Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 10, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Customs
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52/2012 - dated
6-12-2012
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ADD
Extend of anti-dumping duty upto one more year -‘Polyvinyl Chloride (PVC) Suspension Grade’, originating in, or exported from, Taiwan, People’s Republic of China, Indonesia, Japan, Korea RP, Malaysia, Thailand and USA,
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60/2012 - dated
6-12-2012
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Cus
Amendments in the notification No. 158/95-Customs, dated the 14th November, 1995 - Exemption to Goods when re-imported into India for repairs or for re-conditioning, regarding
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108/2012 - dated
6-12-2012
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Cus (NT)
Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified w.e.f. 07 December, 2012
Highlights / Catch Notes
Customs
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Extend of anti-dumping duty upto one more year -‘Polyvinyl Chloride (PVC) Suspension Grade’, originating in, or exported from, Taiwan, People’s Republic of China, Indonesia, Japan, Korea RP, Malaysia, Thailand and USA, - Notification
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Amendments in the notification No. 158/95-Customs, dated the 14th November, 1995 - Exemption to Goods when re-imported into India for repairs or for re-conditioning, regarding - Notification
Case Laws:
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Income Tax
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2012 (12) TMI 257
Reassessment Proceedings - Fee for Technical Services u/s 44D r.w.s. 115A - reason - change of opinion. AY 2004-05 and 2004-06 - held that:- Assessing Officer in the original proceedings had examined and was aware of the two agreements. He was also aware that Quest had received payments from NHAI and that these were not included in the taxable income or receipts of the income. He was also aware that the petitioner‘s income was taxed on the gross receipt basis under Section 115J. There was no lapse or fault on the part of the assessee. Full facts were on record and the Assessing Officer accepted the returns. If at all, there was a lapse on the part of the Assessing Officer to understand the legal position. At best, the case of the Revenue can be that the Assessing Officer had wrongly applied, and did not appreciate the legal position. This cannot be a ground to reopen finalised regular assessments for the said years. - Reassessment proceedings for the assessment years 2004-05 and 2005-06 quashed. AY 2002-03 and 2003-04 - held that:- For the assessment years 2002-03 and 2003-04, the agreement between the petitioner-assessee and Quest is not in the assessment records. - the petitioner had denied any contract or business relationship between them and Quest. This is in spite of the fact that they had an agreement, and it is an accepted and admitted position that they had entered into an agreement with Quest dated 1st February, 2001. The aforesaid fact was clearly concealed, and incorrect factual information was circulated to the Assessing Officer. - Reassessment proceedings for the assessment years 2002-03 and 2003-04 sustained.
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2012 (12) TMI 256
Sale of Shares - whether Business (‘adventure in the nature of trade’ or ‘business’) or LTCG (as per Assesssee) - sole criterion of abnormal profits cannot lead to conclude that the ‘sale of asset’ was an ‘adventure in the nature of trade’- held that:- Assessee is not a dealer in shares and has acquired shares consequent to the re-organization of the business as per the terms approved by the Hon'ble Bombay High Court and as the entire group was getting reorganized and foreign investor was acquiring the controlling interest in the part of group business, the shares were sold to M/s Mysore Breweries Ltd. Since the abnormal profit as considered by AO arose in the peculiar circumstances of the case, it cannot be considered that the realization of profit can be considered as adventure in nature of trade. Assessee continued to have its beer business and income from beer business of Rs.6.54 crores was also offered - if assessee’s acquisition of shares is not to be accepted then the shares are to be considered as held by the holding company M/s PDPL and in its hands the income would have been capital gain again - principle company i.e. Shaw Wallace Company Ltd, as AO noted that the entire income has to be considered as income of SWCL substantially and in case it was upheld, the order in assessee’s case will be modified accordingly - order of the CIT (A)is uphold - held as taxable as LTCG - appeal by Revenue is dismissed.
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2012 (12) TMI 255
Reopening of Assessment - Escapement of Income - The objection of the assessee remained that the notice issued by the AO u/s 148 was beyond a period of four years from the end of the asstt. Year, hence it was barred by limitation under the proviso to section 147 of the Act. - Held that:- AO completely overlooked the record of the assessment before initiating the proceedings which inter alia reflected that the assessee had claimed only deduction of ₹ 45,57,381/- towards gratuity and ₹ 5,84,045/- represented the liability towards bonus which too had been paid before the due date of filing of the return of income. All material facts necessary for the assessment had been truly and fully disclosed during the course of original assessment u/s 143(3) of the Act, hence initiation of reassessment proceedings u/s 147 / 148 was illegal in view of the specific proviso to section 147 of the Act. - There was neither fresh material surfaced after the original assessment nor in the reassessment proceedings disallowance made by the AO which was not made by his predecessor in the original assessment order, was based on suppression of primary information on the part of the assessee. - Decided in favor of assessee.
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2012 (12) TMI 254
Dis allowance of Brokerage Expenses - Deduction u/s 22 while computing annual value of Property u/s 24 - held that:- in computing the income from house property only deduction as permissible u/s 24 of the Act are to be considered and no deduction is allowable therein for payment of brokerage charges - Decided in favor of revenue. Disallowance of business loss - held that:- facts on record as per the audited financial statements of the assessee for the relevant period, clearly established with irrefutable evidence that the assessee had commenced its real estate business operations in the relevant period and the expenses incurred for salaries, wages, brokerage, professional fees, rent, registration fees, audit fees, bank charges, etc were genuinely incurred for the bona fide conduct of business operations - expenditure incurred by the assessee, as debited in its profit and loss account and the Schedule’s thereto, have been incurred in the normal course of business operations and the resultant business loss of Rs.16,18,288 is to be allowed. The assessee's ground on this issue is allowed. Re-computation of capital gains on transfer of land - AO rejected computation of capital gain as per sale deed - make reference to DVO for fair market valuation of the said land u/s 55A r.w.s.sec 16A of Wealth Tax Act,1957 - assessee do not object to vauation as per DVO report - AO, instead of adopting the valuation of land as per the DVO’s report, recomputed capital gains by making a mark up of 40% on sale consideration of Rs.1,46,47,100(as per DVO), as per the Journal Publication of Estimated Market Value of Immovable Properties & Buildings for Registration Bangalore (Urban) District as it was a commercial property - held that:- Action of AO to add a sum of Rs.58,58,840 to the valuation of the said land as per DVO’s report on account of 40% for commercial property and then proceeded to compute the capital gains was without any basis on facts or the provisions of law and argued that the capital gains ought to computed as done by the assessee and adopting the estimated value of the land at Rs.1,46,47,090 as per the DVO’s report - This action of AO and CIT(A)’s sustenance of this are, in our considered opinion, erroneous and contrary to the requirements laid down in the provisions of section 55A of the Act r.w.s. 16A(6) of the Wealth Tax Act, 1957 - direct the AO to recompute the capital gains arising to the assessee on account of sale of the said land to M/s. Bagadia Estate Developers Pvt Ltd taking the sale price of the property at Rs.1,46,47,090 as estimated by the DVO in his report dt.24.12.2010. It is ordered accordingly.
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2012 (12) TMI 253
Provision of warranty expenses - held that:- Provisions for warranty charges is not a contingent liability and is deductible in computation of taxable income. It is an accrued liability - no infirmity in the order of CIT(A), on the issue of warranty provisions. - Decision in CIT vs. Vinitec Corporation Pvt. Ltd.[2005 (5) TMI 54 - DELHI HIGH COURT] followed - In the result, department’s appeal is dismissed.
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2012 (12) TMI 252
Initiation of Proceedings u/s 153C - Unexplained Purchases - held that:- As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of section 69C are not applicable as there was no unaccounted expenditure.Purchases and sales are accounted for in the books of accounts. Thus, source of the expenditure incurred in purchases is obviously explained - Appeal is dismissed in favour of assessee. Disallowance of Expenses - held that:- On legal issues, it was submitted that the grounds would become academic if the merits are decided in the assessee’s favour and hence he would not press the same. Hence, in view of our decision on merits, the cross-objections are dismissed as not pressed - In the result, appeals of the revenue as well as cross-objections of the assessee are dismissed.
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2012 (12) TMI 251
Person u/s 2(31) - Artificial Judicial Person (AJP) as defined in section 2(31)(vii) - Society - Change of status from AJP to AOP - held that:- After verifying the genuineness of the activities of the society and satisfying about its objects, the registration was granted u/s 12AA(1)(b)(i) with effect from 1.4.2002. The return was also filed in the status of AJP. However, without giving any notice or any reason much less a cogent reason, the Assessing Officer has assessed the same as AOP. We do not find any justification in the action of the Assessing Officer which was confirmed by the Commissioner of Income Tax (Appeals). - the Assessing Officer was not justified in changing the status of the assessee without giving any notice. - Decided in favor of assessee. Disallowance of traveling expense - telephone expenses - held that:- lower authorities were not justified in declining the claim of exemption u/ss 11 and 12 of the Act on the plea of contravention of section 13(2) and 13(3) of the Act. Subsction (2) of section 13 under Clause No. (c) provides the payment of salary and other allowance to the persons referred to in sub-section (3) of section 13 out of the resources of the institution for services rendered by that person to the institution provided the amount paid is not in excess of what may be reasonably paid for such services. The payment of DA for the purpose of travelling for the work of the institution is not at all excessive and the payment of such expenditure is not for the personal benefit of office bearers and, therefore, there is no violation of section 13 of the Act. Application of income in respect of acquisition of fixed assets – Held that:- Assets have been acquired for the purpose of advancement of the objects of the society and, therefore, such investment should be treated as an application of income in terms of the provisions of section 11 of the Act - there is no violation of section 13 and as such the Assessing Officer was not justified in declining the deduction for application of income u/s 11(1)(a) of the Act – in favor of assessee Inclusion of corpus donation – Held that:- Section 11(1)(d) provides that the income the form of corpus donation shall not be included in the total income of the person who is in receipt of such income. The Assessing Officer since held that sections 11 and 12 will not operate and, therefore, he has not taken into consideration the provisions of section 11(1)(d) and included the said amount in the assessed total income - assessee’s eligibility for benefit of sections 11 and 12 of the Act cannot be declined and the corpus donation is required to be excluded from the total income as per the provisions of section 11(1)(d) of the Act Disallowance – alleged that assessee has paid land diversion charges which are in violation of section 40A(3) – Held that:- Land diversion charges were paid by the assessee to State Government which does not violate the provisions of section 40A(3), hence, disallowance made by the Assessing Officer and confirmed by Commissioner of Income Tax (Appeals) is not justified.
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2012 (12) TMI 250
Reduction in GP Rate - rejection of books of accounts u/s 145(3) - held that:- The stock record is a vital component of the assessee's books of account; in the absence of which it is not possible to deduce the correct profits there-from. How would assessee then place reliance on its books of account for determining its profits? There is no law that the books of account cannot be rejected in the absence of a stock register. True, there is equally no law that the book results are to be necessarily rejected in its absence; the finding of whether the books as maintained could be relied upon for deducing true profits being essentially a matter of fact - even the feasibility of maintenance of the stock record/s is again a question of fact, and which we have found as so in the instant case.- We, therefore, uphold the invocation of the provision of sec. 145(3) of the Act by the Revenue in the instant case, and concomitantly proceeding to estimate the assessee’s trading results. - Decided against the assessee. Disallowance u/s. 36(1)(iii) of the Act - disallowance is on account of a loan given by the assessee to M/s. M.P. Food Products on interest-free basis – Held that:- M/s. M.P. Food Products, is not the assessee’s sister concern; the same being a proprietary concern of Shri Devendra Agarwal, the assessee's grand-son, and in a completely different line of business - there is no question of any business expediency for advancing the same to the said concern - disallowance upheld Disallowance out of discount expenses – Held that:- Expenditure has been explained by the assessee as arising on account of short receipt from the customers - no basis in the said disallowance by the AO; the assessee explaining the claim with reference to its accounts. The same stands restricted by the ld. CIT(A) on adhoc basis, without furnishing any reason for its confirmation or restriction – disallowance deleted
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2012 (12) TMI 249
Addition made u/s.40A(2)(b) of the Act – interest to sister concerns - Held that:- The A.O. made hypotheticated calculation in assessment order without any base and material. The addition was made on presumption. In both years, there is no nexus between the borrowed fund and interest free loan. The assessee did not take substantial interest in the business of the specified person or the specified person has a substantial interest in the business of the assessee. The A.O. has not brought on record any evidence regarding the assessee has substantial interest in M/s. Yuletide Industries Private Ltd. and M/s Covenent Investment Co. Ltd. and vice versa. Further interest free loan given to alleged sister concern were part consideration of service rendered by both the companies. - In favor of assessee Disallowance on account of adjustment of Excise Duty on purchase, sales and closing stock u/s 145A of the Act – The claim of decrease in profit – Held that:- . In Section 145A, there is an amendment w.e.f. 01.04.1999 in Subclause b of Section 145A. - Adjustment to include the amount to any tax, duty, cess or fee (whatever name called), actually paid or incurred by the assessee to bring goods to the place of its location and condition as on date of valuation is required to adjust as per law by the A.O. Therefore, the A.O. is directed to make suitable adjustment as per law after giving the opportunity of being heard to the assessee. - Accordingly, this issue is set aside to the A.O - appeals are partly allowed and decided for statistical purpose.
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2012 (12) TMI 248
Deduction u/s 80IA - interest from investments/ deposits - other income - held that:- the interest income has been earned from holding FDs and other term deposits from the surplus generated by the assessee in the earlier year therefore may not be the income earning or derived from the business of the assessee of generating power. - Decided against the assessee. MAT - The credit for minimum alternate tax availed by the assessee therefore could only be at best adjusted by the Assessing Officer was the sole issue insofar as there is no loss of revenue for the impugned Assessment Year when the assessee was required to pay only the minimum alternate tax. This credit has to be carry forward requires consideration by adjudication of the issue by the Hon’ble High Court. - Decided against the assessee. Disallowance on account of periphery development expenses - Held that:- The assessee’s business for incurring periphery development expenses for development of the area as defined by the Collector of the area in which charge the assessee carries out the work. Therefore, it was nobody’s case that the expenses have not been incurred as the amount has been paid to the Government authorities. - Expenditure are being incurred and claimed as business expenditure therefore cannot be disallowed insofar as the claim of the assessee of Rs.5 lakhs paid to the Collector, Bolangir is properly documented. - However, the sum of Rs.20,000 paid as donation to Jharsuguda District Kick Boxing Association, Belpahar Rs. 5,000.00, Organising Committee, Lakhanpur Block Football Championship Rs. 5,000.00, Binapani Yubak Sangha Rs.3,000. Tiger Club, Belpahar Rs.5,000 and V.S.S.Club, Belpahar Rs.2,000, all related to incurring of expenses which may or may not have been called for to be incurred by the assessee as per the requirement of peripheral development committee. Therefore, this amount of Rs.20,000 not relating to periphery development expenses are directed to be sustained as disallowable business expenditure as the assessee has not been able to establish the nexus for periphery development expenses in these cases. Disallowance on account of donation – Held that:- Assessee submitted a letter addressed by the Chief Minister acknowledging receipt of Rs. 20 lakhs as donation to the Chief Minister’s Relief Funds settles the issue that the assessee is entitled for 100% under the provisions of Section 80G - granting for continuous approval u/s.80G(2)(3HF) of the I.T.Act,1961 was issued by the CIT, Bhubaneswar on 26.2.2003 which has been placed on record - CIT(A) disallowed the claim for want of commercial expediency for incurring these expenses when he restored the issue to the file of the Assessing Officer to allow the claim u/s.80G on the basis of production of receipts which has now been produced. Approval was on 26.2.2003 for the impugned Assessment Year when the 80G claim was made for the Assessment Year 2004-05 - Assessing Officer directed to grant 100% deduction in accordance with the certificate granted by the CIT and acknowledge receipt of the Chief Minister
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2012 (12) TMI 247
Addition on account of gift from the assessee’s mother – Held that:- Computerized books of account of the donor and the donee have not been rejected by the AO - AO had not brought any clinching documentary evidence on record to repudiate the assessee’s claim - Revenue had failed to bring any corroborate documentary evidence to pin down the assessee and that the addition has been resorted to only on surmise and conjecture in a flimsy way. On a perusal of the cash book of the donor, it has been observed that at that relevant point of time, the donor had sufficient cash balance at her kitty to gift a sum of Rs.2.01 lakh leaving a balance of Rs.84,790/- on hand as on 31.8.1999 - genuineness of the gift by the donor and receipt of the same by the assessee cannot be disbelieved - addition deleted Addition on account of investment in Ninad Co-op Housing Society - alleged that the assessee made an investment of Rs.20 lakhs in Flat Nos.202, 203, 302 & 402 in Ninand Co-op Hsg. Society in the name of his four employees as conduits – Held that:- No conclusive documentary evidence to lead that the assessee had invested Rs.20 lakhs in Nanad Co-op Housing society by using his four employees as conduits for booking of flats - authorities below have not brought any conclusive documentary evidence on record that the assessee had, in fact, made unaccounted investment of Rs.20 lakhs and, accordingly, the addition of Rs.20 lakhs stands deleted. Addition on account of unaccounted investment - alleged that the assessee accepted the fact that Rs.4.5 lakhs in cash and Rs.50,000/- in cheque have been paid and receipts obtained for purchase of this property which has not, however, been reflected in the books of the account and the same is offering now for taxation – Held that:- This agreement was, in fact, entered into in the month of March 1995 whereas the block period was from 1.4.1996 to 6.9.2001 - this transaction alleged to have been entered into by the assessee doesn’t fall within the block period under consideration - in favour of the assessee Addition on account of unaccounted sum given to Shri Sanjeev Shukla - alleged that the assessee’s mother filed a civil suit against Neelkant Corporation involving Rs.1.5 lakhs against which documents showed that shops were allotted to the assessee’s mother and also relied on the statement of Sanjeev Shukla – Held that:- Agreement of understanding purported to have been entered into between the assessee’s mother and Shri Sanjeev shukla - suit has been filed by the asssessee’s mother in a Civil Court against Neelkant Corporation involving Rs.1.5 lakhs against which documents show that plot No.7 and two shops were allotted to assessee’s mother - assessee’s mother had invested the said sum with Neelkant Corporation for allotment of a plot and two shops - against the assessee. Addition on account of unaccounted investment – loan to Shri Dinesh Dhabalia – Held that:- No loan of Rs.5 lakhs was given to Shri Dhabalia as alleged by the AO and that the suit was filed by Dhabalia only on the basis of assessee’s refusal to return the flat and documents to him etc. - assessee has not been extended an opportunity to cross examine Dhabalia for his statement purported to have been recorded which was solely relied on by the AO - Revenue has failed in its endeavour to bring on record any unambiguous documentary proof to nail the assessee on this score - addition delete Additions on account of unaccounted investments in Jay Shiva Apartments – Held that:- Addition is made based on the general practice of cash payments made outside the books of accounts in the case of immovable property transactions - In order to establish that the assessee had paid amount outside the books of accounts for effecting real estate transactions substantial evidence has to be placed on record which is absent in this case. It would be unjust if an addition is made on the appellant based on a statement made by one of the partners of the firm without further making enquiries and collecting evidence – addition deleted Addition on account of unaccounted investment from Bhavya Ghantakaran Cottage Association – Held that:- AO’s presumption that the assessee financed Shri Shash by giving him Rs.10 lakhs and in lieu of which he obtained post-dated cheques as security was without any basis or with no corroborate evidence. Admitting the AO’s logic for argument sake, no prudent lender would have parted with such a huge sum without any substantial proof in the shape of a promissory note as proof - no addition can be resorted to purely based on presumption, assumption and guess work – addition deleted Addition on account of unaccounted investment in Dhwirup Bungalow - AO had found that a Civil suit was pending in a Court where the assessee had claimed possession of a property from Shree Jaisheel A Patel against the payment of Rs.5 lakhs and another Rs.50,000/- given as registration charges – Held that:- Assessee was having sufficient cash balance with him and family members as per the books of accounts - assessee had produced documentary proof to belie the assumption of the AO who took a stand that the investment of these amounts were not open to verification etc. - investment made by the assessee stands explained – addition deleted Addition on account of investment in Santro Car – alleged that Car was not registered in the name of the assessee – Held that:- Assessee had produced the receipt for alleged to have paid cash of Rs.1 lakh and subsequent return of the vehicle which appeared to have been a used car and also found at the time of search operation, the addition of Rs.1,80,000/- cannot be sustained – addition deleted Addition of Rs.3 lakhs being fictitious entries in the name of Bharat Textile – Held that:- There was no justification in making the addition since there was no question of any unaccounted investments and drafts have been purchased from the cash available as per cash book - since the drafts have been purchased from the cash available at the relevant period, there was no question of making any addition on this count. The addition of Rs.3 lakhs is, therefore, deleted. Addition of Rs.1,01,000/- treating the value of household items purchased as unaccounted and unexplained investment - assessee submitted that the AO had not appreciated the assessee’s explanation on the ground that the books were not found during the search and entry showing all the purchases of household articles from time to time was not believable – Held that:- It is a common phenomenon for a person of appellant’s stature to accumulate household appliances, entertainment equipments and other electronic items during a period of time either by way of purchase, gifts etc. Further, there is no evidence to establish that these goods are purchased out of unexplained source – addition deleted
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2012 (12) TMI 246
Addition on account of interest expenditure - assessee has both borrowed and interest free funds – Held that:- Assessee-company had sufficient interest free fund could be used towards loan and advances to sister concern - Revenue has not demonstrated as to how the interest bearing funds have been used towards loan/advances to the sister concern - entire interest free funds including the assessee’s own capital and accumulated profits and other interest free credits and loans and if the total interest free advances including the debit balance of partners did not exceed the total free funds available with the assessee, interest was not disallowable merely on amount of utilization of the funds for non-business purpose - disallowance deleted
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2012 (12) TMI 245
Natural justice – opportunity to being heard - Held that:- CIT(A) has decided the appeal of the assessee ex.parte - CIT(A) has not provided adequate opportunity of being heard to the assessee before deciding the appeal – matter remanded to CIT(A)
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2012 (12) TMI 244
TDS - Applicability of the provisions contained in section 9(1)(vi) of the Income-tax Act - sale of software as royalty - manufacture and sale of Automated Teller Machines (ATMs) - assessee imported software from NCR Global Solutions Ltd., Ireland, however while making outward remittances, the assessee did not deduct tax at source - Held that:- Payment made by the assessee to non-resident companies would amount to royalty within the meaning of Article 12 of the DTAA with the respective countries and there was obligation on the part of the assessee to deduct tax at source u/s. 195 of the I.T. Act – in favor of revenue. Decision in Samsung Electronics Co. Ltd.. v. Dy. CIT (International Taxation) [2012 (8) TMI 112 - ITAT BANGALORE] followed.
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2012 (12) TMI 243
Invocation of provisions of section 40 (a)(ia) of the Income-tax Act – alleged that out of total amount debited under the head “freight and cartage”, a sum of Rs.10,18,825 has been paid to five persons exceeding the prescribed limit of Rs.50,000 on which no tax has been deducted at source – Held that:- Challan for deposit of Rs.25,398 was produced before the ld. CIT(A) and he has verified the factum of deposit - assessee has made deposit of the TDS though it might not have been deducted from the payments made to the payee, but it related to those payments. The fact that all the payments have been made before the end of the financial year has not been disputed by the Revenue - disallowance under section 40 (a)(ia) of the Act is not called for Addition on account of lifting charges – alleged that the disallowance was made by the Assessing Officer on ad-hoc basis without pointing out any specific defect – Held that:- Lifting charges are more or less fixed at Rs.160 per M.T or Rs.180 per M.T (which has been paid for lifting of coils purchased from TISCO/SAIL) - Assessing Officer should have rather verified if such quantities of steel indeed lifted by the assessee during the year, which has not been done by him - D.R. could not point out any specific defect in the claim of the assessee. He has simply relied upon the order of the Assessing Officer - Assessing Officer has made ad-hoc disallowance of Rs.25,000 without identifying a particular expenditure which is not supported by any bill/voucher - ad-hoc disallowance deleted Disallowance on account of application of section 14A of the Act - alleged that the assessee had considerable interest bearing borrowings which was, inter-alia, used by the assessee in making investments and the income therefrom was not chargeable to tax – Held that:- Both the lower authorities have examined the issue in dispute on different aspects. They have not examined whether the assessee has maintained separate account for making investments. Undisputedly the assessee has borrowed some funds but according to him these funds were utilized for business purposes. Since there is no categorical finding of the lower authorities in this regard - matter remanded back to the Assessing Officer - appeal of the Revenue is partly allowed for statistical purposes
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2012 (12) TMI 242
Disallowance of salary and interest paid to partners - compliance of furnishing the Partnership Deed during the course of assessment proceedings – Held that:- Payment of interest and salary to the partners is to be allowed since the certified copy of the partnership deed was made available to the A.O. in the course of assessment proceedings - provisions of Section 184 of the Income tax Act, 1961 are directory and not mandatory – defect of not filing copy of partnership deed with return of income is a curable defect. - in favor of assessee Disallowance of expenses of Hire charges of Trucks – alleged that these three vehicles were transferred to the name of the respective subcontractors only on 21.03.2005 and prior to such transfer, these vehicles were registered in the name of the assessee – Held that:- Assessee has already debited all these expense in respect of these vehicles in its books of account, no further deduction is allowable to the assessee on account of hiring of these tankers. But we find force in this contention that all operating expenses of these three tankers should be allowed as deduction to the assessee - assessee has to establish that in addition to Rs.8,08,995.22, any other expenditure was incurred on the vehicles and the same were not debited by the assessee but were debited by the so called contractors, that deduction should be allowed to the assessee for such expenses if the assessee can satisfy the A.O. about allowability of such expenses - ground is allowed for statistical purposes. Disallowance u/s. 40(a)(ia) of the I.T.Act – Held that:- No tax was deductible by the assessee in view of the certificate issued by the A.O. of these subcontractors u/s 197(1) of the Income tax Act, 1961, no disallowance is justified u/s 40(a)(ia) of the Income tax Act, 1961 but since we have confirmed the disallowance for the reasons stated in the above para, this ground is of academic interest only - appeal of the assessee stands allowed.
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2012 (12) TMI 241
Reject of application for registration of Charitable Trust u/s 12AA - Assessee is engaged in the educational field - Held that:- Nothing has been found out that assessee has been using the funds for the purpose other than that mentioned under the trust deed. CIT argued that Trust is run for commercial purposes and not for charitable purposes – all the surpluses were used in further expansion in the same or subsequent years Use of the surplus in further expansion of the same objects cannot be said to be proving that there is an object to make the profit by the trust. If any surplus results, incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purposes. Direct the CIT to grant registration to assessee. In favour of assessee
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2012 (12) TMI 240
Disallowance of provision for Leave encasement on actuarial basis Sec.43B(f) - Whether clause (f) of Section 43B is arbitrary, unconscionable and dehorse - Assessee is following mercantile system of accounting and the provision for leave encashment was made on actuarial basis – Held that:- Following the decision in case of Bharat Earth Movers (2000 (8) TMI 4 - SUPREME COURT) and Exide Industries Limited (2007 (6) TMI 175 - CALCUTTA HIGH COURT) held that leave encashment is not a contingent liability if the provision is made on some scientific basis. Therefore disallowance made by AO is not justified. In favour of assessee Disallowance u/s 14A – Expense incurred in relation to earn exempt income – Held that:- As concluded from the facts of the case as well as that of the A.Y 2006-07, no disallowance is called for u/s 14A out of interest expenditure because own funds of the assessee were many times more than the amount invested in shares. Some disallowance is justified out of administrative expenses. A.O. is directed to restrict the disallowance u/s 14A to ₹ 1 lac. Issue partly allowed Software license fees – Capital or revenue in nature – Assessee has paid license fees for user of Finance, Purchasing, Order Management and Manufacturing users – Held that:- The most important test is the functional test and if it is found that the function being carried out with the help of the software is such which can be said to be a part of profit making apparatus of the assessee then the same has to be considered as capital expenditure and if it is only for increasing the organizational efficiency, the same cannot be treated as forming part of the profit making apparatus of the assessee company and should be treated as revenue expenditure. Software will help the assessee in increasing the efficiency but the same cannot be treated as forming part of profit making apparatus of the assessee company and, therefore, the expenditure on this software cannot be treated as capital expenditure. In favour of assessee Disallowance u/s 40(a)(ia) - Reimbursement of expenses of C&F agents – Held that:- if bills for reimbursement of expenditure have been raised by the commission agent separately, TDS was not required to be deducted for reimbursement and as a consequence, section 40(a)(ia) is not applicable with regard to such reimbursement. A.O. shall decide this issue afresh and pass necessary order. Issue remand back to AO
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2012 (12) TMI 239
Long term capital gain - sale of share – Claim exemption u/s 54F in respect of LTCG – AO argued that assessee had not invested the capital gains in the construction of a residential house within the time frame stipulated u/s 54F - AO had reopened the assessment u/s 147 and issue notice u/s 148 – AO brought LTCG under tax. Re-opening of assessment u/s 147 – Held that:- AO was within his realm to reopen the assessment by issuance of a Notice u/s 148 of the Act to verify the claim of the assessee as to whether the assessee is entitled to claim exemption. Statement given by assessee that the original return filed on 27.7.2008 (sic) 27.7.2007 for the assessment year 2007-08 may be treated as return filed in response to your notice u/s 148. This assertion of the assessee makes it implicit that the assessee had not objected to whatsoever the reopening of the assessment during the reassessment proceedings. In favour of revenue Exemption u/s 54F – Long term capital gain - Held that:- As no residential house worth the name was constructed within the three years from the sale of the original asset as contemplated u/s 54F. Assessee was expected to construct a residential house not later than 18.1.2010 whereas when the AO made a spot inspection along with his Inspector as late as on 19.10.2010 and found in the presence of the assessee’s representative that the construction was just started and the very fact has been acknowledged by the assessee herself. She had accordingly filed a revised return for the AY 2010-11 admitting the said amount as her income for the said assessment year. Therefore rejecting the assessee’s claim for exemption u/s 54F. In favour of revenue
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2012 (12) TMI 238
Disallowance u/s 40(a)(ia) - TDS u/s 194H - Assessee has paid brokerage and sales promotion expenses without deducted TDS – Held that:- Following the decision in case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) held that disallowance u/s 40a(ia) can be made only when the amount is payable as on 31st March of every year and it cannot be invoked to disallow expenditure which had actually been paid during the previous year without TDS. To verify the same fact issue remand back to AO Revenue or capital expenditure - Refurbishment of showrooms – debited to Renovation and repairs – AO argued that spent for new show-rooms and the payments include interior and exterior works, furniture, Mannequins, racks, light fittings, partitions etc., which is going to provide the assessee benefit of enduring nature. Whether setting up a new showroom would amount to starting a new business or is it only an expansion of the existing business - Assessee is already in the business of retail trading of Reebok footwear and shoes – In two different locations the assessee would be carrying on the business of retail trading in Reebok shoes and footwear – Held that:- As the goods in which the assessee is trading are one and the same, merely by opening new showrooms it cannot be said that the assessee is starting a new business. Whether the expenditure on civil and electrical works incurred in leasehold premises would fall in the capital field – Held that:- Lease is for a period of 4 years only and the assessee was to pay for lease rental as well interest-free security deposit for the lease and also that the assessee is required to incur the expenditure for interior and exterior works for carrying on the business as per 'brand' specifications. Therefore, it cannot be said that the assessee is deriving an enduring benefit nor can it be said that any capital asset has been created in favour of the assessee. Expenditure incurred is revenue in nature. In favour of assessee Expenditure on Keyman insurance policy - Partners of firm - AO held that as these partners are not employees of the firm – Held that:- As the partners are 'connected with the business of the assessee' and therefore are covered by the second part of the meaning given in the Explanation to Sec.10(10D). the premium paid on the Keyman insurance policies taken by the assessee on the life of its partners is allowable as expenditure. In favour of assessee
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2012 (12) TMI 237
Penalty u/s 271(1)(c) - Transfer pricing – Arm length price - Whether multiple year data can be used or the current year data has to be used to calculate arm length price – Held that:- This is a debatable issue at the point of time when the assessee filed its return of income, the assessee adopting multiple year data for arriving at arm's length price is a bonafide exercise. Thus penalty levied on that account cannot be sustained. The law on this issue was evolving. Transfer pricing – Deletion of comparable - TPO has accepted the same in the earlier AYs – Held that:- Selection of comparables is a subjective exercise. The assessee has seriously contested the conclusions drawn by the TPO on selection of comparables for bench marking of international transactions. It is another matter that the assessee chose not to carry the issue in appeal, the reasons of which have been explained. the assessee acted in the bonafide manner in conducting its transfer pricing study and arriving at an arm's length price. The explanation is bonafide and under those circumstances the levy of penalty under Section 271(1)(c)is not warranted. In favour of assessee
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2012 (12) TMI 236
Computation of salary of partners u/s 40(b)(v) – Computation of book profit to compute salary of partnership firm - Assessee treated compensation for use of shared facilities and license fees for use of name under head PGBP as other income in computing book profit – AO reduces the same from book profit considering it as income from other sources – Whether for the purpose of computation of allowable remuneration to partners, the 'book profit' comprises the entire net profit as shown in the P&L or only profit and gains of business assessed under Chapter IV-D - Held that:- Even if the income from other sources is included in the profit and loss accounts to ascertain the net profit qua book-profit for computation of the remuneration of the partners the same cannot be discarded. In favour of assessee
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2012 (12) TMI 218
Acquisition of Land - Enhanced Compensation - Interest accrued on additional compensation - held that :- Assessee became entitled to the enhanced compensation and interest pursuant to the award dated 26th February, 1990 passed by the Additional District Judge, Varanasi which award has been stayed by this Court vide order dated 24th September, 1990 in appeal preferred by the Collector, Varanasi - Staying the operation of the award would mean that the assessee became entitled to nothing till the matter is finally decided by this Court - interest income could not be taxed during the assessment years in question - order of the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.
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2012 (12) TMI 217
Rectification u/s 154 - short levy of interest u/s 234A,234B - held that:- Ext.P4 order passed without furnishing the details sought for by the petitioner deprived her of an opportunity to file her objection to Ext.P2 and therefore Ext.P4 is an order passed in violation of the principles of natural justice - set aside Ext.P4 order and consequently Ext.P5 demand notice also - Respondent is directed to furnish the detailed working of the interest proposed in Ext.P2 to the petitioner on the production of copy of this judgment. Once the details are furnished, the petitioner will also be allowed to file her objection to Ext.P2 and will be afforded an opportunity of hearing and thereafter a consolidated order on Exts.P1 and P2 will be passed by the respondent - Writ Petition is disposed of.
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2012 (12) TMI 216
Validity of Provisional attachment of Assets u/s 281B - Escapement of Income - held that:- This Power can be exercised during the pendency of any proceeding for assessment, so that the assessee does not fritter away or secrete his resources out of the reach of the department when the assessment is completed - provisional attachment order shall still remain in force for six months from date of assessment - Provided also that the period during which the proceedings for assessment or reassessment are stayed by an order or injunction of any court shall be excluded from the period specified in the first proviso."during the pendency of any assessment proceeding or proceedings in pursuance to reassessment that in order to safeguard the interests of the revenue, after recording reasons for the same in writing and seeking the approval from the concerned authority, an order for provisional attachment can be passed. In the present case, Assessment order was passed on 8.11.2012 and demand notice u/s 156 of the Act was issued on the same day granting 30 days time to the assessee to deposit the tax due - petitioner that the appeal has been filed against the said assessment order on 9.11.2012 and stay application has also been filed at a later date before the Income Tax Appellate Tribunal, New Delhi - to safeguard the interests of the revenue till the expiry of 30 days period allowed to discharge the liability of a huge amount of Rs. 2,10,57,87,648/-, learned counsel for the petitioner submitted that till 8.12.2012, the assets to the extent of Rs. 100 crores which are lying with the Bank shall not be utilised - Accordingly, while holding that the provisional attachment order Annexure P.2 dated 1.11.2012 and notices/letters dated 2.11.2012, appended collectively as Annexure P.9 shall also cease to operate after 8.11.2012, it is directed that in terms of the statement made by the Senior counsel for the petitioner, the assets to the extent of Rs. 100 crores shall not be utilised and shall remain in the same form till 31.12.2012. - It shall however, be open for the petitioner to approach the Tribunal for stay of recovery or for the revenue to take proceedings for recovery in accordance with law.
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2012 (12) TMI 215
Transfer Pricing Adjustment - Use of Brand name/ trade name - Arm's length price - Payment of License Royalty - Expense incurred wholly and exclusively for the purpose of business - In assessee’s returns AO had disallowed sum of Rs.33.82 crores being 40% of the general license as not incurred wholly and exclusively for the purpose of business and that the royalty was excessive in the circumstances of the case so as to attract proportionate disallowance of 40% - held that:- Expenditure was neither excessive nor unreasonable, the same could not be disallowed u/s 40 A (2) of the Act - assessee has been able to discharge its burden namely it was a justifiable and reasonable business expenditure and thus should be allowed u/s 37 of the Act - Transfer Pricing Officer after detailed analysis and examination of the material on record concluded that pricing adjustment was unnecessary; therefore, the application of this amendment, made later, to the facts of this case especially in a context in which they have arisen, is academic - no substantial question of law arises, in these circumstances the appeal is dismissed. Decision in COMMISSIONER OF INCOME TAX Versus M/S NESTLE INDIA LTD [2011 (5) TMI 566 - DELHI HIGH COURT] followed.
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2012 (12) TMI 214
Rectification / modification of order of Tribunal u/s 254 - discrepancy in the paper book submitted by the assessee before the tribunal - non furnishing the photocopy of FD - It has been explained by the petitioner that it was only after the receipt of the order of the Tribunal in the appeal that it came to know of the alleged discrepancy and had that been put to the petitioner in the course of the hearing before the Tribunal, it could have been explained by obtaining the necessary certificates from the bank even before the conclusion of the hearing. It was submitted that the petitioner could not have, even after due diligence and enquiry, been aware of the discrepancy and once he came to know of the same on receipt of the order of the Tribunal, he took steps to obtain the necessary certificates from the bank and produced them before the Tribunal along with the application for modification of the order of the Tribunal. It was further submitted that no prejudice would be caused to the Revenue if the certificates are directed to be examined by the Assessing Officer and a fresh decision be taken in the interest of justice. Held that:- matter remanded back to AO for due consideration of the documents sought to be placed on record through the Miscellaneous Application before the Tribunal.
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2012 (12) TMI 213
Appeal against an order of Tribunal remanding back the matter to AO - held that:- An explanation, unless a suitable opportunity is given to verify the same, cannot be treated as a material brought on record. - An explanation pertaining to an entry made by the appellant ought to have had been explained at the time the survey was conducted. -He having had not done so, it was his obligation to explain the same to the Assessing Officer. - He did not do so. - He purported to give explanation before the first Appellate Authority thereby preventing the Assessing Officer to satisfy himself that the explanation is worthwhile. Therefore, the Tribunal was constrained to remit back the matter for re-assessment.
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2012 (12) TMI 212
Penalty u/s 271(1)(c) - Service Charges - furnishing of inaccurate particulars - concealment of Income - on the basis of certain documents found during search which has no connection with the Appellant - Expenses/payments were made through a debit note raised to reduce the taxable profits of the appellant - held that:- Tribunal has reached a finding of fact that the appellant had filed inaccurate particulars regarding its income by showing false/exaggerated expenses - provisions of Section 271(1)(c) of the Act stand attracted - Making of a claim on admitted/disclosed facts is different from filing false/inaccurate particulars - details furnished by the appellant were found to be inaccurate leading to a concealment of income on the part of the appellant - no fault with the order of the Tribunal dated 14th May, 2010 upholding penalty u/s 271(1)(c) of the Act upon the appellant - no substantial question of law arises - appeal is dismissed with no order as to costs.
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2012 (12) TMI 211
Exemption u/s 11 of the Act - whether business activities carried on by the assessee were incidental to the main aims and objects of the Trust which are of Charitable nature or not - In the present case business in Katha was carried on by the trustees or the Board of Directors and not by the beneficiaries of the trust - held that:- If a property is held under trust, and such property is a business, the case would fall under Section 11(4) and not under Section 11(4A) of the Act. Section 11(4A) of the Act, would apply only to a case where the business is not held under trust. - we are unable to accept the contention urged on behalf of the revenue before us that the provisions of Section 11(4A) are sweeping and would also take in a case of business held under trust. The mere fact that whole or some part of the income from Katha business is ear-marked for application to the charitable objects would not render the business itself being considered as incidental to the attainment of the objects. We are in agreement with the view taken by the CIT (Appeals) in his order for the assessment year 1992-93 that the application of the income generated by the business is not the relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. It was contended on behalf of the assessee that the mere letting out of the factory on lease w. e. f. 01.01.1992 does not amount to carrying on of any business. We are unable to accept this contention. Decision in the case of Thanthi Trust [2001 (1) TMI 80 - SUPREME COURT] distinguished - the observations of the Supreme Court must be understood and appreciated in the background of the facts in that case and should not be extended indiscriminately to all cases. It was contended on behalf of the assessee that in case we hold that the assessee-trust is not eligible for exemption because the Katha business was itself not held under trust, it would produce an anomalous or discriminatory result inasmuch as all that is required is for the settler of the trust to declare that the Katha business itself would be held in trust. It is not for us to comment on the contention; we cannot question the legislative wisdom and if there is really an anomalous or discriminatory resultant position, it is for the legislature to take care of it. It is not for us to enter "such a complex arena in which no perfect alternatives exist" All the appeals decided against the assessee and in favour of the Revenue.
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2012 (12) TMI 210
Book profit u/s 115JB - Provision for warranty @4% of total sale value of products on scientific analysis - as provision for diminution in the value of assets - in case of a manufacture and sale of one single item the provision for warranty could constitute a contingent liability not entitled to deduction u/s 37 - obligations arising from past events have to be recognized as provisions as a result of past events resulting in an outflow of resources. As decided by court in case of M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] in concluding such warranty provisions were not contingent liabilities would apply with greater force to negate the claim by the revenue that such provisions are made for diminution in the value of any asset, so as to be covered by Explanation 1(i) to Section 115 JB of the Act - no substantial question of law arises for consideration. Provision in respect of “slow moving finished goods” - held that:- Assessee is dealing with sophisticated medical consumables which are used by the large public and if an inventory is not moving for sufficiently long period, it is considered to be non-productive or non-useable. The assessee had identified through SAP computer programme which took into consideration each and every item of slow moving finished goods lying at the end of each year and contained information in that regard. The assessee has properly identified such stock and has also followed in accordance with commercially accepted accounting principles of valuation and has put the realizable value for the purpose of valuing the same - CIT(A) was correct in law and on facts to have deleted the addition made by the AO which was based not taking into consideration the hard realities of assessee's business - The addition in our view, is properly deleted - concurrent findings as to the scientific and reasonable method adopted by the assessee in the facts of this case have been recorded after the facts were gone into in detail by the appropriate authorities. The Court does not find any reasons to disturb the said findings. On this ground too the revenue's claim has to fail. In view of the decision CIT Vs. Hindustan Zinc Ltd. [2007 (5) TMI 195 - SUPREME COURT], decided in favor of assessee.
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2012 (12) TMI 209
Disallowance under section 14A of the Act - alleged that the assessee had not made any submission of expenses relating to investment or dividend of income, though indisputedly, certain expenses are bound to have incurred for earning the dividend income - Held that:- In terms of section 14A(2) of the Act, the condition precedent for the AO to determine the amount of expenditure incurred in relation to exempt income is that he must record his dis-satisfaction with the correctness of the claim of expenditure made by the assessee or with the correctness of the claim made by the assessee that no expenditure had been incurred - determination of the amount of expenditure in relation to exempt income under Rule 8D of the Rules would only come into play when the AO rejects the claim of the assessee in this regard - assessment order does not evince any such dis-satisfaction of the AO with regard to the claim of the assessee that no expenditure had been incurred - matter is remitted to the file of the AO to be decided afresh in accordance with law Sale of shares – Business income or capital gain – alleged that assessee company engaged in the business of purchase and sale of shares, showed part of the purchase and sale in its profit and loss account – Held that:- Shares/securities in the nature of capital asset are shown under the head Long Term Investment and accordingly gain/loss thereon is shown under the head capital gain - shares/securities in nature of trading/revenue assets that is held for disposal in the ordinary course of business are classified under the head current investment and accordingly profit and loss thereon is shown under the head income from business and profession - there was no occasion, as such, to conclude that all disposal of shares, whether under stock in trade or as investment, should be assessed only as the business income of the assessee, merely for the fact that the assessee was a trader in shares Disallowance of interest expenditure on account of alleged non-business use of the borrowed funds – alleged that the assessee had borrowed funds and had given interest free loans to its sister concerns – Held that:- no evidence was brought on record by the AO to show any divergence of funds by the assessee to its sister concerns. No disallowance of interest was called for either in respect of interest on Marging Financing or regarding interest on vehicle loan - Schedule 10 of the accounts which shows a total of Rs. 7,28,217/- by way of interest and financial charges, does not depict any interest by way of corporate loans - No part of the sale proceeds executed on account of Fortis has been proved to have been diverted to parties who have been providing interest free advances - interest on vehicle loan, these had been provided to City Finance and ABN Amro Bank. Again, there is nothing on record to suggest the assessee having diverted these loans to the account of the parties that had been providing interest free advances - appeal filed by the assessee is treated as allowed for statistical purposes
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2012 (12) TMI 208
Sales Tax Incentive – Capital vs Revenue - Following the decision of Hon’ble Apex Court in the case of [Sahney Steel and Press Works Ltd. And Others Vs. Commissioner of Income Tax 1997 (9) TMI 3 - SUPREME COURT ] held that:-. Under the Incentive Scheme of the Government, assessee is only entitled to deferment of sales-tax payment, calculated at a percentage of fixed capital investment. In fact, according to him, the sales-tax incentive will be treated as a deferred loan and the assessee is required to reimburse the said loan to the government - amounts in question are to be treated as capital receipt - Since the facts of the year under consideration are identical, respectfully following the above decision of the Tribunal in assessee’s own case for AY 2006-07, assessee’s appeal is allowed. Gratuity to book profit for computation of MAT liability u/s 115 JB - When the assessee has a defined gratuity plan and the liability of the gratuity has been ascertained on the basis of actuarial valuation as per the assessee’s gratuity plan, it cannot be said that the liability of the gratuity is unascertained liability. Therefore, the addition of the provision for gratuity while computing the book profit is uncalled for. The same is deleted - assessee’s appeal is allowed. Expense on foreign travel of Directors – held that:- Burden is upon the assessee to establish that the expenditure was incurred wholly and exclusively for the purpose of business. In respect of foreign travel, the only explanation given by the learned counsel was that the directors’ foreign traveling was for exploring the business opportunities abroad. However, this explanation was too vague and also unsubstantiated - no justification to interfere with the orders of lower authorities in this regard - assessee’s appeal is rejected - In the result, appeal of the assessee is partly allowed.
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2012 (12) TMI 207
Re-assessment proceedings - proceedings u/s 147 were initiated on the ground that the assessee has claimed excess deduction u/s 80HHC – Held that:- AO accepted the returned income claiming the deduction u/s 80HHC of the Act - Once this was done, the AO has no jurisdiction to go on making further additions, while the same has been done by the AO in this case - AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the assessment proceedings though the reasons for such issue were not included in the notice; however, if after issuing a notice under s. 148, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as matter of fact not escaped assessment, it is not open to him independently to assess some other income – in favor of assessee
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2012 (12) TMI 206
Disallowance of Demat charges – section 14A - Held that:- CIT(A) is on this basis that proportionate interest on investment of Rs.1793.51 lacs should be on the basis of average rate of interest paid by the assessee - The average rate of interest has been worked out by Ld. CIT(A) @ 6.57% and disallowance at this rate was confirmed by him and this has been worked out at Rs.1,17,91,794/- is against the amount of disallowance made by the A.O. - This aspect of the order of Ld. CIT(A) is reversed and the A.O. is directed to compute the interest to be disallowed u/s 14A @ 6.57% Penalty u/s 271(1)(c) - Disallowance under section 14A of the Act - Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(21)(c) - no penalty is justified in respect of disallowance made by the A.O. u/s 14A of the Income tax Act, 1961 - penalty appeal of the revenue is dismissed.
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2012 (12) TMI 205
Income from civil contract business - computation of income u/s 44AD - It has also been observed by the AO that since the income was shown by applying the provisions of section 44AD of the Act, therefore admittedly the assessee had not maintained the books of accounts. - The AO has finally concluded that for the year under consideration as per DVO the cost of expenditure was at Rs.19,65,615/- as against that the assessee had shown Rs.10,66,553/-, therefore the balance of Rs.8,99,062/- was held as unaccounted investment u/s.69 of IT Act. - held that:- order of CITA(A) deleting the addition upheld - decided in favor of assessee. Reassessment – alleged that assessment is reopened based on DVO report – Held that:- Return was filed on 25/10/2004 and on the basis of the DVO’s report, vide a notice u/s.148 dated 20/04/2006 the case was reopened - A case can be reopened if the AO has in his possession a specific information so as to form an opinion that there happened to be an escapement of income - for the years under consideration admittedly the assessee had declared the net income by taking the shelter of section 44AD of IT Act. It is also been gathered that regular books of account have not been maintained by the assessee – against assessee
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2012 (12) TMI 204
Remuneration to partners - interest income - whether business income or income from other sources for the purpose of computation u/s 40(b) - financial charges (income) were treated by the assessee as “business income” - While claiming the remuneration to partners the said income was considered. – the financial charges are earned as per the provisions of section 56 of I.T. Act. The AO has concluded that the assessee was not entitled to include such interest receipts while working the amount of remuneration to partners u/s.40(b) of IT Act. - – Held that:- Assessee is not in a money lending business but the transaction was nothing but dove-tailed with the business activity of the assessee - appeal of the Assessee is allowed
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2012 (12) TMI 203
Penalty under section 271(1)(c) – Held that:- Department had not discharged its burden of proving concealment and had simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, and that penalty could not be levied - penalty proceedings and assessment proceedings both are separate proceeding and the explanation given during penalty proceedings is required to be considered by the assessing authority which in the present case has not been done - assessee’s funds are mixed funds i.e. the own fund and interest bearing funds - AO has not specifically pointed out during the assessment proceedings or in the penalty proceedings that the funds which are interest bearing and having used for non-business purposes i.e. the AO has not brought on record the diversion of funds. Therefore on surmises and conjectures, the AO cannot levy the penalty u/s. 271(1)(c) of the Act – In favor of assessee
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2012 (12) TMI 202
Interest income - cash system versus accrual system – Held that:- Under Section 145(1) of the Act, income chargeable under this head shall subject to the provisions sub-section (2) be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. - As already noticed the assessee is following the cash system of accounting. Therefore the interest cannot be assessed on accrual basis - in respect of OFCPN/DDB, the interest thereon could not be assessed on accrual basis since the assessee had followed cash system of accounting – In favor of assessee Capital gain - transaction of Interest Coupon Strips – short term or long term – Held that:- Capital gains arising on the sale of the deep discount bonds should be assessed as long term capital gains on the footing that he held them for a period of more than 12 months starting from 23-9-2000 before they were sold on 20-3-2002 - assessee is entitled to the exemption under Section 54EC as claimed – In favor of assessee Capital gain - Non Convertible Debenture - deduction u/s.54EC – Held that:- the capital gain should be assessed as Long Term Capital Gain on the footing that the period of holding of Deep Discount Bond is more than the period prescribed. - gain in question was to be taxed as long term capital gain - in consequence thereupon the assessee should also be entitled for exemption u/s.54AC of IT Act. - ground of the assessee is allowed
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2012 (12) TMI 201
Addition on account of reconciliation difference in the closing stock of natural gas – Held that:- Loss of about 4% of purchases is reasonable subject to verification. Instead of verifying the percentage of loss, the AO reproduced his earlier order. The loss of 3.4% is borne out by audited accounts, which is lower than the average loss of about 4% - no reasonable cause to make the disallowance of reconciliation loss by stating that the details of stock lying in pipe lines were not furnished in qualitative or quantitative terms. What had to be verified was whether the loss was in the vicinity of 4%, which has been held to be reasonable by the Tribunal – addition deleted
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2012 (12) TMI 200
Depreciation on the rented building – Held that:- Area of self occupation and let out has not been specified. CIT (A) had only directed to allow depreciation on the W.D.V. of the rented portion of the building. Since assessee had not filed all rent agreements which specify the area - assessee shall submit all the necessary agreements and also the evidences to justify the claim of the self occupied area of the building - matter restored to the file of the Assessing Officer Addition on account of depreciation on mould and dies - alleged that the claim of depreciation was made on the moulds and dies. These assets were leased out. The income from letting out of these moulds and dies is to be assessed as income from other sources – Held that:- Whether the rental income received by the assessee of Rs.12 lacs pertains to the rental of moulds and dies. To whom these assets were let out - All these facts are necessary to ascertain the correct nature of the income and only then the claim of depreciation on these assets could be entertained. Whether the depreciation is to be allowed for passive use or it has to be allowed under section 57(ii) of the Income-tax Act. Under which head of income the rental income received on account of letting out moulds and dies is to be assessed – matter remanded to the file of Assessing Officer Addition of expenses incurred on exempted income on the ground that not allowable under section 14A of the Income-tax Act - issue regarding expenditure under the head building repairs, rates and taxes and insurance had not been thrashed out properly – Held that:- Some of the buildings or parts thereof were let out and the income from the same is being assessed as income from house property, on which deductions are allowed as per sections 23 & 24 of the Income-tax Act - facts need clarity about the expenses to which these expenses pertain – matter remanded to the file of Assessing Officer - appeal of the revenue is allowed for statistical purposes.
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2012 (12) TMI 199
Addition on account of cancellation charges realized from clients default in payments of installments – Held that:- Assessee has filed conformation from all the buyers whose booking were cancelled during the year under consideration. All these buyers have confirmed the receipt of the entire booking amount through account payee cheques without deducting any cancellation charges - Since the assessee has discharged its onus by filing their confirmations from the buyers in respect of the amount received after cancellation without charging any cancellation charges, therefore - addition deleted Addition on account of interest on account of delayed payments – alleged that assessee group is having the practice of charging interest payments on delayed payments of ground rent and installments - addition was made on the basis of statement of Jaideep recorded by Investigation Wing on 3.08.2007 wherein he has admitted to have paid interest of Rs.6,500/- in cash to the assessee – Held that:- Statement recorded before the Investigation Wing does not corroborate with the seized material where the interest payment shown as Rs.49,783/- whereas Jaideep only admitted Rs.6,500/- as interest - no opportunity was provided to cross examine – matter remanded to Assessing Officer - appeal is allowed for statistical purposes
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Customs
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2012 (12) TMI 272
Restoration of Stay Application - non-prosecution - held that:- Appeal of the appellant was dismissed earlier on sufficient cause and the same was restored on payment of costs quantified at Rs.5000/- The appellant seems to be a habitual defaulter so far as pursuing the proceedings not only before this Tribunal but also before other judicial forum - Considering these facts,cost should be imposed on the appellant for restoration of the stay application. The costs quantified at Rs.5000/- should be paid to the accounts of the Commissioner of Customs (Import), JNCH, Nhava Sheva within four weeks from today. On such payment, the order of this Tribunal dated 28.09.2012 would be recalled and the stay application restored to its original number.
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2012 (12) TMI 271
Revocation of CHA licence – Held that:- CHA sublet his licence for a consideration in gross violation of Regulation 12 of CHALR, 2004 and this is an act of corruption - Customs area, the Commissioner of Customs is responsible for the happenings, the discipline to be maintained there and he is best placed to understand the importance of CHA and if he takes a decision necessary for that purpose, the Tribunal should not ordinarily interfere on the basis of its own notions of difficulties likely to be faced by CHA or their employees, and not be swayed by considerations of misplaced sympathy - Customs Act proceedings in the same case, the CHA has been found to be guilty of the offences punishable under the provisions of Customs Act and has been imposed with a penalty of Rs. 5 lakhs under the provisions of Section 112(b) of the Customs Act - fraud in this case has been committed in so many consignments over a long period of time and the same could not have happened without the connivance of the CHA - decision of the ld. Commissioner to revoke the CHA licence is justified
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2012 (12) TMI 270
Import of machines – violation of condition – alleged that as against import of 8 machines permitted under the aforesaid licence, the appellants imported 10 machines – Held that:- Machines were imported in the guise of ‘Spares and Accessories for Nos. of High Speed Take-up Machines’ in violation of Import Control Regulations and the Project Import Regulations - M/s. JKSL imported additional items of machinery and equipment for use in their Polyester Staple Fibre (PSF) plant against the aforesaid licences issued for their PFY Expansion project and cleared the same at concessional rate of duty applicable to Project Imports in gross violation of the Import Trade Control Regulations and Project Import Regulations by mis-representing the facts and giving the impression that the same were required for the PFY Expansion project - request is for post facto approval, which implies that after transferring the plant they are seeking the approval for the same - they have once again sought permission for shifting of the equipment from their PFY plant to their PSF plant. This very conduct of the appellant itself makes it clear that they have violated the terms and condition of the Project Import Regulations - they are not eligible for the benefit of the said Regulations and the concessional rate of duty prescribed under CTH No. 84.66/98.01 of the Customs Tariff Waiver of pre-deposit – Held that:- Appellants had a cash and Bank balance of Rs. 13.6 crores as on 31-3-2011 and, therefore, the plea of the financial hardships made by the appellants is not borne out of the record of the case - appellant directed to make a pre-deposit of 50% of the customs duty confirmed against them
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2012 (12) TMI 231
Offence u/s 135 of Customs Act,1962 - bailability of offences - held that:- we had, by our Order of 11th March, 2011, stayed the arrest of the petitioner in connection with the subject-matter of the said file, presuming that the same would be relating to the offences under the Customs Act, 1962. However, in the petition for vacating the said interim order, it has now been brought to our notice that the subject-matter of the said file has nothing to do with the offences under the Customs Act but under the provisions of the Foreign Exchange Management Act, 1999, and Prevention of Money Laundering Act, 2002, referred to hereinabove, in respect of which we have not expressed any opinion regarding the bailability of offences thereunder. The subject-matter of the writ petition, as has also been submitted today, being confined to the question of bailability in respect of offences under the Customs Act, we allow the petition for vacating the interim order and dispose of Writ Petition ( Crl .) No.57 of 2011 by indicating that, as far as the petitioner's submission with regard to the provisions of the Customs Act is concerned, the same stands covered by the decision of this Court in Om Prakash & Anr . [2011 (9) TMI 65 - SUPREME COURT]. We also indicate that the interim order regarding stay of arrest in connection with the file, referred to hereinabove, is vacated and the respondents would be permitted to proceed in accordance with law as far as the offences under the said file are concerned.
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2012 (12) TMI 230
Penalty – confiscation - Non-notified items – Held that:- In case of non-notified items, the onus to establish the smuggled nature of goods is on the Revenue - appellant has produced on record copies of invoices showing sale of the zinc in question - supplier has also deposed in his statement to the above effect. Failure on the part of the Revenue to locate the supplier cannot be held to be conclusive proof of his non-existence - confiscation of seized zinc and penalty set aside
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2012 (12) TMI 229
Smuggled goods – confiscation and penalty – Held that:- In case of non-notified goods u/s. 123 of Customs Act, the onus to prove that they have illegally entered the country lies very heavily upon the Revenue - same has to be discharged by production of tangible and positive evidence by the Revenue - goods after import become the part of the stock of identical goods already available in the country. Failure on the part of the person possessing such goods to establish that the same were legally imported cannot lead to ipso facto conclusion that the same were smuggled - imposition of penalty upon the appellants were not justified
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Corporate Laws
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2012 (12) TMI 269
Amalgamation - held that:- Scheme involving Amalgamation of a wholly owned subsidiary Company with its Holding Company, Holding Transferee Company is not obliged to seek sanction under the provisions of Sections 391 to 394 of the Act. Upon the Scheme being sanctioned, the entire shareholding of the Petitioner Subsidiary Company would stand cancelled. Further, the Scheme of Amalgamation does not involve any compromise or arrangement with the Shareholders or Creditors of the Transferee Company. In the present case, the material on record demonstrates that upon Amalgamation of the Petitioner Subsidiary Company, with the Holding, Transferee Company, no reorganisation of the share capital of the Transferee Company is involved. The Scheme, if sanctioned, would not be detrimental to the interests of the members or creditors of the Transferee Company or to the public interest at large - net worth of the Petitioner Subsidiary Company is positive and it has an excess of assets over liabilities. Similarly, the net worth of the Transferee Company is positive and it has an excess of assets over liabilities. There is, therefore, no question of the Scheme being detrimental to the public interest - stand taken by the Regional Director cannot be accepted - proposed Scheme of Amalgamation would be in the interest of the Transferor and Transferee Companies, their members and Creditors.
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2012 (12) TMI 268
Winding up Petition - Inability to pay Debts - held that:- It is not only the factum of indebtedness be affirmatively established, but the quantum thereof needs also to be conclusively demonstrated.” The concept of inability of paying the debt cannot be applied in the case where the creditors are fully secured and they have in fact nothing to do with the alleged inability of the company to pay its debts. A secured creditor can always realise his securities to satisfy his debt - mere nonpayment of a money claim is a dispute covered by the arbitration agreement governing the matrix contract on which the money claim is based. There is no dispute as to the claim of the petitioning creditor against the company. The claim is founded on dishonored cheques and even the primary basis of the claim stands admitted. The company did not reply to the statutory notice and has not indicated anything that would make the debt disputed or that would detract from the presumption of the company’s inability to pay that arises u/s 434(1)(a) of the Companies Act. The order of injunction subsisting on the guarantors and the undertakings furnished by the guarantors pursuant to the are matters not relevant for assessing the company’s inability to pay - petitioning creditor’s claim must be quantified, it must be appreciated that the petitioner has quantified its claim both in the statuary notice and in the petition; and it is only the company’s assertion that since the value of the properties covered by the Bombay injunction against the company cannot be conveniently made, the quantified claim put forth by the petitioner should be regarded as an unascertained claim. Such argument does not appeal and is rejected - CP No. 560 of 2011 is admitted for the principal sum of Rs.4,07,05,062 together with interest thereon at the agreed rate of 15.50 per cent per annum from the date of adjustment of the sum of Rs.92,54,515 on account of the fixed deposit. If the company pays off the entire amount, inclusive of interest and costs assessed at 3000 GM, within six weeks from date, the petition will remain permanently stayed. In default, the petition will be advertised in “The Statesman” and “Bartamaan” newspapers. The advertisements should indicate that the matter will appear before the court on the first available working day after the expiry of four weeks from the date of the advertisements being published.
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Service Tax
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2012 (12) TMI 275
Waiver of pre-deposit of Service Tax, interest & penalty - Whether giving bullock-carts on consideration amounts to supply of tangible goods service – Held that:- As per the definition of tangible goods service it includes machinery, equipment and appliances. Bullock-carts prima facie cannot be considered as machinery, equipment or appliances. In view of this, the applicants have made out a case for total waiver for hearing of the appeal. Stay petition allowed. Commissioner (Appeals) has not decided the appeal on merits. Therefore, the impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to decide afresh on merits after affording an opportunity of hearing to the appellant.
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2012 (12) TMI 274
Referring the matter to Hon’ble President – Classification of Service either under the head Business Auxiliary Service or Advertisement Agency Service - The appellants are engaged in brand promotion of ‘INTEL' and ‘MICROSOFT' for which commercial considerations were being paid by both the brand owners periodically. Held that :- Case be placed before the Hon'ble President to refer it to a 3rd Member to decide the issue on the following points:- Difference of Opinion - Whether the Member (Judicial) is correct in holding that the appellants are engaged in the activity of promoting the brand of Intel/Microsoft consequently, the activity of ‘promotion or marketing of logo or brand' does not cover under the category of Business Auxilliary Service by relying on the judgment of [M/s JETLITE (INDIA) LIMITED Versus CCE , NEW DELHI, 2010 (12) TMI 40 - CESTAT, NEW DELHI]. Or - Whether the Member (Technical) is correct in holding that the appellants are engaged in the activity of promoting the branded goods of Intel/Microsoft, therefore, the judgment of Jetlite (India) Ltd., (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxilliary Service and the extended period of limitation has rightly been invoked.
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2012 (12) TMI 273
Reverse charge on import of services – Assessee has received various services from territory outside India who have no office in India - The period involved in this case is 01.04.99 to 31.03.04 – Revenue contended that assessee not paying the Service Tax on the services, falling under the category of 'Consultancy Engineering Service' as specified in Sec. 65(31), received by them – Held that:- Since the period involved which is prior to 18.04.2006, i.e. the date of insertion of Section 66A of the Finance Act, 1994. Before enactment of Section 66A it is apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives services outside India as held in case of INDIAN NATIONAL SHIPOWNERS ASS.& ORS. (2010 (12) TMI 12 - SUPREME COURT OF INDIA). Hence impugned Orders are not sustainable in law. Therefore, the Orders are set aside and the Appeals of assessee are allowed.
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2012 (12) TMI 234
Demand of Service Tax - self service - services provided to units/branches of M/s SAIL (assessee) - held that:- There is no dispute that the applicant is an unit of M/s SAIL and the other units are also part of M/s SAIL. - Service provided to self is not liable to service tax - applicants are able to make out a prima facie case for total waiver of pre-deposit in their favour - stay granted. Decision in the case of INDIAN OIL CORPORATION LTD. Versus COMMISSIONER OF C. EX., PATNA - [2007 (5) TMI 135 - CESTAT, KOLKATA] followed.
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2012 (12) TMI 233
Cenvat Credit - 'rent a cab' - Following the decision of court in case of [Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT] held that:- As per Rule 14 of the Cenvat Credit Rules, 2004 - As is clear from the definition any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service - If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business - merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit - Rule 3 of the Cenvat Credit Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit, the service tax leviable under section 66 of the Finance Act and paid on any input service received by the manufacturer of a final product - Decided in favour of the assessee.
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2012 (12) TMI 232
Waiver of pre-deposit of Duty - Held that:- Works Contract in question are divisible into two components for supply of materials and providing services. Issue whether the activity can be taxed as service is not examined and the provisions of Article 366 (29A) of Constitution not considered because that was not relevant to the issue before the court. Claim that the activity that is sought to be taxed was done before 16-05-2005 was not substantiated by documents before the lower authority though they stated that they would produce such evidence within 15 days from 31-08-2010, the date of hearing before adjudicating authority. It appears that the applicant is raising arguments in piecemeal before different authorities for delaying the process of early conclusion of the proceedings and delaying payment of tax involved. The appellants have submitted some documents after hearing of the stay petition but before the issue of this order - Considering the various aspects held that this is not a case for complete waiver of pre-deposit of tax arising from the impugned order – applicant directed to make a pre-deposit of 50% of the tax demanded within six weeks from the date of receipt of this order for admission of the appeal.
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Central Excise
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2012 (12) TMI 267
Availment of Cenvat credit - Membership of club tourism service and mandap keeper services - Input service - nexus with Manufacture - held that:- payment for club membership is allowable as business expenditure inasmuch as club membership is used for convening business meetings and to facilitate vital decisions making, exclusively cordial ambience is essential for creating calm, composed, peaceful and tranquil mind set of the clients and the customers - relatable activities of the business. Hence, the same are covered under the definition of input services - Service Tax paid on the same is available as Cenvat Credit to the appellant. Mandap Keeper services - held that:- Employees of appellants company were on strike during the relevant period and mandap keeper services were availed for safeguarding the materials lying in the open yard and to provide accommodation under the tent for the employees during the strike period - mandap keeper services were availed by the appellant in connection with their business activity though it was one time expenditure incurred on housing the striking employees and safeguarding the material lying in the open by the workers during strike - fact that it was one time expenditure will not change the fact that said services were availed in connection with the business activities - same are available as credit to the appellant - impugned order is set aside appeal is allowed.
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2012 (12) TMI 266
Hot Melt Unit - Capital Goods - Rule 57-Q - held that:- Marketability is an essential criterion for determining the liability of goods to excise duty and the process of rendering goods to market is a manufacture - end products manufactured by the respondents cannot be marketed without proper packing and therefore the modvat credit on the impugned machine used for packing of such goods is admissible as capital goods under Rule 57-Q." - The denial of the credit for this reason therefore cannot be sustained". In the present case "Hot Melt Unit" was admittedly used by the assessee while packing their finished goods - "welding electrodes". Since packing is held to be one of the essential components of the manufacturing process of the finished goods and being in the nature of incidental or/and ancillary to the main manufacturing activity, the assessee in this case was rightly held entitled to claim modvat credit on the item - "Hot Melt Unit" treating the same as capital goods under the Rule 57-Q ibid for claiming benefit - issue sought to be urged by the applicant (revenue) no longer remains resintegra - no referable question of law arises in the case - reference application fails and is accordingly dismissed. Decision in EASTEND PAPER INDUSTRIES Versus COLLECTOR OF C. EX., CALCUTTA [1989 (8) TMI 81 - SUPREME COURT OF INDIA] and Dharampal Satyapal v. Commissioner of Central Excise, Delhi- I, New Delhi [2005 (4) TMI 66 - SUPREME COURT OF INDIA] followed.
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2012 (12) TMI 265
Eligibility for Cenvat credit - nexus with the manufacture of final products – input service - manufacture sugar and molasses - services of the insurance of - plant and machinery including breakdown of machinery, company’s vehicles, employees in respect of medical claim (Medi-claim), stock of finished goods (sugar) and molasses (by product) kept in the factory, cash in safe and transit; and finished goods (sugar) in transit - According to Department services have no nexus with the manufacture of final products – Held that:- Any prudent businessman in manufacturing business would insure his plant and machinery, goods in storage, cash in transit and goods in transit if his sales are on FOR destination basis - services are integrally connected with the manufacturing business of an assessee and the same have to be treated as “activities relating to business” and hence covered by the definition of input service - appellant plead that the lower authorities decided the case against them without giving them opportunity to produce these documents - Since these documents go to the root of the matter, the miscellaneous application filed by the appellant for admitting this additional evidence is allowed - appellant’s claim regarding Cenvat credit can be examined with regard to these documents only by the original adjudicating authority, tine matter has to be remanded to the original adjudicating authority
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2012 (12) TMI 264
Cenvat credit demand along with interest and penalty - Cenvat credit - inputs in process destroyed in fire – Held that:- If the WIP has reached the stage, when it can be considered as manufactured goods, in that case, the same treatment as applicable to finished goods - if the activity carried out on the WIP goods cannot be considered as amounting to manufacture, in that case, the said goods should be considered as input and the treatment for reversal of credit applicable to input would be applicable - no dispute about the fact that the insurance claim received by the appellant in respect of loss of the work-in-process inputs does not include the element of Central Excise duty - Cenvat credit demand along with interest and penalty set aside
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2012 (12) TMI 263
Demand of differential duty - Confiscation of seized goods – alleged that Stereo Cassette Players received from Delhi without cover of invoices and without payment of duty which were not accounted for in the statutory records by the respondents – Held that:- Revenue is not contesting the fact that confiscation of the goods seized in the hands of current respondent or in the hands of suppliers of the goods in Delhi. Since the goods have held to be not liable for confiscation - demand of differential duty not sustainable
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2012 (12) TMI 262
Duty demands – limitation - appellants had purchased DEPB scrips obtained by M/s. Shree Krishna Impex – alleged that the DEPB scrips were obtained by M/s. Shree Krishna Impex by over valuing the goods and therefore, correct value in the DEPB was not reflected and therefore the imports made by the appellants against such licenses have to be treated as non-duty paid – Held that:- DGFT has yet to decide whether the value declared for the purpose of obtaining DEPB scrips is correct or not and they have also not taken action to reduce the value of DEPB scrips or to cancel the same - action taken by the Revenue seems to me pre-mature - matter remanded - Waiver of pre-deposit allowed
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2012 (12) TMI 261
Denial of cenvat credit on iron and steel structure - Modvat credit on various items which were used for fabricating items like vacuum tank, syrup extraction receiver, stationary flange juice guard etc. – alleged that appellant failed to establish that these items were used as parts and accessories of the goods falling under specific heading – Credit is not available on goods which are used for erecting the machine or constructing any foundation or supporting structures basically because these items become immovable property - admissibility of the claims are decided having regard to the issue whether the items are used in erecting machinery or are part and accessories of the machinery and the decision in respect of each item as declared by the appellant - held that:- all items can be considered to be parts and accessories of “Machinery for Sugar Manufacture” falling under Heading 8438.30 An observation - I give my findings based on information available on record and taking declaration to be correct. This may lead to some inaccuracies but in the facts and circumstances such inaccuracies are inevitable. Such inaccuracies could have been avoided if the lower authorities were willing to inspect the items and record their findings on use each item which was not done. If I remit this matter for de-novo consideration, going by past experience, the authorities below are most likely to keep writing about case laws without verifying actual use and waste the time of the Tribunal again on this matter involving a small amount. So such a course of action is not warranted.
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2012 (12) TMI 260
Cenvat credit – alleged that appellants had not reversed the cenvat credit on the inputs so shown as written off in their balance sheet – Held that:- It is not Revenue’s case that the inputs were cleared from the factory. Merely because the same were written off in the books of account and the value shown as nil, by itself, cannot be considered to amounting to removal of the inputs from the factory premises in the absence of any evidence to that effect - inputs were still in their possession. Revenue has not rebutted the above submission of the appellant and there is no allegation or finding that the inputs stand cleared from the factory - Cenvat Credit Rules, 2004 were amended on 16-5-2005 - The question whether this new provision will apply for inputs written off prior to 16-5-2005 was examined by the Mumbai High Court in the case of CCE v. Hindalco Industries Ltd. - [ 2011 (6) TMI 662 - BOMBAY HIGH COURT] and held that the provisions cannot be invoked in such a situation.
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2012 (12) TMI 259
Refund - Cenvat credit of input services - processing of frozen shrimp and frozen fish – export – Held that:- Frozen shrimps and frozen fish are attracting no duty or rather ‘nil’ rate of duty and, therefore, need not be cleared on execution of any bond as there is no duty liability. As there is no duty liability and the appellants are undisputedly manufacturing only “exempted goods” (‘nil’ rated goods) during the disputed period the bar prescribed in terms of Rule 6(1) of the CENVAT Credit Rules shall apply - as the appellants are processing only exempted products and since the bar under Rule 6(1) of the CENVAT Credit Rules shall apply, the question of their executing a bond envisaged under Rule 5 of CENVAT Credit Rules does not arise - Decided against the assessee.
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2012 (12) TMI 258
Refund claim - unutilized Cenvat credit of Additional Excise Duty – Held that:- the appellant seeks cash refund of unutilised AED (T & TA)) credit i.e. credit to personal ledger account (PCA) on the ground that the same has been accumulated on account of wrong instruction of the Department refraining them from utilising this credit for payment of AED (GSI) and thereby compelling them to pay the AED (GSI) leviable on their final products through PLA. However, since undisputedly on account of taking over of the unit by M/s. Harshit Textile Pvt. Ltd., the unutilized AED (T &TA) credit has been transferred in favour of M/s. Harshit Textiles Pvt. Ltd., there is no question of refund of this credit to the appellant. Their plea for cash refund of this credit to M/s. Harshit Textiles cannot be entertained as no such request has been made by M/s. Harshit Textiles before the lower authorities. - in favour of Revenue
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2012 (12) TMI 228
Cenvat Credit - rent-a-cab services - transportation of workers/employees from their factory to homes and back - for sending sick employees to hospital - for transporting children of employees/workers to school/tuition centres and back - Input Service - Cenvat credit demand, Interest and Penalty - nexus with manufacture of Goods - held that:- service of rent-a-cab service availed for bringing employees to the factory and dropping them back home is covered by the definition of Input Service and appellant had rightly claimed Cenvat Credit. Decision in C.C.E., Bangalore vs. Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] and C.C.E., Bangalore III vs. T.G. Kirloska Automoiive Pvt. Ltd [2011 (4) TMI 206 - KARNATAKA HIGH COURT]; that also judgment of Hon’ble Punjab & Haryana High Court in the case of C.C.E., Chandigarh I vs. M/s Federal Mogul Goetze (India) Ltd [2011 (9) TMI 120 - PUNJAB AND HARYANA HIGH COURT] is followed. cenvat credit in relation to the ambulance services - held that:- Factory owner is under legal obligation to ensure basic medical facility for the welfare of the employees who may suffer from injury in accident or may suddenly fall sick. In the instant case, hiring of ambulance for carrying sick employees to the hospital for treatment is extension of the aforesaid legal obligation of the assessee - health of the workers in a factory has direct relation to its output - service tax paid on ambulance service i.e rent-a-cab service for ambulance, by the appellant in respect of welfare of employees has nexus with the production of final product - Com has fallen in error in disallowing aforesaid cenvat credit to the appellant. Cenvat credit for transportation of employees children to schools/tuition centres - is a welfare activity which is not covered by the definition of Input Service - cenvat credit demand of Rs.62,435/- is upheld along with interest, rest of cenvat credit demand is set aside. Since the issue involved in this appeal relates to interpretation of the provisions of Cenvat Credit Rules, penalty of Rs.10,000/- imposed on the appellant is also waived.
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2012 (12) TMI 227
Disallowance of Cenvat credit - Recovery of Cenvat credit with Interest and Penalty - inputs/capital goods and services utilised by the appellant in the research and development centre had no direct or indirect nexus with the manufacture of final product(Department) - appellant seeking waiver of condition of duty demand, interest and penalty - held that:- Appellant who is manufacturer of motor vehicles is required to submit prototype of the vehicle for test by agency specified under the rules before starting actual production of motor vehicle for sale. Therefore, any charge incurred in research and development unit would fall within the definition of Input service, capital goods or input service for the purpose of availing cenvat credit - impugned order is not sustainable as nexus with manufacture is established and thus this is a fit case for grant of waiver of duty demand, interest and penalty pending appeal - after waiving the conditions ofi pre-deposit, impugned order is set aside and remand the matter back to the Commissioner concerned for de novo adjudication in the light of the Motor Vehicles Rules, 1989 after giving opportunity of being heard to the party as the above plea has been raised for the first time before the Tribunal in the interest of justice - Appeal is decided accordingly.
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2012 (12) TMI 226
Calculation of entitlement of DTA sale - 100% EOU - Exim Policy - whether deemed export is equivalent to physical export - held that:- Tribunal in its impugned order held that once Development Commissioner giving permission to the appellant, a 100% EOU, to sell goods in DTA up to a specified value. Revenue cannot go beyond the permission and dispute it holding that for fixing the limit only physical exports and not deemed exports should have been taken into account - no merit in the appeal filed by the Revenue and accordingly, reject the same. Decision in GINNI INTERNATIONAL LTD. Versus COMMISSIONER OF C. EX., JAIPUR [2001 (9) TMI 165 - CEGAT, COURT NO. IV, NEW DELHI] followed.
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2012 (12) TMI 225
Cenvat credit – appellants received goods along with invoices on which they have taken input duty credit - alleged that goods were purchased from the market and that there were no duty paying documents evidencing payment of duty to the Central Excise Department – Held that:- They cannot be given duty credit, if the supplier from whom they have purchased the goods has not paid the duty to the Central Excise Department in the first place - If the appellants have been given invoices showing payment of duty without the supplier having paid the duty, there are legal recourses available to the appellants to obtain compensation from the supplier. There is no reason why the Central Excise Department should compensate them because they had entered into transactions which someone who has duped them by giving them such invoices on which credit cannot be taken by them - appellants directed to pre-deposit equal to 50%
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2012 (12) TMI 224
Unaccounted goods – seizure – Held that:- Non-accountal of excisable goods produced by a manufacturer in the prescribed RG-I register is contravention of the provisions of Rule 10 of the Central Excise Rules, which attracts confiscation of the unaccounted goods and penalty on the manufacturer under Rule 25(1)(b) ibid. Therefore, the unaccounted goods under seizure have been correctly ordered to be confiscated and penalties have been correctly imposed on the appellant company and its Directors. However, looking to the fact that appellant company had gone to the Settlement Commission and have discharged the duty liability as determined by the Settlement Commission, the redemption fine is reduced
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2012 (12) TMI 223
Refund claim - goods cleared to 100% EOU - unjust enrichment – Held that:- Certificate given by the buyer of the respondent that no excise duty was paid by them to the respondent - as the respondent was entitled to clear the goods without payment of duty and it was only on account of delay in permission on the part of the department - Merely because the duty element stands reflected in the excise invoices, by itself, cannot be the basis to hold that such excise duty was recovered by them from their customer, who is 100% EOU and such, is not liable to pay excise duty - respondent cannot be called upon to establish by other evidence that the said duty has not been passed on to their buyer – refund allowed
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2012 (12) TMI 222
Penalty whether mandatory - Section 11AC or Rule 25 - intention to evade payment of duty – Held that:- A mandatory penalty equal to the duty (neither more nor less), short paid or not paid or erroneously refunded is payable if such non-payment or short payment or erroneous refund was due to fraud, collusion, wilful misstatement or suppression of facts etc. under Section 11AC. - Rule 25(1) does not envisage mandatory penalty equal to duty, the rule only provides penalty upto duty payable on such contravening goods or Rs. 2,000/- whichever is higher. However, from the above it does not follow that provisions of Rule 25(1) would not apply in case the ingredients of fraud, wilful mis-statement or suppression etc. are not present. Otherwise the provisions of Rule 25(1) would be rendered otiose. Proposal in the show cause notice was for imposition of penalty for contravention of Rule 4 and Rule 8 ibid, under Section 11AC read with Rule 25(1) - there is no suppression of facts before the Department of wilful mis-statement or fraud or evasion of duty - this is not a case where the penal provisions can be upheld or that where the penalty can be imposed - provisions of Section 11AC are para-materia to the provisions of Rule 25(1)(d) so far as the contravention of any of the provisions of Rules with intent to evade payment of duty is concerned - penalty is not imposable under Rule 25 – in favor of assessee
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2012 (12) TMI 221
Cenvat credit - service tax paid on the insurance on vehicle, finished goods, cash in transit and insurance on cash box – Held that:- insurance service may be indirectly connected to the manufacturing or other activity but that may be in relation to manufacture or various other business activities enumerated in Rule 2(l) of Cenvat Credit Rules, 2004. This establishes the dependability of input to the output. Unless the vehicle is used otherwise than serving the purpose of manufacture or providing of service, the insurance paid to cover risk should not go out of consideration to grant Cenvat credit - considering inevitability of insurance to make the assessee risk free for carrying out its manufacturing operation and other activities related thereto or to the services relating to inclusive aspects under Rule 2(l) cenvat credit allowed
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2012 (12) TMI 220
Admissibility of cenvat credit - cenvat credit demand in respect of MS angles, Channels, CTD bars, sheets etc. used for fabrication and erection of supporting structures of the machinery, this credit has been taken during Nov. 1994 - August 1995 period – Held that:- With effect from 16-3-1995 goods of chapter 73 were not mentioned in the new definition. The eligibility of capital goods modvat credit of M.S. angles, channels, sections, CTD bars etc. used for fabricating and erecting supporting structures for machinery has to be examined on the basis of definition of “capital goods” - portion of the impugned order disallowing Modvat credit in respect of MS Angles, Channels, Sections, bars, etc. used for supporting structures for machinery for the period prior to 16-3-1995, is set aside and the portion of the order disallowing the Modvat credit in respect of these items for the period w.e.f 16-3-1995 is upheld - appeal partly allowed
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2012 (12) TMI 219
Disallowance of credit - discharge of additional customs duty from DEPB account - Notification No. 96/04-Cus. was issued on 17-9-2004 – Held that:- In absence of specific provision of law, there cannot be any artificial construction of law, that can be made to make law unworkable - when the bona fide of the appellant is not doubted and law was under confusion stage authority cannot proceed against the appellant to disallow Cenvat credit - appellant was also in dark to ascertain the proper position of law, in view of travel of the litigations from 2002 to 2010 from Tribunal to High Court. Therefore, noticing no mala fide, the appellant also succeeds on limitation - appeal is allowed partly
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CST, VAT & Sales Tax
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2012 (12) TMI 276
Preferential Creditor vs Secured Creditor - The claim of the appellant is in the sum of ₹ 1,40,60,422/-; they are sale tax, central tax and entry tax dues payable by the company (in liquidation) for its Morena Unit and Gwalior Unit. The appellant is aggrieved by the finding returned by the Official Liquidator that he be ranked as a preferential creditor and not a secured creditor. - held that:- Provisions of Section 529-A of Companies Act (a Central legislation) have to be override the provisions of Sec 53 of the M.P. Commercial Tax Act of 1994 (a State legislation) - tax liability will be subject to the provisions of Sec 530 of the Companies Act subject to the provisions of Section 529-A of the said Act. There appears to be no conflict between the State Act and the Central Act - even if there is a conflict between a State legislation and a Central legislation, the Central legislation must prevail - Appeal has no merit - Dismissed.
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2012 (12) TMI 235
Uttarakhand Value Added Tax Act - duplex coated board, mill board and grey board - whether the products manufactured by the respondent can be said to be articles of packing – Held that:- Boards are articles of packing - in commercial world and in common parlance, user of such boards is as articles of packing and, accordingly, would come within the inclusive meaning of articles of packing mentioned in entry No. 9 of Schedule II(B) of the Act
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