TMI Tax Updates - e-Newsletter
December 12, 2012

Case Laws in this Newsletter:

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

Articles

1. Keyman insurance policies- some important aspect of a financial tool for risk coverage and tax deferment.

   By: DEVKUMAR KOTHARI

2. Reimbursement of Expenses not subject to Service Tax

   By: Bimal jain

News

1. Indian Coal Reserves to Last Over 100 Years

2. Cancellation of Coal Blocks

3. Coal India Limited to Setup 20 Coal Washeries

4. Foreign Exchange Earnings from Tourism Shows an increase of 22 percent Foreign Tourist Arrivals also goes up by 20 Lakh

5. Successful SME

6. Scheme for Assistance to Training Institutions

7. Growth in MSME Sector

8. Vacant Posts in DGCA

9. FDI in Aviation Sector

10. India's Foreign Trade: November 2012

11. Gross Direct Tax Collection Figures for April-November 2012-13 Up by 7.14 Percent at Rs. 3,25,696 Crore as Against Rs. 3,04,002 Crore in the Same Period Last Year

12. India’s Rank in the Global Competitive Index

13. Incorporation of the Corporate Social Responsibility Provision in the New Companies Bill

14. Changes in the Companies Bill 2011

15. MCA 21 Project – Achievements and Continuation

16. Investigation into the Affairs of Certain ‘Multi-Level Marketing’ Companies

17. National Competition Policy

18. Cases of Default in Repayment by the Non-Banking Financial Companies

19. Unregistered Companies

20. Statement made by Revenue Secretary to Media

Highlights / Catch Notes

Income Tax

• Guidance on Section 54F Tax Exemption: Follow Leena J Shah Precedent Over Prema P. Shah for Capital Gains Clarity.

  Case-Laws - AT : Exemption u/s 54F – Capital Gain - The case of Leena J Shah (2005 (11) TMI 386 - ITAT AHMEDABAD), and not that of Prema P. Shah (2005 (11) TMI 182 - ITAT BOMBAY-J), should be followed for deciding the issue related to Section 54F. - AT
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• Discounts on SIM Cards and Recharge Coupons Classified as Commission; Subject to TDS u/s 194H.

  Case-Laws - AT : TDS u/s 194H - the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS under s. 194H - AT
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• Assessee Penalized for Violating Section 269SS by Accepting Loans of Rs. 20,000+; Penalty u/s 271D Upheld.

  Case-Laws - AT : Penalty u/s 271D - accepting the loans/ deposits or aggregate of such loans or deposits of Rs. 20,000 or more - As such the assessee committed violation of provisions of section 269SS of the Act. - penalty u/s. 271D rightly imposed - AT
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• Non-compete fee payments classified as capital outlays are not deductible as revenue expenses for tax purposes.

  Case-Laws - AT : Disallowance of Non-Compete Compensation - Amount paid as non-compete fee being capital out lay, can not be allowed as revenue expenditure - AT
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• Gas Cylinder Security Deposits Not Trading Receipts; Cylinders Qualify as Plant for 100% Depreciation Under Income Tax Act.

  Case-Laws - AT : Whether the security deposits collected from customers on letting out the Gas Cylinders is trading receipt, whether these Gas cylinders would constitute as plant as per Income Tax Act, if so, the depreciation to be granted at 100% on these Cylinders - both issues decided in favor of assessee - AT
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• Denial of Trust's 80G(5) Income Tax Approval Renewal Due to Unauthorized Trust Deed Favoring Hindu Community.

  Case-Laws - AT : Renewal of approval under section 80G(5) of the Act - Even the unauthorized amended Trust Deed/so called supplementary Trust Deed contravenes the provisions of section 80G(5)(iii) read with Explanation 3 of the Act, being expressed to be for the benefit of a particular religious community i.e. Hindu. - Trust is not entitled to renewal of approval u/s 80G(5) of the Act. - AT
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• Tax Audit Trigger: Advances Not Included in Turnover Calculation u/s 44AB of Income Tax Act.

  Case-Laws - AT : Tax audit u/s 44AB - inclusion of advances - The mischief of section 44AB shall only become operative if the “turnover or business receipts” exceed Rs. 40,00,000/-. The section does not mention anything with regard to advances received from its customers and that too conditional - AT
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• Only Section 24 Deductions Allowed for House Property Income; Brokerage Charges Not Deductible Under Income Tax Act.

  Case-Laws - AT : Deduction u/s 22 while computing annual value of Property u/s 24 - 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 - AT
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• Tax Entity Status Changed Without Notice: AJP Reclassified as AOP Under Income Tax Act Section 2(31)(vii.

  Case-Laws - AT : Person u/s 2(31) - Artificial Judicial Person (AJP) as defined in section 2(31)(vii) - Change of status from AJP to AOP - the Assessing Officer was not justified in changing the status of the assessee without giving any notice.- AT
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• Section 184 Income Tax Act: Salary and Interest to Partners Rules Are Directory, Partnership Deed Filing Omissions Curable.

  Case-Laws - AT : Salary and interest paid to partners - 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. - AT
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• Software License Fees Enhance Efficiency, Not Capital Expenditure, Says Court.

  Case-Laws - AT : Software license fees - 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. - AT
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• Partner Salaries Must Include Other Income Sources in Net Profit Calculations u/s 40(b)(v) of Income Tax Act.

  Case-Laws - AT : Computation of salary of partners u/s 40(b)(v) – 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. - AT
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Customs

• Customs Case: Refund Claim Denied Due to Unjust Enrichment; Price Uniformity Doesn't Prove Duty Burden Stayed with Seller.

  Case-Laws - AT : Refund - unjust enrichment – uniformity in price before and after assessment does not lead to inevitable conclusion that incidence of duty has not been passed on to buyer as such uniformity may be due to various factors – refund claim rejected - AT
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• Royalty Payments Must Be Included in Transaction Value for Customs Duty Calculation to Ensure Accurate Duty Assessment.

  Case-Laws - AT : Transaction value for the purpose of levy of customs duty - royalty is paid for the supply of the goods as a condition of sale has to be necessarily included in the transaction value for the purpose of levy of customs duty - AT
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• Uniform Interpretation Required for Notification No. 21/2002 to Prevent Inconsistencies in Customs Regulations Application.

  Case-Laws - AT : Benefit of Notification No. 21/2002 - there cannot be two different interpretation on parts one for the purpose of notification and another for the purpose of the tariff - AT
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• CHA License Revoked for Subletting in Violation of Regulation 12, CHALR 2004; Act Deemed Corrupt.

  Case-Laws - AT : Revocation of CHA licence – CHA sublet his licence for a consideration in gross violation of Regulation 12 of CHALR, 2004 and this is an act of corruption - AT
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Corporate Law

• Shareholder Disputes Shouldn't Automatically Lead to Company Winding Up; Explore Alternative Dispute Resolution First.

  Case-Laws - HC : The company should not be wound up merely because of disputes which have arisen between the two groups of shareholders; if the same can be resolved by alternate modes and these alternate modes must be exhausted in the first instance; the winding up of a company is the extreme and last remedy and should be resorted to only as a final resort - HC
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Service Tax

• Refund Claim Rejected: No Proof of Export Proceeds Receipt; New Claim Submission Won't Revive Rejected Claim.

  Case-Laws - AT : Refund - partially rejected on the ground that assessee has not been able to produce any proof of receipt of export proceeds - claim which already stands rejected cannot be allowed to be revived by way of filing of fresh claim - AT
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• Appellants Not Required to Verify Service Tax Payment Dates for Cenvat Credit; Responsibility Lies with Service Provider.

  Case-Laws - AT : Cenvat Credit on input services - non payment or delayed payment of service tax by the service provider - Appellants are not expected to/required to know the actual date of payments of the service tax by the service provider - AT
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Central Excise

• Packaging Twin Blade Cartridges with Shaving Gel Not Manufacturing for Excise Duty Purposes, Court Rules.

  Case-Laws - AT : Demand of excise duty - manufacture - assembly of two or more products - The activity of the appellant in packing the twin blade cartridge as also Gillette shaving gel tube in a combination pack and selling it at a discounted MRP of Rs. 85/- does not amount to manufacture. - AT
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• Deliberation on Potato Peelings' Tax Classification: Starch or Vegetable Waste? Stay Granted, Awaiting Final Decision.

  Case-Laws - AT : Classification – waste - peelings of potatoes – manufacturing of potato chips - whether the goods in question is starch classifiable under Tariff Entry 1108 13 00 or vegetable waste classifiable under Tariff Entry 2308 00 00. - stay granted. - AT
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• Cenvat Credit Valid Despite Written-Off Inputs; No Evidence of Physical Removal from Factory Required.

  Case-Laws - AT : Cenvat credit – 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 - AT
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• Appellants processing exempt products can't claim Cenvat credit refund on input services u/r 6(1) CENVAT Credit Rules.

  Case-Laws - AT : Refund - Cenvat credit of input services - 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 - AT
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VAT

• Central Law Prevails: Section 529-A of Companies Act Overrides State Law in Creditor Claims During Liquidation.

  Case-Laws - HC : Preferential Creditor vs Secured Creditor - 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. - HC
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Case Laws:

• Income Tax

• 2012 (12) TMI 340
  Nature of application software - Capital or revenue in nature – Held that:- The tests generally applied to decide the nature of expenditure as to whether it is capital or revenue, are the fact of enduring benefit, ownership test and functional test. Following the decision in case of Amway India Enterprises (2008 (2) TMI 454 - ITAT DELHI-C) held that examination of whether software expenditure incurred is capital or revenue in nature would require to be done in respect of each and every software independently having regard to the criteria / principles laid down. Issue remand back to AO

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• 2012 (12) TMI 339
  Penalty order u/s 13 of the Interest Tax Act, 1974 – Concealment of particulars of chargeable interest or furnishing of inaccurate particulars of chargeable interest – Held that:- As concluding from the facts of the case assessee had shown receipt of in the P&L account on account of interest others but this receipt was not included in the computation of chargeable interest. Following the decision in his own case by Delhi High Court held that on account of interest other, was added to the chargeable interest of the assessee. In favour of revenue Recording in the assessment order u/s 8(2) - Satisfaction as warranted by Sec. 13 for initiating the penalty proceedings - Held that:- As concluding from the facts of the case AO has not recorded satisfaction in course of assessment proceedings and simply initiated penalty. Following the decision in case of Ram Commercial Enterprises (1998 (10) TMI 13 - DELHI HIGH COURT) held that merely because penalty proceedings had been initiated it cannot be concluded that satisfaction as warranted u/s 13 was arrived at and Diwan Enterprises (1998 (11) TMI 27 - DELHI HIGH COURT) held that unless requisite satisfaction was recorded in the proceedings under the Act, the jurisdiction to initiate the penalty proceedings could not have been exercised. Thus, the entire penalty proceedings were without jurisdiction. In favour of assessee

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• 2012 (12) TMI 338
  Deduction u/s 80HHBA – Deduction u/s 80HHB – Assessee was engaged in the business of engineering and technical consultants – Deduction claimed in relation to derive profits from the business of execution of a foreign project – AO argued that assessee’s role in the above works are of consultancy and supervisory nature which cannot be treated as an integral part of execution of any project. Whether services rendered by the assessee fell within the scope of the expressions “execution of a foreign project” or “execution of a housing project’’ and the profits derived from such services are eligible for the deduction u/s 80HHBA it has to be complemented by an equally important aspect of the supply of the designs, drawings and such other technical or technological inputs as well as supervisory and engineering services rendered by the assessee company Both the physical as well as technical aspects of the project are equally important and one cannot be separated from the other. Therefore assessee is entitled to the deduction both u/s 80HHB and u/s 80HHBA. In favour of assessee

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• 2012 (12) TMI 337
  Undisclosed investment – Assessee had purchased agricultural land – AO argued that the purchase price was quite low as compared to the prevailing market rate of the land – AO made addition considering jantri price and auction price of SUDA – Held that:- Following the decision in case of Virjibhai Kalyanbhai Kukadia (2012 (10) TMI 791 - ITAT AHMEDABAD) and Naresh Khattar (HUF) (2003 (1) TMI 77 - DELHI HIGH COURT) held that merely on the basis of fair market value no addition can be made u/s. 69B. Section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment u/s. 69. AO has failed to bring on record any material to support the rates estimated by him. In favour of assessee

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• 2012 (12) TMI 336
  Penalty u/s 271(1)(c) – Whether mere submitting a claim which is incorrect in law would amounts to concealment of income – Assessee earn dividend from UTI MIP and claim exemption of such amount u/s 10(15) - After pointed out by AO, assessee admitted said income – AO made addition of said dividend income and levy penalty u/s 271(1)(c) - Held that:- Following the decision in case of Zoom Communication Pvt. Ltd (2010 (5) TMI 34 - DELHI HIGH COURT) held that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. In favour of revenue

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• 2012 (12) TMI 335
  Capital gain or business income - Whether the income earned from the activity of purchase and sale of shares could be treated as PGBP or capital gain - Assessee is a sub-broker and has also carried out purchase and sale of shares on own account - Assessee is maintaining two separate portfolios i.e. investment portfolio and trading portfolio – Held that:- As the assessee has long term and short term capital gain out of the investment portfolio and it is not the case of the Revenue that any point of time the assessee has mixed up the above two portfolio and merely because the assessee had sold the shares in the relevant year and made substantial gain does not mean that transactions of investment portfolio were not as an investor but as a trader. Following the decision in case of Rewashanker A. Kothari (2006 (1) TMI 80 - GUJARAT HIGH COURT) this issue decides in favour of assessee Disallowance of STT u/s 40(ib) (Securities Transaction Tax) - Assessee has debited the STT to the brokerage account and had credited to P&L account by brokerage which is net of STT and other debts – Assessee claims that he has not charged security transaction tax and has maintained separate accounts in his books of accounts - Held that:- In the absence of the evidence issue required to reexamined. Remand to AO

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• 2012 (12) TMI 334
  Exemption u/s 54F – Capital Gain - Whether assessee was eligible for claiming exemption u/s 54F on purchase of residential premises outside India against the capital gains earned from sale of residential house in India - Assessee is a citizen and resident of USA – Held that:- The words 'Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house' occurring in section 54F means 'investment in residential house in India' and not 'residential house anywhere else in the world'. As stated earlier the words 'in India' may not occur in the relevant provisions, but sub section 3 refers to imposition of capital gains tax, if the asset is transferred within a period of three years and such contemplated transfer can be of a house existing in India. - In favour of revenue The case of Leena J Shah (2005 (11) TMI 386 - ITAT AHMEDABAD), and not that of Prema P. Shah (2005 (11) TMI 182 - ITAT BOMBAY-J), should be followed for deciding the issue related to Section 54F.

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• 2012 (12) TMI 333
  Validity of reassessment u/s 147 - Disallowance u/s 40(a)(ia) – Non-deduction of TDS on payment made to Non-resident - Disallowance was made in a reassessment done when the original assessment was completed u/s 143(3) – Held that:- As all the details relating to TDS on payments made to non-residents, were duly disclosed by the assessee at the time of original assessment. This has not been rebutted by the Revenue. Reopening for a reason that assessee had not deducted tax at source, was not warranted. Especially so, since four years had lapsed from the end of the impugned assessment year, when the re-assessment proceedings were initiated. First proviso to Section 147 of the Act clearly applied and Revenue was unable to show any failure on the part of the assessee to disclose materials or particulars relevant to impugned assessment year. Appeal decides in favour of assessee

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• 2012 (12) TMI 332
  Cost of construction – AO adopted value determined by the Departmental Valuation Officer – Tribunal directed AO to apply state PWD rates for the valuation of construction and instead of CPWD rates – CIT(A) orders reduction of 15% from cost estimated based on CPWD rates would automatically give a valuation at par with State PWD rates - Held that:- Nothing was brought on record by revenue to show that a reduction of 15% on the value based on CPWD rates would give a value at par with State PWD rates. Unless and until this can be demonstrated, we cannot say that the orders of authorities below are in accordance with the directions given by this Tribunal. Nevertheless, we also note that assessee did not give a valuation based on PWD rates before the AO. Therefore, matter has to go back to AO once again for deciding the issue in accordance with directions of the Tribunal. Appeal remand back to AO. Depreciation on motor Car – Personal v/s revenue expense - Assessee has purchased a car during the relevant P.Y. - AO stated that the said vehicle was classified under Non-Transport category - Business was carried on in Kumbakonam, whereas, the car was registered in Chennai - Disallowed the claim of depreciation on the car considering it to be personal in nature – Held that:- The car might have been registered as Non- Transport category vehicle, but, this will not preclude an assessee from using it for the purpose of its business. There is no Rule that every vehicle owned in a business, even if used by employees and executives, also should be registered as Non-Transport category vehicle. Just because the car was registered in Chennai and business of the assessee was in Kumbakonam, would not be a reason to disallow the claim of the assessee. Therefore, its claim that the car was used for the purpose of business could not have been brushed aside. Depreciation allowed. Appeal in favour of assessee Income from house property – A.O. had made the addition for rental income based on the report of his Inspector – Held that:- As such a report was never put to the assessee for her rebuttal. Findings of the AO and assertions of the assessee are at loggerheads. Nothing is available on record to verify which of this is correct. Therefore, issue remand back to AO

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• 2012 (12) TMI 331
  Addition made in respect of Long Term Capital Gains - CIT(A) deleted the addition - additional evidence consists of copy of Termination Agreement furnished to the CIT(A) as per rule 46A - Held that:- CIT[A] has admitted certain additional evidence in violation of the provisions of Rule 46A without affording any opportunity to the AO and has decided the appeal on the basis of the Termination Agreement dt. 26.3.2009 which was not before the AO and this has also been challenged by the Revenue as per the additional ground of appeal. Since CIT(A) has grossly erred in not giving any liberty to the AO to consider the said Termination Agreement following the principles of natural justice this issue back is restored to the files of the AO to examine the termination agreement & recompute the capital gains tax liability in the light of the provisions of sec 45(1) - in favour of Revenue for statistical purposes.

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• 2012 (12) TMI 330
  Disallowance of deduction u/s 80IA - no element of developing, operating and maintaining any infrastructural facility - Held that:- Considering the description of the work executed by the assessee in the relevant period is certainly not the development of any infrastructure as the Champakara and Udyogmandal canals in Kerala were constructed/developed decades ago. What work the assessee executed in respect of these two canals and the Tapi riverbank viz. rip-rap masonary for protection of the canal bank and river bank can at best be work which is a sub-activity in the category of repairs and maintenance thereof rather than development of an infrastructure facility namely, inland waterways which has been done by IWAI. We are of the considered view that the assessee executed works contracts on behalf of the concerned Government bodies and there is certainly no element of developing or operating and maintaining or developing, operating and maintaining of any infrastructure facility as envisaged in clause ( c ) to the Explanation to sub-section(4) of section 80IA - against assessee. Addition being the amount of shortfall in the contract receipts - Held that:- As the assessee was not able to controvert the findings of the AO and CIT(A) that the assessee was unable to explain or reconcile the difference of Rs.40,582 in the contract receipts declared by the assessee and the contract receipts reflected in the TDS Certificates of Indian Oil Corporation, Mangalore Chemicals & Fertilisers and The Indian Navy. As this fact was acknowledged by the assessee before the AO in the course of assessment proceedings no hesitation in confirming the addition made by the AO in respect of undeclared contract receipts - against assessee.

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• 2012 (12) TMI 329
  Denial of claim of 50% discount in respect of valuation of stock - stock was obsolete and got out of fashion and as such it was put up for sale at 50% discount - Held that:- This would not be possible as valuing part of the stock at market price and other part of the stock at “cost price” is not permissible in law. - in accordance with method of valuation of stock adopted by the assessee i.e. lower of “ cost or market value”, no further deduction for discount sale could be allowed to the assessee - against assessee. Rejection of claim of the stock - bills for which were not credited in the books of accounts, pending for accounting - Held that:- As the assessee has produced bills amounting to Rs.2,42,501/- and has claimed in its return of income before the department merely because there was delay in making the claim and the claim was not made at the time of survey itself or at the time of making statement of the partner of the assessee-firm, it could not be said that the facts should not have been verified by the AO and credit of the bills claimed to be available at the business premises of the assessee at the time of survey was not allowable. There is no material before us to suggest that any exercise to verify the genuineness of the bills was made by the AO at any stage of the assessment and no reason for not doing so could be assigned - in favour of assessee. Deletion of addition by CIT(A) - Revenue appeal - Held that:- As admissibility of appeal filed by the Revenue in the light of various instructions issued by CBDT from time to time wherein monetary limits for filing departmental appeals (Income-tax matters) and other conditions were specified, restricting filing appeals before Appellate Tribunal. As tax effect in this case is less than Rs.2 lakhs therefore the present appeal of the department is not maintainable - in favour of assessee.

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• 2012 (12) TMI 328
  Claim of deduction u/s. 80 IB (10) disallowed by AO - CIT(A) allowed the claim - Held that:- As decided in CIT Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] section 80IB(10) provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances. It does not provide that the land must be owned by the assessee seeking such deductions - The relevant terms of development agreement are to be examined so as to ascertain the terms on which the assessee was granted right of construction of a housing project & on the basis of the terms and conditions, it has to be ascertained whether it was a “work contract” or a “Development Contract”& whether under the agreement the assessee had been given full authority to develop the land & AO has to examine about the “profit” or “loss” arising from the said project. CIT(A) has passed the order finding justification only on the issue of ownership of the land based on the development agreement and has unjustly allowed the claim of the assessee - set aside the order of the learned CIT(A) and remit back the case to the file of ht e learned CIT(A) to pass appropriate order - in favour of Revenue.

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• 2012 (12) TMI 327
  Provision paid as salary to the employees before filing of the return - addition to income deleted by CIT(A) - Held that:- The addition was made by the AO on the plea that the assessee debited the impugned amount as provision for cadre staff salary whereas the claim of the assessee, during assessment proceeding that the provision for cadre staff salary was paid to District Cooperative Bank and that since payments could not be paid before 31.3.2008, the impugned amount of Rs.1.20 crores was debited in the p & L account towards provision for cadre staff salary. A sum of Rs.1,19,49,383/- was paid before filing the return of income, therefore, as per provision of Sec. 43B, salary paid to the employees, before filing the return of income, is an allowable deduction - in favour of assessee. Premium paid on government securities - Addition to income deleted by CIT(A) - Held that:- As decided in American Express International Banking Corporation Versus Commissioner Of Income-Tax [2002 (9) TMI 96 - BOMBAY HIGH COURT] that trading of securities is a banking business - as the assessee bank used to buy and sell securities to maintain statutory liquidity ratio, however, this buying and selling resulted into business income or loss was subjected to income-tax - in favour of assessee.

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• 2012 (12) TMI 326
  No opportunity of being heard given to assessee - Held that: - As notices u/s 143(2) were issued to the assessee on 30.6.2008, 17.4.2009, 18.5.2009, 10.6.2009, 21.7.2009, 1.10.2009 along with questionnaire and notice u/s 142(1 dated 30.6.2008 and 17.4.2009 served through speed post, therefore, the contention of the assessee that proper opportunity of being heard was not provided is without any basis. Addition to income - unexplained - Held that:- As CIT(A) affirmed the disallowance but no remand report was obtained from the AO and the disallowances were maintained on the ground that the necessary details could not be filed before the AO. Thus the issue is remanded back to the file of AO to examine the claim of the assessee afresh after providing due opportunity of being heard - in favour of assessee for statistical purposes.

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• 2012 (12) TMI 325
  Deduction being interest payable to HDFC - CIT(A) allowed the claim - Held that:- HDFC, institution in question, is not a Schedule Bank/ Public Financial Institution- it is non-banking financial institution. In these circumstances, it is not covered by provision of sec. 43B(e) , thus addition was made to the income of the assessee need to be deducted - in favour of assessee. Disallowance of prior period expenses - Held that:- Considering the assessee's contention that amounts in question were bad debts, but in the accounts same were disclosed as prior period expenses but the assessee in the revised return also had not claimed the said amount as bad debts, thus matter should be restricted back to the file of the AO - Also considering that First Appellate Authority first allowed the same as bad debts and later on passed an order u/s.154 with regard to an amount of Rs.1.22 Crores, the issue need to be reconsidered - in favour of assessee by way of remand. Disallowance of interest expenses - Held that:- FAA after considering the submission of the assessee held that though the advances were made to group concerns from the borrowed funds, yet same were advanced for commercial expediency, that advance were in pursuance of an agreement, that the assessee was granted permission to publish a magazine without payment or royalty and reduced payment of assets usage charges but had not mentioned as how the payment of Rs.2.33 Crores commensurate with asset usage charges, that agreement of royalty reduction and usage charges was not available to the AO - the matter should be remanded back to the A.O for fresh consideration - in favour of Revenue for statistical purposes. Refund of sales tax paid in excess of demand - addition to income - Held that:- FAA in appellate proceedings held that sales tax refund did not contain any interest paid by the sales tax department & directed the AO to verify the addition and delete the addition if there was no part of interest payment on the refund. From the orders available it is found that neither the AO nor the FAA has examined the issue of refund with reference to the provisions of section 43(B), so the matter is being remitted back to AO for further verification and to take a final decision - in favour of Revenue for statistical purposes. Disallowance of employees’ contribution to ESIC - Held that:- Considering assessee's submission that contribution to provident fund and ESIC were made before the filing of return of income the matter should be restored back to AO for verification of claim made by the assessee - in favour of assessee by way of remand.

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• 2012 (12) TMI 324
  Income from house property - computation of ALV - Sec. 7 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 is not applicable in respect of Flat C of the Madhukunj property - Held that:- Flat ‘C’ of Madhu Kunj property has been let out since July, 1970 & that Flat ’C’ of Madhu kunj became the asset of the firm M/s. Premchand Roychand & Sons with effect from June, 1979, thus Flat ‘C’ is on the same platform as Flat A & B of Madhukunj property and therefore the ALV of the flat ‘C’ should be computed in the same line as that of Flat A & B - The findings of the CIT(A) are reversed as ALV of Flat ‘C’ has to be determined as per the standard rent - No reason to sustain the money value of interest free deposit of Rs. 60,88,738/- as computed by the AO and confirmed by CIT(A). Therefore, the AO is directed to delete the addition of money value of interest free deposit - in favour of assessee. Disallowance being 10% of telephone, telex, and fax charges - Held that:- Considering the chart submitted by assessee it depicts that out of total debit of Rs. 14,06,991/- the assessee has recovered a sum of Rs. 9,58,197/- from its tenants thereby resulting into a net amount of Rs. 4,48,794/-. As it appears that this bifurcation of expenses was not before the lower authorities it is fit to restore this matter back to the file of AO to verify the details of this chart and restrict the disallowance of 10% to net amount only - in favour of assessee for statistical purposes. Disallowance of payment made to Ramabai Kokre - settlement amount in relation to a suit filed in the Small Causes Court in 1991 - Held that:- As the assessee had filed a plea made to Small Causes Court stating that the settlement has been arrived between the assessee and the wife of the driver by which the assessee has agreed to pay ex-gratia amount as paid by cheque No. 971080 dt, 17.11.1997 which has been acknowledged by the Legal heir of the deceased driver. Thus such payments are made to avoid unnecessary litigation and to buy peace of mind therefore need to allow the claim as business expenditure - in favour of assessee. Disallowance of expenditure of purchase of paintings - Held that:- Considering the nature of the business of the assessee he has to maintain the business centre by giving it a decent look therefore display of painting on its wall is to be treated as business expenditure. Having allowed the sum as business expenditure, the assessee will have to forego the depreciation on this amount which has been allowed by the AO - in favour of assessee. Disallowance of deduction being 10% of the motor car expenses - Held that:- Considering the chart submitted by the assessee as noted in Ground 2 it is found that out of the debits under the head motor car expenses, the assessee has also shown credits in the form of recoveries from tenants which has resulted into a net gain of Rs. 9388/-. The AO is directed to verify the details as per the chart and if the net result is actually a gain, then no disallowance can be made under this head - in favour of assessee for statistical purposes. Disallowance of professional fees - CIT(A) allowed the claim - Held that:- AO has not assigned any reason for not accepting the claim of the assessee except that the assessee has separately claimed expenses under the head office repairs and maintenance, office equipments etc. Thus the AO has not made out any case of making such addition - in favour of assessee. Disallowance of expenditure on computer software - CIT(A) allowed the claim - Held that:- As new and improved version of the softwares are available which render the existing software obsolete. Therefore, it cannot be said that these softwares give any enduring benefit. Accordingly no reason to interfere with the finding of CIT(A) - in favour of assessee. Disallowance of expenditure under the head repairs and maintenance - CIT(A) allowed the claim to an extent - Held that:- Since all the expenses so incurred are periodic costs which are necessary to maintain a business centre. The nature of business of the assessee has also to be kept in mind and in this line of business , the center needs new and better look every year in the form of wall paintings , new furniture and carpets . Therefore, no reason to interfere with the findings of CIT(A) - in favour of assessee. Disallowance of expenditure in respect of payment made to Conwood Contractor and Architects and for fixing new woolen carpet in office premises - CIT(A) allowed the claim - Held that:- Considering the explanation above & considering the nature of the business of the assessee, these expenses are nothing but period costs and are recurring in nature and allowed them as Revenue expenditure - in favour of assessee.

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• 2012 (12) TMI 323
  Claim of share trading loss - whether the assessee had declared the rights share in assessment year 1995-96 as stock-in-trade ? - Deduction u/s 80IA - Held that:- The assessee was promoter of GVMCL and shares acquired as promoter of the company had been declared as investment in the balance sheet. The company had come out with rights issue in February’95 and assessee had subscribed to rights issue only with the intention of selling the rights shares. The intention of the assessee can be gathered from the nature of entry made in the books of account at the time acquisition of rights shares in February/March, 1995. The assessee has submitted that the assessee had obtained the balance sheet of assessment year 1995-96 from CIT(A) in response to application dated 30.11.2011, a copy of which has been enclosed with the affidavit showing that the shares of GVMCL had been declared as stock-in-trade but from the perusal of the said balance sheet it is noted that the same is not the certified copy of balance sheet given by CIT(A) from his records because it neither bears the stamp of the office of CIT(A) nor there is any covering letter from CIT(A) enclosing therewith copy of balance sheet. Therefore, it is not established whether the balance sheet for the assessment year 1995-96 now being filed is copy of balance sheet filed during the assessment proceedings for the assessment year 1995-96. Thus the matter requires verification at the level of CIT(A) restore the matter back to CIT(A) for passing a fresh order - in favour of assessee for statistical purposes.

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• 2012 (12) TMI 322
  Deduction of u/s 80IB - excluding interest received on loans and advances from the computation - Held that:- AS in agreement with the proposition that ginning and pressing is an activity of manufacturing. However, so far as earning of interest is concerned, there should be direct and proximate nexus with the business activity. Therefore, on the issue of interest, the issue is need to be remanded to the file of the AO as for claiming deduction u/s 80IB there must be “direct nexus” between the activity/business and is should be “derived from” the business activity of the assessee. Disallowance out of oil mill hammali, pressing expenses, ginning Ludai expenses and Kapas freight and hammali - Held that:- Disallowance of these expenses were done or the reason that these were not supported by verifiable documents and were based on self made vouchers & hammali charges were disallowed on the ground that there was steep increase approximately it was 4 times in such expenses in comparison to preceding year though there was increase of quantity of purchase by about 2½ times only and even the self made vouchers were not signed by the payees.

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• 2012 (12) TMI 321
  Denial of exemption u/s 10(23C)(vi) - denial of claim was advancing of money to Total Diagnosis Private Limited - Held that:- The amount given by assessee to M/s. Total Diagnosis Private Limited was not a loan but was advance in pursuance to agreement to purchase the office space - the amount paid by the assessee society to M/s. Total Diagnosis Private Limited was immediately used by Total Diagnosis Private Limited for purchase of land on which building was to be constructed. On verifying the original agreement and found that stamps for executing the agreement was issued by vendor on 27.3.2005 vide entry no. 4115. All these notes were at the back of the original stamp on which agreement was executed. We also found the rubber stamp of date of issue of stamp by office of District Treasury on 24th March, 2005. Thus, the genuineness of agreement entered by the assessee is not in doubt. It is clear that the amount given by the assessee was not in the nature of loan but was an advance for purchase of office space and when ultimately the Total Diagnosis Private Limited could not give office space due to sanction being not given by Bhopal Municipal Corporation for construction of 4th and 5th Floor, the amount was paid back to the assessee with interest of Rs. 69 lakhs, thus, the transaction was a commercial transaction, where an interest was charged. Thus, there was no loss of any revenue in the hands of assessee society, even when the building could not be handed over to the assessee. Thus no violation of provisions of Section 13 for the advance given to the Total Diagnosis Private Limited for purchase of office space as it is not an amount lent but was in the nature of advance given for purchase of office space and hence exemption u/s 11 & 12 cannot be denied. The excess of income over expenditure is exempt u/s 11 & 12 - in favour of assessee. Disallowance of travelling expenses - Held that:- Trustees’ husband and wife both travelled to Delhi for necessary approval of ‘AICTE’. Minor daughter of Trustee aged 10 years had to be taken alongwith, because she could not be left alone only because the girl being the minor, she had to be taken along and could not be left alone, the expenditure incurred on travelling pertaining to such minor daughter cannot be declined. Furthermore, the amount is negligible and this cannot be treated as benefit to any persons, since these trips were wholly and exclusively for the purpose of society and not for personal purpose - merit in the action of CIT(A) in holding that assessee society has infringed provisions of Section 13 by giving advance to other societies - in favour of assessee. Assessing Officer is directed to recompute interest u/s 234D after giving appeal effect of this order.

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• 2012 (12) TMI 320
  Penalty u/s 271(1)(c) - bogus entries for purchases and sales of shares - income offered for taxation only after issuing notice u/s 148 - Held that:- Assessee in the original return of income has filed details of long term capital gain from sale of shares of M/s Robinson Limited were disclosed by the assessee. However, some additional documents as required by the AO could not be produced due to non-cooperation of M/s Robinson Limited, therefore, the assessee filed revised return on 22.5.2008 in which the income declared under the head long term capital gain was offered as normal income. The assessee also paid due taxes and interest thereon. As decided in CIT Versus Guru Ram Dass Fruit And Vegetable Agency [2001 (12) TMI 60 - PUNJAB AND HARYANA HIGH COURT] if the revised return is filed after investigation started but before issue of notice u/s 148 then no penalty is leviable - As in the present case assessment was framed wherein income offered in the revised return was accepted by the department without making any further addition. Notice u/s 148 was issued by the AO on 11.2.2010 i.e much after filing of the revised return, thus is not a fit case for levying the penalty u/s 271(1)(c) - in favour of assessee.

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• 2012 (12) TMI 319
  Unexplained investment in stock u/s 69 - survey - Held that:- Survey was made by the department on 22.2.2007 and since the amount in difference of Rs. 2,17,148/- was surrendered by the assessee, therefore, the assessee was not expected to keep the furniture forever especially when the Valuer also did not visit on 8th March, 2007, therefore, there is all possibility that the furniture thereafter might have been sold by the assessee - In such a situation, the valuation cannot be done by the Valuer and that too he did not go to the premises of the assessee, as has been claimed. It is a case of survey and how long the assessee will wait & since the assessee has already surrendered the amount of difference (valuation made by the survey party and declaration of the assessee), which was accepted by the department at the time of survey, therefore, no further addition is warranted - in favour of assessee.

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• 2012 (12) TMI 296
  Benefit of claim u/s 80IB(10) - developing and building housing projects - ownership as criteria - held that:- Assessee was not the owner of the property and the statutory appeal of the project was not on the name of the assessee - Sec 80IB of the Act did not warrant the ownership of the land - following the decision of the Gujarat High Court in Commissioner of Income-Tax V. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - case of Revenue was rejected and assessee is entitled to deduction u/s 80IB.

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• 2012 (12) TMI 295
  Expenditure incurred on land development - Failure to deduct tax as required u/s 194C - applicability of provisions of sec 40(a)(ia) - project completion method adopted by assessee in dispute - Rejection of Books of account - held that:- from the P&L Account, which was filed by the assessee at the time of hearing that it has not claimed the above amount of Rs. 44,01,500/- as expenditure and did not debit the same to the P&L A/c. When the assessee did not claim the said expenditure/payments by debiting P&L A/c, the question of disallowing this amount by invoking the provisions of section 40(a)(ia) does not arise. further view of revenue that in case of ‘completed contract method’ AO is empowered to examine the expenditures incurred during the year which increases the opening work-in-progress or addition in work-in-progress. But one does not agree with the view of revenue that addition is to be made in total income, if some expenditure were found not allowable. The correct procedure in ‘completed contract method’ is that instead of making addition, the AO should correct the amount of work-in-progress by reducing or enhancing workin- progress as the case may be. Such corrected WIP will be finally considered in P&L a/c /contract account for the year in which work is completed - AO made addition in all the projects including incomplete projects, which is not warranted - no infirmity in the order of the CIT(A) in deleting the addition of Rs. 44,01,500/- made by the AO invoking the provisions of section 40(a)(ia) of the Act, thus, the same is hereby upheld dismissing the ground of the revenue. Decision in the case of Savala Associates Versus Income-tax Officer, Navi Mumbai [2009(10) TMI 640 - ITAT MUMBAI] followed.

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• 2012 (12) TMI 294
  TDS u/s 194H - Commission or discount to distributors of SIM cards/recharge coupons - AO observed that upto financial year 2007-08, assessee has deducted TDS on amounts paid on sale of recharge coupons by treating the same as commission - held that:- transaction between BSNL and purchase dealer was on principal to agent basis - Assessee, a cellular operator, provides prepaid connections to the subscribers through distributors called prepaid market associates (PMAs) appointed by it - It offers discount for prepaid calling services to its distributors - Legal relationship is established between the assessee and the ultimate consumer/subscriber, who is sold the SIM card by the agents further appointed by the PMAs with the consent of the assessee Fact that the PMA is supposed to make the payment in advance as per the agreement does not make any difference to the nature of the transaction in view of the other terms of the agreement - Even though advance payment is made by the PMA qua SIM cards, it does not amount to ‘sale’ of goods in as much as unsold SIM cards are to be returned to the assessee and it is required to make payment against them - This is an antithesis of ‘sale’ Therefore, the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS under s. 194H - Contention of the assessee that s. 194H is not applicable as there is no ‘payment or credit’ by the assessee to the distributor cannot be accepted."- no infirmity in the order passed by the learned CIT(A). Therefore, this ground of appeal raised by the assessee for both the assessment years under consideration is dismissed. Decision in CIT v. Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] followed.

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• 2012 (12) TMI 293
  Validity of Reassessment Proceedings - Escapement of Income - concealment of income and tax evasion - “reason to believe” - jurisdiction to reopen the petitioner’s assessment - petitioner did not disclose expenditure incurred by her in her foreign travels during the relevant previous year - no documentary evidence was available to show the inclusion of the expenditure involved in the foreign travels in the taxable income of the petitioner’s husband, who was also assessed to tax by the ACIT, Circle 48(1), New Delhi - notice u/s 148 was issued on 28.3.2012 after a period of 4 years from the end of the assessment year - held that:- no documents were submitted along with the petitioner’s return of income to show that the expenditure incurred on foreign travels along with her family was part of the salary package of her spouse, Abhisar Sharma - failure of petitioner to furnish fully and truly all primary and material facts relating to her assessment - In absence of any document or evidence filed along with her return of income explaining the expenditure incurred by her on her foreign travels during the relevant previous year, the Assessing Officer was justified in invoking the first proviso to Section 147 and in coming to the prima facie belief that there was escapement of income on account of the assessee’s failure to satisfy the requirements of Explanation 1 below Section 147 - notice issued on 28.3.2012 u/s 148 of the Act for the assessment year 2005-06 was within the jurisdiction of the Assessing Officer - AO is directed to dispose of the objections filed by the petitioner within a reasonable time and at any date not later than 30 November, 2012, if not already disposed of.

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• 2012 (12) TMI 292
  Penalty u/s 271D - Violation of Provisions of sec 269SS - Held that:- CIT(A) is not justified in accepting the oral explanation offered by the assessee that the depositors do not have PANs and the assessee only acted as a custodian of the amount and did not gain anything and the depositors were agriculturists - there existed no reasonable cause for accepting the loans/ deposits or aggregate of such loans or deposits of Rs. 20,000 or more from various persons otherwise than by crossed account payee cheques or DDs. As such the assessee committed violation of provisions of section 269SS of the Act. Therefore, the penalty u/s. 271D is attracted and rightly imposed by the Assessing Officer and the learned CIT(A) was not factually or legally correct in deleting the penalty levied by the Assessing Officer. Accordingly, we cannot sustain the order of the CIT(A) which is based on irrelevant considerations - order of CIT(A) is reversed and restore the order of the Assessing Officer - In the result, Revenue appeal is allowed. Decision of Commissioner of Income-Tax, Central, Calcutta Versus National Taj Traders [1979 (11) TMI 2 - SUPREME COURT] followed.

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• 2012 (12) TMI 291
  Validity of Assessment order passed by Tax Recovery Officer, who is not AO - Held that:- Tax Recovery Officer inherently lacks the status of an Income Tax Officer. In the present case, assessment is framed on 29.12.2008, and, the provisions of section 2(44) permitting Tax Recovery Officers to do assessment work was amended well before this date. It is wholly immaterial whether or not this provision was in force in the beginning of the relevant assessment year, because it is a procedural provision and all that matters is that the procedure should be carried out in accordance when such procedure is adopted. In any event, power to transfer cases u/s. 127(2) cannot be challenged before this forum - plea of the assessee is rejected. Disallowance of Commission - Held that:- It is illegal, unjust and arbitrary since these have allowed under similar terms and conditions subsequently, and in same case, opportunity for cross examination of witnesses was not allowed to appellant. fundamental requirements for allowing deduction in respect of commission payment is that there should be evidence for some services having been rendered. The services having been rendered cannot be simply assumed or inferred. In the absence of such evidence, no interference is called for in this disallowance - confirm the same - In the result, appeal filed by assessee is dismissed.

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• 2012 (12) TMI 290
  Disallowance of Non-Compete Compensation - held that:- Expenditure incurred in warding off competition in the business even to rival dealer will constitute capital expenditure and to hold it as capital expenditure, it is not necessary that non-compete fee be paid to create monopoly rights. Thus, Amount paid for non-compete fees is considered as capital outlay, the same cannot be allowed as the revenue expenditure u/s 37(1). Moreover since the amount is not in the nature of revenue expenditure, a part of it cannot be considered as deferred revenue expenditure so as to allow over period of non-compete agreement. In view of this, assessee's contention cannot be accepted - ground raised by assessee is dismissed and confirm the action of AO in this regard - In the result, appeal filed by assessee is dismissed. Amount paid as non-compete fee being capital out lay, can not be allowed as revenue expenditure Decision in Tecumseh India Pvt. Ltd. Versus Addl. CIT [2010 (7) TMI 685 - ITAT, DELHI] followed.

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• 2012 (12) TMI 289
  Initiating proceedings u/s 263 - Disallowance of payments made under Exit Option Scheme(VRS) as Employee welfare measure - held that:- It is eligible for deduction u/s 35DDA of the Act and accordingly, the appellant shall be eligible for 1/5th of the total expenditure as deduction in assessment year 2007-08 and the balance in subsequent four assessment years. further it was clarified that compliance with Rule 2BA is not mandatory in such cases. It was, therefore, found that the deletion of conditionalities originally incorporated in the Bill showed that legislative intendment was not to incorporate all the conditions of section 10(10C) in section 35DDA. Finally, the Legislature left the scheme of voluntary retirement open-ended and did not place any restriction on the scheme. Thus, plain language of the provision supports the case of the assessee. Assessing Officer directed to allow 1/5th of Rs. 7,09,56,323.23 as deduction under section 35DDA for the concerned assessment year. Decision in CIT Versus SONY INDIA PVT. LTD. [2012 (6) TMI 286 - ITAT DELHI] Followed.

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• 2012 (12) TMI 288
  Deduction u/s 14A - held that:- The object of section14A of the Act is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. In the present case, there is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which such shares were acquired. Mere fact that shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares. Proportionate amount should be disallowed having regard to the total income and the income from the exempt source. In the absence of any material disclosing the source of acquisition of shares which is within the special knowledge of the assessee, the assessing authority took a most reasonable approach in assessment - where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim - AO has to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act - restore the matter to the file of the AO for deciding the issue, afresh in accordance with law in the light of our aforesaid observations , after allowing sufficient opportunity to the assessee - In the result, appeal is partly allowed but for statistical purposes. Decision of Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - DELHI HIGH COURT] followed.

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• 2012 (12) TMI 287
  Claim for Deduction – Whether the loss was incidental to the business of the assessee – Following the decision of Supreme court in case of [Ramachandar Shivnarayan v. CIT 1977 (11) TMI 2 – SUPREME COURT] Held that:- There must be direct and proximate connection and nexus must be between the business operation and the loss. In the present case Biotechnology was the purpose of the joint venture and forward integration of the business of the Assessee. Loan to Rubtech was investment in the capital of Biosift by Rubtech and that Rubtech was only a conduit and that it was the intention of the Assessee to invest in the capital of Biosift. If one were to proceed on the presumption that it was direct investment by Assessee in the capital of Biosift or a loan by the Assessee to Rubtech, the intention of the loan was to further the business interest of the Assessee and it was not a case of making investment with a view to get returns on such investments alone. - The investment in the capital of Biosift through a loan to Rubtech was a strategic investment with a view to enter field of biotechnology. - The fact that the venture did not take off as expected cannot be the basis to say that the loan by the Assessee to Rubtech for making investment in share capital of Biosift was not given without business interest in mind and was a mere investment for returns - Claim of the Assessee for deduction on account of loss on account of write of debts due by Rubtech has to be allowed - appeal of assessee is allowed.

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• 2012 (12) TMI 286
  Capital receipt - compensation - surrender of tenancy rights - matrimonial disputes between the assessee and her husband - pursuant to the agreement arrived at between the parties hereto and in consideration of the Landlord agreeing to the Tenant an amount of Rs. 1,40,00,000/- (Rupees One Crore Forty Lacs only) by way of compensation in lieu of permanent alternate accommodation to be provided by the Landlord in the proposed new building to be constructed on the said property, the Tenant hereby surrenders and relinquishes free from all encumbrances, all her right, title, interest and claim into or upon the said property - consideration received by the assessee against surrender of tenancy right is assessable as capital gain – In favor of revenue Addition in the capital gain – Held that:- Assessee has estimated the cost of acquisition of the tenancy right at Rs.10 lacs which was rejected by the Assessing Officer as the Assessing Officer adopted cost of tenancy right at nil - claim of the assessee of adopting cost of acquisition of asset as on 1.4.81 at Rs.10 lacs is not allowable - In favor of revenue Disallowance on account of expenses incurred for conducting the activity of nursery school - Assessing Officer disallowed 25% of the expenditure for want of evidence to prove the same – Held that:- Assessee failed to produce any evidence to prove the claim of expenses – disallowance upheld

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• 2012 (12) TMI 285
  Addition on account of forfeiture of deposit as revenue receipt – Held that:- Compensation arises out of the agreement of letting out immovable property and therefore, assumes the nature of the income from house property. Therefore, in our opinion, such receipt would fall under the head ‘Income from house property’. - Any other receipt other than the annual value cannot be computed as income under this head - compensation received by the assessee cannot be taxed – addition deleted Disallowance of interest u/s. 36(1)(iii) of the I.T. Act – alleged that the assessee company has given loans to its sister concern by charging interest @4% and assessee is paying interest @8% on borrowed funds – Held that:- Loan advanced by the assessee at concessional rate to the sister concern is out of the redemption of units of mutual fund. When the assessee has not utilised the borrowed funds for advancing the same at concessional rate to the sister concern when the assessee’s own money out of the redemption of units of mutual fund has been given at concessional rate to sister concern, the same does not call for disallowance of proportionate interest u/s.36(1)(iii) of the I.T. Act - borrowed funds from Axis bank has gone towards purchase of the property and the amount advanced to the sister concern is out of redemption of Prudential ICICI liquid fund – addition deleted – In favor of assessee

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• 2012 (12) TMI 284
  Whether the security deposits collected from customers on letting out the Gas Cylinders is trading receipt, whether these Gas cylinders would constitute as plant as per Income Tax Act, if so, the depreciation to be granted at 100% on these Cylinders. – Held that:- The cylinder is to be returned to the assessee company and the company has to refund the security deposit on its return. From the facts of the case, it is clear that the assessee supplied cylinders and the cylinders are the property of the assessee itself and the consumers does not have any right or interest over the cylinders. The security deposit collected by the assessee from the customers cannot be treated as received by the assessee towards sales consideration by any stretch of imagination. - the receipts of Rs. 52,06,650 are security deposits and not the income of the assessee. - Decided in favor of assessee. Depreciation of cylinders - held that:- The user of the cylinders were customers of the assessee company and leasing of the cylinders is the business of the assessee and usage of cylinders by the assessee’s customers is to be considered as usage by the assessee itself. Therefore, it could not be said that the cylinders were not used by the assessee in its business and the depreciation cannot be disallowed. - AO directed to allow depreciation at 100% on cylinders - Decided in favor of assessee.

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• 2012 (12) TMI 283
  Renewal of approval under section 80G(5) of the Act - power of amendment or deletion or addition to the object clause - Third member decision - Held that:- From the judgment of Hon'ble Supreme Court in Sri Agastyar Trust Versus Commissioner of Income-Tax [1998 (2) TMI 7 - SUPREME COURT], it is clear that when the founders of the trust have no power to alter or vary the terms of the trust, a trustee appointed to manage the properties of the trust for securing its object, can under no circumstances be regarded as having such a power especially when the original trust deed does not bestow such power on him. In the instant case, founders or trustees had altered the object clause, without any power available to them to alter the same as per the original trust deed. - such amendment carried out by the trustees or founders is non est and invalid. For the sake of argument if it is accepted that the trustees or settlers had power to amend or alter the original Trust Deed even then on the strength of Corrigendum and supplementary deed mentioned hereinabove, the trust is not eligible for renewal of approval u/s 80G of the Act. The immovable property, as comprised in the 1st Schedule to the said Trust Deed remains untouched. The income from the said Trust property is to be applied first, in the maintenance and repair of temple property, as also to be spent for the worship of the said Deity and in the defraying of the usual expenses of holding festivals of the said deity, remains intact. Similarly, the construction of the temple and worship of the said Deity and adoration of the said Deity is still an integral part of unauthorisidely amended Trust Deed. Further, holding of periodical festivals of the Deity and offering daily worship, are still the organic part of the said Deed. These objects are purely religious in nature, inextricably linked to the Hindu religious community and its Deity 'Laxmi Narayan'. Even the unauthorized amended Trust Deed/so called supplementary Trust Deed contravenes the provisions of section 80G(5)(iii) read with Explanation 3 of the Act, being expressed to be for the benefit of a particular religious community i.e. Hindu. Trust is not entitled to renewal of approval u/s 80G(5) of the Act. - Decided against the assessee.

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• 2012 (12) TMI 282
  Addition - difference between the sales as per books and sales as per stock statements submitted to bank - suppressed sales – Held that:- Assessee placed on record, copy of general ledger, bank statement, delivery challan, consignment note of transporter, which the CIT(A) considered as fresh evidence and rejected them by holding that there existed no reason by which the appellant was prevented in producing them before the AO - certain details filed by the assessee before the CIT(A) had neither been filed at the assessment stage, nor before the CIT(A) (before the remand report) nor before the AO at the remand stage. To give fair and equitable chance to both sides, we think it proper that the issue must be examined by the AO from the perspective of all the evidence, including new and fresh evidence placed before the CIT(A) - grounds allowed for statistical purposes Addition on account of disallowance of amount written off in respect of discarded stocks – alleged that assessee in its account had shown unserviceable and unusable finished stock – Held that:- Assessee had claimed that the materials had been discarded - write off on account of discarded material allowed by giving benefit to the assessee that the goods have been “discarded” five years back, the same can never be traced or even found at the present moment. Even in the books the assessee has treated the same as discarded and therefore written them off - direct the AO to allow the claim of write off as discarded materials Disallowance of depreciation - disallowance of depreciation claimed on building and furniture – Held that:- Even if the unit is closed for production activity, some activity or even the usage of the factory and furniture and fixture, even by the chowkidar, who is employed to keep a watch and upkeep of the premises would be there - accounts are maintained by the assessee - direction to the AO to allow the depreciation as per law to the “assessee” – ground allowed for statistical purposes Non-consideration of additional ground of appeal - claim for allowance of set off of brought forward losses – Held that:- Assessee had filed additional ground of appeal. This ground, though filed well in advance has not been adjudicated. He, therefore, prayed that this issue has to go back to the file of the revenue authorities - ground is allowed for statistical purposes.

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• 2012 (12) TMI 281
  Tax audit u/s 44AB - inclusion of advances in the turnover to calculate the prescribe limit for audit - held that:- no equation between advances and turnover/receipts - The mischief of section 44AB shall only become operative if the “turnover or business receipts” exceed Rs. 40,00,000/-. The section does not mention anything with regard to advances received from its customers and that too conditional - CIT(A) had correctly interpreted the provisions of section 44AB and also reversed the decision of the AO for rejecting the books of accounts of the assessee, solely on the ground that the books had not been audited by the C.A. - Decided in favor of assessee. Addition on account of estimation of income at 10% on the advances received - alleged that assessee is following project-completion method – Held that:- There was no work done during the year and no amount was received towards flats. What was received from prospective buyers was only in the nature of loans, a good portion of which was repaid between 1985 and 1986 and therefore, could not be considered as amounts received towards price of the flats intended to be sold - AO was wrong to treat the advances received as sales - AO was wrong to add back adhoc “notional income” @ 10% of the advances and deleted the same - Decided in favor of assessee.

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• 2012 (12) TMI 280
  Capital gains - transfer of agriculture land - alleged that the land sold was located within a distance of eight kilometers from the limits of the Hyderabad Municipal Corporation and, therefore, was a capital asset within the meaning of section 2(14) of the IT Act – Held that:- Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation - land transferred by the assessee is a capital asset, liable for capital gain – in favor of revenue. Decision in the case of Gousia Begum [2011 (11) TMI 475 - ITAT HYDERABAD] followed.

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• 2012 (12) TMI 279
  Search - addition u/s 68 of the Act, as unexplained cash credit – Held that:- Grievance of the assessee is that the AO ignored the cash flow statement filed before him and since the AO has not pointed out any mistake in the cash flow statement, then there is no requirement for adducing evidence for sources particularly when the capital is introduced from out of available funds - issue needs verification, therefore – matter remanded to AO Addition as unexplained investment - AO made the addition based on seized document found in the course of search conducted in the premises of the assessee – Held that:- Merely based on the notings in the seized material from the premises of the assessee and coming to the conclusion that the assessee made unexplained investment in the plots and making addition u/s 68 is not proper without bringing on record proper evidence to show that assessee has invested unexplained money in the plots - restore this issue to the file of the AO

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• 2012 (12) TMI 278
  Deduction u/s 80IA – alleged that the company inflated the income of Dehradun unit by deflating the income of other units. He arrived at the income of Dehradun unit by working out the gross profits of all units separately and arriving at the average gross profit rate and applied it to Dehradun sales – Held that:- Proviso to section 80IA(8) of the Act clearly empowers the assessing officer to re compute the eligible profits on a reasonable basis as he deems fit - it is most appropriate to consider the actual cost as per cost records maintained by the assessee and thereafter assessing off ice consider the profits on these transaction as compared to other industries in similar line or if there is no comparable fix reasonable percentage of profit depending upon market condition prevailing in the similar line of industry – matter remanded to AO

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• 2012 (12) TMI 277
  Disallowance of commission – Held that:- No TDS has been deducted on the commission payment and assessee was unable to substantiate the extra services rendered by Kapil Sarin, in addition to the services for which he was paid salary, disallowance of commission was justified Regarding payment of salary is concerned – Held that:- Shri Kapil Sarin is a qualified and experienced person, who worked for 8 years with leading Pharma company and he was independently handling sales and marketing operations of the assessee in the Western Region from Pune - no justification for disallowance of salary of Rs. 45,000/- paid to Shri Kapil Sarin. Disallowance of payment of sales tax incentive – Held that:- Assessing Officer has not disputed the duties and responsibility of all the three. Each of the person possessed the required qualification and work experience for the functions performed by them, which was commensurate with the compensation so paid. The sales incentive so paid was confirming part of their over all compensation as employees. Nowhere the Assessing Officer has alleged that payment to them was in excess of the fair market value of the services so rendered by them - Assessing Officer to restrict the disallowance of incentive to the extent of 25%. Disallowance of depreciation - assessee has purchased assets for new Branch Office opened at Pune, which started functioning in the next assessment year 2004-05 and that assessee had not shown any sales through Pune Office – Held that:- New office at Pune was purchased on 19.9.2002 and a regular pharmacists joined the Pune Office w.e.f. 17.1.2003 i.e. during the year under consideration - Merely because the actual operation started in the next assessment year, the fact that preparatory steps for starting business operation was duly undertaken during the year under consideration. There is no valid reason for disallowance of depreciation on the assets - Assessing Officer is directed to delete the disallowance of depreciation With regard to disallowance of depreciation of car, repairs and maintenance of vehicles and plea of personal use, AO directed to restrict the disallowance to 1/10th on the plea of personal use. Regarding Diwali expenses – Held that:- Assessee has produced vouchers for purchase of Raymond’s’ shop. The CIT(A) has confirmed the disallowance on the plea that the assessee has not given the names of the persons to whom such gifts have been distributed - no justification on the part of the lower authorities for decline of genuine claim of expenditure, which is essentially incurred for the purpose of business - These are the customary expenses, which in the present scenario is normally incurred to boost the business and to have a healthy relations with the employees

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• Customs

• 2012 (12) TMI 355
  Refund - unjust enrichment – Held that:- Certificate from the Chartered Accountant submitted by the appellants merely states that the extra duty has been accounted in the Profit and Loss Account and in the Balance Sheet - extra duty burden has been booked under the expenditure column and in the Balance Sheet does not show the extra duty amount as receivable from the department - extra duty burden has been absorbed in the cost of the output and the same has been passed on as part of the price of the goods -uniformity in price before and after assessment does not lead to inevitable conclusion that incidence of duty has not been passed on to buyer as such uniformity may be due to various factors – refund claim rejected

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• 2012 (12) TMI 354
  Revoking of CHA licence – alleged that Enquiry Officer has not conducted the enquiry as per Regulation 22(3) and (4) of the CHALR, 2004 - Held that:- On the previous unblemished record of the CHA, it must be borne in mind that a single act of corruption is sufficient to award the maximum penalty which, under the CHALR, is of revocation of the license - a personal hearing was given to the appellants on 24-1-2008 and the CHA did not reiterate for cross-examination of the officers listed as witness - enquiry was conducted regarding violation of Regulation 13(a) & 13(d) of CHALR. This is a fact on record that the CHA did not get any authorization from the exporter on whose behalf he was filing the export document. Since there was no authorization the violation of Regulation 13(a) has been established against the CHA by the enquiry officer as well as the Commissioner - revocation of the CHA licence by the Commissioner of Customs is sustainable

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• 2012 (12) TMI 353
  Transaction value for the purpose of levy of customs duty - whether royalty and licence fees is to be included in the assessable value? – Held that:- The agreement between the foreign supplier and the Indian importer states that the Indian importer has to pay royalty towards the ‘Video Rights’ of the imported goods, i.e. master Digi beta tapes containing the feature films. From the master tapes, the appellant makes VCDs/DVDs of the films and sells the same in the domestic market on which royalty is payable to the foreign supplier. The value declared at the time of importation is not the cost of film but only the cost of media in which the film is recorded and the same is not the value of the goods imported. As decided in COMMNR. OF CUSTOMS EXCISE, NEW DELHI VERSUS M/S. LIVING MEDIA (INDIA) LTD. [2011 (8) TMI 41 - SUPREME COURT OF INDIA] royalty is paid for the supply of the goods as a condition of sale has to be necessarily included in the transaction value for the purpose of levy of customs duty - the appellant has not made out any case for complete waiver of pre-deposit thus directed to make a pre-deposit of Rs. 80 (Eighty) lakhs within a period of eight weeks and report the compliance.

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• 2012 (12) TMI 313
  Benefit of Notification No. 21/2002 - Chargers of Mobile Telephones imported by the respondent – denial of benefit on the ground that chargers of mobile telephones are not parts of the telephones, but are accessories of the mobile telephones – Held that:- Products under importation are classifiable under Heading No. 8529.90 of the Customs Tariff - if classification is under Heading No. 8529.90, obviously the goods are parts suitable for use solely or principally with the appropriate Heading 8525 to 8528. Therefore, the charger will be part of the mobile telephone for the purpose of classification under the Customs Tariff. Notification No. 21/2002 under Sl. No. 319 prescribes a concessional rate of duty of 5% adv. on parts of Cellular Telephone falling under 8529.90 - product entitled for benefit of Notification - tariff heading itself covers only parts under Heading 8529, there cannot be two different interpretation on parts one for the purpose of notification and another for the purpose of the tariff

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• 2012 (12) TMI 312
  100% EOU - Issuance of Show cause notice without consultation with the Development Commissioner - held that:- As per the Board’s circular, the Revenue can issue show cause notice for protecting interest and the adjudication order has to be passed after the Development Commissioner has given a finding as to whether the 100% EOU has fulfilled their export obligations or not. In the instant case, there is a clear finding by the Development Commissioner that the appellant had failed to fulfil the export obligations and the adjudication order has been passed after the order of the Development Commissioner in this regard - Decided against the assessee. As regards the indigenously procured goods, both the capital goods and the raw materials have been procured in terms of Notification No. 1/95-C.E., dated 4-1-1995. However, the demand of duty has been computed on the basis of provisions of Notification No. 52/03-Cus., dated 31-3-2003 in terms of para 3(ii) of the said Notification in respect of imported capital goods and raw materials/consumables. As regards the indigenously procured capital goods and raw materials the duty demand has been made in terms of condition (4)(b) of Notification No. 22/03-C.E., dated 31-3-2003. Both the Notifications No. 52/03-C.E. and 22/03-C.E., both dated 31-3-2003 came into force on 31-3-2003 and they have only prospective application and the provisions of these Notifications cannot be made applicable to goods imported during the period 1994-97 and procured during the period from 1995-97 in respect of indigenous goods. On this ground alone the demand of Customs duty on the imported goods and the demand of Excise duty in respect of indigenously procured goods are not sustainable and are liable to be set aside. In the impugned order, an amount of Rs. 40,34,232/- confirmed in the order of the Deputy Commissioner mentioned above and recovered by way of tender has been reduced from the total demand of duty on raw materials. Therefore, issue of demanding any duty on raw materials/consumables unused in the manufacture of export goods does not arise at all. the case of raw materials which are consumed in the manufacture of goods which have been exported, the question of demanding either Customs duty or Excise duty do not arise at all as the goods have been used for the purpose for which they were procured. Duty after warehousing period after allowing depreciation on capital goods - During the material period if the capital goods have been put to use, the appellants were entitled for depreciation as prescribed in Board’s Circular No. 43/98-Customs, dated 26-6-1998 on the used capital goods. In the instant case, from the records it is seen that the commercial production commenced in April, 1996 and the production was completely stopped in July, 1999 and, therefore, for this period, the appellant is certainly entitled for the depreciation on capital goods. The liability to pay duty on capital goods would arise only when the goods are removed from the bonded premises or when the goods are deemed to have been removed when the warehousing period expired. In the light of the Apex Court’s decision in the case of Kesoram Rayon v. Commissioner of Customs, Calcutta [1996 (8) TMI 109 - SUPREME COURT], the duty on capital goods will have to be demanded at the rate of duty prevalent on 20-9-2003 on the depreciated value of the capital goods. In respect of indigenously procured capital goods/raw materials/consumables, the duty demand will have to be made in terms of the provisions of Notification No. 1/95-C.E., dated 4-1-1995 as amended. Matter remitted back to the adjudicating authority for re-computation and quantification of duty demands in accordance with law as it stood at the relevant time of import of capital goods/raw materials/consumables and at the time of procurement of indigenous goods in terms of the Notifications under which these goods were procured.

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• Corporate Laws

• 2012 (12) TMI 352
  composition of offence committed u/s 621A of Companies Act - license u/s 25 granted to promote the game of cricket - held that:- Under sub-clause 6 of the licnece the company could pay remuneration to its members but only with the previous approval of Central Government - petitioner was aggrieved by the remuneration paid by the company to its members in the year 2008-09, 2009-10, 2010-11 - prayer made in this petition is that appropriate action be taken against the company for the breach committed by it of Sec 25 of Companies Act under which the licence has been granted - submission being that the breach of the mandatory conditions of the licence amounts to an automatic revocation - Except sub-section (10) of Section 25 of the Companies Act, there is no provisions u/s 25 of the Act which lays down a penalty for non-compliance of the licence granted u/s 25; for a breach of such conditions provisions of Sec 629 A of the Act have to be resorted to - no infirmity in impugned order of CLB; it calls for no interference. Appeal is without any merit; it is accordingly dismissed with costs of Rs. 20,000/-.

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• 2012 (12) TMI 351
  Winding up of Company - when alternate remedy is available - held that:- The word 'may' appearing in Sec 443 (2) has been construed to be read as 'shall' making it mandatory for the Court not to pass an order for winding up if there is an alternate remedy available to the petitioner. further winding up of a domestic or family company on just and equitable rule is permissible if there is a justifiable lack of confidence in the conduct and management of the company's affairs, grounded on the conduct of directors in regard to company's business. Misconduct of a petitioner that results in deadlock or breakdown cannot be a ground to wind up a company under the just and equitable clause. A party cannot take advantage of his own wrong, to ask for winding up under 433(f) of the Act. As the words 'just and equitable' themselves suggest the Court must be satisfied with the allegations of the petitioner that it is just and equitable to wind up a company". In the present case Business of the company is being run; it is profitable; one group in fact wants to out-buy the other. Both of them want to steer the wheel of the company. The parties have also not explored the alternative remedy either under the domestic forum or under Sections 397 if the same can be resolved by alternate modes and these alternate modes must be exhausted in the first instance; the winding up of a company is the extreme and last remedy and should be resorted to only as a final resort; this principle is fully applicable in the instant case. It is the interest of the company which is to be watched first; the personal prejudices and personal vendetta of one group qua the other cannot become the basis of a winding petition; pressure tactics cannot be applied - On all counts petition has no merit and is accordingly dismissed with costs of Rs. 25,000/- .

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• 2012 (12) TMI 311
  Scheme of Arrangement of Demerger of Estate Division of BHASKAR REFRACTORIES AND SW PIPES PRIVATE LIMITED (Demerged Company); into B N B S CEMENTS AND PRODUCTS PRIVATE LIMITED (Resultant Company) - held that:- Resultant Company (being wholly owned subsidiary of the De-merged Company) and Demerged Co. both are controlled by the members of the same family - In view of approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region to the proposed Scheme of Arrangement, there appears to be no impediment to the grant of sanction to the Scheme of Arrangement - Petitioner Companies will comply with the statutory requirements in accordance with law - Certified copy of the order be filed with the Registrar of Companies within 30 days from the date of receipt of the same. In terms of the provisions of sections 391 and 394 of the Companies Act, 1956, and in terms of the Scheme, the whole of the assets, rights and powers of the Estate Division of Demerged Company be transferred to and vest in the Resultant Company without any further act or deed - this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law; or permission/compliance with any other requirement which may be specifically required under any law - Petitioner Companies would voluntarily deposit a sum of Rs. One lac in the Common Pool fund of the Official Liquidator within three weeks from today. The statement is accepted - Petition is allowed.

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• 2012 (12) TMI 310
  Summoning the Accused u/s 138 of Negotiable Instruments Act, 1881 - held that:- Petitioner is in charge of and responsible for the conduct of the business of the company, however, there is considerable delay in approaching court. Normally once the criminal proceedings have been initiated, court is exercise of its inherent jurisdiction would be reluctant to interference at an interlocutory stage. petitioner is permitted to withdraw the petition and raise contention as raised herein at the appropriate stage before the learned Magistrate itself. However, personal appearance of the petitioner on each date of hearing in the facts and circumstances shall remained dispensed with and he shall be permitted to appear through his counsel subject to the condition that the petitioner shall file an undertaking that his counsel shall appear on each date of hearing and he shall have no objection if the evidence of the complainant is recorded in his absence and he shall appear on such day/days when his presence is required by the learned trial Magistrate for which intimation shall be given to the counsel appearing from him - The criminal misc. petition is dismissed as withdrawn.

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• 2012 (12) TMI 308
  Admissibility of Winding up petition by Secured creditors - neglected to pay the sum due - held that:- Petitioner has evinced a clear intention to enforce the security by filing a suit in this court for the recovery of its dues and the enforcement of its securities. There can be no doubt about the proposition that the object of a petition for winding up is to realise the property of the company for distribution to all the creditors in accordance with the applicable rules. In the present case, petitioner has filed a suit in this court and made it clear, therefore, that he seeks to enforce the security. When the stage of proving its of debt does arise, the petitioner would necessarily have to prove for the balance of the debt which is due and owing to it after the security in respect of which the petitioner is a secured creditor is realised.creditors' petitions are the most common petitions for winding up companies and most creditors prefer the short-cut of the legal fiction to establish the concerned company's inability to pay its debts. Apart from meeting the other preconditions built in to Section 434(1)(a) of the Act, even an unsecured creditor of a company has to demonstrate the unimpeachable quality of its claim in its written demand or a part of such claim in excess of Rs 500/- for the negligence of the company to be established as the final prerequisite before the legal fiction - the presumption of company's inability to pay its debts is cemented. In the absence of a secured creditor establishing the inefficacy or the inadequacy of the security held by it, such creditor cannot demonstrate any negligence on the part of the company which is relevant for the purpose of the provision; and, consequently, no inference may be drawn of the company's inability to pay its debts and the legal fiction does not kick in. Since the petitioning creditor here has neither averred nor otherwise established that the security that it enjoys is inefficacious or inadequate to meet its claim against the company, the petition cannot be admitted - In any event, even if the petitioning creditor had crossed that hurdle and had established that a debt was due which was unmatched by any efficacious security, its conduct in advertising the statutory notice prior to instituting this petition is a good ground for exercising the limited discretion available to the company court to refuse to admit a creditor's petition even if the debt were unimpeachably established - liberty to the petitioner to launch fresh winding-up proceedings upon exhausting its remedies against the securities that it enjoys. As a consequence, application under Sec 450 of the Companies Act, is dismissed. The interim order subsisting on such application is vacated with immediate effect and the official liquidator is discharged as the provisional liquidator of the company.

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• Service Tax

• 2012 (12) TMI 358
  Waiver of pre-deposit of Duty along with interest and penalty - Real Estate, Insurance Service, Outdoor Catering Services, Staff Welfare, Management, Maintenance or Repair Services - held that:- There is no nexus between the input services and the output services. The input service has been defined under Rule 2 of the CENVAT Credit Rules, 2004. These services in question are not integrity connected/related to the business of the applicant and the services do not have any nexus with the output services, in view of Rule 2(1) of the Cenvat Credit Rules - pre-deposit of Rs. 1,00,000/- (Rupees one lakh only) to be paid by the applicants within six weeks and compliance to be reported on 21.9.2012. On due compliance, there shall be stay against recovery of the balance service tax, interest and penalty till disposal of the appeal.

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• 2012 (12) TMI 357
  Tele Communication Service - Demand of service tax along with interest and penalties - liability to pay at place where service is provided v/s place where consideration is collected - Held that:- In a technology intensive operation like providing of telecommunication service backed up by computers it is always possible to find out the consideration received for service provided in taxable territory if only the appellant desired to do so. The appellant has prima facie encouraged sale of such cards in Jammu & Kashmir and not accounting and reporting services provided in the taxable territory this is a case of suppression of information with intent to evade payment of service tax, as the impugned telephone service was provided by the appellant and not the franchises who sold the card - short levy in tax is not attributable to the franchisees - appellant has to pre-deposit the entire tax dues arising from the impugned order for admission of appeal and if such amount is not deposited in time the appeal will be rejected without any further notice to the appellant - Decided against the assessee.

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• 2012 (12) TMI 356
  Demand of Service Tax - Management Consultancy Services - held that:- Impugned order on the issue of Taxability of the Service is set aside and remand the matter to Commissioner (Appeals) for fresh decision to deal with all the issues raised after granting opportunity of personal hearing to appellants - Appeal is allowed by way of remand.

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• 2012 (12) TMI 317
  Refund - partially rejected on the ground that assessee has not been able to produce any proof of receipt of export proceeds - instead of filing appeal, filed a fresh claim before the adjudicating authority placing on record, proof showing receipt of export proceedings - held that:- Once the appellant has allowed the order of rejection of refund claim to attain finality, there is no provision under the law to revive the same issue by filing a fresh letter - lower authorities have rightly rejected the appellants claim - appellant cannot revive the same very issue by filing a fresh letter subsequently - claim which already stands rejected cannot be allowed to be revived by way of filing of fresh claim - Return of subsequent refund claim by the Assistant Commissioner has no effect on the facts of the case inasmuch as it was for the appellant to challenge the earlier order - Non-challenge to the earlier order cannot be held to be on account of late return of the subsequent refund claim - no infirmity in the impugned order of Com (A) - appeal filed by appellant is rejected.

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• 2012 (12) TMI 316
  Non grant of abatement of 67% on Material used - Commercial or Industrial Construction Services - held that:- Issue involved requires appreciation of factual matrix as regards consumption of material of the appellant for rendering services of Commercial or Industrial Construction Services - set-aside the impugned order and remand the matter back to the adjudicating authority for reconsidering the issue afresh after following the principles of natural justice.

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• 2012 (12) TMI 315
  CENVAT Credit of Service Tax - canteen services - Following the decision of court in case of Commissioner of Central Excise, Ahmedabad Versus M/s Ferromatik Milacron India Ltd [2010 (4) TMI 649 - GUJARAT HIGH COURT] Held that:- Cenvat credit of service tax paid on outdoor catering provided in the factory canteen is available - appeal filed by the Revenue has no merit and accordingly, is rejected.

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• 2012 (12) TMI 314
  Cenvat Credit on input services - non payment or delayed payment of service tax by the service provider - held that:- Appellants are not expected to/required to know the actual date of payments of the service tax by the service provider and they have paid the bill amount (the service charges + the service tax) to the service provider before November, 2006 itself and, therefore, there is nothing irregular in their taking the credit in November, 2006 - Service provider has defaulted/delayed in paying the service tax and the said service provider has not been included as a noticee in the present proceedings - appellant has made out a case for waiver of penalty imposed on them - waiver of penalty and stay of recovery thereof till the disposal of the appeal.

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• 2012 (12) TMI 301
  Demand of service tax – alleged that by undertaking the contracts for design, manufacture, commissioning and testing of signalling system and telecom systems for the railways, appellant have provided the services falling under the category of installation and commissioning agency services - Held that:- Such service would not get covered under the category of installation and commissioning services for the period prior to 1-6-2007 - Stay granted.

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• Central Excise

• 2012 (12) TMI 350
  Extended Period of limitation invoked - appellant cleared the goods claiming the benefit of exemption notification no 64/95-CE dt. 16.3.1995 - Held that:- There is no evidence on record to show that the certificate is procured by the applicant from the Indian Navy by wrong representation or mis-representation as no investigation was conducted by the Revenue from the authority who issued the certificates to the appellant. The applicant also filed a necessary declaration under Rule 173B of the Central Excise Rules, 1944 in respect of the goods in question by claiming the benefit of Notification No. 64/95-CE. Copy of such declaration dt. 25 th September 1997 is produced by the applicant during the arguments. As the revenue was aware that goods in question have been cleared to M/s Mazgaon Dock Ltd. by claiming the benefit of notification, hence, the allegation of suppression with intent to evade payment of duty is not sustainable in the present case - in favour of assessee.

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• 2012 (12) TMI 349
  Extended period of limitation invoked - Evasion of Payment of Duty - appellant contended against demand as whole excise is revenue neutral - Held that:- As that one unit is clearing waste and scrap generated during manufacture of final products to the independent buyers at a higher price and to the other unit at a lower price. The fact of clearing waste and scrap to the other unit at a lower price was not disclosed to the Revenue. In these circumstances, it cannot be said that the appellants were not aware of the fact that the duty is to be paid on the same assessable value at which the goods are being cleared to the independent buyers. There is no evidence to show that the appellants were under the reasonable belief that they were not required to disclose the fact of clearance of waste and scrap to the other unit at lower price - extended period of limitation is available to the Revenue - in favour of Revenue.

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• 2012 (12) TMI 348
  MRP - provisions of Rule 4A - sales to dealers – Held that:- Period of demand is from 1-6-2006 to 31-10-2010, Rule 17 and Rule 2(j) of SWM Rules were deleted w.e.f. 31-1-2007 by GSR 425(E) - for the period w.e.f. 31-1-2007, the Commissioner’s findings that the goods sold to the dealers being multi-piece packages, there were requirement to affix MRP on the packages, would not be correct - period prior to 31-1-2007 when Rule 17 read with Rule 2(j) of the SWM Rules were there, the goods being cleared do not appear to be covered by the definition of ‘multi-piece packages’, as it is not the department’s case that each piece was individually packed in retail sale - no evidence that these boxes containing 100 pieces were meant for retail sale, there is no evidence that pieces of fasteners were individually packaged or labelled for retail sale - even prior to 31-1-2000, there was no requirement to affix MRP on the packages in which the goods were being sold to dealers and hence, the provisions of Rule 4A were not applicable - provisions of Rule 4A would not have been applicable if each individual piece was individually packed for retail sale and two or more of such individually pieces were further packaged in bigger boxes, which were also intended for retail sale – in favor of assessee In respect of the clearances to Spare Parts Division of Automobile manufacturers – Held that:- Provisions of Rule 4A would be applicable and the duty would be liable to be paid on the assessable value determined on the basis of MRP declared under the Provisions of Section 4A and in respect of these clearances, the dispute is only on the point as to whether in respect of such clearances of Spare Parts Division of Automobile manufacturers, the duty has been paid on the value determined under Section 4A - Appellant directed to make pre-deposit

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• 2012 (12) TMI 347
  Cenvat credit of excise duty paid on inputs - manufacture of sugar during crushing of sugarcane by-product/waste - bagasse emerges – alleged that since the appellant have not maintained separate account and inventory of the inputs used in or in relation to manufacture of dutiable final products - sugar and molasses and exempted final product - bagasse, in accordance with the provisions of Rule 6 (3) of Cenvat Credit Rules, 2004, they would be required to pay an amount equal to 8% of the sale value of bagasse – Held that:- Bagasse emerges in course of crushing of the sugarcane - crushing of sugarcane is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane - no need to maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse - Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any input-chemicals etc. having been used at that stage – in favor of assessee

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• 2012 (12) TMI 346
  Benefit of exemption under Notification No. 56/2002-C.E - AI claimed exemption under Notification No. 56/2002-C.E., dated 14-11-2002 as a unit situated in Jammu - As per this notification whatever duty is paid by AI through PLA is refunded to AI. Further the buyer of the product is able to take Cenvat credit of the duty paid by AI – alleged that such refunds were taken in respect of goods not manufactured in Jammu - Revenue is proposing to recover the refund amount both at the end of AI and at the end of the buyers shown in the invoices issued by AI – Held that:- Revenue’s argument that no processing was done in Jammu is not consistent with the observations recorded during the investigative visits. Arriving at the quantum of excise duty evasion done by the applicants requires much more” detailed hearing and examination of case records - demands confirmed at the supplier’s end and buyer’s end amounts to recovering the same amount twice once at the end of AI and again at the end of the buyers. A strict interpretation of the notification authorising refund and the Cenvat Credit Rules authorising taking of credit may result in such an outcome if the fraud made out by Revenue is held to be proved - waiver of pre-deposit allowed

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• 2012 (12) TMI 345
  Application for rectification of mistakes – cenvat credit - plea of the appellant is that Whytheat - C Special, Fire Crete, Air Compressor, Spare Parts for Compressor, Air Cylinder, Spare Impeller, Grate Bar, Grate Plate, Fork Lifter Truck and Lifting Chain were the items covered by the definition of the term - capital goods – Held that:- Modvat credit in respect of the above-mentioned items was disallowed on the ground that Clauses (d) & (e) to Rule 57Q were inserted for the first time by Notification No. 11/1995-C.E. (N.T.), dated 16-3-1995 and being so, the same cannot be applied to this case - appeal is restored to its original number. The ROM is allowed.

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• 2012 (12) TMI 344
  Assessable value – As per franchise agreement with M/s. Coca Cola Company, the appellants were required to buy NABB from M/s. Britco Food Company Ltd. - appellants were incurring expenditure on advertising, marketing and sale promotion of beverages - appellants received money from Britco Food Company Ltd. to compensate for expenses incurred on advertising, marketing and sale promotion and also as price support incentive –– Held that:- Prices stood reduced on account of concession given by M/s. Britco, supplier of concentrates (raw material), to the assessee - There is no evidence of flow back of any additional consideration from the buyers of aerated water (beverage) to the assessee - price uniformity was maintained. No favour for extra commercial reasons were shown to any of the buyers of aerated water. There is no evidence of any concession to any of the buyers. There is no evidence of existence of any favoured buyers - Rule 5 is not applicable - duty demand with interest and penalty set aside

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• 2012 (12) TMI 343
  Whether machining and drilling of holes activity amounts to manufacture - rough forgings - Held that:- Goods received by TWGI are rough forgings classifiable under Heading 7326 - products which emerges after being subjected to machining and drilling of holes by TWGI are clearly identifiable as a part of excavators and can be directly used, as such, and the same are classifiable as part of the earth moving machinery under sub-heading 84314990 - processes undertaken by TWGI would amount to manufacture and, hence, attract Central Excise duty - TWGI never informed the department about their activity - penal provision of Rule 26 of Central Excise Rules, 2002 would be attracted

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• 2012 (12) TMI 342
  Waiver of pre-deposit – classification - Jaljeera and Hazmi – Held that:- Any mixture of grinded spices packed in a packet can be termed as “packed masala” - Jaljeera and Hazmi are packed masala classifiable under Chapter 9 of Central Excise Tariff Act, 1985 particularly Entry No. 0903.10 - waiver of the condition of pre-deposit allowed

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• 2012 (12) TMI 341
  Activity amounts to Manufacture or not - appellants are engaged in the manufacture of HT/LT Coils for transformers and also are engaged in repairing of transformers received from the electricity boards - transformer oil is subjected to the process of filtration under vacuum and heating and, thereafter, the same is used for filing in the cavities in the transformers as liquid insulator – Held that:- Appellant had subjected the transformer oil purchased by them to the process of filtration and heating to make it suitable for their own industrial use i.e. for repair of the transformers. The process undertaken by the appellant thus, does not amount to manufacture – in favor of assessee

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• 2012 (12) TMI 307
  Confiscation of seized goods - confiscation of tractor - imposition of penalties - Appellant contended that shortages were on account of clearance of products without the cover of any documents - admitted clearance of 25000 Kgs. of final products without the cover of any document, interception of the same, statement of driver and Shri Rajendra Kumar Sharma, clandestine clearance - held that:- confirmation of demand of duty of Rs.4,00,087/- along with imposition of penalty of identical amount under Section 11 AC is required to be upheld - Lower authorities while imposing penalty to the extent of 100% of duty, have not extended any option to the appellant to pay the entire dues along with 25% of penalty within a period of 30 days from the date of passing of order, in which case penalty shall stand reduced to 25% in terms of proviso to Section 11AC. further in terms of Gujarat High Court decision in the case of CCE, Surat I vs. Harish Silk Mills [2010 (2) TMI 494 - GUJARAT HIGH COURT], such option can be given at the appellate stage - option to the appellant is extended and if they deposit entire dues along with 25% of penalty, within a period of 30 days from the receipt of present order, the penalty shall stand reduced to 25% - such option is now extended to appellant.

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• 2012 (12) TMI 306
  Claim of Refund of Cenvat Credit - Surrender of Central Excise Registration - closure of factory - unutilised credit - held that:- Refund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non - absence of express grant in statute does not imply ipso facto entitlement to refund - absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable - answered negatively and in favour of Revenue since refund of unutilized credit is only permissible in case of export of goods and for no other reason whatsoever that may be

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• 2012 (12) TMI 305
  Demand of duty – alleged that the transportation cost/freight charges from the place of removal to the place of delivery ought to have been included in the value of the goods for assessing the excise duty payable – Held that;- There is nothing on record to suggest that the respondent-assessee and the customer to whom the goods were sold were related parties - Rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is not attracted - excess amount of freight collected by the assessee need not form part of assessable value - if the place of removal of goods is factory of the assessee then transport charges will not be included in the assessable value – appeal dismissed

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• 2012 (12) TMI 304
  Demand of excise duty - manufacture - assembly of two or more products - manufacture of Razors and razor blades by way of assembling the components supplied by M/s. Gillette India Ltd. (GIL) – Gillette Shave Gel Tubes (GSG) obtained from GIL under a promotional scheme and marketed those combination packs discounted on MRP of Rs. 85 - combination packs consisting of five twin blade cartridge having MRP of Rs. 66/- and 60 gms. tube Gillette shaving gel tube with MRP of Rs. 49 - appellant paid duty on the basis of MRP of five twin blade cartridge mainly for the reason that Gillette shaving gel tube procured by the appellant firm from GIL were duty paid. AR for respondent submits that admittedly this is a case of repacking twin blade cartridge as also the shaving gel tube in a combination pack and altering the retail sale price (MRP). As such the combination packs falls within the deemed definition of manufacture under Section 2(f)(iii) - held that:- Above argument is of no avail to the respondent for the reason that Section 2(f)(iii) was introduced in the Central Excise Act, 1944 by way of amendment w.e.f. 1-3-2003, and the instant case relates to the period earlier to the amendment i.e. October and November 2003 as such deeming definition provided under Section 2(f)(iii) is not applicable to the present case. The activity of the appellant in packing the twin blade cartridge as also Gillette shaving gel tube in a combination pack and selling it at a discounted MRP of Rs. 85/- does not amount to manufacture. As no mere product has come into being the combination product does not attract incidence of excise duty. Admittedly, the appellant has paid duty on Gillette shaving gel tube while procuring them from GIL and he has paid excise duty on MRP of the twin blade cartridges while clearing the combination pack. - Demand and penalty set aside - decided in favor of assessee.

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• 2012 (12) TMI 303
  Condonation of delay – delay of 261 days – Held that:- Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few - no proper explanation offered by the Department for the delay except mentioning of various dates Department failed to give any acceptable and cogent reasons sufficient to condone such a huge delay - application for condonation of delay is dismissed

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• 2012 (12) TMI 302
  Clandestine removal – loss of molasses in the storage tank - Revenue says that loss cannot abnormally occurred for one period while loss claimed for a larger period appears to be within the range of 2% - submission of Revenue is that the losses occurring in different circumstances envisaged by Section 35B calls for consideration by the jurisdiction of Revisional authority – Held that:- Tribunal is conferred with power of Civil Court only to a limited extent as is enacted in Section 129C(7) and (8) of the Customs Act, 1962 - Tribunal has no power to act as Civil Court beyond its jurisdiction - if the appellant so chooses to seek the revisional jurisdiction, it may do so and if there is a delay in seeking remedy before that jurisdiction, it may file application for condonation of delay, which may be considered by that authority in accordance with law - stay application dismissed.

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• 2012 (12) TMI 300
  Waiver of pre-deposit - Cenvat credit - appellants are manufacturers of GI pipes. They had obtained steel sheets and constructed one tank in which zinc can be melted and used in the process of galvanizing – Held that:- Inputs are covered by provision of Rule 2(k) of Cenvat Credit Rules, 2004 – pre-deposit waived

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• 2012 (12) TMI 299
  Cenvat credit – alleged that appellant wrongly availed cenvat credit – Held that:- Appellant is not disputing the improper/ineligible Cenvat credit availed - reversed the amount of Cenvat credit - appellant is allowed to pay 25% of the amount of the ineligible Cenvat credit which has been reversed by him as penalty under Section 11AC subject to the condition that he pays the amount of interest on irregularly availed Cenvat credit and also the 25% of the amount as penalty

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• 2012 (12) TMI 298
  Classification – waste - peelings of potatoes – manufacturing of potato chips - According to assessee, the waste which has been generated in the manufacturing process falls within the Entry No. 23080000 of Chapter 23 relating to vegetable materials and vegetable waste, vegetable residues and by-products and this item is not subject to excise duty. The stand of the department is that the aforesaid peelings of potatoes and waste in the shape of paste is nothing but starch, therefore, it falls within the entry under Chapter Heading No. 11081300, which is subject to excise duty at the rate of 40% of the sale price These appeals raise serious issue of classification i.e. whether the goods in question is starch classifiable under Tariff Entry 1108 13 00 or vegetable waste classifiable under Tariff Entry 2308 00 00. - good prima facie case - pre-deposit waived

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• 2012 (12) TMI 297
  Demand – manufacture of cotton and polyester spun yarn - no Cenvat credit of excise duty paid on polyester fibres has been taken - Cenvat credit has admittedly been taken on packing materials for packing of yarn for export, the services of foreign commission agents and GTA services from the factory to the port and according to the appellant, this Cenvat credit has been taken only in respect of the goods which after payment of duty has been exported out of India – Held that:- According to the department, the appellant had also availed Cenvat credit in respect of the dyes and chemicals, which have been used in the manufacture of dutiable final products as well as waste - appellant on the other hand, deny having used any such duty paid dies or chemicals and having availed Cenvat credit - matter remanded for de novo adjudication

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• CST, VAT & Sales Tax

• 2012 (12) TMI 359
  Writ petition – Kerala Value Added Tax Act - violation of principles of natural justice – alleged that without issuing any notice or hearing the petitioner, exhibit P9 assessment order was passed – Held that:- Assessment will be completed only if the assessment order is served on the assessee and any objection filed by the assessee disputing the assessment order should also be considered before completing the final assessment. If that principle is applied to the facts of this case, it can be seen that as on November 7, 2009 when exhibit P11 order was passed the first respondent should have taken into account the contentions raised in exhibit P8. Admittedly this was not done and for that reason exhibit P9 is vitiated - direct that the first respondent shall issue notice to the petitioner, hear them and pass fresh orders in the matter duly adverting to exhibit P8 objection filed by the petitioner also - in the event of passing fresh assessment order, it is for the first respondent to consider whether notice is to be issued under section 67 of the KVAT Act

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• 2012 (12) TMI 318
  H. P. Value Added Tax Act – notice - Excise and Taxation Commissioner-cum- Appellate Authority, in exercise of its power under section 46(1) of the Act, issued a notice to the petitioner calling upon the petitioner to give his response. The said notice has been challenged by the petitioner before this court in the present writ petition - petitioner submitted appellate authority cannot be treated to be authority, subordinate to the Commissioner (Excise and Taxation) for the purpose of section 46 of the Act – Held that:- Any proceedings include assessment proceeding or miscellaneous proceedings or appellate proceedings and any authority subordinate to the Commissioner includes authorities up to Additional Commissioner level discharging the work of assessment or discharging the work of check-post, etc. Section 46 does not indicate that the Additional Commissioner while working as an appellate authority is excluded from authority subordinate to the Commissioner - writ petition is' disposed of with an observation that since the petitioner has bona fidely been pursuing his grievances before this court, as such, if the' petitioner approaches before the Tribunal, then period for which the writ petition was pending before the High Court may be excluded from the limitation period as provided under section 46(3) of the H. P. Value Added Tax Act

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• Indian Laws

• 2012 (12) TMI 309
  In the present case Family Settlement had been given effect to a substantial extent and that the respective parties were in effective control of their respective shares in the terms of the said family settlement since 2007. No doubt there were some disputes relating to some aspects appear to have been admittedly there allegations of non-compliance of certain terms of the memoranda of understanding which the learned Single Judge, correctly held required to be decided on affidavit evidence. - there is a prima facie acceptance of the factum of concealment of additional family assets by the defendant no. 1 which constitutes a case of fraud also does not merit grant of an interim order at this stage. Such stance of the plaintiffs was contested by defendant no. 1 & 2 on the score that accrual of personal assets post 2007 would not constitute part of the joint family corpus and such rival contentions required to be adjudicated in the course of trial. Hence mere allowing of amendment of the plaint to include the additional family assets as a part of the subject matter of the suit would not simpliciter ground to come to a conclusion of a strong prima facie case of fraud warranting the interim relief. Interim relief - learned Single Judge has come to a reasonable conclusion not to grant the interim relief to the plaintiffs in the instant case and not to substitute such discretion of the learned Single Judge since the same neither appears to be arbitrary, capricious or perverse in any manner whatsoever. Accordingly Appeal stands dismissed Amendment in the plaint - The trial in the suit had also not commenced and the learned Single Judge was wholly justified to conclude that amendment at such early stage of the proceeding would not prejudice either of the parties and ought to be permitted. Assets and/or legal entities which were sought to be included as subject matter of the suit did not comprise of the joint family corpus inasmuch as they had come into existence after 2007 and that no case of concealment had been made out are essentially matters of defense which his clients would be entitled to agitate fully in the course of trial by filing written statement, if not filed. The nature and circumstances in such amendment was prayed for in our considered view did not amount to alternation of the nature and character of the suit in any manner. If written statement is not filed, the same may be filed within eight weeks from the date of service of amended copy of the plaint - impugned order to the extent it permitted amendment of the plaint does not warrant interference and the appeal being is accordingly dismissed.

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