judgment, the issue has been decided in favor of Assessee.

  ---

• 2013 (11) TMI 420
  Rectification u/s 154 of the Income Tax Act – Held that:- Once the income is from the tea grown by the assessee, as is the settled legal position in view of Rule 8 of the Income Tax Rules 1962, only 40% of the same can be taken as nonagricultural income - It is elementary that what can be rectified u/s.154 is a mistake which is glaring, unambiguous and incapable of two views being taken. Therefore, proceeding on the basis that income of Rs.29,42,802/- was trading income, for which no support is available from material on record, would not be possible under the inherently limited scope of section 154, even if that be so - Assessment was completed under section 143(3) and yet no material was brought on record to support such a finding - In this view of the matter, decided against the Revenue.

  ---

• 2013 (11) TMI 419
  Whether amount of service tax is part of ‘Fees for Technical Services’ – Held that:- Following Veolia Ea-Compagnie [2013 (11) TMI 418 - ITAT CHENNAI] - Reimbursement of service tax could not form part of taxable income of the assessee - Fee for technical services is for the services rendered by the assessee and service tax collected by the assessee from the recipient of services on such fee would not form part of fee for technical services – Decided against Revenue.

  ---

• 2013 (11) TMI 418
  Treatment of service tax collected – The assessee has collected service tax on fees received - Held that:- Following Chowringhee Sales Bureau (P) Ltd. vs CIT [1972 (10) TMI 4 - SUPREME Court] - Reimbursement of service tax cannot form part of the taxable income of the assessee - Fee for technical services is for the service rendered by the assessee - Service tax is not an expenditure incurred by the assessee - It is a statutory levy on the person who avail the service from the assessee - Benefit of section 28 to 44C would not be available to the assessee and the provisions of section 44D would apply – Decided in favour of assessee. Reimbursements towards car hire charges, international air tickets and equipments procurement – Held that:- Reimbursement of car hire charges, international air tickets and equipments procurement expenses would not be grossed to tax at the flat rate of 20% - The amount being reimbursement expenses earlier incurred by the assessee would not constitute assessee’s income by way of fees for technical services – Following ACIT vs Real Image Media Technologies (P) Ltd [2007 (12) TMI 263 - ITAT MADRAS-C] – Decided in favour of assessee. Exemption by the assessee u/s 10(6A) – Income-tax paid by service receiver on the remuneration paid to the assessee for providing consultancy - Held that:- The definition of ‘infrastructure facility’ can be imported in section 10(6A) - The assessee had furnished consultancy to Water Supply Project which is included in ‘Infrastructure project’ as per Explanation 2 to section 80IA(4) – Following Louis Berger International Inc. [2010 (6) TMI 524 - ITAT, HYDERABAD] - Development of infrastructure falls within the Industrial Policy of Government of India - Approval of the Government is not a pre-requirement for claiming exemption u/s 10(6A) – Fee received by the assessee towards technical services/ consultancy would fall under Article 12 and not under Article 7 - Decided in favour of assessee.

  ---

• 2013 (11) TMI 417
  Transfer pricing adjustments - selection of internal comparables - Held that:- The assessee was justified in undertaking internal bench marking analysis on stand alone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm's length price in respect of international transactions undertaken with the associated enterprise. It was further concluded that the TPO had no mandate to have recourse to external comparables when in the present case, internal comparables were available, which could be applied for determining the arm's length price of international transactions with AEs. - Decision in Assistant Commissioner of Income-tax, Circle 3(1), New Delhi Versus Birla Soft Ltd. [2011 (1) TMI 406 - ITAT, DELHI] followed - matter restored before AO - Decided in favor of assessee. Deduction / Exemption u/s 11A - AO was of the opinion that this new unit was not altogether different unit but it was the extension of the existing unit as both the units were situated in the same building and doing same business. - Held that:- G-GDC STP unit situated at third floor, Sector 29, Noida is to be treated as separate unit and, accordingly, deduction u/s 10A was allowable. Deduction is available under section 10A - Losses of STP units to be set off against income from other units on the ground that STP units were exempt u/s 10A of the Act while profits of non STP units were taxable as normal business income – Held that:- Reliance has been placed upon the case of Hindustan Unilever Ltd. v. DCIT [2010 (4) TMI 206 - BOMBAY HIGH COURT], wherein it has been held that the losses of the unit eligible for deduction u/s 10B of the Act were held allowable to be set off against profits of the business – Further, reliance has been placed upon the Special Bench decision of ITAT, Bench 'C' Chennai (SB) in the case of M/s Scientific Atlanta India Technology Pvt. Ltd. vs. ACIT [2010 (2) TMI 658 - ITAT, CHENNAI], where it has been held that even though sec. 10A falls under Chapter III, it has been mentioned in the section itself that what is to be given is only a deduction and not exemption after amendment made with effect from 1st April, 2001. It was further held therein that the intention of this legislature w.e.f. 1st April, 2001 was to give only deduction and not exclusion from total income – In the instant case, matter restored to the file of A.O. for his fresh computation by treating the provisions of sec. 10A to be in the nature of deduction provision and not exemption – Appeal allowed for statistical purpose - Decided in favor of Assessee. Deduction u/s 10A for the income earned during the notice period – Sum of Rs. 35,52,781/- was received by assessee on account of notice pay and deduction u/s 10A was claimed – Held that:- amount received towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A shall be allowed accordingly - Assessee was entitled for deduction u/s 10A in respect of amount received on account of Notice Pay – Decided in favor of Assessee.

  ---

• 2013 (11) TMI 416
  Exemption under section 54EC - Held that:- developer was held to have taken possession on account of the irrevocable licence granted to him to enter upon the property whereas in the instant case no such finding was given by the tax authorities. In fact the learned CIT(A) opined that the date of handing over of possession in the instant case was 20.09.2005, and based on this factual premise it has to be held that the transfer had taken place in the previous year relevant to A.Y. 2006-07. Reckoned from the date of possession, i.e., 20.09.2005, the assessee having invested the money within six months in long term specified asset, the benefit of exemption under section 54EC deserves to be extended to the assessee in the instant case - Following decision of Chaturbhuj Dwarkadas Kapadia Versus Commissioner of Income-Tax [2003 (2) TMI 62 - BOMBAY High Court] - Decided in favour of assessee.

  ---

• 2013 (11) TMI 415
  Exemption u/s 54F - Investment towards purchase of land and construction of house property - Held that:- discrepancies with regard to the exact amount of investment made by the assessee towards purchase/construction of property has not at all been reconciled by the assessee before the revenue authorities. Further, the assessee is also required to explain why and under what circumstances the agreement executed with M/s Dhatri Constructions Pvt. Ltd. on 19/03/2008 was not acted upon and M/s Dhatri Constructions Pvt. Ltd., as claimed by the assessee transferred the amount of Rs. 64 lakhs to Fima Properties Ltd., Hyderabad. Once the assessee demonstrates that the consideration received on transfer has been invested either purchasing a residential house or in constructing a residential house even though the transactions are not complete in all respects and as required under the law that would not disentitle the assessee from availing benefit u/s 54F of the Act. Even investment made in purchasing a plot of land for the purpose of construction of a residential house has been held to be an investment satisfying the conditions of section 54F of the Act. Though there cannot be any dispute with regard to the above said proposition of law, the assessee is required to prove the actual date of investment and the amount invested towards purchase/construction of the residential house with supporting evidence. - Matter restored back for reconsideration - Decided in favour of assessee.

  ---

• 2013 (11) TMI 414
  Disallowance u/s 37 - Cash expenses and bills and voucers - CIT deleted disallowance - Held that:- The disallowance of expenses on estimated basis on the ground that the same was not supported by proper bills and vouchers is justified but it is a settled legal position that disallowance has to be made on proper basis. In this case the AO had made Ad hoc disallowance without giving any basis for computing the disallowance. No comparison has been made with similar expenses incurred in the last year in assessee’s own case nor any other comparative case has been cited to prove that expenses were excessive this year - CIT (A) has also deleted the disallowance on the account of professional fees. The professional fees had been paid to tax consultants, advocates and architects on which tax had been deducted at source - no infirmity in the order of CIT (A) that there was no justification for disallowance of such expenses. In relation to other disallowances of expenses which is in dispute such as commission, site expenses etc., no supporting material was submitted to justify such huge ad hoc disallowance - Decided against Revenue.

  ---

• 2013 (11) TMI 413
  Deduction u/s 48 - Development expenditure - Onus of proving nature of exdpenditure - Held that:- Suffice it to say that the assessing officer categorically observed that the sale deed do not contain any clause, whereby development of land was required to be carried out by the assessees as part of the package of sale. Section 48(i)&(ii) provides for mode of computation of capital gains whereby, an assessee is entitled to compute the capital gains taxable under the Act by deducting, from the full value of the consideration received, the following amounts i.e. (a) expenditure incurred wholly and exclusively in connection with such transfer and (b) the cost of acquisition of the asset and the cost of any improvement thereto - In respect of any claim of expenditure, the initial onus is upon the assessees to prove that such expenditure was incurred wholly and exclusively in connection with such transfer. In the instant case, the assessing officer repeatedly asserted that development is not a pre-condition for sale - the expenditure claimed to have been incurred by the assessees herein is about 30% and no business man would ordinarily spend such amount voluntarily unless they are compelled to do so and such compulsion should be reflected in the sale deed. Similarly, even if the land had to be developed/filled in, nobody would be willing to incur generously 30% of the sale price that too without any agreement, either with the purchaser or with the developers. It is also necessary to notice that the developers, being business men, would not ordinarily take up such contracts without anything in writing and without any prior payment. The entire surrounding circumstances plainly go to prove that the assessing officer has correctly noticed the facts and arrived at a conclusion that development expenditure cannot be allowed as deduction u/s 48 of the Act. Merely because he has drifted from his main observations to estimate expenditure on adhoc basis and to generously allow the same as deduction the Ld. CIT(A), whose powers are co-terminus with that of the assessing officer, should not remain as a mute spectator of the game - Therefore, matter is restored back to CIT - Decided in favour of Revenue.

  ---

• 2013 (11) TMI 412
  Retrospective operation of section 40(a)(ia) tax deducted at source and paid before the due date of filing of the return of income - Held that:- Supreme Court in case of Allied Motors Pvt. Ltd. Vs CIT(1997 (3) TMI 9 - SUPREME Court) and in case of CIT vs Alom Extrusions Ltd.(2009 (11) TMI 27 - SUPREME COURT) has already decided that the aforesaid provision has retrospective application - Decided in favour of assessee. Disallowance u/s 194C - Trucks taken on hire - Work u/s 194C - Held that:- Mumbai Tribunal in the case of Bhail Bulk Carriers v ITO [2012 (4) TMI 230 - ITAT MUMBAI] has held that, Once the Commissioner (Appeals) has accepted the fact that the outside tank owners do not had any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus, the payment made to the outside parties do not come or fall within the purview of section 194C, as the carrying out any work indicates doing something to conduct the work in pursuance of contract and in instant case, it was solely between appellant and its principal. - There is nothing on record to suggest that the above order of the Mumbai Tribunal is brought to the notice of the learned CIT(A) - matter remanded back for reconsideration.

  ---

• 2013 (11) TMI 411
  Penalty u/s 271(1)(c) / 271AAA - Concealed income - Held that:- There is no dispute that assessee had not filed returns of income within the time period allowed under Section 153(1) of the Act. The time period allowed under Section 153(1) is two years from the end of relevant assessment year. This is the time given for passing an assessment order. For the impugned assessment years, it is an admitted position that assessee had not filed any return of income within two years from the end thereof - Assessee had not filed here return within the time allowed under Section 139(1) or the extended time mentioned in Section 153(1) of the Act. There was a search in assessee's case when investments in immovable properties were detected. In the returns filed subsequent to the search, assessee disclosed income to cover the source of such investments - The amounts so shown by her as 'other income' was not a part of her regular accounts. Hence such amounts squarely came within the purview of concealed income - Sub-section (1) of Section 271AAA clearly mentions that said Section applies only to a specified previous year. Explanation (b) defines what is the specified previous year. Both the impugned assessment years does not fall within such definition. Relevant previous years were neither the year in which search was conducted, nor was an year to which time for filing return under Section 139(1) was still there. Decisions relied on by the ld. CIT (Appeals) to give relief to the assessee were entirely on different fact situation and not relatable to any case where Explanation 5A to Section 271(1) applied - Decided in favour of Revenue.

  ---

• 2013 (11) TMI 410
  Diversion of income by overriding title or application of income - loan was discharged in pursuance of the decree order of the Jurisdictional High Court - on the basis of consent agreements between assessee and PGFICL, decrees of the High Court, development agreement with Piramal Holdings Ltd., final sale proceeds and treatment of the income by the assessee, submitted that the assessee has not received the amount of Rs. 225 crores at all, as the same was given directly by the seller to the PGFICL in terms of decree passed by the Hon'ble Jurisdictional High Court, therefore, it is a clear cut case of diversion of income by overriding title. - Held that:- For allowability of business deduction or loss, it has to be seen, whether the same business has been continued i.e., whether there is any inter-connection, inter-lacing, inter-dependence and unity of control in the two businesses by way of existence of common management, common business organisation, common business administration, common funds and common place of business. Even if one business is closed without affecting the conduct of other business, there would still be strong indication that the two business construed the same business. However, this aspect has not be examined either by the Assessing Officer or by the Commissioner (Appeals) at all - decision in the case of CIT v/s Prithvi Insurance Co. Ltd. [1966 (10) TMI 49 - SUPREME Court] followed - matter remanded back for reconsideration. Disallowance of value of stock-in-trade - conversion of land into stock-in-trade - joint development agreement - The assessee had received a sum of Rs. 32 crores for assigning the development rights on the said land - Held that:- Ideally, once the assessee has received a sum of Rs. 32 crores from Piramal Holdings Ltd., the assessee has as developer should have adjusted the amount against the cost and should have taken the amount to the Balance Sheet as reduced work-in-progress rather than showing it as business income. In any case, this claim of deduction has to be allowed on the peculiar facts of the assessee’s case. The findings and the conclusion drawn by the learned Commissioner (Appeals) as well as the Assessing Officer cannot be upheld for this reason alone. In fact, this is merely an arithmetical adjustment of accounts so as to disclose the correct profit from the sale of stock, otherwise either the income offered and assessed in the assessment year 2004-05 is incorrect or the claim for reduction in the stock of Rs. 8,20,25,000 is incorrect. Both cannot be held to be incorrect simultaneously because it will leading to a double jeopardy to the assessee - Decided in favour of assessee. Sharing of rental income with the developer of land / property - transfer of income by overriding title or not - Held that:- AO himself while treating the income from sales, has accepted the revenue sharing basis of 78% and 22%. Therefore, this principle and ratio was to be applied on rental income also. The findings of the CIT(A) that the entire development agreement is a kind of financial arrangement for obtaining the loan is wholly erroneous because the sum of Rs. 32 crores, which was paid by the developers to the assessee at the time of entering the development agreement, has been shown as business income in the assessment year 2004-05, which has been assessed and accepted as such by the Department. Thus, the said reasons given by the learned Commissioner (Appeals) cannot be upheld that this was some kind of loan / finance arrangement - Decided in favour of assessee.

  ---

• 2013 (11) TMI 409
  Estimation of income from works contract business - rejection of books of accounts - Disallowance of freight charges u/s 40(a)(ia) - TDS deduction u/s 194C - Held that:- CIT(A) has accepted the contentions of the assessee that the profit from sub-contract works will be lower than the main contract works and accordingly maintained a difference of 2% in the rate of profit estimated for main contract works and sub-contract works. There should not be any dispute that the income estimated for a particular assessee would depend upon the facts and circumstances prevailing in that case and such kind of estimates cannot be generalized or standardised - assessee himself has declared a profit of 5.20% after depreciation on the combined Gross receipts - assessee deserves further reduction in the estimate made by the Ld. CIT(A) in view of the huge depreciation benefit available to the assessee - the matter would meet the ends of justice if the profit from main contract works is estimated @ 6.5% of the relevant net contract receipts. Since the Learned CIT(A) has maintained a difference of 2% between the income estimated for main contract works and sub-contract works, we also direct the assessing officer to estimate the income sub-contract works @ 4.5% of the relevant net contract receipts - Decided in favour of assessee. Business income or capital gain - Income from other sources - Interest on Fixed deposit receipts - Held that:- facts were that on account of delay in payment of contract receipts, interest was paid additionally with reference to such delayed receipts, and, therefore, such interest was only accretion to the assessee’s receipts from the contract works and was attributable to and incidental to the business carried on by it. There being a direct nexus between the contract receipts and interest thereon in the said case, the interest income was held as business income, whereas in the appellant’s case, the interest income did not flow directly from the contract receipts, and, therefore, it cannot be said that the interest income had a direct nexus with such receipts, and, accordingly, it cannot be treated as business income of the appellant. Interest earned on bank deposits has to be assessed separately, even if the income from contract works is estimated - Following decision of CIT Vs. Govinda Choudhary and Sons [1992 (4) TMI 8 - SUPREME Court] - Decided against Assessee. Disallowance prescribed under section 40(a)(ia) is a technical disallowance, which shall be attracted only if there is a failure on the part of the assessee to deduct and pay the TDS amounts as per the relevant provisions of the Act. It is also further seen that the expenses so disallowed can be claimed as expenditure in the year in which such failure is made good. The modalities prescribed in sec. 40(a)(ia) would show that the disallowance prescribed in that section is not an absolute disallowance to be made once for all, but it is only deferment of allowance of expenditure for non-compliance of TDS provisions. Where as, in the case of disallowances prescribed in other provisions like sec. 40A(1), 40A(3) etc., they are absolute disallowances, which are not allowed as expenses at all in computing the business income. Further such disallowances shall apply uniformly to all assessees - disallowance can be made under section 40(a)(ia) of the Act independently, even if the business income is estimated after rejecting the book results.

  ---

• 2013 (11) TMI 408
  Disallowance u/s 36 - Interest expenditure - proportionate disallowance on the ground that possession of the premises had not been handed over to the assessee till the end of the AY - assessee contended that he has used interest free funds for purchase of property - Held that:- neither before the AO nor before the FAA assessee had proved that interest free funds were given out of appellant’s own funds out of internal accruals. - AO and FAA had rightly disallowed the interest payment. But, we are of the opinion that there is need for recalculating the exact amount of interest disallowance. Matter is restored back for recalculation of interest disallowance - Decided against the assessee. Market to market loss - loss on account of Exchange rate fluctuation - of outstanding debtors and creditors for sale and purchase of foreign currency - speculative transaction or not - Held that:- assessee was not dealing in Foreign Exchange, therefore transactions entered into by it in Foreign Exchange cannot be held to be hedging transactions. Assessee is dealing in diamonds and FC entered into only for diamonds would have been covered by the proviso (a) to the section 43(5)of the Act. As held by the Hon’ble High Court of Calcutta in the matter of Gourepore Co. Ltd.(1980 (11) TMI 23 - CALCUTTA High Court) onus was on the assessee to prove that the transactions in question were not of a speculative nature. We are of the opinion that the assessee has failed to discharge the onus cast upon him by the statute. - Decided against assessee.

  ---

• Customs

• 2013 (11) TMI 448
  Refund of deposit - Applicability of Section 27 of the Customs Act, 1962 - Unjust enrichment - Held that:- Additional Solicitor General submits that as per the order passed by the adjudicating officer as well as the appellate authority, certificate of the Chartered Accountant was not filed. The said observations are factually incorrect because in the grounds of appeal preferred before the first appellate authority the respondent had referred to certificate dated 18th January, 2006 of M/s Obhrai Kataria and Associates, Chartered Accountants. Along with the certificate they had also filed copy of the balance sheet that tax of Rs. 5 crores had not been passed on to the buyers and, therefore, the principle of unjust enrichment was not applicable. The factual finding of the tribunal is correct - The deposit made along with interest will be released to the respondent within ten days - Decided against Revenue.

  ---

• 2013 (11) TMI 447
  Revocation of CHA Licence - charges under Article 13(a) of the CHALR 2004 - Whether the CESTAT is right in law in holding that the charges under Regulation 13(a) of the CHALR, 2004 stand not proved, even after noting that during the course of investigation it was found that the authorization was fraudulently obtained - Held that:- Tribunal completely ignored the fact that the Revenue realised the fraudulent authorisation only during the investigation, but the fact that the authorisation was genuine would have been in the knowledge of the respondent or in any case if the respondent had made the necessary enquiry of verifying the original certificate of IEC Number issued by the DGFT depicting the photograph of the proprietor then in such a case the fact that the person seeking to import the goods was not a genuine importer would have come to the knowledge of the CHA at the time of the import. This obligation was cast upon the importer in terms of Regulation 13(a) of the CHALR, 2004. Interim order - revenue directed that the CHA license is made available to the respondent till such time as the Commissioner of Customs decides the issue. Thus there is a contributory default on the part of the both. While in this case the Enquiry Officer as well as the Commissioner of Customs had come to a specific finding that the respondent had not done necessary verification which he was obliged to do while acting as CHA which led to a forged authorisation being used for the import of the goods. Thus allowing an importer to import goods - Therefore, order of the Tribunal as well as the Commissioner of Customs needs to be set aside and the matter be remanded to the Commissioner of Customs for a fresh determination. This is so particularly in view of the fact that the verification of the IEC Code and explanation of the Banker may be necessary to establish that the respondent CHA acted for an unauthorised person - Decided in favour of Revenue.

  ---

• 2013 (11) TMI 446
  Waiver of recovery - Issue of interim order - Process of making export - Irreparable injury and loss - Held that:- if the appellant deposits a sum of Rs. 3,00,000,00 in cash and furnishes security other than cash or bank guarantee to the extent of Rs. 9,00,000,00 to the satisfaction of the respondent no. 2, the recovery against the appellant shall not be pressed in the meantime - Stay granted partly.

  ---

• 2013 (11) TMI 445
  Condonation of delay - Status of order not informed - Change in address - Appeal filed with a gap of 10 years from the date of the order of adjudication - Held that:- several attempts were made to serve the appellant by registered post. The operation reports which have been referred to in the order of the Tribunal indicated that the appellant was absconding since there was a COFEPOSA detention order against him, pending execution during the period. The Additional Chief Metropolitan Magistrate, Mumbai by an order dated 28 September 2001 required the presence of the appellant on 21 December 2001 by cancelling the bail issued to him earlier. Eventually as required under Section 153(b), a copy of the order was displayed on the notice board of the Customs house. The Tribunal was under the circumstances justified in coming to the conclusion that service was duly complete as required under Section 153 and if the appellant had changed his address, it was his duty to inform the authorities. As a matter of fact, the appellant was absconding in view of the COFEPOSA detention order and the proclamation made for his appearance. The appellant was evading the service of summons. No case for condonation of delay is made out - Decided against Appellant.

  ---

• 2013 (11) TMI 444
  Application for stay of order granting refund - Refund of SAD paid - description in the sales invoices for the purpose of VAT was shown as LDPE whereas the product imported was LLDPE - Held that:- mistake has happened because of the software which was being used by them and they also take note of the fact that the Chartered Accountant s certificate was submitted which is one of the requirements prescribed by the Board for sanctioning refund. - according to CBEC circular No. 18/2010-Cus. dated 08.07.2010 the authorities have been instructed not to conduct detailed investigation if a Chartered Accountant's certificate has been produced. - in this case not only a Chartered Accountant s certificate was submitted but the sales tax authorities had also given certificate certifying the payment of VAT in respect of goods imported under these bills of entry in the invoices on the basis of refund has been sanctioned. - assessee have been able to show that what has been sold was only LLDPE and not LDPE and therefore I am not able to take a view that Revenue has made out a prima facie case for grant of stay against sanctioning of the refund - Prima facie case not in favour of Revenue - No Stay of refund.

  ---

• 2013 (11) TMI 443
  Stay application - Penalty u/s 112(b) - Diversion of goods - Held that:- appellant has indicated that he was aware of diversion of 500 MT of crude palm oil, to go to Delhi - Prima facie case not in favour of assessee - Stay granted partly.

  ---

• 2013 (11) TMI 442
  Benefit of Notification No.93/2004-Cus. - Import of raw sugar under advance licenses - Contravention of condition (v) of Notification No.93/2004 - Held that:- The fact that the goods manufactured out of raw sugar imported without payment of duty has been exported is not dispute. Further, it is not clear how the rebate claimed by the merchant exporter is a benefit that would not have been available to the applicant if the applicant was to export the goods. There is no Chapter Note under Chapter 17 of the Central Excise Tariff in relation to Heading 1701 to the effect that packing of sugar in polythene bags will amount to manufacture. We also note that the ARE-1 were signed by both the applicant and the merchant exporter and thus it is not as if the goods were being disposed of in the domestic market. The goods were cleared under an undertaking to export the goods and such exports have taken place - it is proper to waive the requirement of predeposit of dues arising from the impugned order for admission of the appeal - stay granted.

  ---

• Corporate Laws

• 2013 (11) TMI 441
  Validity of defence - Arbitration clause - Held that:- In the circumstances, particularly, since the rubber stamp of the petitioner appearing on the questioned document of September 22, 2010 is at variance with the impression of the petitioner's rubber stamp in the documents elsewhere, the company's defence appears to be without basis and the petitioner appears to be justified in his assertion that the company has fabricated the document or brought the same into existence for the purpose of resisting this claim. There is a further tell-tale sign of the company having no defence to the claim in the company having received the statutory notice and not replying thereto. If a company had squared off a transaction by payment in the year 2010, if would defy logic and reason that it would receive the statutory notice demanding payment in respect of such transaction but would not reply thereto. The company's affidavit makes out a simplistic story of some person in the company having questioned the petitioner or an associate and it having been agreed between such persons that the statutory notice would not be proceeded with. The explanation by the company as to why the statutory notice was not replied to, is not worthy of belief. It is elementary that an arbitration clause does not stand in the way of a company petition being filed or being adjudicated on merits. In any event, the agreement that is asserted by the petitioner in this case is the settlement agreement of June 16, 2009 which does not contain any arbitration clause.

  ---

• Service Tax

• 2013 (11) TMI 459
  Rectification of Mistake - Clerical error in calculation of Interest – Held that:- National Mining Co. Ltd. Versus Commissioner of Central Excise, Dibrugarh [2007 (10) TMI 227 - CESTAT, KOLKATA]– The matter has not been examined by the Tribunal - Matter remanded back to the original authority – matter remanded to tribunal.

  ---

• 2013 (11) TMI 458
  Demand of service tax - Commercial Training and Coaching service - Assessee provided training in field of Export-Import, Merchandising and Retail Management and claimed exemption under "Commercial Training or Coaching" Service - by virtue of Notification 9/2003 and 24/2004 - Revenue argued that such training cannot be considered as Vocational - Held That:- In view of Wigan & Leigh College (2007 -TMI - 2307 - CESTAT, BANGALORE) and Ashu Export Promoters (P.) Ltd. Versus Commissioner of Service tax, New Delhi [2011 (11) TMI 387 - CESTAT, NEW DELHI], service were considered as vocational - stay granted.

  ---

• 2013 (11) TMI 457
  Valuation - benefit of notification no. 12/2003 - goods sold - Erection, installation and maintenance services - Waiver of pre deposit - Held that:- appellant has been taking a plea from the beginning that they had supplied hydraulic machinery on which applicable VAT has been paid and separate bills have been raised. - benenfit of Notification No.12/2006-, prima facie, cannot be denied to the appellant as the said notification talks about extending or deducting the value of goods from the gross value of services, which are charged for by the service provider to the recipient of services. - stay granted.

  ---

• 2013 (11) TMI 456
  Waiver of pre deposit - Construction services - Works contract services - Held that:- Since the issue needs deeper consideration, we find the amount deposited by the appellant during the proceedings can be considered as enough deposit to hear and dispose the appeal. Accordingly, the application for waiver of pre-deposit of balance amounts involved is allowed and recovery thereof stayed till the disposal of appeal - stay granted.

  ---

• 2013 (11) TMI 455
  Demand of service tax - Amount collected as service tax not deposited - Held that:- On perusal of the balance sheet produced before the Bench for the year ending 31.03.2012, we find that the appellant is not in that kind of financial difficulty which would preclude him from depositing the amount which has been collected. In our view, even if there is any financial hardship/difficulty, any amount collected by an assessee as Service Tax liability from his customers, needs to be deposited at the correct time with the Government of India. Keeping in mind that the appellant has deposited an amount of Rs.25.56 lakhs and the amount of Service Tax liability which has been collected comes to approximately Rs.2.25 Crores, we direct the appellant to deposit an amount of Rs.2.25 Crores within a period of eight weeks from today - stay of interest and penalty granted.

  ---

• 2013 (11) TMI 454
  Release of freezed bank accounts - Appellant had availed in-eligible benefit of Notification No.1/2006-ST, by discharging the Service Tax liability on 33% of the value of contract for which he received the paymen - Held that:- There is no agreement/contract on record to go into whether the claim of the appellant as to the contract was divisible. It is also to be noted that the demand has arisen on the ground that the appellant has not included the value of steel in the bills raised by him and such steel was supplied only in respect of 4 invoices. We also note that the appellant is claiming the bonafide belief having discharged Service Tax liability after availing the abatement under Notification No.1/2006-ST, as amended from time to time - Appellant should deposit an amount of Rs.5 lakhs in order to hear and dispose the appeal - stay granted partly.

  ---

• 2013 (11) TMI 453
  Waiver of pre deposit - Modification of the order - Held that:- Appellant is ready to make the pre deposit - Hence further time is given to the applicant to comply with the direction of the Tribunal of making the pre deposit - time extended to make pre-deposit.

  ---

• 2013 (11) TMI 452
  Valuation - inclusion u/s 67 - Cenvat Credit - Duty payment documents - Whether the amounts paid towards advertisement charges to the media houses by M/s DIL but routed through the petitioner, must be included in the gross taxable value attributable to receipts by the petitioner for the taxable advertisement agency service, under Section 67 of the Finance Act 1994 - Held that:- total amount, which is described as the gross amount spent by the clients for such services is chargeable to tax except to the extent of the actual charges for advertisements charged by the media, since that component is clearly not rendered by the advertising agency; and that amount is simply a consideration paid to the print or electronic media, as the case may be, for providing /flashing advertisements through that medium. In fact the Board’s circular dated 31st October 1996 also clarifies this issue and to the same effect. In so far as the Cenvat credit availed by the petitioner is concerned, the 2004 Rules do not specify that invoices must on the registered office of the claimant - Following decision of ADWISE ADVERTISING PVT. LTD. Versus UNION OF INDIA [2001 (3) TMI 1 - HIGH COURT (MADRAS)] - stay granted.

  ---

• 2013 (11) TMI 451
  Waiver of pre deposit - cenvat credit in respect of Cargo handling service and warehousing service - output service viz. maintenance and repair services - providing taxable and exempted services - Rule 6(3) - Held that:- It is appropriate to grant waiver of pre-deposit and stay all further proceedings pursuant to the impugned adjudication order, on condition that the petitioner remits 80% of the Cenvat credit amount ordered to be recovered along with interest thereon under Rule 14 read with Section 75 of the Act i.e. on 80% of the Cenvat credit ordered to be recovered, within four weeks from today. - stay granted partly.

  ---

• 2013 (11) TMI 450
  CENVAT Credit - Exempted service Prior to November 2008 - Held that:- alleging irregular availment of Cenvat credit of Rs.5,42,11,516/- for the period prior to November 2008, proceedings were initiated culminating into the adjudication order. In response to the Show Cause Notice dated 17.6.2010, the petitioner submitted on 13.8.2010. In the adjudication order despite noticing that Rs.6.02 crores was remitted by the petitioner towards exempted services provided for the period prior to November 2008, utilising its Cenvat credit, the adjudicating authority ordered recovery of Rs.5,42,11,516/- for having wrongly availed credit to this extent and ordered recovery thereof, under Rule 14 of Cenvat Credit Rules, 2004 - applicant has made out a strong prima facie case for waiver of pre-deposit. We accordingly grant waiver of pre-deposit and stay all further proceedings pursuant to impugned adjudication order dated 24.2.2012, pending disposal of the appeal - stay granted.

  ---

• 2013 (11) TMI 449
  Demand of service tax - Exemption under Notification No.45/2010-ST - Services rendered relating to transmission and distribution of electricity - Held that:- Prima facie the notification is applicable to the appellant and therefore exemption would be available in respect of service rendered relating to erection, commissioning or installation. As regards, renting of immovable property service also the appellant's claim appears to be sustainable. However, we also take note of the fact that the appellant has made a deposit of Rs.21,70,930/-. We consider that the amount deposited by the appellant is sufficient for the purpose of pre-deposit. Accordingly, the requirement of pre-deposit of the balance dues is waived and stay against recovery during the pendency of the appeal is granted - stay granted.

  ---

• Central Excise

• 2013 (11) TMI 440
  Shortage of Goods – Product Wastage or Final Product - Waiver of Pre-deposit - Revenue of the view that the wastage was not actually wastage sold by them but was the final product – Held that:- The reports of the RTO which are to the effect that the Truck Number mentioned in the invoice have not passed through the said RTO - the adjudicating authority has referred to certain discrepancies in the use of the Truck numbers in the invoices, leading to doubt that the said Trucks were not used for carrying waste - the duty confirmed on the ground that it reflected shortage of manganese ore in the IT returns, which actually stands used by them for the manufacture of their final product and clearance of the same without payment of duty - The applicant directed to deposit Rs.75.00 Lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

  ---

• 2013 (11) TMI 439
  Cenvat credit – Excess use in Manufacture – Difference in scrap - Waiver of Pre-deposit - During the period the appellant showed the excess use of pig iron in the manufacture of their final product – Held that:- The value difference in the scrap in the hands of the manufacturer and in the hands of the dealer was on account of various processes adopted by the in between persons - The issue is contentious and arguable - Lot of evidences are required to be gone through the report of NIT, Raipur procured by the Revenue and as also by the appellant is required to be examined and scrutinized - keeping in view financial condition of the applicant the applicant directed to deposit an amount of Rs.25.00 Lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

  ---

• 2013 (11) TMI 438
  Due Date to Submit Advance Duty - Compounded Levy Scheme – Waiver of Pre-deposit - The Revenue raised objection and directed the appellant to claim refund of the excess duty deposited by them in the month of March, 2011 and to deposit fresh amount for the month of April 2011 – Held that:- The entire issue is technical in nature, and there is no loss of Revenue – it is just and proper to dispense with the condition of pre-deposit of the dues till the disposal – stay granted.

  ---

• 2013 (11) TMI 437
  Clandestine Removal of Goods – Waiver of Pre-deposit – Held that:- It is seen that the slips are meticulously maintained by the appellant and are also carrying the time of entry of the Truck and exit of the same by writing IN & OUT - As such it is difficult to believe at this stage that the slips were for movement of the goods in the factory - the slips are also showing the gross weight of the goods as also net weight of the same - Prima-facie appellant is not entitled to unconditional stay – appellant directed to deposit an amount of Rs.35.00 Lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – the recipients of clandestinely removed goods of M/s. Waryam Steel Castings Pvt. Ltd. are also required to be put to some terms of deposit - both the applicants directed to deposit 10% of the penalties imposed upon them - Partial stay granted.

  ---

• 2013 (11) TMI 436
  Cenvat credit - Input Service Distributor – Waiver of Pre-deposit - Whether credit taken by their Doddaballapur unit is admissible or not – Revenue was of the view that assessee being not registered as "Input Service Distributor" are not entitled to CENVAT credit in respect of invoices pertaining to period prior to their obtaining registration - Held that:- Following Beico Industries Ltd. vs. CCE, Nasik [2012 (4) TMI 311 - CESTAT, MUMBAI] - Under the rule 7 of CENVAT credit rules there is no bar denying the credit in respect of the invoices of the period prior to date of the registration – requirement of pre-deposit for hearing of the appeal is waived till the disposal – Stay granted.

  ---

• 2013 (11) TMI 435
  Waiver of Pre-deposit of Duty u/s 11A (1) – Held that:- The appellant has deposited an amount which is more than 8% of the total liability - the deposit is enough to hear and dispose the appeals, relying upon the various orders of this Bench - Applications for the waiver of pre-deposit of balance amounts involved are allowed and recovery stayed till the disposal of appeals – Sat granted.

  ---

• 2013 (11) TMI 434
  Automobile Excise Cess – Held that:- A combined reading of the notification under the Central Excise Rules and Automobile Duty Rules specifies that the manner of levying, collecting and refund as applicable to the duty are applicable to the Automobile Excise Cess - This aspect of the matter is not considered in the order – Following Banswara Syntex Ltd. v. UOI [2007 (7) TMI 308 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR] - while interpreting the education cess levied under the excisable goods allowed rebate on cess though not covered under the notification for the relevant period - All contentions are left open - matter remanded back – Decided in favour of Petitioner.

  ---

• 2013 (11) TMI 433
  Stay Application – Appeal and stay application pending – Recovery notice issued to petitioner based on CBEC circular dated 1-1-2013 - Held that:- Relying upon LARSEN & TOUBRO LTD & OTHERS Versus UNION OF INDIA AND OTHERS [2013 (2) TMI 188 - BOMBAY HIGH COURT] – the Commissioner (Appeals) directed to dispose of the appeal – Recovery stayed - Decided in favour of Petitioner.

  ---

• 2013 (11) TMI 432
  Precedent - Principles of judicial discipline – Held that:- Orders passed by Collector (Appeals) and Tribunal binding on all adjudicating and appellate authorities within their respective jurisdiction - Relying upon Union of India v. Kamlakshi Finance Corporation Ltd. [1991 (9) TMI 72 - SUPREME COURT OF INDIA ] - The mere filing of an Appeal before the next higher forum will not tantamount to a Stay on those decisions - The Assistant Commissioner has construed that, mere filing of an Appeal, empowers her to entertain a different view - Such an approach will cause utter chaos and detriment to the administration of justice - Mere fact of appeal having been filed against the order no ground for not following it - The correct course for her was to transfer the case to Call-Book and await the decision of the Hon’ble CESTAT on the Appeal filed by the Department – order set aside – decided in favour of Assessee.

  ---

• 2013 (11) TMI 431
  Rebate claim under Rule 18 of the Central Excise Rules, 2002 r.w. Notification No. 19/2004 – Non-production of any certification - assessee cleared the goods as “Ship Stores” to be used on ships - there was no proof that the ship is on foreign run – Held that:- The Commissioner (Appeals) has erred in establishing that no Commissioner of Customs can certify that the quantity supplied as ship stores and that the Customs Authorities would allow the ship stores to be loaded on ship only when they are satisfied that they are not unusual and in high quantities unless such quantities of material are genuinely required for the ship - The powers under para 2(C) are vested in Commissioner of Customs and are not delegated to lower authorities - Respondent has not obtained any approval from Commissioner of Customs, the condition 2(C) stands violated. The respondent failed to satisfy the basic mandatory requirement of the Notification No. 19/2004, the rebate claim is not admissible to them- Relying upon M/s. Eagle Flask Industries Ltd. v. CCE, Pune [2004 (9) TMI 102 - SUPREME COURT OF INDIA] - the conditions of the notification are not merely procedural and exemption can be denied for non-observance of the said conditions - order set aside – Decided in favour of Revenue.

  ---

• 2013 (11) TMI 430
  Rebate claim - Rule 18 - Valuation of export goods – inclusion of freight and insurance beyond the port of export for the purpose of rebate - Held that:- place of removal cannot be beyond the port of export - So the transportation cost, at the most up to port of export (the place of removal) can be included in the value. - decided against the assessee. Rebate claim on export of free samples - Held that:- Applicant contended that rebate of duty paid cannot be denied on the goods supplied free as samples - The free sample has no value as they are shown free in the Shipping Bills - As per Condition 2(e) of Notification No. 19/2004-C.E. if the market price of the excisable goods at the time of exportation is less than amount of rebate claimed, the rebate will not be admissible since the goods are free and therefore rebate on such goods is rightly denied under Rule 18 of Central Excise Rules, read with Notification 19/2004. Rebate / Refund of excess amount paid as duty by including freight and insurance beyond - Held that:- The adjudicating authority has held that excess paid duty i.e. duty paid on part of value exceeding transaction value is to be treated a voluntary deposit with Government and same is to be returned in the Cenvat Credit account from which said duty was paid. Adjudicating authority has directed the applicant to approach jurisdictional authorities for allowing re-credit in their Cenvat Credit account. In this regard, Government directs the jurisdictional Central Excise authorities to allow the re-credit of said excess paid amount in their Cenvat Credit account. Interest on delayed payment u/s 11BB of Central Excise Act,1944 – Held that:- On delayed payment of refund claims interest is paid under Section 11BB of the Central Excise Act, 1944 after the expiry of three months of the date of receipt of application for rebate in the Divisional offices in terms of Section 11BB – Following M/s. Ranbaxy Laboratories Ltd. v. UOI [2011 (10) TMI 16 - Supreme Court of India] - liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the period from the date on which order of refund is made – In case of delayed refunds, the applicants are entitled for interest payment under Section 11BB. - Decided partly in favor of assessee.

  ---

• CST, VAT & Sales Tax

• 2013 (11) TMI 461
  Proceeding u/s 45A - Imposition of penalty - Petitioner contends that he is neither a dealer nor an assessee under the Kerala General Sales Tax Act, 1963 - The petitioner is not in possession of the premises - Therefore, the proceedings under Section 45A are without jurisdiction and are liable to be quashed - Held that:- The course adopted by the assessing authority is totally unacceptable especially in view of the specific contention taken by the appellant that he did not conduct the disputed business and the signatory to the SIR was not his relative. It appears, simply by way of relying on the penalty order, the assessing authority was pleased to pass an order of assessment by way of estimating the taxable turnover of the appellant on the basis of the details collected by the Intelligence Officer at the time of inspection - Matter remitted back to assessing authority to conduct a fresh enquiry and pass appropriate order in accordance with law after affording an opportunity of hearing to the petitioner - Decided in favour of Assessee.

  ---

• 2013 (11) TMI 460
  Non maintenance of books of accounts - Penalty u/s 12(3) - Held that:-assessee, having brought into account subsequent to the inspection of the variation in the stock, the addition made by the Assessing Officer, namely, twice the actual variation, is unwarranted. The Appellate Assistant Commissioner made an addition of actual suppression, holding that the same would be adequate towards probable omission - Appellate Assistant Commissioner is just and proper and the Joint Commissioner has re-fixed the turnover only for the purpose of bringing the taxable turnover above Rs. 10 lakhs, in order to attract additional sales tax - Decided in favour of assessee.

  ---