Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 14, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction. - HC
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Application of income versus diversion of income at Source - There is no provision to tax a person on the basis of the deemed income for the purpose of capital gain tax. - HC
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Disallowance u/s 40(a) (ia) - payment made to transporters - assessee had not furnished form No. 15J before 30th June 2006 as required under Rule 29D - no disallowance - decided in favor of assessee - HC
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Deduction u/s 80IB - deduction to small scale industrial units engaged in manufacture or producing articles or things. - reduction in investment limit from Rs. 3 crore to Rs. 1 crore in case of small scale industrial undertaking - AT
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As the assessment order passed after the death of the assessee was not a valid assessment. AO is directed to pass fresh assessment order after affording reasonable opportunities of hearing to the legal heirs of the assessee. - AT
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Holding period of property - LTCG / STCG - Date of purchase agreement or date of final payment/date of registration or from date of possession - holding period has to be reckoned from the date of possession of the property. - AT
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Rental Income - Business Income vs Income from House Property - rental income received from Ms. Rekha Jalan (director) has to be treated as business income and rental income received from Ms. Snehal who was only a shareholder has to be assessed as income from house property. - AT
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Withdrawal of objection submitted before DRP - DRP has not issued any direction on merits of the proposed draft assessment order; therefore, the Assessing Officer got no jurisdiction to pass any order u/s 144C(13). - AT
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Imposition of Penalty u/s 271(1)(c) - The explanation given by the assessee for the depreciation claim, is neither bona-fide, nor substantiated - penalty confirmed - HC
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Computation of income - Income from house property - notional interest not to be included in the municipal ratable value - AT
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As per AS-9 which gives the option of proportionate completion method and completed service contract method, out of which one is following by the assessee. AO rejected the books without any justification. - AT
Customs
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Re-export the goods - drawback claim – the fact of export of imported goods had not been declared by the petitioner and the shipping bills had not been filed, under Section 74 of the Customs Act, 1962 - petitioner is not entitled to drawback - HC
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Jurisdiction to adjudicate the matter - prayer made by the learned AR cannot be accepted as there is no adjudicating authority appointed to adjudicate the impugned show cause notice - Order in original set aside. - AT
DGFT
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Amendment in Para 3.11.8 of Handbook of Procedures Vol. I (RE 2012)/ 2009-14. - Public Notice
FEMA
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Master Circular on Wilful Defaulters - dis-closer of information by the Bank to RBI - FWilful defaults of parties of dues under a derivative transaction with a bank are covered by the Master Circular and this we hold not because the RBI wants us to take this view, because this is our judicial interpretation of the Master Circular. - SC
Corporate Law
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Claim of Excise Department - Liability to pay Interest on principal amount - co. in liquidation - Claim of interest of the Department (Central Excise) dis-allowed - HC
Indian Laws
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Maintainability of compensation applications u/s 12B of MRTP Act - These powers vested in the MRTP Commission under sub-section (3) of Section 12B of the MRTP Act are independent of its powers under Section 10 and Section 36B of the MRTP Act. - SC
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Professional misconduct of Advocates - filing a compromise deed by forging and fabricating the signatures - Thus it would be just and proper if the respondent-advocate is suspended from practice for a period of three years - SC
Service Tax
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Supply of Tangible Goods service - The fact that SOTG service was introduced in 2008 does not mean that the same service was not covered by any service earlier. - AT
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Demand of service tax on renting of immovable property - Extended period of limitation - Prime facie the Commissioner of Service Tax has not properly applied his mind to the issue required to be addressed for invoking the extended period of limitation. - HC
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Scope of the term Export - Money transfer business – It is Western Union who is the recipient and consumer of this service provided by their Agents and sub-agents, not the persons, receiving money in India. - Tri (LB)
Central Excise
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Eligibility for exemption under Notification No. 50/2003-C.E. – area based exemption - merely because of inadvertent clerical error regarding Notification No. in the declaration filed for the purpose of exemption, the appellant cannot be denied the benefit of Notification No. 50/2003-C.E., when he otherwise is eligible for the same - AT
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Service of show cause notice - in absence of any evidence regarding service of show cause notice on the respondent prior to 22-7-2005, the impugned order of Commissioner (Appeals) holding the show cause notice to be time barred cannot be faulted. - AT
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Remission of excise duty - fire incident - appellant has placed sufficient material on record to show that finished/semi-finished goods were destroyed in fire accident cause due to short circuit - appellant is granted remission of excise duty pertaining to the goods destroyed in fire - AT
Case Laws:
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Income Tax
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2012 (12) TMI 422
Applicability of section 44BB or Section 44DA - revenues earned in respect of services in connection with the prospecting for extraction or production of mineral oils - Revenue contended that the AAR erred in its decision that Section 44BB would apply to the present case and that it failed to note that the appropriate provision to be applied was Section 44DA read with section 9(1)(vii), Explanation 2. On the other hand the contention urged on behalf of the assessee is that it is Section 44BB which is the more specific of the two sections and which made "special provision for computing profits and gains in connection with the business of exploration, etc. of mineral oils" that was applicable and not Section 44DA which made "special provision for computing income by way of royalties, etc. in case of non-resident". Held that:- Under section 44BB one does not find any reference to a permanent establishment in India. The type of services contemplated by the provision is more specific than what is contemplated by Section 44DA. Section 44BB refers specifically to "services or facilities in connection with, or supplying plant and machinery on hire, used or to be used in the prospecting for, or extraction or production of mineral oils". Revenues earned by the non-resident from rendering such specific services are covered by Section 44BB. It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim "Generallia specialibus non derogant". It is again a well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction. The amendment made by the Finance Act, 2010 w.e.f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of Section 44BB. Profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. - Decision of AAR upheld - Decided in favor of assessee.
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2012 (12) TMI 421
Application of income versus diversion of income at Source - Capital gain from sale of inherited property - settlement between two brothers - the sale consideration of Rs.14 crores was distributed between the respondent and his brother at Rs.6 crores and Rs.8 crores respectively. - AO observed that the sale consideration of the inherited property has to be distributed between the two brothers at Rs.7.00 crores each. - This was on the basis that Rs.1 crore received by respondent 's brother was in excess of that received by the respondent and is, in fact, an application of income received by the respondent and not diversion of income at source. - AO brought to tax the capital gain taxable in the hands of the respondent on the basis of the net consideration of Rs.7 crores as against Rs.6 crores declared by the respondent for sale of New Delhi property. - CIT(A) and ITAT deleted the addition Held that:- the appellant had received only Rs.6 crores for the sale of his rights in the New Delhi property and the same had been offered to tax. There is no provision to tax a person on the basis of the deemed income for the purpose of capital gain tax. - Decided in favor of assessee. Determination of cost of acquisition of inherited property - Fair Market value (FMV as on 1/4/1981) - held that:- the valuation done by an empaneled registered valuer of the Income Tax Department would certainly take precedence over Nabhi's Guide to House Tax. The valuation done by the registered valuer is with regard to the specific property and takes into account its various advantages and disadvantages all of which influence the valuation of the property. As against the above, the Nabhi's Guide to House Tax is generalized guide and does not take into account the peculiar features of the property being valued. Moreover, the determination of the fair market value as on 1/4/1991 is a question of fact which has been examined by both the Commissioner of Income Tax (Appeals) as well as the Tribunal and both have concluded that the fair market value as estimated by the registered valuer at Rs.47.74 lacs as on 1/4/1981 is acceptable. - Decided in favor of assessee. Exemption u/s 54 - purchase of two flats - inter connected by internal stair case. - held that:- two flats were joined together before the respondent assessee became the owner of the two flats. The Certificate from the society also established the fact that two flat Nos. 416A and 516A were joined together and were considered as one residential house. - Exemption allowed - Decided in favor of assessee.
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2012 (12) TMI 420
Reassessment - The assessee objected to the reopening of the assessment. But the objections were rejected and reassessment orders were passed - held that:- there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As per the proviso to Section 147 of the Act, assessments beyond four years from the end of the relevant assessment year can be reopened only if there is failure on the part of the assessee to disclose all material facts. Therefore, in the facts of the present case, the decision of the Tribunal in holding that the reopening of the assessment was bad cannot be faulted. Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case. - Decided in favor of assessee.
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2012 (12) TMI 419
TDS u/s 195 - DTAA of India and U.K - Subscription fees - The payment in question has been made by the assessee towards the subscription for access to the website of WGSN thereby having access to the information available at the said website. The Assessing Officer held that the assessee is permitted to keep the design, trade mark and not permissible to redistribute any of the contents accessible at the website; therefore, the assessee has no other right except the right to use the information from the website. Accordingly, the Assessing Officer has held that amount payable to foreign company is nothing but for use of information concerning industrial, commercial experience falls within the definition term 'royalty' as defined in Article 13(3) of the DTAA. Held that:- There is no dispute that the information available on the website of the WGSN is not a database available in public domain but access to the information is restricted only to the subscribers. - the assessee has contended that the payment was made for subscription for a journal or a magazine of a foreign publisher which is similar to the facts of the case in hand where the assessee has also claimed that the payment is towards subscription to online fashion magazine. Since no specific finding has been given by CIT (A) on the point of transfer of right to use the copyright and the decision relied upon by the Commissioner of Income Tax(Appeals) has been reversed by the Hon'ble High Court; therefore, the impugned order of the Commissioner of Income Tax(Appeals) is not sustainable as the very basis of the same has been reversed. Accordingly, we remit the issue to the record of the Commissioner of Income Tax(Appeals) to decide the same afresh in the light of the decision of the Hon'ble Karnataka High Court in the case of Commissioner of Income-tax, (International Taxation) Versus Wipro Ltd. [2011 (10) TMI 473 - KARNATAKA HIGH COURT] as well as the other decisions/rulings available on the point - appeal filed by revenue is allowed for statistical purpose.
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2012 (12) TMI 418
Broken period interest on securities - banking business - The assessee claimed the loss on the difference of interest received and paid on the ground that the securities in which the assessee was investing constituted part of its stock-in-trade in the banking business. - held that:- The interest in respect of current securities, which are held in stock-in-trade has to be allowed as the revenue expenditure based on the Bombay High Court decision in the case of American Express Bank Vs. Commissioner of Income Tax [2002 (9) TMI 96 - BOMBAY HIGH COURT]. - After citing the decision in Vijaya Bank Ltd's case [1990 (9) TMI 5 - SUPREME COURT], distinguishing the case of the assessee on the securities held as stock-in-trade, the Bombay High Court pointed out that the decision in Vijaya Bank [1990 (9) TMI 5 - SUPREME COURT] would have no application to the case, where securities were held as trading assets and interest income were assessed as business income under Section 28 of the Act. - No substance in remanding the matter once again back to the Assessing Officer for the self same exercise. Valuation of investments and stock-in-trade - held that:- securities held as stock-in-trade and investment being stock in trade are to be treated on par and to be valued either at the cost or market price, whichever is lower. In the circumstances, keeping in the background the decision in the case of UCO Bank Vs. CIT [1999 (9) TMI 4 - SUPREME COURT], we direct the Assessing Officer to redo the valuation in respect of stock-in-trade at cost or market value, whichever is lower. Disallowance on the payment of additional interest on deposits made by Public Sector Undertakings - held that:- the assessee is entitled to succeed on its claim for deduction under Section 37 of the Act and the view of the Income Tax Appellate Tribunal that payment of additional interest on Fixed Deposits by PSUs as contrary to public policy cannot be sustained.
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2012 (12) TMI 417
Determination of relationship with the bank - stock broker - agent and principal - triple taxation of the same income in the hands of appeal, Indian Bank and PSUs? - ITAT concluded that the appellant did not act as an agent of Indian Bank - whether the assessee could be termed as a broker for Indian Bank, that the assessee could not claim any interest on a sum of Rs.14,78,91,000/- at the time when Indian Bank paid the consideration for the purchase of securities. The second question herein is that whether the said sum could be held to have been given to the assessee for the purpose of taking demand drafts payable to the 9 public sector undertakings as by way of extra interest, payable by the Bank on the fixed deposits maintained by the public sector undertakings. The third question is as regards the relevance of the Criminal Court's decision. The Assessing Officer pointed out that of the eight public sector undertakings, three of them confirmed the receipt of demand drafts. The rest of them denied to have received any such demand drafts either from the assessee or from Indian Bank. The Officer pointed out that there was no agreement between the assessee and the Indian Bank about this payment. Held that:- when after a full-fledged trial, a Court of competent jurisdiction had pronounced on the relationship between the parties, that A2, the assessee herein, acted as a broker only, in the absence of any contra evidence produced by the Revenue, the Tribunal should have considered this finding as answering the question on the role of the assessee as a broker. Contrary to the view of the Tribunal, the evidence spoken therein by the prosecution witnesses, clearly establish the role of the assessee as a broker, that he never acted as a principal to deal with the securities on his own without any instruction from the Indian Bank. The status of the assessee vis-a-vis Indian Bank was only that of a broker of Indian Bank and nothing else. - The assessee could not be mulcted with any liability as regards the sum of Rs.14,78,91,000/- as his income. - Decided in favor of assessee.
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2012 (12) TMI 416
Assessment of interest on securities, allowability of depreciation on leased assets, disallowance of entertainment expenses, disallowance of bad debt and disallowance of loss on unmatured foreign exchange contracts. - One of the due dates fell after the end of the previous year i.e. after 31st March. The issue is whether any income on account of interest had accrued to the assessee during the broken period from the previous due date till 31st March of the previous year which was not the due date. - held that:- the issue is fully covered by the judgment of Hon'ble High Court of Bombay in case of Director (International Taxation) vs. Credit Suisse First Boston (Cyprus) Ltd. (2012 (8) TMI 17 - BOMBAY HIGH COURT). - interest from securities for the broken period till the end of the previous year is not assessable in case of the assessee. - Decided in favor of assessee Depreciation on leased assets - held that:- The Special Bench has since decided the issue in M/s.IndusInd Bank Limited Versus The Addl.Commissioner of Income-tax [2012 (3) TMI 212 - ITAT MUMBAI] in which it has been held that it was a case of mere advancing of loan by the assessee to Indo Gulf Fertilizers & Chemical Corpn. and there was no genuine leasing of the boiler. The Special Bench therefore held that no depreciation was allowable in case of the assessee lessor. - Decided against the assessee. Disallowance of entertainment expenses on estimate basis - held that:- from assessment year 1988-89 there is no provision for disallowance of entertainment expenses. The expenses incurred by the assessee bank on employees during the official visits and in connection with clients and business visitors have to be allowed as incurred wholly and exclusively for business purposes. - Decided in favor of assessee. Loss amounting to Rs.2,37,82,608/- on unmatured foreign exchange contracts - held that:- The assessee had made the claim as per the method of accounting and as per FEDAI guidelines which is allowable. - Decided in favor of assessee. Reduction of claim of bad debt under section 36(1)(vii) - held that:- In the first place, the ad hoc deduction under s. 36(1)(viia) (b) being the last item on the computation of taxable business profits, it cannot be taken into account at the time of allowing deduction under s 36(1)(vii), and, to that extent, the actual deduction attributable to bad debts [i.e. 36(1)(vii) plus 36)(1)(vii)(b)] will indeed be more than the actual bad debts in that year However, since the provision so allowed under s 36(1)(viia)(b) is be taken into account while allowing deduction for actual bad debts in the subsequent year, the effect of excess deduction, if any, will be squared up in that subsequent year. Secondly, a view seems perfectly acceptable that the provision for bad debts allowable under s. 36(1)(viia)(b) being inherently attributable to the debts outstanding at the end of the year, provision allowable as such is against future bad debts out of debts outstanding at the year end, and, therefore, It need not he mixed up with actual bad debts incurred during the year. - AO to compute deduction allowable on account of bad debt in line with the decision of the Tribunal in case of Oman International Bank, SAOG vs. DCIT [2003 (11) TMI 286 - ITAT BOMBAY-H]
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2012 (12) TMI 415
Deduction u/s 80IB(10) - whether allowable on a prorata basis where both commercial and residential houses have been built and when there is no such provision under the statute to grant the same? - Held that:- Housing project defined under Section 80HHBA refers not only building, but also road, bridge or other structure in any part of India. Given the fact that the one and only definition we have on the 'housing project' is under Section 80HHBA and it refers to the project of construction of a building apart from other things, the expression 'housing project' as defined therein referring to "any building", should be taken as referable to a structure that is built irrespective of its usage as for residential/commercial usage for the purpose of understanding the scope of Section 80-IB(10). Thus, as rightly pointed out by assessee, irrespective of the purpose for which the housing project has been developed and constructed, so long as the conditions stipulated under Section 80-IB(10) are satisfied, the assessee would be entitled to the benefit of deduction under the said provision. Given the object of the provisions under Section 80-IB(10) when the deduction to be granted is on the profits and gains of undertaking developing and constructing approved housing projects, in the absence of restrictive covenant under sub- Section (10) of Section 80-IB, no justifiable ground to hold that on the mere fact of some of the units having the built-up area exceeding the condition specified under clause (c), the claim for deduction would stand rejected on the entire project. As pointed out in CIT v. BRAHMA ASSOCIATES [2011 (2) TMI 373 - BOMBAY HIGH COURT] with zones classification permitting commercial establishment in residential flats too, once the local authorities approved the project with or without the commercial use as permitted under the Rules, the project approved is eligible for deduction under Section 80IB(10). When the project fulfills the criteria for being approved as a housing project, then, deductions cannot be denied under Section 80IB(10) merely because the project is approved as residential plus commercial - In the case of mixed projects, the assessee's claim has to be allowed in full, if all the residential units satisfied clause (c); otherwise, to the extent of compliance, the relief has to be worked out. A housing project of commercial premises is entitled to 100% deduction, there being no necessity of looking at clause (c) for compliance - in favour of assessee.
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2012 (12) TMI 414
Taxation of interest received from head office - Held that:- Interest income of Rs. 5.61 crore which has resulted only from the assessee's dealings with its Head office cannot be charged to tax on the principle of mutuality. Accordingly no tax can be levied on the interest earned by the assessee from its Head office or overseas branches. At the same time the principle of mutuality will extend equally in respect of interest paid by the assessee to its head office or other overseas branches. The assessee cannot claim deduction in respect of interest paid to its head office and overseas branches. The Assessing Officer is directed to allow exemption in respect of interest income and also not to grant any deduction in respect of interest expenditure. Deduction u/s 44C - specific expenses incurred by head office on behalf of Indian branch in revised return u/s 37 - Held that:- When the assessee revised its return and claimed deduction u/s 44C at higher level than that claimed in the original return, it was the duty of the AO to consider the higher claim u/s 44C and not to restrict himself to the claim made in original return - no absurdity in the direction of CIT(A) to AO to consider deduction u/s 44C on the basis of revised return subject to verification of the correctness of the revised return. Therefore, upholding the impugned order on this issue except for the removal of the last sentence from para 6.1., which is contrary to his conclusion on the point - the assessee's ground is accepted to the extent of the removal of the last sentence. Disallowance u/s 43B - employer's contribution to provident fund not paid before the due date under the EPF Act - CIT(A) sustained the disallowance accordingly - Held that:- No disallowance can be made if the employer's contribution or the employees' contribution is paid before the due date of filing return of income as per sec 139(1) as decided in CIT v. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT ] read along with CIT v. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT]- in favour of assessee. Deduction on account of bad debt written off - disallowance as the assessee could not prove that the amount had become bad in the year - Held that:- As decided in T.R.F. Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] & DIT (International taxation) v. Oman International Bank [2009 (2) TMI 54 - BOMBAY HIGH COURT] deduction of bad debt is allowable on a simple write off and it is not for the assessee to prove that the debt had become bad - in favour of assessee. Non deduction of TDS - paid transaction charges on NOSTRO account with banks outside India - Disallowance u/s 40(a)(i) - Held that:- As decided by the Tribunal in earlier years in assessee's favour. Respectfully following the same, we uphold the impugned order on this issue. This ground is not allowed.
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2012 (12) TMI 413
Disallowance u/s 40(a) (ia) - payment made to transporters - AO disallowed such expenditure under section 40(a)(ia) on the ground that the assessee had not furnished form No. 15J before 30th June 2006 as required under Rule 29D of the Income Tax Rules, 1962 - held that:- The exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub-contractor does not own more than two goods carriages during the entire previous year. The moment, such requirements are fulfilled, the liability of the assessee to deduct tax on the payments made or to be made to such sub-contractors would cease. In fact he would have no authority to make any such deduction. once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. - application of section 40(a)(ia) would not arise - Decided in favor of assessee.
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2012 (12) TMI 412
Deduction u/s 80IB - deduction to small scale industrial units engaged in manufacture or producing articles or things. - reduction in investment limit from Rs. 3 crore to Rs. 1 crore in case of small scale industrial undertaking. - Ministry of Commerce and Industry, Government of India, in press note No.3 has clarified that units which have obtained permanent registration based on the order dated 10.12.1997 would continue to remain as SSI unit in spite of order dated 24.12.1999 reducing the investment limit to Rs. 1 crore. - held that:- it appears that the assessee satisfies all the conditions to be regarded as a small scale undertaking under S.11B of the Industries (Development and Regulation) Act,1951. The letter dated 19.10.2000 of the Additional Development Commissioner, SSI relied upon by the Learned Departmental Representative only supports the claim of the assessee. In view of the aforesaid facts and circumstances, the direction of the CIT(A) to the assessing officer to verify the original documents and allow deduction under S.80IB, if registration has been obtained prior to 24.12.1999 is most appropriate and does not call for any interference. - Decided in favor of assessee. Deduction of TDS withheld by the the authorities of Sikkim as expenditure - the assessee explained that the amount debited is income tax deducted by State Government of Sikkim while making payment to the assessee for material supplied during the relevant previous year. The assessing officer disallowed the claim of the assessee by observing that the TDS is not an allowable expenditure. - held that:- any rate or tax levied on the profit or gain of any business or profession shall not be allowed as deduction. The tax levied on the profits or gain of any business would mean that profit has been ascertained in a manner comparable with the outline in the provisions of the Income-tax Act. In the aforesaid context, it has to be seen whether the income-tax deducted at 3% on the bills of the assessee, partakes the character of a tax levied on the profits of the assessee. It has also to be seen whether the tax levied at the rate of 3% under the Sikkim Income Tax Manual, is after determination of profit in accordance with a machinery provision comparable with the provisions of the Indian Income Tax Act, or whether it is on the basis of a rough estimate. - matter remanded back to AO.
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2012 (12) TMI 411
Computation of net profit at 8% u/s 144 - estimation of income - application rate prescribed in section 44AD - held that:- we feel it reasonable to estimate the income on gross receipts @6% for the Assessment Year 2007-08. However, as per the financial result disclosed for the Assessment Year 2008-09 we do find that the Assessing Officer had made additions on account of disallowance of sundry creditors which had increased not in proportion to the increase in the material cost therefore indicated that the assessee had raised bills on the contractees when the material cost was still to be borne by the assessee. In this view of the matter, the estimation at 8% confirmed by the learned CIT(A) by deleting these additions and disallowances made u/ss.68 and 69 we hold 7% profit as reasonable to be taxable income on the gross receipts disclosed by the assessee in its financial statements. To conclude for the Assessment Year 2007-08 the AO is directed to tax 6% of the gross receipts as taxable income of the assessee and for the Assessment Year 2008-09 he is directed to tax 7% of the gross receipts as taxable income of the assessee. - Decided in favor of assessee.
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2012 (12) TMI 410
Deduction u/s 80IA - AO disallowed the claim on the ground that assessee has not employed 10 or more persons – AO however held that the assessee has employed only 4 to 5 workers and has disallowed the part of salary - Held that:- The ITAT, Pune, vide its order dated 30-06-2008 held that the claim of the appellant about employment of workers is correct and accordingly the disallowance out of salary to workers was deleted. Not carried out any activity of manufacturing – Held that:- As there was no conclusive evidence to prove this to the hilt, but there is no evidence to dislodge the claim of the assessee supported by excise and other statutory records as also by the evidence of purchase of raw material etc. that the production of PCB took place in Silvassa. Deduction allowed. In favour of assessee Addition on account of payment to labour contractors – Assessee contended that the incorrect noting was made by the supervisor and appellant is not concerned with the same - Held that:- As the noting in the seized material about an amount of Rs. 3,60,000/- is receivable from the contractors. The contention of the appellant in respect of the said amount is not acceptable in view of the noting found in seized material. Delete the balance addition made by AO as confirmed by ITAT, Pune. Appeal partly allowed in favour of assessee
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2012 (12) TMI 409
Disallowance of expenditure incurred to earn tax free income – Whether Sec. 14A read with rule 8D comes into play when the assessee has not incurred or claimed any expenditure for earning the exempt income – Held that:- For making any disallowance u/s. 14A AO is to, firstly, examine the assessee's claim of having incurred some expenditure or no expenditure in relation to exempt income, If the AO gets satisfied with the same, then there is no need to compute disallowance as per Rule 8D. It is only when the AO is not satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure having been incurred in relation to exempt income, that the mandate of Rule 8D will operate. Appeal decides in favour of assessee
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2012 (12) TMI 408
Whether assessment order passed by AO after death of the assessee is valid or not - Assessee filed ROI on 31-10-2006 – Assessment was finalized on 31-12-2008 by the AO – Assessee was passed away on 23-10-2008 i.e. two month before completion of assessment – Assessment order passed by the AO was of a deceased person – Held that:- As the assessment order passed after the death of the assessee was not a valid assessment. AO is directed to pass fresh assessment order after affording reasonable opportunities of hearing to the legal heirs of the assessee.
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2012 (12) TMI 407
Holding period of property - LTCG / STCG - While calculating period of holding of property which date is to be consider as date of acquisition - Date of purchase agreement or date of final payment/date of registration or from date of possession - Held that:- As the year of acquisition of the flat has to be considered as the year in which assessee had taken possession of the flat after making part payments by instalments as the assessee became owner of the flat u/s 53A of the transfer of property right Act. The assessee got ownership rights from the date the assessee got possession of the flat which was 20th Dec. 2000. Following the decision in case of Madathil Brothers (2007 (10) TMI 234 - MADRAS HIGH COURT) that holding period has to be reckoned from the date of possession of the property. Therefore, AO has to take the holding period from the date of possession after necessary verification of possession date. Appeal decides in favour of revenue & remand back to AO.
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2012 (12) TMI 406
Disallowance the share of apportionment of total expenses by HO – Assessee is a branch of a foreign company as PE in India having HO in U.K manufacturing of pharmaceutical products – Share of laboratory expenses incurred by HO was apportioned on the basis of sales ratio to Indian branch – AO observed that since the R&D is centralized by the HO in U.K.& R&D matters are connected with executive and general administration – Held that:- As the assessee has also filed financial statements to show that the UK based HO has shown executive or general administration expenditure as indicated in Sec. 44C separately. Therefore, the assessee has proved beyond doubt that the expenses claimed on the laboratory expenses did not include any executive or general administration expenses. Since all these details were already filed by the assessee before the A.O. and the ld. CIT(A) and the Revenue Authorities without examining the same or without pointing out any item of disallowable nature to show that the said item of expense did not pertain to laboratory expenses. Therefore appeal decides in favour of assessee
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2012 (12) TMI 405
DTAA – India and Belgium - Whether interest paid by branch of foreign bank as PE to its Head Office in Belgium is allowable as deduction - Disallowing the interest paid to HO on debt & term deposit – Assessee is a branch of foreign bank in India as PE – Assessee has also deducted tax at source – Held that:- Following the decision in case of Sumitomo Mitsui Banking Corporation (2012 (4) TMI 80 - ITAT MUMBAI) that interest paid to the head office of the assessee bank by its Indian branch which constitutes its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the PE which is taxable in India. Thus interest paid by the Indian branch of the assessee Bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted. In absence of any distinguishing feature brought on record by the Revenue. Appeal decides in favour of assessee. Additional grounds raised for the first time – Held that:- Following the decision in case of Tollaram Hassomal (2006 (3) TMI 136 - MADHYA PRADESH HIGH COURT) that 1additional grounds treating them to be legal grounds in appeal for the first time. Therefore remand the said additional grounds to the ld. CIT(A) to decide the same afresh.
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2012 (12) TMI 404
Legitimacy of assessment order u/s 263 – Whether assessment u/s 263 can be called valid, when order passed was not based on finding mention in SCN issued u/s 263 – CIT proposing to cancel the assessment order passed u/s.143(3) being erroneous – Held that:- As the content given in the SCN have neither been confronted to the assessee nor any enquiry or examination has been done by the CIT himself to reach to the conclusion drawn by him in the impugned order. There is no finding as to how the AO’s order is erroneous in this regard and that whether the AO has failed to examine this issue. On the contrary as per the query letter issued by the AO and reply submitted by the assessee, it seems that all expenses have been looked into and verified by the AO. Thus on this point also the order of the AO cannot be held to be erroneous so far it is prejudicial to the interest of the Revenue. Thus without going into the merits of the issue raised, prima facie, we are of the opinion that the impugned order passed u/s.263 by the CIT is unsustainable in law as the same has been passed without giving any proper opportunity to the assessee which is in violation of principles of natural justice. Appeal decides in favour of assessee
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2012 (12) TMI 403
Disallow the claim of deduction u/s 80IB on Duty Draw Back - AO stated that said benefit has not been derived by the assessee directly from the business of the industrial undertaking – Held that:- Following the decision in case of Sterling Food ltd. (1999 (4) TMI 1 - SUPREME COURT) that the benefit of import entitlements are granted by CG under an Export Promotion Scheme. Therefore, the source of import entitlements could not be said to be the industrial undertaking of the assessee. Appeal decides in favour of revenue Disallowance of sharing of common expenses/facilities – Assessee has two units in Mumbai and Daman maintain separate books of accounts - Claim deduction u/s.80IB in respect of Daman Unit - Mumbai Unit is in only one activity of job work of stitching garments and Daman unit is engaged in multiple activities of manufacturing readymade garments - AO stated that assessee has under-allocated expenses and thus claimed excessive deduction u/s.80IB - Held that:- Following the decision in case of Nitco Tiles Ltd (2009 (4) TMI 547 - ITAT MUMBAI) that total turnover of the eligible Daman Unit is 73.43%, it is fair and reasonable to allocate the expenses between the units on the basis of turnover in the absence of any contrary facts brought on record before us. Therefore appeal decides in favour of revenue Disallowance on account of delay in deposit of employees contribution to PF – Held that:- Employees contribution which is covered u/s 36(va) is to be allowed as deduction if the deposits are made within due date/grace period. Issue decides in favour of assessee Disallowance of interest expense - AO considered that amount is partly used for business purposes and partly used for non-business purposes – Assessee has used some money in purchasing the controlling stake in an company - Held that:- As the amount to that extent has been paid by the assessee to acquire capital assets and as such, borrowing money used to acquire controlling interest in the firm by purchase of shares and/or by acquiring assets could not be allowed as deduction and interest is to be disallowed in relation to loan which has been given to others, on which, no interest has been charged by the assessee. The assessee has not contended that the said loans to others have been given for any business purposes. Issue remand back to AO.
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2012 (12) TMI 379
Reopening of assessment - deduction u/s 80IA - Pricing of power and quantum of profits eligible for deduction - Escapement of Income - mere change of opinion - held that:- assessment is sought to be reopened by a notice dated 31.03.2008 which is admittedly beyond 4 years from the end of assessment year 2001-02 - first proviso to Section 147 is applicable and in the absence of failure to disclose fully and truly all material facts necessary for assessment it cannot be said that there has been any escapement for the assessment year 2001-02. In such circumstances, there could be no failure on the part of the respondent to disclose facts which are not in its possession during assessment proceeding leading to the order dated 23.03.2004. The jurisdiction to exercise powers of reopening and assessment is specifically barred in respect of any matter which has been a subject matter of appeal by the 3rd proviso to Section 147 of the Act. Further issue of application of Sec 80IA (10) of the Act instead of Sec 80IA (8) of the Act to arrive at the profit for claiming deduction under Section 80IA of the Act is a mere change of opinion without any tangible material which would not warrant reopening of assessment. The material to reopen the assessment being relied on by the revenue seems to be the order of MERC dated 01.07.2004 which has nothing to the with arriving at profits for purposes of deduction under Section 80IA of the Act but deals with fixing of the power tariff for the consumer and for that purpose takes as one of the ingredients 16% return on investments - no fault can be found with order of the Tribunal dated 14.05.2010 - questions of law as formulated does not raise any substantial question of law - decided in favor of assessee.
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2012 (12) TMI 378
Rental Income - Business Income vs Income from House Property - nature of income - assessee had received rent from letting out of the property being flats and therefore, income has to be assessed as income from house property. However,assessee has raised a plea that the part of the property i.e. 65% had been let out to the director Ms. Rekha Jalan for her residence which had to be treated as business user of the property and in such cases income from such asset has to be treated as business income. The plea raised by the assessee is supported by judgment of Hon'ble High Court of Madras in the case of New India Maritime agencies Pvt. Ltd.[2001 (6) TMI 27 - MADRAS HIGH COURT], in which it has been held that the buildings owned and occupied by the Director of the assessee company has to be treated as used for business and income derived has to be assessed as business income - held that:- rental income received from Ms. Rekha Jalan has to be treated as business income and rental income received from Ms. Snehal who was only a shareholder has to be assessed as income from house property. Determination of annual value - income from house property - rental income from Ms. Snehal Jalan - Applicability of the provisions of Rent Control Act - held that:- The provisions of Rent Control Act can be applied only in case of bonafide letting out of properties and not in case of colourable transactions which are only an arrangement to reduce tax liability. In this case the company had let out the property to the daughter of the director who controlled the company and is responsible for taking all decisions Instead of letting out the property at market rate which is very high, the director had let out property to her daughter at a very low rent, obviously to reduce tax liabilities. Therefore, in our view, the provisions of Rent Control Act cannot be applied to such arrangements. Accordingly we hold that annual value in relation to part of the property let out to Ms. Snehal Jalan will be the fair rent in the market based on comparable cases. Deduction on account of municipal taxes @ 30% u/s 24(a) - held that:- municipal tax paid by the assessee will be allowable as deduction @ 30% while computing income from house property. As regards the portion let out to its director income from which has been held as assessable as business income, the deduction on account of municipal tax will obviously be allowable. Administrative expenses - assessee was not doing any business since long - AO disallowed the claim of expenses ie 65% of rental income being received from director was assessable as business income and only 35% of the rent received from the share holder could be assessed as house property income - held that:- 65% of administrative expenses should be allowed. Interest income received from ICDs and bills discounting - business of financing is one of the objects in MOA and assessee had been undertaking these activities in an organized manner - held that:- in assessment year 2005-06 in scrutiny assessment u/s 143(3) had treated the income as income from other sources which was accepted by the assessee as no appeal was filed. Though in subsequent years the business income declared by the assessee has been accepted but those assessments were covered in summary scheme in which the AO was not empowered to take any view regarding computation of income and had to simply accept the returned income. Therefore, acceptance of business income under section 143(1) in subsequent years can not be taken as decision by authorities to accept the claim of the assessee. There is nothing to show that assessee was engaged in these activities in an organized manner - held that:- Assessee had surplus fund which had been invested to earn interest income which in our view has been rightly assessed as income from other sources - order of CIT(A)is confirmed.
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2012 (12) TMI 377
Undisclosed Additions - cash purchases made from Jindal Electro Casting Pvt. Ltd., Hissar, to the extent of Rs. 86,87,000/- for assessment year 2000-01 and Rs. 2,42,71,186/- for assessment year 2001-02 in dispute - additions to the extent of Rs. 62,37,000/- and Rs. 2,22,19,840/- were deleted by CIT (A) in appeals filed against the original assessments and his order was accepted by the Revenue which did not file any appeal before the Tribunal - assessee filed appeals before the Tribunal against the additions sustained by CIT (A) - held that :- since Revenue accepted order of CIT (A) in the first round of proceedings, deleting substantially the additions made by AO. It did not prefer any appeals to the Tribunal against the relief of Rs. 62,37,000/- and Rs. 2,22,19,840/- granted by the CIT (A) respectively for assessment years 2000-01 and 2001-02. Matters which have attained finality cannot be re-agitated - Revenue failed to file appeals before the Tribunal challenging the relief granted by the CIT (A) in the first round of proceedings. That part of the assessment orders, therefore, got merged with the order of CIT (A), which became final. It was, therefore, not open to the Assessing Officer to tamper with their finality, so far as the relief granted by the CIT (A) is concerned. Tribunal has rightly held that the Revenue cannot question the relief granted by the CIT (Appeals) on the principle of finality of orders. In our opinion, therefore, no question of law arises for our consideration. The appeals of the revenue are accordingly dismissed with no order as to costs.
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2012 (12) TMI 376
Exemption u/s 10(23C) - assessee is a registered society formed by Govt. of Madhya Pradesh for promotion and development of open school system in the State - As per audited accounts, assessee showed gross receipt of Rs. 14,34,36,039/- resulting into surplus income of Rs. 3,65,49,479/-. AO found that assessee did not file return of income for the A.Y. 2006-07, therefore, notice u/s 148 was issued. Held that:- Huge surplus has been generated by the assessee, therefore, it can be said that the profit motive of the assessee is clearly established. During hearing, the ld. Counsel for the assessee contended that the word "substantially" will be made even if the grants are 10%. We are not agreeing with this proposition because the word is "wholly or substantially", meaning thereby, either it can be 100% or near to 100% but in any case may not be less than 75% because it has been used with the word wholly and not singularly. Admittedly, there is no clear cut formula regarding per centage in the Act but some figure may be adopted under the facts and circumstances available on record. Assessee has not complied with two essential conditions as stipulated in the Act, therefore, we find no infirmity in the conclusion drawn in the impugned order. It is upheld. Finally, all these appeals are dismissed.
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2012 (12) TMI 375
Validity and maintainability of assessment order - withdrawal of objection submitted before DRP - assessee submitted that when the Assessing Officer has already passed the order u/s 144C(3) r.w.s 143(3) after the clarification issued by the CBDT, then the application/objection before the DRP is to be treated as non-est and the DRP became functus offico. He has further submitted that the objections were withdrawn by the assessee prior to the issue of notice of hearing in the matter and also prior to the expiry of 30 days from the date of receipt of the draft order from the Assessing Officer. Therefore, no direction ought to have been issued by the DRP. held that:- when the objections filed by the assessee were allowed to be withdrawn on the ground that the assessee intend to exercise the option to proceed to file appeal before the Commissioner of Income Tax(Appeals), then there cannot be any direction under sub-sec. (5) in the absence of any objection as required under sub-Sec. (2) of sec. 144C of the Act. It is clear from the order dated 13.7.2010 of the DRP that the DRP has not issued any direction on merits of the proposed draft assessment order; therefore, the Assessing Officer got no jurisdiction to pass any order u/s 144C(13). Hence, the order dated 20.8.2010 passed u/s 144C(13) r.w.s 143(3) by the Assessing Officer is without jurisdiction and accordingly is not sustainable. Even otherwise, when the Assessing Officer has already passed an assessment order dt 10.2.2010 u/s 144C(3), then the second order would result multiplicity of litigation. - Decided in favor of assessee.
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2012 (12) TMI 374
Excise duty refund/set off - whether said amount is to be included in the business profits for the purpose of deduction u/s 80IB of the Income Tax Act - held that:- looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construed as mere production and trade incentives, as held by the Tribunal - receipt are capital receipt - Decided in the favour of the assessee. Decision in Shree Balaji Alloys v. CIT [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] followed.
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2012 (12) TMI 373
Imposition of Penalty u/s 271(1)(c) - furnishing inaccurate particulars of income - understatement of Income on sale of cylinders - Income on sale of cylinders - held that:- in the penalty proceedings,CIT(A) by order dated 30.3.1995 confirmed the imposition of penalty. - The Tribunal deleted the penalty held that:- tripartite agreement made by assessee cannot be considered as valid. persons who make claims of this nature, actuated by a mala-fide intention to evade tax otherwise payable by them would get away without paying tax legally payable by them, if their cases are not picked up for scrutiny. There can be no doubt that the assessee was aware of the true nature of the transaction, despite which the claim for depreciation was made. Its claim was rejected as sham, by this Court – that order has become final. The explanation given by the assessee for the depreciation claim, is neither bona-fide, nor substantiated - cancellation of penalty was unwarranted. The impugned order is accordingly set aside; the order of the AO imposing penalty is restored.
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2012 (12) TMI 372
Extension of stay of demand - stay beyond 365 days - T.P adjustment and disallowance u/s 40(a)(i) - held that:- inherent jurisdiction of the Tribunal to grant Interim relief so as to make the ultimate relief effective cannot be curtailed indirectly by Sub-section (2A) of sec. 254 of the Act. At the end of the period of 365 days when the appellant makes an application for extension of the stay, the Tribunal can always consider whether there is any change in the circumstances which would justify extension or modification of the stay The Revenue gets an opportunity to bring to the notice of the Tribunal such changed circumstances - when there is nothing to suggest that delay in disposal of appeal is attributable to the assessee, we extend the period of stay of demand until 31st March, 2012 or until disposal of appeal, whichever earlier - assessee shall not seek adjournment on the date of hearing of the appeal, now fixed for 8.11.2012 and in case of breach of this condition, the stay granted shall be vacated forthwith unless directed otherwise by the Bench. Decided in the case of Hon'ble Bombay High Court in CIT vs.Ronuk Industries Ltd [2010 (11) TMI 461 - BOMBAY HIGH COURT] followed.
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2012 (12) TMI 371
Computation of income - Income from house property - Inclusion of notional interest in the municipal ratable value - calculation of notional interest on advance rent received and security deposit(used for renovation) while determining annual value of the let out property - The rent payable as per the lease agreement from the said tenants was Rupee 1/- per sq.ft. per month. The total rent of Rs. 2,54,400 thus was received for the year under consideration from the tenants in respect of Jindal Mansion and since the municipal ratable value of the said building at Rs. 10,61,190 was higher than the actual rent received, income under the head "Income from house property" was declared by the assessee in is return of income by adopting the municipal ratable value. According to the AO, interest on security deposits taken by the assessee from the tenants was liable to be added on notional basis to the actual rent received by the assessee in order to determine the annual letting value of the building owned by the assessee. Held that:- following the decision of court in case of Dy. CIT Versus Reclamation Realty India Pvt. Ltd [2010 (11) TMI 477 - ITAT, MUMBAI] AO directed to accept the income from house property declared by the assessee adopting the municipal ratable value as annual letting value of its property. - in favor of assessee.
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2012 (12) TMI 370
Royalty received on account of distribution of films - DRP directing income being generated by the distribution and exhibition of the films in India by the Agent of the assessee WIPL on behalf of the assessee in India, income accrues and arises in India is tenable or not - held that:- even if income arises to the Non-Resident due to the business connection in India, the income accruing or arising out of such business connection can only be taxed to the extent of the activities attributed to permanent establishment. In this case, the assessee does not have any permanent establishment in India. Since the Indian company who obtained the rights is acting independently, Agency PE provisions are not applicable to the assessee company. Incomes arising to a Non-Resident cannot be taxed as business income in India, without a PE. As the assessee does not have any permanent establishment in India, the incomes arising outside Indian Territories cannot be brought to tax. Therefore, there is no need to differ from the findings of the CIT (A) and accordingly Revenue Appeal is dismissed - in favor of assessee. Decision in the case of Ishikawajma-Harima Heavy Industries Ltd v. Director of Income Tax [2007 (1) TMI 91 - SUPREME COURT] followed.
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2012 (12) TMI 369
Set off of loss u/s 71 - Whether loss under head PGBP can be set off against income held as unexplained investment u/s 69 - Held that:- Following the decision in case of D. P. Sandu Bros. Chembur P. Ltd. (2005 (1) TMI 13 - SUPREME COURT) that since the assessee has not given any explanation about the source of cash deposits made into his saving bank account, it is not proved that this income is generated from out of his business of trading in shares. Since the assessee did not prove that the deemed income is liable to be taxed under any particular head, such deemed income shall fall under the head ‘income from other sources’. Therefore, the AO is directed to allow set off of business loss against income from other sources in accordance with the provisions of Sec 71. Issue decides in favour of assessee
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2012 (12) TMI 368
Validity of Order by CIT u/s 263 - Deduction u/s 80HHC - AO allowed deduction u/s 80HHC without setting off of carry forward loss – CIT issue order on the basis of decision in case of IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT) – Assessee contended that Hon’ble Madras High Court granted an ad-interim stay on validity of retrospective amendment to Sec. 80HHC - Held that:- As in the case of Avani Exports & Others v. CIT & Ors.(2012 (7) TMI 190 - GUJARAT HIGH COURT) holding that amendment to Sec 80HHC is prospective and could be given effect from the date of amendment and not in respect of earlier assessment years is also nothing to do with the ratio of the decision in case IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT). Therefore, CIT u/s 263 in directing the AO to allow deduction u/s 80HHC in accordance with law. Issue decides in favour of revenue
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2012 (12) TMI 367
Addition made on account of unproved trade creditors – Bogus trade creditors - Additions were made based on the report of the Income Tax Inspector – Held that:- Following the decision in case of Smt. Rolex Sugunamary (2012 (10) TMI 412 - ITAT CHENNAI) that the purchases made by the assessee during the period and payments were also made through banking channels. The AO has not disputed the purchases and the payments made by the assessee. The trading results have also not been disturbed. The report of Inspector cannot stand against the overwhelming evidence referred. Delete the addition. Issue decides in favour of assessee
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2012 (12) TMI 366
Disallowance u/s 40A(2)(b) – Excess payment to related parties - Purchase of goods at higher prices then market price – Held that:- As the AO failed to consider that the purchases from related parties were of finished and semi-finished leather and whereas, the purchases from unrelated concerns were of raw leather. Moreover, the types and quality of skin purchased were also different. Without going into these details, the AO merely considered the average rate of purchases and reached a conclusion that the prices paid to the related parties were excessive for which there is no basis. Delete the addition. Appeal decides in favour of assessee
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2012 (12) TMI 365
Disallowance of Excess rent paid - Properties occupied by the assessee and belonging to one of the group concerns – Held that:- The rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance by following the decision in assessee’s own case. Issue decides in favour of assessee Addition on account of interest – Excessive rental deposit free of interest made to sister concern – Held that:- For the years before us also, the facts are identical. Therefore, respectfully following the order of the Tribunal, wherein the Tribunal has deleted the disallowance of interest, for these years also, we delete the disallowance of interest, holding that the deposits were made for taking the premises on rent which was necessitated by business expediency and are based on market rent. Issue decides in favour of assessee
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2012 (12) TMI 364
Disallowance of depreciation on windmill - AO disallow depreciation on the basis of statement given by Executive Engineer of TNEB during survey u/s 133A – Held that:- Following the decision in case of S.Khader Khan Son (2007 (7) TMI 182 - MADRAS HIGH COURT) that the statement of the Executive Engineer cannot be used against the assessee. Except for the statement of Executive Engineer, the Department has no other conclusive evidence to show that the windmill was not commissioned or no unit of electricity was generated on 31.3.2005. Appeal decides in favour of assessee
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2012 (12) TMI 363
Deduction u/s 80IB - 80HHC – Revenue argued that deduction u/s 80HHC has to be computed only on the profits available after allowing deduction u/s 80IB – Held that:- Following the decision in case of MRF Limited (2009 (10) TMI 653 - MADRAS HIGH COURT) that both the two sections are independent and therefore the deduction can be claimed under both the sections on the gross total income. Issue decides in favour of assessee. Deduction u/s 80IB - Whether Job work charges eligible for deduction u/s 80IB – Held that:- Following the decision in assessee’s own case that for a person to be engaged in manufacturing activity it is not sine qua non that he should undertake all manufacturing activities by himself. It would be enough if he engages himself in a part of manufacturing activity and gets rest of it done through the agency of others. Therefore, the assessee is entitled to deduction u/s 80IB in respect of profits derived from the job work production. Issue decides in favour of assessee
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2012 (12) TMI 362
Compute profit u/s 44AE by rejecting the books u/s 145 - Whether AO applies presumptive tax rate in case where books are maintained by assessee - Assessee being builder regularly follows project completion method and book revenue only when possession of the constructed building is given - Same was accepted by revenue in earlier years – AO reject the books in view that revenue is to be recognized in the year in which it has been earned and the same cannot be postponed on the ground of following projection completion method - Held that:- As per AS-9 which gives the option of proportionate completion method and completed service contract method, out of which one is following by the assessee. AO rejected the books without any justification. Whereas project completion method followed by the assessee, and the entire profit of the project has been offered to tax by the assessee. Appeal decided in favour of assessee.
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2012 (12) TMI 361
Deduction u/s 80IB (10) - AO denied on the ground that the commercial area in the project is more than 2000 sq.ft.- Built up area of some of the flats is more than 1500 sq.ft – Held that:- Assessee contended that after excluding the balcony/terrace the total built up area of none of the flats exceeds 1500 sq.ft. Whereas AO argued that some of the residential units have a built up area exceeding 1500 sq.ft. even when the terrace area is excluded. Therefore, Issue needs fresh adjudication and decides on the basis that total built up area of flats excluding the balcony/terrace area, not exceeds 1500 sq.ft as decide in case of Prime Properties (2012 - TMI - 217271 - ITAT, PUNE). Issue remand back to AO.
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2012 (12) TMI 360
Deduction u/s 80IB – Whether deduction u/s 80IB will be allowed in respect of whole project or on partial basis - Assessee is a firm engaged in business of builder and promoter - AO has denied the deduction on the ground that project was not complete within the stipulated time - Completion certificate was obtained and furnished before the AO for 173 out of 205 flats – Held that:- Assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. - Restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. Therefore, assessee is entitled for benefit u/s.80IB(10) in respect of 173 flats completed before prescribed limit. Issue decides in favour of assessee
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Customs
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2012 (12) TMI 440
Cutting and slitting of coils into sheets - Violation of conditions of Notification no. 43/2002 dated 19.04.2002 - Demand of duty,interest and Penalty - Held that:- Activity undertaken by the appellant amounted to manufacture and it was not cleared ‘as such' by the appellant importer. Once this condition has been satisfied by the appellant from the records maintained by them, the Commissioner should not have gone into other issues which have already been decided by the Tribunal holding that at the relevant time the process undertaken by the appellant amounted to manufacture and the appellant had cleared the same on payment of appropriate excise duty. What the Commissioner has done is to re-consider an issue which has already been settled in favour of the appellant in the previous proceedings by this Tribunal which is not permissible as the Commissioner is subordinate to this Tribunal in judicial matters. Therefore, the impugned order is not sustainable in law.
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2012 (12) TMI 439
Re-export the goods - drawback claim – alleged that shipping bills had been filed, inadvertently, under Section 75 of the Customs Act, 1962, instead of filing the claim, under Section 74 of the said Act – Held that:- in case of re-export of goods imported under the DEPB scheme, the Boards Circular No. 75/2000-Cus., dated 11-9-2000, specifies certain conditions, according to which the re-export of the imported goods are allowed only if the goods are found to be unfit for use because of certain manufacturing defects. Further, the goods in question are to be re-exported within a period of six months from the date of import, and the identity of the goods has to be established to the satisfaction of the customs authorities concerned. While so, it is not in dispute that the goods had been re-exported by the petitioner, as they did not find any suitable buyer. As such, it cannot be said that the goods were defective in nature. Further, the petitioner had not adhered to the other relevant provisions of the Customs Act, 1962. As such, it is clear that the petitioner would not be eligible for drawback, under Section 74 of the Customs Act, 1962, in respect of 5000 kilograms of goods, as their batch numbers did not match with the bills of entry cited by the petitioner. It is also seen, from the shipping bills, invoices, packing list and the examination report, that the fact of export of imported goods had not been declared by the petitioner and the shipping bills had not been filed, under Section 74 of the Customs Act, 1962 - petitioner is not entitled to drawback
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2012 (12) TMI 438
Import of plastic films from China – mis-declaration - provisional release of the goods – Held that:- As per provision of Section 110(2) of the Customs Act if Show Cause Notice is not issued within 6 months from the date of seizure, the goods have to be released - adjudicating authority can extend the period by another 6 months by passing an order as envisaged in the said section. Such order extending the period can be passed only after giving an opportunity for hearing to the appellants. The impugned order is not passed under the said provisions. If such order has not been passed the goods have to be released to the appellants – in favor of assessee
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2012 (12) TMI 395
Jurisdiction to adjudicate the matter - held that:- impugned show cause notice was assigned to the Commissioner of Customs (Import), Nhava Sheva for adjudication - impugned order passed by the Commissioner of Customs (Import), Nhava Sheva is without jurisdiction - vide F.No. S/V-30/Misc-300/2005-M-II dated 27.08.2009 the appointment of Shri K.K.Srivastava, Commissioner of Customs (Adjudication) has been withdrawn - prayer made by the learned AR cannot be accepted as there is no adjudicating authority appointed to adjudicate the impugned show cause notice - impugned order is set aside and the appeals are allowed.
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2012 (12) TMI 394
COD - application for condonation of delay of 221 days – Held that:- Right of appeal or right to file cross appeal is to be conferred by statute - in terms of the provisions of Section 35E of the Central Excise Act, 1944, the Tribunal has no powers to condone the delay caused in filing the appeal beyond the period of three months allowed by the provisions of the said Section 35E(4) - COD application stands rejected, the appeals filed by the Revenue are dismissed as barred by limitation
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2012 (12) TMI 384
Refund claim – rejection of refund claim on the ground that while filing the Bill of Entry the appellant did not mention the exemption under Notification No.21/2002-CE dated 01/03/2002 - Held that:- It is the duty of the Customs Officer while assessing the bill of entry to assess in accordance with the law - there is an obligation on the part of the department to extent exemption given by an unconditional exemption notification and the same could not be refused because the appellant has omitted to claim that relief
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Corporate Laws
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2012 (12) TMI 393
Winding up of Company - auction and re-auction of property as per the direction of the Supreme Court - whether the finding of the High Court as regards the role of the official liquidator is correct or not. - held that:- On a perusal of the record, it transpires that the official liquidator had appeared before the recovery officer on number of dates. However, the DRT had returned a finding that he has a restricted role which has been found fault with by the High Court. In our opinion, the High Court is absolutely correct in its analysis and we concur with the same, but, a pregnant one, the fact remains that the High Court had set aside the sale on the foundation that a fair and transparent procedure had not been adopted. Having given due respect to the same, this court had passed orders on earlier occasions which we have reproduced hereinabove to get the auction conducted in a fair and transparent manner and recorded our conclusion. Therefore, the confirmation of sale as has been directed by us shall be treated to have attained finality. While confirming the sale subject to the conditions imposed hereinbefore, we are disposed to think that keeping in view the interest of the workmen and their rights, the High Court should deal with the rights of the workmen regard being had to the submissions advanced by the first and second respondents before it in an apposite manner and, if required, monitor the same. Presently to the Interlocutory Applications which have been filed for impleadment and withdrawal of the amounts that have been deposited as earnest money. Regard being had to the facts and circumstances of the case, all impleadment applications are allowed and the bidders who have deposited the money are allowed to withdraw the same.
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2012 (12) TMI 392
Rectification of Share Register - dismissing application of appellant u/s 111A - condonation of 250 days delay - maintainability of Appeal - held that:- Special Leave Petition preferred by the appellant was argued at length and was withdrawn only when the appellant failed to make out a challenge on merits to the order dated 2nd February, 2012 of the learned Company Judge - appeal is accordingly dismissed as not maintainable.
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2012 (12) TMI 391
Claim of Excise Department - Liability to pay Interest on principal amount - co. in liquidation - non-availability of funds - held that:- Central Excise Department is only a preferential creditor and his debt has to rank after the payment has been made to the secured creditors and to the workmen; Provident Fund Commissioner is to rank in a still higher priority; further submission being that as on date in view of the financial status of the company, no interest is payable by the company. In the present case admittedly no interest was agreed upon between the parties; argument of the respondent is to the effect that Section 11AA of the Act is operative by law and interest becomes payable in view of this statutory provision. Rule 156 envisages a situation where no rate of interest has been agreed upon between the parties. It postulates that interest can be paid up to a maximum of 4%. where the Official Liquidator has a surplus after payment in full of all the claims which are admitted to proof. It is only where an excess amount is available that the question of payment of interest will be considered as per Rule 179. As on date as is the submission by the Official Liquidator, Rs.2,20,00,000/- is lying with him out of which Rs.35 lacs has to paid to the workmen. The claim of the Central Excise has been admitted to Rs.1,85,04,400.76; the liability of the company today would thus be almost Rs.2,20,00,000/-. Keeping in view of the fund position, no fund is available with the Official Liquidator to consider the payment of interest to the Department. Claim of interest of the Department (Central Excise) dis-allowed - application has become infructuous and disposed of.
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FEMA
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2012 (12) TMI 396
Master Circular on Wilful Defaulters - dis-closer of information by the Bank to RBI - Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 - held that:- no force in the submission that any information relating to a party who has defaulted in payment of its dues under derivative transactions cannot be disclosed by a bank to the RBI or any other bank because of an implied contract between the bank and its customer or by Section 45E of the 1934 Act. Sections 45C and 45E of the 1934 Act. Information relating to a party who has defaulted in payment of its dues under derivative transactions to the bank is credit information within the meaning of Section 45A(c)(v) of the 1934 Act. Sub- section (1) of Section 45C of the 1934 Act provides that the RBI may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the RBI from time to time. Hence, information relating to a party, who has defaulted in payment of its dues under derivative transactions being credit information may be called for from the banking company by the RBI under sub-section (1) of Section 45C of the 1934 Act. No force in the submission that the Master Circular has penal consequences and, therefore, has to be literally and strictly construed. Constitutional right of a person under Article 19(1)(g) - held that: - No challenge was made by the writ petitioners before the Bombay High Court to the constitutionality of the Master Circular and the challenge by the writ petitioners before the Calcutta High Court was to the constitutionality of only Paragraph 3 of the Master Circular relating to the Grievance Redressal Mechanism. Hence, we are not called upon to decide in these appeals whether the Master Circular violates the right of a person under Article 19(1)(g) of the Constitution of India. Master Circular covers not only wilful defaults of dues by a borrower to the bank but also covers wilful defaults of dues by a client of the bank under other banking transactions such as bank guarantees and derivative transactions. Wilful defaults of parties of dues under a derivative transaction with a bank are covered by the Master Circular and this we hold not because the RBI wants us to take this view, because this is our judicial interpretation of the Master Circular.
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Service Tax
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2012 (12) TMI 425
Classification of taxable services u/s 65A - Supply of Tangible Goods service u/s Section 65(105)(zzzzj) versus Mining of Mineral, Oil or Gas service' u/s Section 65(105)(zzzy) versus Survey and Exploration of Mineral, Oil and Gas service – Rules of interpretation – use of own equipment for providing services - drilling of wells for production/exploitation Hydrocarbons (developmental drilling) is put along with site formation and clearance and excavation and earth moving, which are not part of Survey and exploration of mineral service - contemporanea exposito and intention of the Government – Extended period of limitation. Held that:- There are five elements [i.e. A source rock, Migration, Trap, Seal or cap rock and Reservoir] which are required to be complied with to identify source of potential petroleum Hydrocarbon drill location. - In our opinion, this is what is covered by the definition of Survey and Exploration as far as oil/gas is concerned. - the wells drilled as per the GSPC's specification in the location identified after ensuring that the five elements of prospect are existing in the activity subsequent to survey and cannot be said to be a part of the service which is preliminary to mining or drilling activity. The fact that SOTG service was introduced in 2008 does not mean that the same service was not covered by any service earlier. - Decision in the case of Kopran Limited (2009 (4) TMI 121 - CESTAT, MUMBAI)followed. Regarding Extended period of limitation - held that:- It is also settled law that if two views are possible and if an assessee entertains a belief that he is not liable to pay duty or tax, intention to evade duty, suppression/mis-declaration cannot be attributed and therefore, extended period of limitation for demanding duty/tax cannot be invoked. Therefore, even if our finding on classification aspect turns out to be incorrect, extended period of limitation could not have been invoked. It is settled law that object and content of the contracts cannot be determined and decided by looking at one paragraph or one clause but the whole contract has to be seen as a whole and considered. Regarding demand within normal period of limitation – Whether service provided is covered by the definition of Mining of Oil or Gas Service - held that:- , activities undertaken has direct nexus with Mining as the activity undertaken is drilling of wells for exploration of minerals. - The decision in the case of Indian National Shipowners Association (2010 (12) TMI 12 - SUPREME COURT OF INDIA) distinguished. Whether the service provided by M/s. Atwood can be classified as SOTG service with effect from 16.5.2008. – held that:- The main contention of SOTG i.e. allowing another person to use the rigs without giving legal right of possession are fulfilled in this case. Further, we also find that the clarification issued by the Ministry at the time of introduction of this service are also applicable to the facts of this case. Under these circumstances, we have to hold that after 16.5.2008, the service provided by M/s. Atwood has to be classified under SOTG services only. Penalty u/s 78 – waiver of penalty u/s 80 – assessee submitted that it was not interested in entering into litigation and believed in paying the taxes. - It was submitted that even though they believed that they had a case for non-payment of tax prior to 16.5.2008, to avoid litigation they had paid the entire amount of service tax due with interest – held that:- provisions of Section 80 are required to be invoked for waiving penalty imposed under Section 78 of the Finance Act, 1994 Once the penalty is waived under Section 78 of Finance Act, 1994, the question that will remain is penalty under Section 76 or 77. As regards penalty under Section 76, M/s. Atwood get protection from section 73 (3) of Finance Act, 1994 Demand confirmed for service tax with interest for the period 01.6.2007 onwards under Mining Service up to 16.5.2008 and thereafter, under SOTG service as applicable with interest.
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2012 (12) TMI 424
Scope of the term Export - Money transfer business – Location of the consumer - Whether the issue as to what constitutes export of services is to be determined with reference to provisions in Export of service Rules, 2005 only – Difference of opinion – held that:- The term "export" has not been defined either in Article 286 (1)(b) or in any of the article of the Constitution of India. Though the Apex Court's judgments in the case of the State of Kerala vs. The Cochin Coal Company Ltd. [1960 (10) TMI 57 - SUPREME COURT OF INDIA] and Burmah Shell Oil Storage & Distribution Co. of India vs. Commercial Tax Officer & Others reported in [1960 (9) TMI 70 - SUPREME COURT OF INDIA] explain the meaning of the term "export", the ratio of these judgments which are with regard to export of goods, is not relevant for determining what constitutes the export of services. There is no question of Export of Service Rules, 2005, being in conflict with Article 286 (1) (b) of the Constitution of India. The Export of Service Rules, 2005 are in accordance with the Apex Court's ruling in the Association of Leasing & Financial Service Companies vs. Union of India [2010 (10) TMI 4 - SUPREME COURT] and All India Federation of Tax Practitioners vs. Union of India [2007 (8) TMI 1 - SUPREME COURT ] that service tax is a value added tax, which in turn is a destination based consumption tax in the sense that it is levied on commercial activities, and it is not a charge on the business but a charge on the consumers. There is nothing in Export of Service Rules, 2005 which can be said to be contrary to the principle that a service not consumed in India is not be taxed in India. What constitutes export of service is to be determined strictly with reference to the provisions of Export of Service Rules, 2005? Not doing so and leaving this question to be determined by individuals tax payers or tax collectors for each service, based on their deductive ability would result only in total confusion and chaos. Money transfer service is being provided by the Western Union from abroad to their clients who approached their offices or the offices of their Agents for remitting money from to friends/relatives in India. The service being provided by the agents and sub agents is delivery of money to the intended beneficiaries of the customers of WU abroad and this service is "business auxiliary service", being provided to Western Union. It is Western Union who is the recipient and consumer of this service provided by their Agents and sub-agents, not the persons, receiving money in India. When the person on whose instructions the services in question had been provided by the agents/sub-agents in India, who is liable to make payment for these services and who used the service for his business, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of Service. Reimbursement of advertisement and sales promotion activities received from WU is not taxable as the same are for the services provided to WU, which are export of service. When the services provided by the sub-agents have been held to be export of service and hence not liable for service tax, the question of their eligibility for exemption under Notification No. 6/2005-ST is irrelevant and has not been gone into. The services provided by the Agents and sub-agents throughout during the period of dispute are classifiable as "Business Auxiliary Service" under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994 and the same have been exported in terms of the provisions of Rule 3(1) (iii) read with Rule 3(2) of the Export of Service Rules 2005 and hence no service tax is payable. Decided in favor of assessee and against the revenue.
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2012 (12) TMI 423
Demand of service tax on renting of immovable property - Extended period of limitation - Show Cause notice (SCN) has been issued on 18 th April, 2012 in respect of the financial years 2007-2008, 2008-2009, 2009-2010 and 2010-2011 - The allegation against the petitioner is that the petitioner did not disclose the material fact that the petitioner had engaged in providing taxable services and had suppressed facts with intention to evade payment of service tax on the service of “Renting of Immovable Property”. It is alleged that the assessee had thus failed to comply with the requirements of the statutory provisions of the Finance Act, 1994 and the rules made thereunder and had wilfully suppressed facts related to providing/receiving of the said service with intent to evade payment of service tax. Held that:- Prima facie, there is no whisper in the impugned notice of the facts which have allegedly been suppressed. Prima facie, the vague assertion that the petitioner had wilfully suppressed facts pertaining to providing/receiving the services with intent to evade payment of service tax is unfounded. A notice was issued by the Office of the Commissioner, Service Tax, Kolkata dated 13 th April, 2009 calling upon the petitioner to submit copies of lease agreements including list of long term lease agreements. It prima facie appears to this Court that the requisites of the aforesaid notice dated 13 th April, 2009 were complied with. The provisions of the Finance Act, 1994 relating to the service of renting of immovable property have been amended by the Finance Act, 2011 with retrospective effect. The amendment with retrospective effect from 1 st June, 2007 makes rent per se a taxable service. Earlier in Home Solution Retail & Anr. Vs. Union of India & Ors. (2009 (4) TMI 14 - DELHI HIGH COURT), the Delhi High Court had held that rent per se was not a taxable service. Prima facie, the entire claim except for four receipts as stated above are barred by limitation. Prima facie, jurisdiction has been exercised by wrongly deciding jurisdictional facts. Prime facie the Commissioner of Service Tax has not properly applied his mind to the issue required to be addressed for invoking the extended period of limitation. There will accordingly, be an interim order restraining the respondents from giving effect and/or further effect to the impugned show-cause notice till 21 st December, 2012 or until further orders whichever is earlier.
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2012 (12) TMI 401
Waiver of pre-deposit – Service Tax, interest & penalty – Business Auxiliary Service - Assessee has undertaken the activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers - This activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent - Held that:- As the applicant is entitled for the benefit of Notification no. 13/2003-ST which provides exemption from payment of service tax in respect of service provided under “Business Auxiliary Service” in relation to the sale of agricultural products. Hence, pre-deposit of duty, interest and penalty is waived and recovery of the same is stayed during the pendency of the appeal. Stay Granted.
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2012 (12) TMI 399
Waiver of pre-deposit and stay of recovery of amount of Rs.18,931/- and equal amount of penalty imposed - rent for sales offices - held that:- Cenvat Credit is claimed in respect of service tax on rent paid for their office at Bangalore whereas their manufacturing unit is in the Raigad Commissionerate which is not an Input Service as defined under Rule 2 (1) of Cenvat Credit Rules, 2004 - pre-deposit of Rs.18,931/- (Rupees eighteen thousand nine hundred and thirty one 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 recovery of interest and penalty till disposal of the appeal.
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Central Excise
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2012 (12) TMI 437
Cenvat credit on input LSHS - producing steam and electricity for the manufacture of fertilizer - Held that:- In COMMR. OF C. EX., VADODARA Versus GUJARAT STATE FERTILIZERS & CHEM. LTD.[2008 (7) TMI 61 - SUPREME COURT] a view has been taken that modvat credit can be taken on LSHS used in the manufacture of fertilizer exempt from duty. Although this decision was rendered in the context of availing modvat credit under the Central Excise Rules, 1944 as they existed prior to the promulgation of the Cenvat Credit Rules, 2002 the principle of law laid down is general and not specific to the Central Excise Rules, 1944. The decision rendered in Commissioner of Central Excise v. Gujarat Narmada Fertilizers Company Limited [2009 (8) TMI 15 - SUPREME COURT ] has been rendered in the context of the Cenvat Credit Rules, 2002 and is, therefore, more apposite. There is an apparent conflict between GSFCL and Gujarat Narmada since GSFCL does lay down a general principle of law, no option but to refer the issue to a larger Bench to resolve the conflict between GSFCL and Gujarat Narmada. The conflict to be resolved is whether under the Cenvat Credit Rules, 2002 an assessee is entitled to claim cenvat credit on duty paid LSHS utilized as an input in the manufacture of fertilizer exempt from duty.
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2012 (12) TMI 436
Refund claim – pre-deposit – Held that:- Sum of Rs. 40 lakhs was deposited by the respondent pursuant to the direction given by the Commissioner (Appeals) under proviso to Section 35F of Central Excise Act, 1944 - This deposit was in the nature of securing the demand confirmed against the respondents vide order-in-original - Once the order-in-original and order of the Commissioner (Appeals) has been set aside by the Tribunal, the department has no option but to return the amount of pre-deposit and has no right or legal authority to create any obstruction in refunding the amount – In favor of assessee
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2012 (12) TMI 435
Cenvat credit - whether the appellant who is procuring the furnace oil from M/s. Reliance Industries is entitled to Cenvat credit of Service Tax initially paid by M/s. Reliance Industries but recovered by them from the appellant – Held that:- Freight and Service Tax paid by M/s. Reliance Industries is on behalf of the appellant and is reimbursable by the appellants. It is also not Revenue’s case that M/s. Reliance Industries has taken the Cenvat credit of the Service Tax so involved - confirmation of Service Tax against the appellant by denying them the credit is not sustainable – in favor of assessee
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2012 (12) TMI 434
Eligibility for exemption under Notification No. 50/2003-C.E. – area based exemption - Held that:- After field survey, the appellant was found eligible for exemption under Notification No. 50/2003-C.E. - merely because of inadvertent clerical error regarding Notification No. in the declaration filed for the purpose of exemption, the appellant cannot be denied the benefit of Notification No. 50/2003-C.E., when he otherwise is eligible for the same – in favor of assessee
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2012 (12) TMI 433
Refund claim on the basis of exemption Notification No. 130/83-C.E. – Held that:- During the period of dispute for claiming exemption notification, filing of classification list an its approval by the Assistant Commissioner was mandatory requirement under 173B without which exemption could not be claimed - appellant filed classification list in February, 1992 with retrospective effect, this classification list was rejected by the AC and against this order, no appeal has been filed by the appellant and thus AC’s order rejecting the appellant’s claim for benefit of Notification No. 130/83-C.E., dated 27-4-1983, became final - refund claim on the basis of exemption Notification No. 130/83-C.E. cannot be entertained
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2012 (12) TMI 432
Search - goods seized and provisionally released on payment of redemption fine and duty - alleged that there was an attempt to remove the finished goods without payment of duty since goods were found in the factory itself – Held that:- Revenue could not discard plea of appellant discovering any material evidence against appellant’s plea of job work and manufacture of the day – assessee submitted that finished goods came from job worker on Friday and goods manufactured on the same day remained unaccounted for two days because of Saturday and Sunday and accounting staff were absent - appellants claiming to have paid the duty, there shall be no further levy of duty on the goods seized because seizure was also unwarranted when the goods were not found to be without evidence, nor evidence exist to hold attempt to clear excisable goods causing evasion of duty. Therefore, confiscation was unwarranted and redemption fine was not imposable. Penalty – evasion – Held that:- No evasion since the allegation failed to stand. But violation of law occurred for not recording the goods on Friday which calls for levy of penalty - penalty of Rs. 5,000/- shall be appropriate under Rule 27 of Central Excise Rules, 2002. Except this penalty, no other penalty shall sustain
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2012 (12) TMI 431
Cash refund - accumulated Cenvat credit – goods supplied to other 100% EOUs or supplied to DMRC by availing full duty exemption under Notification No. 6/2006-C.E. – Held that:- Cash refund of accumulated Cenvat credit is subject to condition that the manufacturer/provider of output service does not avail the input duty drawback or input duty rebate - Rule 5 is applicable only in respect of the use of Cenvat credit availed inputs or input services for manufacture of the goods which are cleared for export under bond/letter of undertaking or are used in the manufacture of intermediate product cleared for export - supplies to SEZ are to be treated as export for the purpose of this Rule in terms of the provisions of Section 2(m) of SEZ Act, 2005, the supplies to DMRC by availing Notification No. 6/2006-C.E. which though deemed exports in terms of the provisions of EXIM policy, cannot be treated as export for the purpose of Rule 5 of Cenvat Credit Rules, 2004 - provisions of this Rule are not applicable in respect of accumulated Cenvat credit on account of supplies to DMRC by availing full duty exemption under Notification No. 6/2006-C.E. - no evidence that the goods have been used by those EOUs in manufacture of finished product which were exported out of India under bond - appeal is dismissed.
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2012 (12) TMI 430
Penalty – alleged that appellant neglected the obligations cast on him under Rules and Law and on this ground penalty under Section 11AC has been imposed – Held that:- No suppression of facts or misdeclaration has been clearly brought out for imposing penalty under Section 11AC - contravention of some statutory provision relating to accounting for the goods, furnishing the proof of export and re-warehousing certificates etc. and it is definitely not a case where duty is required to be demanded since the goods have been accounted for and exported, the question of demand of duty does not arise - there is no proposal in the show cause notice to impose penalty for contravention of rules and proposal is for imposing penalty under Section 11AC of the Central Excise Act, 1944 only - penalty under Section 11AC of the Central Excise Act, 1944 also cannot be sustained
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2012 (12) TMI 429
Refund – unjust enrichment – Held that:- Appellant have produced evidence in form of letters from M/s. BSL refusing to pay the 15% excess duty, accompanied by Chartered Accountant’s certificate in support of their claim that the incidence of duty whose refund is claimed has been borne by them and that duty has not been recovered from their customer - department’s plea is that the appellant have not produced any documents in support of their claim that the incidence of the excess duty paid, whose refund is claimed, had been borne by them - matter is remanded to the original adjudicating authority for de novo adjudication
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2012 (12) TMI 428
Rectification of mistake - held that:- the point of dispute is eligibility of Cenvat credit of duty paid on rough tiles i.e. rough aluminium die cast tiles which were subjected to the process of cleaning, buffing, electroplating etc. In the final order, after holding that these processes do not amount to manufacture, it has been held that Cenvat credit is not admissible. Thus on the basic issue involved in this case i.e. whether the appellant’s processes on rough tiles amount to manufacture there is no scope for rectification and the question of admissibility of Cenvat credit is linked with this question only. The alternative plea which had been made and not considered, is that even if the appellant’s process does not amount to manufacture, Cenvat credit of duty on rough tiles must be allowed by quashing the impugned order of CCE (Appeals), as the amount of Cenvat credit of duty on rough tiles which has been denied is the same as the rebate of duty on rough tiles to which the appellant would be entitled under Rule 18 of Central Excise Rules, 2002, as the processed tiles had been exported. This plea, in our view is not relevant to the issue involved in this case - admissibility of Cenvat credit of duty paid on rough tiles, as for the reasons given below, considering or not considering this plea will have not bearing on the final decision. f according to the appellant a contrary view is possible on this issue, the point raised would not satisfy the criteria for treating the same as “mistake apparent from records” - Misc. application rejected.
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2012 (12) TMI 427
Condonation of Delay of 812 days in filing appeal - Held that:- Cause for delay as explained by assessee that there was lack of communication between the authorized representative of the appellant and concerned legal and tax department of the appellant is vague plea without detailing the facts not explaining a reasonable cause for delay in filing the appeal. As in December, 2010, the Director of the appellant was arrested and under the term of arrest deposited the interest and penalty. The appellant did not prefer to file the appeal and ultimately in May, 2011, filed the writ petition in the High Court claiming against 100% penalty. There is no explanation as to why the appeal was not filed during the period with effect from December, 2010 to May, 2011. Therefore, the appellant was grossly negligent in pursuing the remedy available to him and has miserably failed to explain sufficient cause for condonation of delay of 812 days in filing the appeal - against the assessee.
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2012 (12) TMI 426
Demand of duty - Period of limitation - imposition of penalty on the appellant under Section 11AC – alleged that assessee have been clearing zinc dross and ash without payment of duty, but the same has not been shown in the ER-I Returns of the respective months – Held that:- When the appellant had declared the clearances of zinc dross and ash in the monthly ER-6 returns regarding Cenvat credit taken and utilized they can not be accused of having suppressed the fact regarding manufacture and sale of zinc dross & ash from the department, even if the production and sale of zinc dross/ash was not mentioned in the ER-I Returns - extended period cannot be applied for the recovery of non-duty paid and only the normal period of limitation would be applicable - penalty under Section 11AC since the criteria for invoking extended period under proviso to Section 11A(1) is identical to the criteria for imposition of equal penalty under Section 11AC and since extended period is not applicable, there would be no justification for imposition of penalty on the appellant under Section 11AC - duty demand would survive only for the normal limitation period.
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2012 (12) TMI 390
Application for modification of Stay Order - stay/dispensation of pre-deposit - In the present case on the application filed by the respondent, a direction was given to deposit only 25% of the amount of the penalty which had been imposed against the said respondent - Applicants claimed that they did not receive the notice - matter was got verified and ascertained from the registry that the notice was duly sent to the address stated on the fact of the Appeal Memoranda - Applicant Firm has not paid a single paisa till date - Tribunal after having exercised jurisdiction for the purposes of passing an order for waiver of pre-deposit u/s 35F of the Act cannot modify that order subsequently like an appellate authority, nor can keep tinkering with the order as and when applications for modification of the order are filed - Appeals are dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act, 1944.
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2012 (12) TMI 389
Service of show cause notice - Benefit of concessional rate of duty claimed under Notification No. 25/97-C.E. dated 7-5-1997 - Demand of Duty with Interest – Held that:- There is nothing in the order-in-original or the record to show as to what proceedings took place pursuant to the show cause notice before the filing of written submissions by the assessee on 22-7-2005. Had the plea of the appellant, that show cause notice was served on the respondent in the year 1998, been correct there ought to have been some proceedings conducted during the period upto 22-7-2005. The order-in-original do not give any clue in this regard. Therefore, in absence of any evidence regarding service of show cause notice on the respondent prior to 22-7-2005, the impugned order of Commissioner (Appeals) holding the show cause notice to be time barred cannot be faulted.
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2012 (12) TMI 388
CENVAT credit on various services - input services - use for the purpose of manufacturing - held that:- CENVAT credit on pest control allowed - Cenvat Credit on AMC for ST plant for sewage disposal allowed - AMC for air conditioners for instrumentation room allowed since there is a nexus between the said service and the manufacture of excisable products by the appellant inasmuch as testing of the products in the factory is an imperative requirement pre-clearance. - Cenvat Credit on canteen facility denied since the appellant admittedly did not have 250 or more employees/workers during the material period. Cenvat Credit on AMC for computers - certain part of the CENVAT credit taken on AMC for computers was reversed by the appellant accepting the fact that this much credit was not used in connection with manufacture or clearance of their products. - for the remaining part, credit allowed. CENVAT credit on Air travel agent’s service - claim of the appellant is that their employees had to travel extensively in connection with the business of the appellant – Held that:- There is no documentary evidence to show that the air travels made by the employees were in connection with the business of manufacturing and marketing of excisable products and not as part of any welfare scheme for the employees - challenge against denial of CENVAT credit on air travel agent’s service fails Online auction service - appellant submit that they used this service for disposal, by auction, of scrap which was generated in the course of manufacture of their final products. It is submitted that the scrap was also cleared on payment of duty. If that be so, online auction resorted to by the appellant is an input service used for clearance of excisable goods. A direct nexus stands established between online auction service and the clearance of excisable goods - credit allowed. Penalty - appellant has also challenged the penalties imposed on them under Rule 15 read with Section 11AC of the Central Excise Act. After hearing both sides on this issue, I take the view that the penalty-related issue requires to be addressed by the original authority, now that the appeals have been partly allowed. That authority is directed to take fresh decision on the question whether any penalty is liable to be imposed on the party under the aforesaid provisions – matter remanded back
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2012 (12) TMI 387
Restoration of appeal – determination of annual production capacity – Held that:- the finding of the Tribunal’s Final Order No. 812/2010-EX, dated 17-8-2010 that the Commissioner’s order determining the annual production capacity of the Appellant’s factory was not challenged by them in the manner known to the law is factually incorrect. - In fact, it appears that this matter is pending before the Apex Court in SLP No. 22134/2008 filed by the Appellant. - ROA is allowed
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2012 (12) TMI 386
Remission of excise duty - fire incident - loss of finished as well as semi-finished goods lying in store – Held that:- There is nothing on record to suggest that there was any material available with the Commissioner (Adjudication) to come to the conclusion that the appellant was not following the safety norms - appellant has filed insurance claim without including the duty element - appellant has placed sufficient material on record to show that finished/semi-finished goods were destroyed in fire accident cause due to short circuit - appellant is granted remission of excise duty pertaining to the goods destroyed in fire
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2012 (12) TMI 385
Waiver of pre-deposit - demanded as interest and penalty – Held that:- Interest liability in this case is relatable to the transfer of credit of education cess effected by the appellant to make it a credit of basic excise duty. True, the taking of credit of education cess in the past was not irregular. But, when it was transferred to the credit column relating to basic excise duty, it turned out to be a case of irregular taking of basic excise duty in the CENVAT account and that credit was reversed only in August 2009 - Rule 14 of the CENVAT Credit Rules, 2004 is squarely applicable - appellant has not pleaded financial hardships. In the circumstances, there will be a direction to them to pre-deposit
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2012 (12) TMI 383
Benefit of Notification 6/2006 - applicant supplied the TMT bars to Thermal Power Project, an inter-state thermal power plant which qualifies as mega power project at nil rate of duty by availing the benefit of Notification 6/2006 – alleged that the goods are classifiable under chapter 72 and not under Chapter Heading 9801 for which the benefit of Notification No. 21/2002 is available – Held that:- Goods imported for mega power project plant to be erected by BHEL is eligible for exemption from payment of duty - Appellants supplied the goods to bidders of International Competitive Bidding, the condition of the Notification is satisfied and there is no justification for denying the exemption notification to the appellant - waiver of pre-deposit allowed
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2012 (12) TMI 382
Cenvat credit denied - Capital goods removed after use – Held that:- The capital goods i.e. D.G. Sets and Water Heat Recovery Equipment were disposed of in the market after putting them to use for a period of 9-10 years. Thus, it cannot be said that dispute of capital goods on transaction value would be covered under the expression “removed as such” so as to attract the reversal of Cenvat credit availed under Rule 3(4)(c) or Rule 3(5) of Cenvat Credit Rules. As decided in Commissioner of Central Excise, Chandigarh v. Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] removal of capital goods on which the Cenvat credit was availed after use on payment of excise duty on transaction value would not attract Rule 3(5) of the Cenvat Credit Rules, 2004.
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2012 (12) TMI 381
Denial of Cenvat credit – alleged that the invoices are in the name of M/s. United Alkalies, Ghaziabad, although these invoices also bear the name & address of the appellants as consignee – Held that:- Credit in respect of the said invoices could not be denied on such ground of the alleged non-submission of documentary/duplicate copy of the invoices, particularly in the face of the said facts and documentary/corroboratory evidence - credit was allowed by the appellate authority after verification of the documents in terms of the observation made by the Tribunal in the earlier order while remanding the matter - substantive benefit cannot be denied on procedural/hypertechnical objection - Revenue’s appeal rejected.
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2012 (12) TMI 380
Abatement of duty in terms of the proviso 1 of Rule 10 of the Pan Masala Packing Machines (Capacity of Determination and Collection of Duty) Rules, 2008 - Rule provides abatement in case a factory did not produce the notified goods during continuous period of 15 days or more - which point of time the counting of day start – Held that:- A day is a unit of time equivalent to approximately 24 hours - closure was for a period of 15 days - Revenue in support of their plea that the day should start from 00.00 hours at night has not placed any support or any material so as to justify their stand. Admittedly the closure was for continuous period of 15 days (by taking a day of 24 hours) and no infirmity can be found in the views adopted by Commissioner (Appeals). Revenue’s appeals are accordingly rejected
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CST, VAT & Sales Tax
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2012 (12) TMI 402
Detention of goods - Imposition of tax and penalty under the OVAT Act and OET Act – Held that:- Consignment was covered with all valid required documents - party No. 3 without assigning any reason forcefully took the vehicle to Talasara Police Station without any notice or show-cause to the person in-charge of the vehicle – At the time of interception of the vehicle in question, the person-in-charge of the vehicle has tendered all the documents to the officer who intercepted the vehicle - it is nobody's case that the goods carried in the vehicle was not covered by valid documents or that the person-in-charge of the vehicle has furnished false/forged way-bill/document - Sales Tax Officer have acted illegally and the orders passed imposing tax and penalty under the OVAT Act and OET Act and the order passed by opposite-party No. 2 under annexure 1 maintaining imposition of penalty made by opposite-party No. 4 are not legally sustainable - writ petition is allowed
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Indian Laws
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2012 (12) TMI 398
Maintainability of compensation applications u/s 12B of MRTP Act - whether initiation of separate proceedings either u/s 10 or u/s 36B of MRTP Act alleging unfair trade practices by the respondents is mandatory for making a compensation application u/s 12B - Held that:- MRTP Commission has been vested with the powers under sub-section (3) of Section 12B of the MRTP Act to make an inquiry to the allegations of monopolistic or restrictive or unfair trade practice made in the application filed under sub-section (1) of Section 12B of the MRTP Act and to determine the amount of compensation realizable from the undertaking or the owner thereof, or, as case may be, from the other person, towards loss or damage caused to the applicant by reason of any monopolistic or restrictive, or unfair trade practice carried on by such undertaking or other person. These powers vested in the MRTP Commission under sub-section (3) of Section 12B of the MRTP Act are independent of its powers under Section 10 and Section 36B of the MRTP Act. There is also no reference in either Section 10 or in Section 36B of the MRTP Act to any of the provisions of Section 12B of the MRTP Act and if the Parliament intended to make Sections 10, 12B and 36B of the MRTP Act interdependent, there would have been some indication of this intention of Parliament in Section 10 or in Section 36B of the MRTP Act - In the absence of any such indication of this intention of Parliament to make the provisions of Section 12B of the MRTP Act dependent on initiation of an inquiry or proceeding under Section 10 or Section 36B of the MRTP Act, the Competition Appellate Tribunal clearly erred in coming to the conclusion that interdependence of the provisions of Section 10 or Section 36B with Section 12B cannot be lost sight of and in the absence of a separate proceeding alleging unfair, monopolistic or restrictive trade practice, an application for compensation under Section 12B of the MRTP Act is not maintainable.
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2012 (12) TMI 397
Professional misconduct of Advocates - filing a compromise deed by forging and fabricating the signatures - Held that:- Professional misconduct committed by the respondent is extremely grave and serious. He has indulged in mischief-making. An advocate found guilty of having filed vakalatnamas without authority and then filing fictitious compromises without any authority deserves punishment commensurate with the degree of misconduct that meets the twin objectives deterrence and correction. Fraudulent conduct of a lawyer cannot be viewed leniently lest the interest of the administration of justice and the highest traditions of the Bar may become casualty. By showing undue sympathy and leniency to the advocate found guilty of grave and serious professional misconduct, the purity and dignity of the legal profession will be compromised. Moreover, the respondent-advocate had been previously found to be involved in a professional misconduct and he was reprimanded. Thus it would be just and proper if the respondent-advocate is suspended from practice for a period of three years from today - order passed by the Disciplinary Committee, BCI is modified and the respondent-advocate is awarded punishment for his professional misconduct.
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