TMI Tax Updates - e-Newsletter
December 15, 2012

Case Laws in this Newsletter:

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

TMI SMS

• ST renting of immovable property -Comm ST has not properly applied his mind to the issue required to be addressed for invoking extended period of limitation -HC

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• ST - Money transfer - it is Western Union who is the recipient and consumer of service provided by Agents not the persons, receiving money in India. -Tri-LB

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Articles

1. AVAILMENT OF CENVAT CREDIT PRIOR TO SERVICE TAX REGISTRATION

   By: DR.MARIAPPAN GOVINDARAJAN

2. Case of Joonktolle Tea & Industries Ltd --Tribunal prescribes certain additional conditions which are not found in the provisions of section 80 IC- a fit case for rectification and also appeal.

   By: DEVKUMAR KOTHARI

News

1. Change in Tariff Value of RBD Palmolein, brass Scrap (All Grades) Poppy seeds, Gold and Silver Notified

2. Income Tax Refund

3. Updating Tax Officials’ Knowledge of Law

4. Tax Raids

5. Government Creates National Clean Energy Fund for Research and Innovative Projects

6. Crop Development Schemes for Achieving Higher Yield of Pulses

7. Incentives for Setting up of Cold Storage Facilities

8. Statement made by Minister for Commerce, Industry and Textiles Shri Anand Sharma in Lok Sabha on situation arising out of dilution of Jute Packaging Materials (Compulsory Use) Act, 1987 and steps taken by the Government in this regard

9. PSB Exposure in Capital Market and Real Estate

10. Online Sale of Insurance Policies

11. New Bank Branch Policy

12. Government is Making Every Effort for Turnaround of the Economy and Creating Investor Friendly Climate - Finance Minister

13. FDI Reforms and Trade Normalisation with Pakistan Mark 2012 Year End Review of Commmerce and Industry

14. RBI Reference Rate for US $ and Euro

15. Setting up of Central Electronic Registry under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002

16. Online Sale of Insurance Policies by Insurance Companies

17. Decline in Sale of Life Insurance Policies

18. Insurance Coverage to BPL Aadhar Card Holder

19. Life Insurance Companies offer Policies for Fixed Policy Term

20. Index Numbers of Wholesale Prices in India (Base: 2004-05=100) Review for the month of November, 2012

21. Frauds-Classification and Reporting

22. Progress report on frauds

23. CD of Indian Account Holders in France

24. Reduction in Commission of PPF agents to make the Schemes more Investor Centric than Agent Centric

25. Three Major Rating Agencies including moody’s investors Service, Standard and poor’s (S&P), and Fitch Ratings, has Reaffirmed india’s Sovereign Credit Rating at Investment Grade during the Year

26. Tax Evasion Possibility of Insurance Companies of Private Sector

27. Inflation Rate of Service Sector and Manufacturing Sector

28. Loans at Lesser Rate of Interest to Poor and Weaker Sections

29. Introduction of Plastic Currency; one billion pieces of Rs. 10 Banknotes on Polymer Substrate to be introduced on A field Trial basis in five Cities

30. Zero Balance Account for Beneficiaries of Government Programmes

31. Investigation Regarding Violation of Norms

32. Investigating the Frauds Committed by the Companies

33. Checking the Cartelisation by Companies

34. Market Research and Analysis unit of Serious Fraud Investigation Office

35. The Concept and the Feasibility of Developing A Business Index

36. Investigation by SFIO in Company Liquidations

37. Publishing the Names of Questionable Multi-Level Marketing Companies

38. De-Registration of Companies

39. Simplification of Procedure in order to make the Award Process of Road Projects faster

40. Finalisation of Reserve Price for the Auction of Spectrum in 1800 MHz band for service areas where no bids were received during auctions held in November, 2012 and 900 MHz band in metro service areas and TRAI’s recommendations on “Spectrum Management and Licensing Framework”

41. Global crude oil price of Indian Basket rebounds to 106.40 US$ /bbl on 12.12.2012

42. MoU with Other Countries

43. Ministry of I&B seeks TRAI views over the issue of imposing Reasonable Restrictions on MSOs and LCOs to Prevent Monopolistic Operations

44. Direct Transfer of Cash for Subsidies

45. Loan Restructuring of PSUs

46. Proposal to Operationalise DTAAs with 12 More Countries Under Process

47. Revival of the Insurance Sector

48. Government Advises Power Utilities to Import 46 Million Ton Coal During 2012-13

49. NHPC Fulfilling its Social Obligation in the Rangit and Teesta Stage-V Projects

50. Cabinet Committee on Economic Affairs Approves Setting Up of National Electricity Fund

51. 100% F D I Permitted in Power Sector

52. Investment by BHEL

53. Data on ECB / FCCB for October 2012

54. Packing of Foodgrains and Sugar in Plastic Bags

55. Position of India in Cotton Export

56. Cotton Production

57. Shortfall in production of Cotton

58. Impact of Recession on Handloom Sector

59. Programme for Development/Upgradation of Textiles Workers

60. Quick Estimates of Index of Industrial Production and Use-Based Index for the Month of October, 2012 (BASE 2004-05=100)

61. Consumer Price Index Numbers on Base 2010=100 for Rural, Urban and Combined for the Month of November, 2012

62. Huge Opportunity for Increase in Investments from Australia into India Particularly in Sectors like Mines and Minerals Based Industry, clean and Renewable Energy, Energy Agro based and Food Processing Bio-Technology, Engineering and Manufacturing, and Marine and Fishery, says Finance Minister Shri P.Chidambaram

63. Reasons for Allowing FDI in Retail Sector

64. Investment in Chennai-Bangalore Industrial Corridor

65. Sops to Set up Units in NIMZs

66. Fixing of Base Price for Tea in Assam

67. Package to Coffee Growers of Karnataka

68. Increase in Export of Agro-Products

69. Know Your Customer (KYC) norms /Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002

70. Issuance of rupee denominated co-branded pre-paid cards

71. Guidelines for issue of debit cards by banks

Circulars / Instructions / Orders

VAT - Delhi

1. 24 OF 2012-13 - dated 12-12-2012

Issuance of Statutory Forms In Advance

2. 3(11)/P-II/VAT/2012/944-951 - dated 4-12-2012

Dealer whose tax period is ‘Quarter’ and who was liable to pay net tax above one lac rupees during the previous financial year or whose tax liability exceeds one lax rupees at any time during the current financial year

Income Tax

3. F.No.DIT(Infra)/DFP/37/2012-13/1504 - dated 13-12-2012

Delegation of Financial Powers to Heads of Departments - reg.

4. F. No.15/6/2008-IFU-III - dated 1-11-2012

Delegation of Financial Powers to Heads of Departments of CBDT & CBEC - reg.

DGFT

5. 36 (RE-2012)/ 2009-14 - dated 12-12-2012

Amendment in Para 3.11.8 of Handbook of Procedures Vol. I (RE 2012)/ 2009-14.

Highlights / Catch Notes

Income Tax

• High Court Deletes Addition u/s 40A(2) of Income Tax Act Due to Unclaimed Discount to Sister Concern.

  Case-Laws - HC : Addition u/s 40A(2)(a)(b) on the ground that the assessee had allowed discount @ 3% tosister concern - It is not disputed that the assessee has neither claimed any deduction as expenditure incurred towards discount offer nor the lesser price charged by it. - Addition deleted - HC
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• Income Tax Act: Sections 80IB & 80IC Exclude Financial Controller and CMO Expenses from Deduction Calculations.

  Case-Laws - AT : Deduction u/s 80IB / 80IC - Allocation of common expenditure - salary, wages and staff welfare expenses relating to financial controller, chief medical officer cannot be allocated. - AT
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• Interest on Refund u/s 244A(1) Taxable When Granted, Not When Proceedings Conclude.

  Case-Laws - AT : Taxability of Interest received u/s 244A - held that:- interest on refund under section 244A(1) granted to the assessee in the proceedings under section 143(1)(a) would be assessable in the year in which it is granted and not in the year in which proceedings under section 143(1)(a) attain finality. - AT
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• High Court Upholds Penalty u/s 271(1)(c) for Wrongful Depreciation Claim, Disagreeing with Tribunal's View on Bona Fide Explanation.

  Case-Laws - HC : Penalty u/s 271(1)(c) - wrong claim of depreciation - We are also unable to subscribe to the view of the Tribunal that the explanation submitted by the assessee “appears to be bona fide - penalty confirmed - HC
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• Court Denies Depreciation Claim for Leased Air Jet Spindle, Positar Disc, and LPG Cylinders.

  Case-Laws - HC : Depreciation on leased out Air Jet Spindle Assembly and Positar Disc / leased out LPG cyclinders - the assessee was not entitled to depreciation. - HC
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• High Court Rules in Favor of Railway Catering Contractor on Cash Payment Disallowance u/s 40A(3) and Rule 6DD(k.

  Case-Laws - HC : Disallowance u/s 40A(3) read with rule 6DD - payment of expenditure in cash - mobile railway catering contractor - Tribunal and the lower authorities adopted an unduly narrow and technical interpretation of Rule 6DD(k), the benefit of which the assessee clearly was entitled to. - HC
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• Section 68 Inapplicable: Family Transaction Exempt from Creditworthiness Assessment, No Outsiders Involved.

  Case-Laws - AT : Three limbs to invite the mischief of Sec. 68, i.e. creditworthiness, capacity and genuineness of the transactions, cannot be questioned, because the transaction is within the family and no outsider is involved - AT
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• Revenue's view on Section 44DA making Section 44BB irrelevant challenges harmonious statutory interpretation principles.

  Case-Laws - HC : 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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• Exploring Income Tax: No Tax on Deemed Income for Capital Gains; Legal Interpretations & Case Laws Explained.

  Case-Laws - HC : 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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• Court Rules No Disallowance for Late Form 15J Submission u/s 40(a)(ia) and Rule 29D for Transport Payments.

  Case-Laws - HC : 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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• Investment Limit for Small Scale Industries Cut from Rs. 3 Crore to Rs. 1 Crore u/s 80IB Deduction.

  Case-Laws - AT : 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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• Assessment Order Invalid Post-Taxpayer's Death; New Order Required with Heirs' Hearing Opportunity Ensured by Assessing Officer.

  Case-Laws - AT : 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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• Capital Gains Holding Period Starts on Date of Possession, Not Purchase Agreement or Registration.

  Case-Laws - AT : 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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Customs

• Board's Circular on Drawback Claims Misinterpreted: Market Goods Are Duty Paid, Cenvat Credit Not Availably Utilized.

  Case-Laws - AT : Drawback claim - circular of the Board, based on the preposition that the goods purchased from the market are deemed to be duty paid and hence non-Cenvat credit availed, as when Cenvat credit is used by a manufacturer for payment of duty on goods cleared for home market, the same has been given back to the Government, is, in our view, totally wrong and contrary to the provisions of the law - AT
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• Petitioner Denied Drawback Claim Under Customs Act Section 74 Due to Missing Export Declaration and Shipping Bills.

  Case-Laws - HC : 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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DGFT

• DGFT Announces Amendment to Handbook of Procedures Vol I (RE 2012)/2009-14, Updating Paragraph 3.11.8 for Trade Clarity.

  Circulars : Amendment in Para 3.11.8 of Handbook of Procedures Vol. I (RE 2012)/ 2009-14. - Public Notice
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Service Tax

• Ship Brokers Defined as Intermediaries, Not Commission Agents; Excluded from 'Business Auxiliary Service' Tax Classification.

  Case-Laws - AT : Classification of service - Broker v/s Commission agent - ship brokers - brokers are purely intermediaries who do not act on behalf of either ship owner or the charterer and, therefore, they cannot be said to be commission agents & not covered by the definition of 'Business Auxiliary Service - AT
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• Clarification: Supply of Tangible Goods Services Existed Pre-2008, Covered by Other Tax Categories.

  Case-Laws - AT : 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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• Service Tax Dispute: Extended Limitation Period on Renting Immovable Property Not Adequately Justified by Commissioner.

  Case-Laws - HC : 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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• Clarification on "Export" in Money Transfers: Western Union as Service Recipient, Not Indian Recipients, for Tax Purposes.

  Case-Laws - AT : 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)
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Central Excise

• COCO Outlets Not "Place of Removal" for Petroleum Product Valuation Under Central Excise Laws.

  Case-Laws - AT : Assessable value - Place of removal – delivery of Petroleum products - company owned company outlets (hereinafter referred as COCOs) - there is no justification to treat the COCO outlets as the "place of removal" - AT
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• Appellant not proven to use cenvatable inputs for bagasse; Rule 6(2) & 6(3) of Cenvat Credit Rules inapplicable.

  Case-Laws - AT : Once it is concluded that the department has failed to establish that the appellant used cenvatable inputs for manufacture of bagasse, Rule 6(2) and Rule 6(3) (i) & (ii) of Cenvat Credit Rules, 2004 are not attracted - AT
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• Appellant Eligible for Area-Based Exemption Despite Clerical Error in Notification No. 50/2003-C.E. Declaration.

  Case-Laws - AT : 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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VAT

• New Circular Issued to Streamline Advance Issuance of VAT and Sales Tax Forms for Better Compliance Efficiency

  Circulars : Issuance of Statutory Forms In Advance - Circular
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• Statute Allows Initial and Subsequent Unilateral Assessments, Followed by Bilateral Hearing to Ensure Substantive Post-Decisional Review.

  Case-Laws - HC : The scheme of the statute itself is first allowing a unilateral assessment by the assessee, thereafter a unilateral assessment by the Assessing Officer and thereafter providing for a bilateral assessment after opportunity of hearing. - With such a statutory scheme, it cannot be said that the post decisional hearing will be farcical or a sham. - HC
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• Court Declines to Intervene in New VAT Law Unless Constitutional Violation or Harm to Assessees Occurs.

  Case-Laws - HC : Once the legislative scheme is not found to be in contravention of the Constitution of India or as causing any prejudice to the assessees, this Court will not interfere therewith merely because the practioners in the field of VAT find themselves reluctant to change to the new law or because it introduces a new scheme. - HC
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Case Laws:

• Income Tax

• 2012 (12) TMI 461
  Addition u/s 40A(2)(a)(b) on the ground that the assessee had allowed discount @ 3% to M/s Ganga Pustakalaya (sister concern) while to the other whole sellers it was allowed @ 2.5%? - held that:- The Tribunal has found that the assessee had offered 2.5% on the counter sales whereas 3% discount was given to sister concern, M/s Sri Ganga Pustakalay, which was carrying the sale outside Varanasi and incurring the expenses on account of packing, transportation etc. Therefore, the Tribunal was of the view that the Assessing Officer was not justified in making the disallowance under Section 40A(2) of the Act. The Tribunal has further held that the provisions of Section 40A(2)(a) of the Act would apply where any deduction is claimed towards excessive and unreasonable expenditure has been incurred by assessee but in the present case neither any expenditure has been incurred nor any deduction has been claimed for the amount which has been charged less than that from other customers, thus provision would not apply. It is not disputed that the assessee has neither claimed any deduction as expenditure incurred towards discount offer nor the lesser price charged by it. Order of ITAT confirmed - Decided in favor of assessee.

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• 2012 (12) TMI 460
  Income from sale of plot - assessee claimed that 3/4 share belong to his sister - AO added the the same under the head income from our sources - CIT(A) and ITAT deleted the addition - held that:- The assessed amount payable to three sisters was received by the assessee on account of power of attorney executed by them in her favour. At the most she could be treated as an agent. The amount has to be assessed in the hands of sisters and not at the hand of the assessee. Therefore, the order of Tribunal does not suffer from any illegality.

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• 2012 (12) TMI 459
  Commission paid to the sub-distributors - disallowance as no evidence furnished regarding work done/services rendered by three dealers - CIT(A) allowed the claim - Held that:- The assessee appointed three sub-distributors as stockists for selling cement. Sub-distributors were providing services of stockist, taking orders from local customers for sale of cement and supplying/selling the cements to the local customers as such they were entitled to get commission on the sales effected by them. It has been proved by the assessee that actual commission was paid to the sub-distributors. Earlier for the financial years 1988-89, 1989-90 and 1990-91, deduction of the payment of commission has been allowed. Income Tax Appellate Tribunal has not applied it's mind to the evidence on record and has illegally set aside the order the Commissioner of Income Tax (Appeals) without considering the reasons recorded by it. Appellate Tribunal is illegal and is liable to be set aside - case remanded back for reconsideration.

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• 2012 (12) TMI 458
  Arm's length price (ALP) - international transactions (TP) - assessment order in pursuance of the directions given by the Dispute Resolution Panel (DRP) - violation of natural justice - the operating margin of the comparables - within the safe harbour of +/- 5% - held that:- What is to be compared is the international transactions of the assessee with its related parties and not for its entire transaction with non-related parties also. Therefore, ALP has to be seen only with regard to international transaction with A.Es and not on the entire turnover/sales. From the working also, at the entity level, the assessee's transactions falls within the range of +/- 5%. Therefore, in our conclusion, by whatever approach, bench marking is done, the entire adjustment made by the TPO falls within the safe harbour of +/- 5%. Insofar as the calculation furnished by the learned Departmental Representative is concerned, we do not find any merit in the said calculation in view of our analysis given above. Thus, at the very thresh hold level itself, the entire adjustment made by the TPO stands deleted. Deduction u/s 80IB / 80IC - AO was of the view that for the purpose of sections 80-IB & 80-IC, the profits derived from the industrial undertaking are to be worked out by reducing certain common expenses incurred at the head office and the central departments such as audit, legal, secretarial, shares department, selection and training, accounting, treasury which cannot be identified with any of the industrial undertakings of assessee. - Held that:- AO directed not to allocate the expenses of chairman, company secretaries and public relation department - salary, wages and staff welfare expenses relating to financial controller, chief medical officer cannot be allocated. - these four operations at the head office are in no way connected to the running of the units. It must be appreciated that each of the units has their own departmental head including financial controller and medical officer. These four operation centres at the head office are more concerned with the managerial issues, they are not connected either with production or sale of these units. With reference to the research expenses - held that:- the research expenditure cannot be allocated to the units claiming deduction unless it has a nexus. Therefore, AO is directed to exclude the same. With reference to the interest expenses - held that:- the expenses attributable to any other unit or the head office expenses which have no relevance to the industrial undertaking cannot be deducted in respect of the said undertaking while computing the profits and gains of the undertaking. Capital expenditure versus revenue expenditure - payment made to the suppliers for termination of arrangement for supply of Sugar Candies - AO was of the opinion that the expenditure was capital in nature. - held that:- assessee has claimed the amount of Rs. 4.60 crores as Revenue expenditure as no right has been acquired by terminating the conversion agreement entered with the said company. It is a business decision and since assessee is still in the business of food and beverages the expenditure is rightly claimed as revenue expenditure. The principles laid down by the Hon'ble Supreme Court in the above referred four judgments equally apply to the facts of the case. Therefore, AO is directed to allow the amount of Rs. 4.6 crores claimed. Relied upon decision - (1) Empire Jute Co. Ltd. v. Commissioner of Income-tax. (1980 (5) TMI 1 - SUPREME COURT), (2) CIT v. Rajaram Bandekar (1994 (3) TMI 73 - BOMBAY HIGH COURT), (3) Commissioner of Income-tax v. Madras Auto Service (P.) Ltd. (1998 (8) TMI 1 - SUPREME COURT) and Bikaner Gypsums v. CIT (1990 (10) TMI 2 - SUPREME COURT). Disallowance u/s 40(a)(ia) - non deduction of TDS - held that:- Assessee has indeed deducted tax under section 192 and so we are of the opinion that provisions of section 40(a)(ia) also do not apply as the said provision can be invoked only in the event of non-deduction of tax but not for lesser deduction of tax. - there is no merit in Revenue's contention that the amount paid to the employees should be disallowed as provisions of section 194J would attract. Taxability of Interest received u/s 244A - held that:- interest on refund under section 244A(1) granted to the assessee in the proceedings under section 143(1)(a) would be assessable in the year in which it is granted and not in the year in which proceedings under section 143(1)(a) attain finality. Brought forward depreciation of amalgamating company - held that:- the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever Expenditure versus Donation - deduction u/s 37(1) or 80G - held that:- In fact, the whole amount of Rs. 10,000 could have been claimed as deduction as an advertisement under section 37(1). However, assessee restricted the same to an amount of Rs. 5,000 being the donation under section 80G. We do not see any reason to disallow the amount as the amount has been paid by the assessee company by way of cheque and there is no dispute with reference to the eligibility under section 80G. Accordingly, AO is directed to allow the amount of Rs. 5,000 as claimed. Appeal decided partly in favor of assessee.

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• 2012 (12) TMI 457
  Penalty u/s 271(1)(c) - wrong claim of depreciation - ITAT deleted the penalty - held that:- This is a case where questionable details and particulars relating to the claim were furnished by the assessee and such details were so fundamental to the genuineness and bona fide of the claim that the mere furnishing of those particulars made the claim vulnerable. In this background, we are wholly unable to countenance the observations of the Tribunal that the assessee had purchased the property for the purpose of its business and sold it in the following year when it found the property not suitable for its commercial activities. We are also unable to subscribe to the view of the Tribunal that the explanation submitted by the assessee “appears to be bona fide and all the facts were on record and nothing has been concealed therein”. The Tribunal failed to appreciate the claim of the assessee for what it is. It completely missed the fact that there was no evidence to show that the property was used for the purpose of the assessee’s business during the relevant previous year. Penalty confirmed - Decided against the assessee.

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• 2012 (12) TMI 456
  Reassessment - notice u/s 148 - reason to believe - change of opinion - held that:- In the present case, the original return of the assessee was subjected to scrutiny assessment, under Section 143 (3). The assessee was apparently closely questioned on various aspects, including its claim for treatment of the three units, under Sections 10-A/10B of the Act. In response to a query raised by Respondent No.1, the Petitioner by letter dated 21.02.2005 furnished information regarding the units eligible for deduction u/s 10A/10B. In the reply the Petitioner listed all three units as units eligible for claiming deduction. The issue of deduction under Sections 10A/10B was specifically examined by the Assessing Officer during the original assessment. When there was intensive examination in the first instance in respect of the issue, which was the basis for re-opening of assessment, it was necessary for the AO to indicate, what other material, or objective facts, constituted reasons to believe that the assessee had failed to disclose a material fact, necessitating reassessment proceedings. That is precisely the “tangible material” which have to exist on the record for the “reasons” (to believe” bearing a “live link with the formation of the belief” The notice, under proviso to Section 147, and consequent reassessment proceedings, are beyond jurisdiction. - Decided in favor of assessee.

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• 2012 (12) TMI 455
  DEPB Credit - Income u/s 28 - Deduction under Section 80 HHC - held that:- under Clause (iiia) of Section 28, a reference to Imports and Exports (Control) Act, 1947 should be taken to be a reference to Foreign Trade (Development and Regulation) Act and the scheme for SIL having been notified under the latter Act, which must be read into Section 28(iiia), the profits of sale of SIL would fall to be assessed under Section 28 (iiia). If that is so, the profits of sale of SIL would be assessed as business profits; then 90% thereof would be excluded from the business profits and, thereafter, the excluded profits would be added back under the first proviso to Section 80HHC (3) in the same proportion as the export turnover bears to the turnover of the business carried on by the assessee. This is another way to look at the controversy and resolve it. - Deduction allowed - Decided in favor of assessee.

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• 2012 (12) TMI 454
  Depreciation on leased out Air Jet Spindle Assembly and Positar Disc / leased out LPG cyclinders - held that:- it is only a case of the assessee financing the purchase of the cylinders; the lease rent constituting the compensation for the financing by the assessee of the transaction of purchase of the cylinders by Janta from Aravalli. The Tribunal, with respect, seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of the above aspects highlighted by the AO. In the case of LPG cylinders, the transaction was only a financing transaction and was not a lease as there is no material to show that the assessee became the owner of the cylinders and leased them to Janta; in the case of airjet spindles and positar disc, the very existence of the assets and the genuineness of the purchase of the assets by the assessee was not proved. In both the cases, therefore, the assessee was not entitled to depreciation. Decided in favor of revenue.

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• 2012 (12) TMI 453
  Maintenability of Appeal - Territorial jurisdiction of HC - Held that:- As decided by Supreme Court in AMBICA INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE [2007 (5) TMI 21 - SUPREME COURT OF INDIA] that High Court situated in the State where the first court is located should be considered to be the appropriate appellate authority. The original and appellate orders had been passed by the authorities situated at Delhi, therefore the Hon'ble Supreme Court had held that the Delhi High Court would have the jurisdiction to deal with the matter. The present appeal is not maintainable in this Court.

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• 2012 (12) TMI 452
  Disallowance u/s 40A(3) read with rule 6DD - payment of expenditure in cash - mobile railway catering contractor - held that:- Apparently, that concern is also a small time one and insists on cash payments for ensuring continuity and timely supplies. Whilst, the Court is conscious and does not in any manner wish to comment adversely on the larger public interest element embedded in Section 40A and the underlying principle, at the same time, the Court also notes that the proviso seeks to relieve to a certain extent, the measure of hardship which might be imposed upon small businesses and professionals who are engaged in activities and are dependent entirely on timely cash flow. It is in such cases that Rule 6DD - which was formulated as a proviso to Section 40A (3) - steps in to aid such assessees and concerns. In this context, the statutory mandate in Section 6DD (k), at least in the circumstances of the case, has to be so construed as to mean that but for the cash payment, the assessee would have been deprived the benefit of supplies itself. This Court clarifies that the interpretation of the expression “who is required to make payment in cash” having regard to the circumstances of the case is fact dependent, at least in the present case. The consequence of instances of payment through account payee cheques in small business which are dependent on such supplies would be to completely stifle, if not stop, the business activities. It is in that sense that the expression “required” would have to be construed. Having regard to the peculiar facts and circumstances, the Tribunal and the lower authorities adopted an unduly narrow and technical interpretation of Rule 6DD(k), the benefit of which the assessee clearly was entitled to. - Decided in favor of assessee.

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• 2012 (12) TMI 451
  Payment of commission to the directors - applicability of Section 36(1)(ii) - reassessment u/s 148 / 148 - held that:- The fact of payment of commission to the directors and the fact that they were major shareholders were already on record and the assessing officer gathered these facts only from the perusal of the assessment record. The Tribunal has accordingly held that the reopening of the assessment made after four years from the end of the relevant assessment year, where the original assessment was framed under section 143(3), was invalid. It has not been pointed out before us on behalf of the revenue that these findings of fact are erroneous or were contrary to the material on record. - Decided in favor of assessee.

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• 2012 (12) TMI 450
  Unexplained Investment in Share Capital - ITAT deleted the addition - Held that:- Tribunal's decision is squarely covered by the decisions in the case of CIT vs. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] and Commissioner of Income-tax vs. Steller Investment Ltd.[2000 (7) TMI 76 - SUPREME COURT] - impugned order passed by the Tribunal does not suffer from any legal infirmity.

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• 2012 (12) TMI 449
  Re-assessment Proceedings - Tribunal quashed reassessment - Held that:- Considering the history of litigation in the present case, it cannot be argued that the assessee did not make full disclosure or withhold any material particulars. This is specially so in the case of assessment years 2002-03 and 2003-04. What appears to have persuaded the Tribunal to uphold the reassessment proceedings for those years was the circumstance that the assessments were initially completed under Section 143(1). However, such is not the case with the subsequent assessment orders, i.e. 2004-05 and 2005-06. This was done after full application of mind under Section 143(3). Thus no infirmity with the order of the Tribunal so far as it held that the reopening of proceedings under Section 147 and 148 was unwarranted for the assessment years 2004-05 and 2005-06 - in favor of the assessee. Interest on borrowed Capital - Held that:- On an analysis of the balance sheet it can be viewed that the assessee is able to demonstrate, utilization of funds for the purpose of the construction. Learned revenue authorities without specifying any reason refused to take cognizance of the balance sheet of the partners. The order of the Tribunal extensively considered the submissions made on behalf of the parties and its reasoning for all the years in respect of the interest claimed for deduction under the head of “interest” is explained. Since the Tribunal constitutes the final court of fact, nothing new has been brought to the notice of this Court to warrant the conclusion that the inference drawn by the Tribunal on the materials available were unreasonable or perverse - in favor of the assessee. Applicability of Sec 45(4) - Held that:- Tribunal noticed difference of opinion in the decisions of various High Courts. Since parties have not advanced any argument on this aspect, therefore, in absence of any finding - allow this ground of appeal raised by the assessee and held that no capital gain tax would be imposable upon it on account of alleged allegation of distribution of assets - in favor of the assessee.

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• 2012 (12) TMI 448
  Jurisdiction of CIT u/s 263 – Held that:- Though the assessment order passed u/s 143(3) does not indicate or suggest that the AO made any enquiry on the issue which is subject matter of order u/s 263, however, AO has considered the assessment order of last year and was aware about the disallowances and the issues involved in the last assessment year. There is no quarrel on the point that if the AO has not made any enquiry and thereby has not applied his mind while framing the assessment order, then the CIT has the jurisdiction u/s 263 to revise such an assessment, if the same is erroneous and prejudicial to the interest of revenue. Capital Gain - Whether market price of the shares can be taken as full value consideration for the purpose of computation of capital gain as per Sec. 48 – Assessee has sold share which they received as bonus share, which had no cost of acquisition – CIT u/s 263 compare the sale prices of share with sale price of shares sold during last year - Held that:- When the transaction is bonafide and the actual sale consideration received by the assessee has not been suspected, then for the purpose of computation of capital gains, the full value of consideration cannot be substituted by market price or value of the capital asset as on the date of transfer. Therefore we hold that the market price of the shares cannot be taken as full value consideration for the purpose of computation of capital gain as per section 48. Appeal decides in favour of assessee

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• 2012 (12) TMI 447
  Addition on account of undisclosed sources of income – Assessee was director of the sick companies (BIFR) and there was a possibility to attached the personal bank accounts of directors for recovery – Assessee withdraw the cash from bank & kept in the house and deposit the same cash in caving bank account after seven months - Held that:- Assessee has duly explained the source of deposits in the bank account, being the withdrawal made from the bank. The AO has also not given any finding that the said amount as withdrawn from the bank by the assessee was utilised for any other purposes, then re-deposited in the bank account. There was a genuine apprehension of attachment of the assessee's account in the process of recovery by the banks against sick companies and in that course assessee withdraw the cash. Appeal decides in favour of assessee

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• 2012 (12) TMI 446
  Delay in filing of appeal before Tribunal u/s 253 – Condonation of delay of 449 days – Order passed by CIT (A) on dated 17/2/2010 – On 01/04/2010 assessee filed rectification application u/s. 154 - Inspite of repeated reminders, no response was received from the CIT(A) – Held that:- As the appeal was filed on 17.8.2011 before Tribunal, thus resulting into a delay of 449 days. Considering the facts brought on record, in the form of affidavit, the assessee was prevented by reasonable and sufficient cause for not filing the appeal within the period of 60 days as per Section 253 . Therefore, the delay is condoned and appeal is admitted. Issue in favour of assessee Addition on account of difference in vendors accounts – AO made addition of 25% of purchase – Held that:- As concluding from the facts of the case and considering the above finding of the AO in the remand report. There is no substance in the finding of the CIT(A) as the AO himself has accepted the genuineness of the purchases alongwith reconciliation. Their remains no reason for the addition. Issue decides in favour of assessee

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• 2012 (12) TMI 445
  Unexplained gifts u/s 68 – Gifts given to the minor child of the assessee - Assessee had furnished gift declaration, copies of ITR’s along with computation of income in respect of donor - AO considered that gift as ‘unexplained’ as result of the failure to produce the concerned donors in order to establish their creditworthiness and genuineness – Held that:- As the said documentary evidence was sufficient to discharge the primary onus, which was shifted to the AO and in the absence of any adverse material brought on record by the AO to doubt or dispute the genuineness of the relevant gifts, the said gifts cannot be treated as unexplained cash credits u/s.68 merely because the donors were not produced by the assessee. No enquiry whatsoever was made by the AO either with the concerned donors or even with their AO in order to ascertain the genuineness of gifts. Issue decides in favour of assessee Addition on account of low withdrawal of house-hold expense – Held that:- As the AO has estimated the household expenses of the assessee at Rs. 25,000/- per month after taking into consideration all the relevant facts and same has been accepted by the assessee also. Issue decides in favour of revenue

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• 2012 (12) TMI 444
  Whether TDS is deductible on purchase of trading goods both local and import – Held that:- AO get confused on purchase and job work contract, and held tax was deductible u/s 194C. Since the transaction is purely of purchases, no surcharge and education cess is leviable on such TDS and further no interest can be levied u/s 201(1)(1A). The AO is directed accordingly. Issue decides in favour of assessee Addition on account of TDS not deducted u/s 194J – AO’s view that TDS should be deducted for payments made outside India for services rendered outside India – Held that:- As the provisions of Sec. 194J does not apply on payments made to a non-resident. It’s also hold that even the provisions u/s 195(1) shall not be applicable in the impugned circumstances as the amount paid was not taxable in India. The said amount paid is in the exclusion part, of section 9(1)(vii)(b). Issue decided in favour of assessee Addition on account of u/s 40(a)(i) non-deduction of tax at source – Assessee had made payment of freight to transporter without deducting TDS – AO disallow the freight expense for non-deduction of TDS – Held that:- As concluded from the facts there was no contract as such, with the transporter and the assessee. In absence of any contract, TDS provisions u/s 194C cannot be attracted, hence, the disallowance is deleted. Issue decides in favour of assessee

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• 2012 (12) TMI 443
  Addition u/s 68 – Assessee had accepted loans in preceding years from husband and sister-in-law – Held that:- As the CIT(A) gone into each credit entry along with the history of each donor and lender along with their capacity, which according to us also, cannot be questioned. From the facts of the case loan taken in the preceding years could not be added u/s 68A. - Apropos the three limbs to invite the mischief of Sec. 68, i.e. creditworthiness, capacity and genuineness of the transactions, cannot be questioned, because the transaction is within the family and no outsider is involved and who have substantial capacity and creditworthiness to give gifts and/or loans. Appeal decides in favour of assessee

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• 2012 (12) TMI 442
  Disallowance of loss on devaluation of shares - Shares are held as stock in trade and valued on Cost or NRV whichever is lower – Held that:- As the method of accounting adopted by the assessee was accepted by the Department in the earlier years. Not even single evidence has been placed on record by the A.O. to prove that the transaction is not genuine. In view of the consistent policy of the assessee company addition liable to be deleted. Issue decides in favour of assessee Disallowance of interest in respect of loan given to sister concerns – Funds were given to its sister concerns for the purpose of business expediency - Held that:- Following the decision in assessee own case related to previous years that it cannot be said that the funds given to sister concerns were not for the purpose of business expediency of the assessee. Such loan was used to repay of loan taken from the bank. No fresh borrowing from any of the banks and it is only due to addition of interest payable during the year and other miscellaneous expenditure that the figure of loan has undergone a change. Issue decides in favour of assessee

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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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• Customs

• 2012 (12) TMI 475
  Import - Refund of Special Additional Duty on the ground that the same was sold by them in India after payment of value added tax (sales tax) under Notification No. 102/2007 – denial of refund – Held that:- No endorsement in some of the invoices that no credit of SAD/CVD can be taken based on such invoices - non-submission of original documents - second circular dated 13.10.2008, the Board had clarified that soft copies of invoices and copies of challans can be accepted - second circular issued by the Board has not been taken into account by the lower authorities - ground on the basis of which refund claims have been rejected is failure to submit VAT returns - copies of VAT returns have not produced, the learned counsel submitted that returns were produced - matter remanded to the original adjudicating authority

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• 2012 (12) TMI 474
  Recovery of Drawback claim - stay - the appellant trader had purchased the goods for export under drawback claim from traders - whether the appellant in respect of their exports of RMG and scarves under drawback claim under Section 75 of Customs Act, 1962 at ‘all industry rate’ fixed under Rule 3 of the Drawback Rules, are eligible for full rate including excise portion or only the customs portion of the rate. – Held that:- It is only in the Board’s Circular No. 16/2009-Cus., dated 25-5-2009 that without any amendment to proviso to Rule 3 of the Drawback Rules, the Board totally reversed its stand with regard to grant of drawback at all industry rate to merchant exporters and clarified that full drawback including Central Excise portion would be available to merchant exporter in respect of export of the goods purchased from open market, without production of any certificate regarding non-availment of input duty credit. The above circular of the Board, based on the preposition that the goods purchased from the market are deemed to be duty paid and hence non-Cenvat credit availed, as when Cenvat credit is used by a manufacturer for payment of duty on goods cleared for home market, the same has been given back to the Government, is, in our view, totally wrong and contrary to the provisions of the law Since export was made under drawback claim and such claim was received by the appellant during period prior to 25-5-2009 and as per the Board’s instructions excise portion of drawback is not available in respect of goods exported by a Merchant exporter purchased from traders in the market, the appellant has been unjustly enriched. It has failed to establish a prima facie case in its favour making an unlawful claim. Therefore the claim was contrary to the statutory provisions of the Rule 3 of the Drawback Rules. In terms of provisions of Section 129E, as discussed in para 6 to 6.2 above, pre-deposit of entire drawback unjustly availed must be paid back to treasury. The appellant, is therefore, directed to deposit entire duty drawback of Rs. 2,43,59,006/- (Rupees Two Crore Forty Three Lakh Fifty Nine Thousand and Six) already availed within a period of eight weeks from the date of pronouncement of this order.

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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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• Corporate Laws

• 2012 (12) TMI 473
  Company in liquidation - The Official Liquidator then put up the property for auction - Subsequently, Siddheswari made application for disclaimer as referred to above. They claimed, two rooms in possession of the Official Liquidator actually belonged to them. The workers also filed application for settling their claim. If we try to find out a solution by looking into the problem in a different way we would find, the sale in favour of Bharat Metal did not have any resistance from any corner. The Court was also satisfied with the price that was offered by Bharat Metal. Bharat Metal approached the Court for reduction of price as they could not get actual area of land that was offered for sale. The learned Judge directed refund of a sum of rupees seventy lacs that, according to His Lordship, was the value of the land, that was offered by Bharat Metal and confirmed by Court. If Bharat Metal would not have approached, the controversy, that is arising today, would not have been there at all. Hence, if we restore rupees seventy lacs as on January 11, 2010 being the date of the order when Official Liquidator was asked to refund the said sum together with reasonable interest for the period when Official Liquidator was out of pocket to the extent of rupees seventy lacs we feel, it would meet ends of justice. Hence, the sum of rupees thirty-seven lacs that was paid by Siddheswari should attract interest at the rate of six per cent per annum on and from January 11, 2010 till the date of payment of the said sum to the Official Liquidator. The balance sum of rupees thirty-three lacs would also carry interest at the same rate on the reducing balance on and from January 11, 2010 till the respective dates of payment.

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• 2012 (12) TMI 472
  Amalgamation - Application u/s 391 & 394 of Companies Act - Held that:- No proceeding u/s 235 to 251 of the Act is pending against the Applicant Companies as on the date of the present Application - proposed Scheme has been approved by the Board of Directors of Applicant Companies - requirement of convening meetings of Shareholders, Secured Creditors and Un-secured Creditors of the Transferor Companies No.1 to 5 and shareholders of Transferee Company is dispensed with, but no consents have been filed on record on behalf of Secured Creditors and Unsecured Creditors of the Transferee Company - their meetings are directed to be convened and duly held as per co.law - validity of Notices calling meeting, quorum and proxy assured - Chairpersons and Alternate Chairpersons appointed for the meetings will be at liberty to issue suitable directions to the management of the Transferee Company so that the aforesaid meetings are conducted in a just, free and fair manner and to file their reports within two weeks from the date of the aforesaid meetings - as far as the Creditors in respect of all the Transferor companies and Transferee Company are concerned, the Applicant Companies have placed on record the certificates of Chartered Accountants of all the Applicant Companies - Application stands allowed in the aforesaid terms.

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• Service Tax

• 2012 (12) TMI 479
  Manpower Recruitment and Supply Agency services - Waiver of pre-deposit confirmed as Service Tax, Interest and Penalty - Held that:- The terms in the contract indicates that the appellant was awarded a contract for functioning or carrying out a particular activity within the cement plant of M/s. Ultra Tech Cement Limited. As that appellant did not appear before the adjudicating authority who in turn did not have a privilege of going through the contract the entire issue needs to be reconsidered by the adjudicating authority - remit the matter back to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice.

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• 2012 (12) TMI 478
  Reconditioning of old and worn out rollers - not paying of Central Excise duty - service tax demand - assessee invoking period of limitation - Held that:- Activity of reconditioning of old and worn out shells was liable to Service Tax only with effect from 16.6.2005. As in the present case the period involved in the present appeal is upto February, 2006, demand upto 16.6.2005 was not sustainable on merits. The period is upto February, 2006 for which the return is required to be filed on 25.4.2006, show cause notice stand issued on 27.4.2007 i.e. beyond the normal period of limitation. The appellants have reversed the credit in respect of pig iron used in the manufacture of excisable goods as also for re-shelling of old rollers. This fact stand duly reflected in their RG 23A Part II which was filed along with the return. As such, it cannot be said that the appellant has suppressed the activity of re-shelling of rollers from the Revenue with an intention to evade the duty, thus merits in the appellants plea of limitation. The demand is also held to be barred by limitation - in favour of assessee.

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• 2012 (12) TMI 477
  Classification of service - Broker v/s Commission agent - demand of service tax under Business Auxiliary Service - activities of the appellants as ship brokers - period of dispute from October 2003 to September 2009 - Held that:- Definition of 'commission agent' as given in Section 65(19) during period w.e.f. 16/5/05 and as given in exemption Notification No. 13/03-ST dated 20/6/03 for the period prior to 16/5/05, the emphasis is on the 'commission agent' acting 'on behalf of another person. Thus, a 'commission agent' acts on behalf of a principal and sells or buys the goods or provides or receives the services on behalf of his principal for some commission & can also deal with the goods or services, collect payment for sale price of goods or services sold or provide guarantee for the payment or undertake any activity relating to such sale or purchase of such goods or service. A ship broker is essentially a broker, a specialist intermediaries for negotiations between ship owner and charterers who use the ship to transport some cargo or between the buyers and sellers of the ship. A ship broker bring together a ship owner who wants employment/fixture for his ship located at a particular Port and ship charterer who requires a particular type of ship at or around a particular Port to transport some cargo. They help in negotiating the terms of the charter and finalisation of charter-party agreement and also assist both the parties in compliance of the charter - party terms and full and final settlement of all the dues and claims. The ship broker also acts as an intermediary for bringing together a ship owner who wants to sell his ship and the prospective buyer and assisting in sale of the ship. The essential ingredient of a 'Commission agents' service is acting on behalf of a principal which is missing is the case of the appellants. From the nature of their activity it is clear that brokers are purely intermediaries who do not act on behalf of either ship owner or the charterer and, therefore, they cannot be said to be commission agents & not covered by the definition of 'Business Auxiliary Service" - in favour of assessee.

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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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• Central Excise

• 2012 (12) TMI 471
  Assessable value - Place of removal – company owned company outlets (hereinafter referred as COCOs) - Oil companies were receiving Petroleum products from various refineries located at different places in India, under bond without payment of duty at their "terminal points" and storing at the Terminal Points without payment of duty. They were clearing the products on payment of duty from the said place. – Held that:- There is no basis to consider the COCO outlets as the "place of removal". It is not the case of the department that the petroleum products were received in COCO outlets without payment of duty and sold from the said COCO outlets only on payment of duty. Therefore, there is no justification to treat the COCO outlets as the "place of removal" - "place of removal" is the factory gate and the sale has taken place at the factory gate and the delivery charges are in the nature of transportation charges for transporting the petroleum products through pipeline. The sale prices from the terminal points to the dealers were based on APM prior to 01.04.2002 (that is as determined by a different authority and adopted by the oil marketing companies) and from 01.04.2002 the same have been determined by the oil marketing companies themselves. For valuation purposes, it is immaterial as to whether the transaction value was based on APM or self-determined by OCM. Since in respect of transfers to COCO outlets, the price applicable to dealers at the "place of removal" (that is terminal points) has been adopted, the same is legal and proper.

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• 2012 (12) TMI 470
  Extended period of limitation – Held that:- There is no challenge by the department to the finding of the lower appellate authority on the question of limitation. As such, the Tribunal cannot go into the question that has not been raised by the department. Besides, when the relief has been given on two grounds i.e., both on merits and on limitation, and the department has chosen not to challenge the same on the count of limitation, it would be an infructuous exercise to go into the appeal on the ground of merit because the respondents would get the benefit in any case on the ground of limitation since the entire demand is for the extended period.

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• 2012 (12) TMI 469
  Period of limitation - period of dispute in is from 19-12-2006 to 1-5-2008 - date of show cause notice is 26-8-2009 – Held that:- Show cause notice would be within time limit only if extended period under proviso to Section 11A(1) is available for which it has to be proved that non reversal of proportionate Cenvat credit was due to wilful mis-declaration, fraud, suppression of facts, etc. on the part of the Appellant. But these allegations can not be made against the appellant - When the Appellant were declaring clearance of Zinc dross/ash without payment of duty as exempted goods in the ER-I Return, they can not be accused of suppressing the relevant information, more so, when there are a series of instructions of the Board directing field offices to scrutinize the ER-I Returns carefully - longer limitation period under provisions of Section 11A(1) is not available to the Department and show cause notice dated 26-8-2009 is time barred. For the same reason, the penalty under Section 11AC is also not imposable - imposition of penalty under Section 11AC is, therefore, not sustainable.

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• 2012 (12) TMI 468
  Benefit of Notification No. 39/2001-C.E. – alleged that appellant had invested substantially and had put up the entire project which would indicate that the unit has been set up only after 31-12-2005, thereby the entitlement of Notification No. 39/2001 is correctly denied – Held that:- Appellant unit was set up after the publication of notification and had started commercial production prior to 31-12-2005. Prima facie, the subsequent investment made by the appellant in the plant in the form of backward integration cannot be held against them for denying the benefit of said notification - waiver of pre-deposit allowed

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• 2012 (12) TMI 467
  Demand of duty - manufacture of V.P. Sugar, molasses, rectified spirit and de-natured spirit - In the process of manufacture, bagasse is produced as a bye-product - appellant was availing Cenvat credit – alleged that appellant cleared bagasse without payment of duty and did not declare the sale in his ER-I Returns – Held that:- Department is required to establish that some Cenvat credit was availed by the appellant in respect of inputs which were used for the production of bagasse at the first stage of manufacture i.e. crushing of sugar cane to extract juice - department has failed to establish that the appellant used cenvatable inputs for production of bagasse. Once it is concluded that the department has failed to establish that the appellant used cenvatable inputs for manufacture of bagasse, Rule 6(2) and Rule 6(3) (i) & (ii) of Cenvat Credit Rules, 2004 are not attracted - duty demand, interest and penalty set aside

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• 2012 (12) TMI 466
  Waiver of pre-deposit of the duty demand and penalty – assessee contested against violation of principle of natural justice – Held that:- Non supply of documents have prevented the appellant to properly defend the show cause notice and case decided even after stay order by High Court - matter remanded back to Com.(Adjudication) who shall also give an opportunity of being heard to the appellant to cross-examine the relevant witnesses.

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• 2012 (12) TMI 465
  Refund – 100% EOU - manufacture of excisable goods falling under heading 5802 for export - assessee procuring indigenously manufactured goods free of excise duty under exemption Notification No. 22/2003-C.E. and its predecessor notifications - appellant procured free of basic excise duty and AED under Notification - refund claims were filed on the ground that the Notification No. 22/2003-C.E. and its predecessor Notifications also exempted the AED levied on HSD under Section 133 of the Finance Act, 1999 – Held that:- There is no scope to cover AED leviable on HSD under Section 133 of the Finance Act, 1999 under Notification No. 22/2003-C.E. and its predecessor notifications, when the AED leviable under Finance Act, 1999 is not mentioned in these notifications - refund claims rejected

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• 2012 (12) TMI 464
  Duty demand – classification of sugar - rate of duty applicable depended upon the nature of clearance - whether for free sale or as levy sugar at price fixed by the Government - Government clarified that differential duty would be reimbursed to the Sugar Mills which would indicate that the Government intended to treat these sugar sales as free sale sugar, the appellant received the differential duty only in August, 2001 and before that, i.e. in June, 2001, they had paid the differential duty – Held that:- Short-payment of duty in this case, which was made goods by the appellant on their own on 7-6-2001, much before the issue of show cause notice on 21-9-2001, can not be attributed to “fraud, wilfil mis-statement, mis-declaration, suppression of facts or contravention of any provisions of Central Excise Act, 1944 or of the rules made thereunder with intent to evade the payment of duty – duty upheld - imposition of penalty on the appellant under Section 11AC is not sustainable. Interest on duty under Section 11AB – Held that:- As per the provisions of Section 11AB, interest under this Section was chargeable only in those cases where short-payment, non-payment or erroneous refund of duty were due to fraud, wilful mis-statement, mis-declaration, suppression of facts, etc. - fraud, wilful mis-statement, mis-declaration, suppression of facts, etc. are absent, interest on differential duty under Section 11AB would not be chargeable

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• 2012 (12) TMI 463
  Demand of excise duty on cement clinkers produced - captively consumed in the same factory for production of cement which was exempted from duty - according to the appellants excise duty is payable on removal of goods from a factory the demands are not maintainable – Held that:- As can be seen from facts recorded above, the disappearance of Explanation-II positioned below sub-rule (3) of the Rule 4 is a very obvious conclusion for private publishers of the amended Rules and persons carrying out amendments on the web site of C.B.E. & C. It is most probably a matter of surprise to the policy makers because there was no policy change announced to the effect that excise duty need not be paid for captive consumption from 25-2-2003. It can also be a source of worry to them for the future. It may be a matter of embarrassment to the person who drafted the amendment. It appears to be a matter of delight for the Counsels who argue that duty liability can no longer arise in the case of captive consumption of excisable goods. It is a matter of labour for judicial forums to decide whether the explanation has gone or not. Explanation-II explicitly stated to be for the purpose of Rule 4 put placed after sub-rule (3) but before the non obstante clause 4 did not get omitted by amendments made by Notification No. 24/03-C.E. (N.T.). The fact that Explanation-I if retained is redundant is not a sufficient reason to conclude that both explanations were dropped. There cannot be any argument that the appellants were under the bona fide impression that duty liability on goods captively consumed has been done away with by issue of Notification No. 24/03-C.E. (N.T.), because no such argument was taken any time in proceedings before lower authorities and was taken for the first time before the Apex Court. There was no policy change announced to that effect. The appellants cannot take note of the wrongly constructed rules after amendment as published on web-site of C.B.E. & C. and at the same time ignore the supplementary instruction issued by C.B.E. & C. Even in the absence of Explanation No. II in Rule 4 of Central Excise Rules duty liability will arise in this case. Thus we are of the view that Explanation-II of Rule 4 has not been dropped by Notification No. 24/2003-C.E. (N.T.). Further even in the absence of the explanation there is a duty liability that arises when clinker is removed within the factory for manufacture of cement.

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• 2012 (12) TMI 462
  Denial of Cenvat Credit - Held that:- Cenvat Credit on the Goods imported and sold to the assessee,if are found same, Cenvat Credit cannot be denied on the ground that Bill of Entry was not endorsed by the port authority although it was duly endorsed by the importer in favour of the appellant through appropriate entry and under cover of those bills of entry the goods moved to the factory of the appellant - in favour of Appellant.

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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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• CST, VAT & Sales Tax

• 2012 (12) TMI 441
  Assessment u/s Delhi Value Added Tax (DVAT) - Sections 32 & 33 - Default assessment of tax payable - Assessment of penalty - principles of natural justice - requirement of hearing to be given prior to assessment and imposition of penalty thereunder and raising of demand thereof. - Whether inspite of Section 74 providing for such an opportunity of hearing, can any fault be found with Sections 32 and 33 in not providing such an opportunity. Held that:- Though the counsels for the petitioners have argued that the remedy of objections is not available owing to Section 79 of the Act but in the face of the express provision in the explanations to Sections 32 and 33 that a person disagreeing with the notices of assessment thereunder may file an objection under Section 74 of the Act, the said contention is clearly erroneous and is not accepted. Enforcement of the demand under Sections 32 and 33 if made the subject matter of objection, is dependent upon the outcome of the objections and till the objections are decided, the disputed demand under Sections 32 and 33 is not to be enforced. Though undoubtedly the third proviso to Section 74(1) has now given a power to the Objection Hearing Authority to direct the disputed tax or penalty or any part thereof also to be deposited but the very fact that the second proviso as well as Section 35(2) have also been retained along therewith on the statute book is indicative of the invocation of the third proviso being only if the circumstances so demand and not in the usual course. Moreover the order if any under the third proviso to Section 74 (1) is to be after giving an opportunity of hearing to the dealer. The contention of the petitioners that the third proviso to Section 74(1) is being invoked as a matter of routine is not only without any specific pleading and particulars but even otherwise does not constitute a ground for us to interfere with the scheme once the legislative policy is plain and clear. A reading of Section 74(1) and Section 35 clearly shows that the liability for payment of the disputed demand under a best judgment assessment under Sections 32 & 33 arises only on the conclusion of objections and which as aforesaid is after the decision on objections and not prior thereto. That being the position, the question of the assessee, during the pendency of objections having the status of a defaulter and thereby suffering any disability does not arise. The scheme of the statute itself is first allowing a unilateral assessment by the assessee, thereafter a unilateral assessment by the Assessing Officer and thereafter providing for a bilateral assessment after opportunity of hearing. With such a statutory scheme, it cannot be said that the post decisional hearing will be farcical or a sham. Moreover such hearing is in exercise of quasi-judicial power and is subject to an appeal to the Tribunal. Further, it is the contention of the counsels for the petitioners themselves, that the Assessing Authority and the Objection Hearing Authority are different. It thus cannot be said that the same officer would shy away from admitting mistakes and thereby reducing the hearing to a farce. The assessment of tax and penalty under Sections 32 and 33 to be complete. Merely because an assessment is subject to objections or appeal does not make it any less complete. Once the legislative scheme is not found to be in contravention of the Constitution of India or as causing any prejudice to the assessees, this Court will not interfere therewith merely because the practioners in the field of VAT find themselves reluctant to change to the new law or because it introduces a new scheme.

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• Indian Laws

• 2012 (12) TMI 476
  Breach of Contract - claim of Civil remedies - Petitioner no.1 engaged in the manufacturing of a soil stabilizer entered into an agreement with the respondent no.3 - respondent no.3 failed to pay the royalty amounts even as per the scheduled terms - respondent no. 2 could not complete the project and pay the royalty @ 12% ex-factory price in addition to the licence fee of Euro 2 million - Held that:- A bare perusal of Section 415 IPC makes it clear that for the purpose of constituting an offence of cheating, complainant is required to show that accused had fraudulent or dishonest intention at the time of making promise or representation. In absence of intention at the time of making initial promise, no offence under Section 420 of the Indian Penal Code can be said to have been made out. In this case, it has been alleged in the FIR that respondent no.2 was induced to enter into agreement and invest money in the venture with dishonest intention by the accused persons, in collusion with each other, including the petitioners. A holistic reading of FIR will not show that prima facie case is not disclosed for registration of FIR and the consequential investigation. Investigation is yet to commence, pursuant to registration of the FIR, inasmuch as investigating agency has to collect relevant material. In view of the nature of allegations it cannot be said that the case has purely a civil profile. Veracity of the allegations has yet to be verified by the investigating agency by collecting materials during the investigation. Allegations and counter allegations levelled by the parties cannot be gone into threadbare at this initial stage of investigation. Thus at this nascent stage, it would not be proper for this Court to exercise its power under Section 482 Cr.P.C. to quash the FIR, more particularly when complainant (respondent no. 2) has alleged in the FIR that all the accused including the petitioners connived with each other and allured him to enter into the agreement and invest huge amount in the project and when same reached at the advanced stage petitioners terminated the contract and tried to take over the respondent no. 3. - Miscellaneous application is disposed of as infructuous.

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