TMI Tax Updates - e-Newsletter
December 17, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Minimum Alternate Tax (MAT) - book profit in respect of SEZ unit not to be included while computing book profit u/s.115JB for the AY 2008-09. - Tri

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• Mutuality - Taxability of interest on FD received from bank - income cannot be said to have been derived from any activity based on principle of mutuality - HC

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• A mistake cannot be overlooked lightly or casually if committed by a practicing Chartered Accountant, more so when it is committed in Annual report - HC

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Articles

1. ANCHOR INVESTORS

   By: DR.MARIAPPAN GOVINDARAJAN

2. AVAILMENT OF CENVAT CREDIT PRIOR TO SERVICE TAX REGISTRATION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Comprehensive Online Filing Services for Patents inaugurated

2. A Round Table on Corporate Regulation Stresses the need for Such Regulation to be Growth-Oriented, Transparent and Inclusive

3. India’s Officially Submitted Stand on ITRs at WCIT-2012

4. Auction of 11 State Government Securities for Rs.9700.00 crore on December 18, 2012

5. The Banking Companies (Nomination) Rules, 1985 - Clarifications

6. Standardisation and Enhancement of Security Features in Cheque Forms-Migrating to CTS 2010 standards

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

8. Income Tax Refund

9. Updating Tax Officials’ Knowledge of Law

10. Tax Raids

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

12. Crop Development Schemes for Achieving Higher Yield of Pulses

13. Incentives for Setting up of Cold Storage Facilities

14. 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

15. PSB Exposure in Capital Market and Real Estate

16. Online Sale of Insurance Policies

17. New Bank Branch Policy

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

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

20. RBI Reference Rate for US $ and Euro

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

22. Online Sale of Insurance Policies by Insurance Companies

23. Decline in Sale of Life Insurance Policies

24. Insurance Coverage to BPL Aadhar Card Holder

25. Life Insurance Companies offer Policies for Fixed Policy Term

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

27. Frauds-Classification and Reporting

28. Progress report on frauds

29. CD of Indian Account Holders in France

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

31. 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

32. Tax Evasion Possibility of Insurance Companies of Private Sector

33. Inflation Rate of Service Sector and Manufacturing Sector

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

35. 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

36. Zero Balance Account for Beneficiaries of Government Programmes

37. Investigation Regarding Violation of Norms

38. Investigating the Frauds Committed by the Companies

39. Checking the Cartelisation by Companies

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

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

42. Investigation by SFIO in Company Liquidations

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

44. De-Registration of Companies

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

46. 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”

Notifications

Companies Law

1. FILE NO. 10/36/2001-CLB - dated 7-12-2012 - Co. Law

Company law board regulations, 1991 - Amendment in Regulation 4

Customs

2. 109/2012 - dated 14-12-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Change in Tariff Value of RBD Palmolein, brass Scrap (All Grades) Poppy seeds, Gold and Silver Notified

Circulars / Instructions / Orders

VAT - Delhi

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

Issuance of Statutory Forms In Advance

Income Tax

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

Delegation of Financial Powers to Heads of Departments - reg.

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

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

FEMA

4. 58 - dated 14-12-2012

Trade Credits for Imports into India – Review of all-in-cost ceiling

5. 59 - dated 14-12-2012

Trade Credit the Companies in the Infrastructure Sector – (ECB) Are Allowed to avail of Trade Credit up to a Maximum Period of Five years for Import of Capital Goods

6. 60 - dated 14-12-2012

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

Highlights / Catch Notes

Income Tax

• Interest from Bank Deposits Taxable; Not Exempt Under Mutuality Concept According to Income Tax Laws.

  Case-Laws - HC : Taxability of interest on FD received from bank - concept of mutuality -the income cannot be said to have been derived from any activity based on principle of mutuality - HC
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• High Court Clarifies Tax Exemption for Educational Entities u/s 10(23C)(iiiad) of Income Tax Act.

  Case-Laws - HC : Exemption under section 10(23C)(iiiad) - educational purpsoe - If the existence of the assessee was not for the purposes of profit, but solely for educational purpose, then the receipts of the assessee, if the same did not exceed Rs. 1 crore per annum, will be outside the purview of total income as is the mandate contained in Section 10(23C)(iiiad) of the Act. - HC
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• Conversion of Partnership to Company: Business Continues, Stock Valued at Lower Cost or Market Price.

  Case-Laws - AT : Conversion of partnership firm into company versus dissolution of firm - Going concern - there was no cessation of business and therefore the closing stock had to be valued at cost or market price, whichever is lower. - AT
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• Director's Liability for Company Dues: Case Remanded for Natural Justice Violation u/s 179.

  Case-Laws - HC : Recovery of dues from director of the company u/s 179 - piercing corporate veil - Matter remanded back to Assistant Commissioner on the ground of violation of principles of natural justice - HC
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• Court Rules Cooperative Banks Can Deduct Interest Income from SLR and Non-SLR Funds u/s 80P(2)(a)(i.

  Case-Laws - HC : Deduction u/s 80P(2)(a)(i) - Co-operative Bank - The question as to whether the business is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P (2) (a) (i) - HC
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• Assessee Denied Industrial Company Status; Not Involved in Manufacturing or Processing Activities u/s 104.

  Case-Laws - HC : Industrial company / undertaking - Additional tax u/s 104 - Assessee was not engaged in any manufacturing or/and processing activity and hence was not eligible to claim the status of an industrial company - HC
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• SEZ Unit's Book Profit Exclusion Upheld in MAT Calculation for 2008-09 u/s 115JB of Income Tax Act.

  Case-Laws - AT : Minimum Alternate Tax (MAT) on SEZ units - Authorities below were not justified to include the book profit in respect of SEZ unit at Mumbai of the assessee while computing book profit u/s.115JB of the Act for assessment year 2008-09. - AT
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• Charitable Trust Wins Case: Donations Not Considered Anonymous u/s 115BBC of Income Tax Act.

  Case-Laws - AT : Addition on account of anonymous donation u/s 115BBC - Assessee is a charitable trust in maintaining gaushalas and veterinary hospital for treatment of wounded and sick animals and birds - issue decided in favor of assessee - AT
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• Can Securities Transaction Tax rebate u/s 88E be deducted from Minimum Alternate Tax u/s 115JB?

  Case-Laws - AT : Whether rebate u/s 88E for STT paid has been allowed from tax payable under MAT u/s 115 JB - when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid u/s 88E is given deduction, by way of rebate, u/s 87. - AT
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• 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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Customs

• Tribunal Can't Review Anti-Dumping Orders; Only Rectifies Non-Time-Barred Mistakes According to Statute.

  Case-Laws - AT : Review of order of anti-dumping duty - statute does not provide any remedy by way of review. - Tribunal cannot exercise review powers and only rectification of mistake can be made when it is not time barred. - AT
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• 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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Corporate Law

• Errors by Chartered Accountants in certified reports are serious; not treated as mere clerical mistakes.

  Case-Laws - HC : A mistake by a clerk or an accountant, which may be considered or allowed or overlooked as inadvertent error, cannot be overlooked lightly or casually if committed by a practicing Chartered Accountant, more so when it is committed in Annual report duly certified by him as correct and authentic report. - HC
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Service Tax

• Co-operative Banks Must Pay Service Tax, Court Rules Against Appellants' Argument on Tax Liability.

  Case-Laws - AT : Banking and other Financial services - Appellants contention that being a bank run by co-operative society, they would not be liable to pay Service Tax is not tenable - AT
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• 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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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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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 499
  Taxability of interest on FD received from bank - concept of mutuality - Reassessment u/s 147 - held that:- A perusal of section 2(24) shows that the Act recognizes the principle of mutuality and has excluded all businesses involving such principle from the purview of the Act, except those mentioned in clause (vii) of that section. In the instant case, the contributors, namely, the members of the assessee made contributions, which have been kept in fixed deposit with third party banks and those third party banks have contributed to the members fund by way of interest and, accordingly, the members fund have been expanded not by the contributors/members, but by a third party. If that is the situation, as held by the Hon’ble Supreme Court in Chelmsford Club versus Commissioner of Income-Tax, ((2000) Vol. 243 ITR 89), as pointed out by it in the case of Royal Western India Turf Club Limited ((1953) 24 ITR 551), the income cannot be said to have been derived from any activity based on principle of mutuality. - Decided in favor of revenue.

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• 2012 (12) TMI 498
  Income from operation of aircrafts - interest on fixed deposit - exemption under Article 8 of Indo-US DTAA. - reassessment u/s 147 - held that:- Since there was no such tangible material before the AO from which he could entertain the belief that income of the assessee chargeable to tax had escaped assessment, the Third Member held that reassessment proceedings initiated by the Assessing Officer were liable to be quashed on the ground that there was no tangible material before the Assessing Officer even though the assessment was completed originally u/s 143(1). - the initiation of reassessment proceedings by the Assessing Officer itself was bad in law and the reassessment completed in pursuance thereof is liable to be quashed being invalid. - Decided in favor of assessee.

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• 2012 (12) TMI 497
  Exemption under section 10(23C)(iiiad) - educational purpsoe - AO expressed only a doubt as to whether the assessee constituted initially to run a school with nursery and kindergarten class will qualify as such educational institution. - held that:- The Assessing Officer held that the assessee is not existing solely for educational purposes, but, at the same time, it clearly and in no uncertain terms recorded a finding that the assessee is running a school with Nursery and Kindergarten classes. No other existence of the assessee was noticed. Therefore, the conclusion would be that the assessee was existing for the purpose of running the said school with Nursery with Kindergarten classes and, accordingly, was existing solely for educational purposes and not for purposes of profit. If the existence of the assessee was not for the purposes of profit, but solely for educational purpose, then the receipts of the assessee, if the same did not exceed Rs. 1 crore per annum, will be outside the purview of total income as is the mandate contained in Section 10(23C)(iiiad) of the Act.

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• 2012 (12) TMI 496
  Deduction u/s 80IA - rectification of mistake u/s 154 - whether the assessing officer was justified in thrusting depreciation upon the assessee while computing deduction under Section 80IA - held that:- on the date on which jurisdiction under Section 154 of the Act was invoked, the issue was covered in favour of the assessee and in any event the issue was debatable. In such a case, no fault can be found with the decision of the Tribunal in holding that the assessing officer was not justified in invoking jurisdiction under Section 154 of the Act. Once it is held that the assessing officer was not justified in invoking jurisdiction under Section 154 of the Act, then we do not consider it necessary to go into the merits of the case. - Decided in favor of assessee.

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• 2012 (12) TMI 495
  Conversion of partnership firm into company versus dissolution of firm - Going concern - Addition u/s 40A cash transaction during purchase of old jewellery - Income escaping assessment - reassessment u/s 147 on the firm after conversion - held that:- Where the surrender value of the old jewellery entrusted by the customers to the assessee firm is Rs. 100/- and the value of new jewellery returned by the assessee is Rs. 200/-, the differential amount of Rs. 100/- alone is paid by the customers to the assessee. The assessee is not making payment of Rs. 100/- to the customer at the time of accepting the old ornaments. That is why the Commissioner of Income tax (Appeals) has correctly appreciated that the entire transaction consisted of cash entries as well as journal entries. The cash entries related to the payment of the differential amount by the customers to the assessee firm. There is no payment of cash by the assessee firm to its customers at the time of receipt of old ornaments. - there is no question of the assessee violating the provisions of law stated in section 40A(3). - Decided in favor of assessee. Valuation of closing stock at the time of conversion of the partnership firm into a private limited company. - held that:- All the partners of the erstwhile firm became the shareholders of the new company. Nobody else was admitted as shareholder. No asset of the old firm was distributed among the partners. No capital was withdrawn by the partners. The capital of the partners was converted into shares contributing towards the capital of the company. All other assets and liabilities were taken over by the company. - there was no cessation of business and therefore the closing stock had to be valued at cost or market price, whichever is lower. - CIT(A) rightly deleted the stock valuation addition - Decided in favor of assessee.

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• 2012 (12) TMI 494
  Recovery of dues from director of the company u/s 179 - piercing corporate veil - held that:- concept of lifting or piercing the corporate veil as sometimes referred to as cracking the corporate shell, is applied by Courts sparingly and cautiously. It is however, recognised that boundaries of such principle have not yet been defined and areas where such principle may have to be applied may expand. Section 179 of the Act itself is a statutory creation of piercing of corporate veil. Ordinarily, directors of a company even that of a private company would not be answerable for the tax dues of the company. Under sub-section(1) of section 179 of the Act, however, subject to satisfaction of certain conditions, the directors can be held jointly and severally liable to pay the dues of the company. If the factors noted by the Assistant Commissioner are duly established, there is no reason why such double application of lifting the corporate veil one statutorily provided and other due to emergent need of the situation, cannot be applied. As noted above, the factors recounted by the Assistant Commissioner in the impugned order are glaring. With respect to the finding of the Assistant Commissioner however, we have two reservations. Firstly, it is nowhere pointed out from where or on basis of which material such findings have been arrived at. There are some far reaching observations and conclusions which would require thorough investigation and support from materials on record. Second dispute that we have with the Assistant Commissioner's order is that same suffers from gross violation of principles of natural justice. In his notice under section 179(1) of the Act, he only put the petitioner to notice that he proposed to hold him liable for recovery of the tax dues of the company. He neither mentioned nor disclosed any tentative reasons why he may also invoke the principle of lifting of corporate veil. Matter remanded back to Assistant Commissioner for fresh decision in accordance with law.

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• 2012 (12) TMI 493
  Deduction u/s 80P(2)(a)(i) - Co-operative Bank - interest on bank deposits of its non-SLR funds - held that:- The question as to whether the business is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P (2) (a) (i) as the deposits of surplus idle money available from working capital, including reserves, excess collection of interest tax and other incomes are all attributable to the business of banking. The interest from such deposits cannot be said to be beyond the legitimate business activities of the bank. The interest are not deposits of non-SLR funds and the cooperative bank will qualify for exemption under Section 80P (2) (a) (i) of the Act. - Decided in favor of assessee.

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• 2012 (12) TMI 492
  Industrial company / undertaking - Additional tax u/s 104 - ITAT concluded that the assessee was not an Industrial Company and, therefore, liable for additional tax under Section 104 of the Income Tax Act, 1961? - held that:- a Company engaged in any construction activities cannot be regarded as having undertaken any manufacturing or processing activity for production of any goods or articles. Though the issue was examined in relation to Section 32-A, 80-HH and 84 of the Act yet the same has full application to the facts of the case in hand. - Decision in the case of M/s. N.C. Budharaja (1993 (9) TMI 6 - SUPREME COURT) followed. Assessee was not engaged in any manufacturing or/and processing activity and hence was not eligible to claim the status of an industrial company and in consequence was not eligible to claim the benefits earmarked for industrial companies under the Act. - Decided against the assessee.

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• 2012 (12) TMI 491
  Minimum Alternate Tax (MAT) on SEZ units - Addition of profit u/s.10A unit located in SEEPZ Mumbai to arrive at book profit u/s.115JB of the Act. - while computing tax liability u/s.115JB of the Act, deducted the income of Rs. 10,86,10,248 in respect of Mumbai Division from book profit as per the provisions of section 115JB(6) of the Act. - held that:- It is evident from above that an existing SEZ unit will also be governed by Special Economic Zones Act, 2005. Therefore, we are of the considered view that the benefits which are to be provided to the newly established unit in SEZ as per section 10AA of the Act will also be available to the existing units in SEZ. Moreover, section 4(1) of SEZ Act provides that an existing SEZ unit shall be deemed to have been notified and established in accordance with provisions of SEZ Act and the provisions of Special Economic Zones Act shall apply to such existing SEZ units. It is also observed that by the SEZ Act, sub-section (6) to section 115JB was also inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. Hence, income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act. Authorities below were not justified to include the book profit in respect of SEZ unit at Mumbai of the assessee while computing book profit u/s.115JB of the Act for assessment year 2008-09. - Decided in favor of assessee.

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• 2012 (12) TMI 490
  TDS u/s 192 - Assessee in default - Perquisite u/s 17(2) - retrospective amendment - held that:- the Legislature while retrospectively amending Section 17(2)(ii) of the Act has not chosen to amend Section 192 or Section 201 of the Act. Therefore, the employer assessee is not hit by the retrospective insertion of Explanation to Section 17(2) of the Act. Section 192 deals with the deduction of tax at source. Perquisite is actually not a payment of salary but a benefit not in terms of money, there was no provision initially to deduct tax at source. It is provided by section 192(1B) by the Finance Act, 2002 with effect from Ist June, 2002 and as to computation of income of perquisite, the provision in section 192(1A), also by the same Act with effect from the same date. This tax, at the option of the assessee, can be paid on the whole or part of such income without making any deduction therefrom at the time when it was otherwise deductible u/s 192. A duty is also cast upon the person deducting tax u/s 200. Rule 3 of IT Rules, 1962 provides for the time and mode of payment to the Government account of tax deducted at source. As per the provisions of section 200, the tax deducted at source is a mode of payment of tax on the income of the person on whose income it is deducted i.e. employees in this case. - Decided in favor of assessee.

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• 2012 (12) TMI 489
  Addition on account of anonymous donation u/s 115BBC - Assessee is a charitable trust in maintaining gaushalas and veterinary hospital for treatment of wounded and sick animals and birds - Donations are coming, are coming in small donations, which are put by public at large in donation boxes - known donations, which were duly taken care in the return and informed to the revenue – Held that:- The decision in the assessee’s own case, wherein the Hon’ble Bombay High Court has accepted that the assessee, was a public trust and donations were exempted u/s 52 of Bombay Trust Act. We also cannot ignore the fact that even the department has been accepting the status and service rendered to humanity and assessment results of the assessee till the preceding year. Also follow the decision in case Swastik Textile Trading Co. Ltd.,(1977 (7) TMI 30 - GUJARAT HIGH COURT) “that supply of fodder to animals and cattle is a charitable object”. Hence appeal decides in favour of assessee

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• 2012 (12) TMI 488
  Penalty u/s 271(1)(c) – Whether voluntary income returned by the assessee u/s 153A, which is otherwise cannot be added on the basis of seized material, would amount to concealed particulars or furnished inaccurate particulars of income - During search a calculation of interest found from residence of assessee - Held that:- As per the seized document only amount was shown as interest and nothing else has been mentioned in the said document. The explanation 5 to sec. 271(1)( c) is applicable only in the cases when the additional income has been admitted by the assessee because of some incriminating material showing material showing undisclosed income found and seized during the search and seizure action. Therefore, it cannot be presumed in the absence of any material or information that the additional income offered by the assessee is otherwise liable to be added to the income of the assessee on the basis of seized material. Issue decides in favour of assessee Bogus gift – Whether gift has been offered by assessee, to avoid the harassment of bringing donor from abroad and to produce before the AO treat as bogus – Held that:- As the amount of gift was duly recorded in books of accounts. The AO himself has recorded the fact that in the e-mail correspondence, the uncle of the assessee has accepted the said amount. Even the source of the gift was also explained as the sale proceed of flat and therefore, though the assessee offered the said amount to tax, the same was not held as a bogus. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Whether penalty u/s 271(1)(c) can be levied, for gift which has been offered by assessee through revised return, to avoid the harassment of bringing donor from abroad and to produce before the AO – Assessee revise ROI filed u/s 153A – Held that:- As the revised return filed by the assessee within the period of limitation as prescribed u/s 139 (5), cannot be held invalid. When the assessee has already recorded the gift amount in the books of account and only to avoid the inconvenience and harassment to his uncle, the assessee offered the same to tax, would not automatically lead to the conclusion that the assessee had furnished inaccurate particulars of income or concealed particulars of income in the absence of any conclusive finding that the claim of the assessee was a bogus. Penalty deleted. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Whether penalty u/s 271(1)(c) can be levied, whereas income offered by assessee on voluntarily basis, and no addition was made on the basis of seized material – Held that:-As the income offered by the assessee in the return filed in response to Sec. 153A does not borne out from the seized material. When there is no co-relation and nexus of the additional income offered by the assessee and the figures return in the seized documents, then it cannot be said that the additional income admitted in the return of income filed u/s 153A is based on some incriminating material or information found during the course of search and seizure action. Following the decision in case of SHRI PREM ARORA (2012 (6) TMI 480 - ITAT DELHI) hence penalty deleted. Appeal decides in favour of assessee

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• 2012 (12) TMI 487
  Disallowance of claim of bad debts – AO argued that value of stock was not trading debt – Held that:- Following the decision in case of Shri Shreyas S Morkhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) & assessee own case in earlier years - in favour of assessee. Disallowance on account of mark to market losses – Provision of loss debited in the P&L on mark to market of open contract - AO was of the view that the derivative contracts are not accounted for in the books of account at the inception thereof at the time of purchase, they do not and cannot form part of stock-in-trade and hence it cannot be valued at the time of preparation of balance sheet as stock-in-trade - Held that:- Following the decision in case of Edelweiss Capital Ltd (2012 (10) TMI 223 - ITAT, MUMBAI) that there is no dispute that the assessee holds derivatives as its stock-in-trade and there is also no dispute that it follows the principle “cost or market price, whichever is lower” in valuing the derivatives. While anticipated loss is taken into account in valuing the closing stock, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. Issue decides in favour of assessee Whether rebate u/s 88E for STT paid has been allowed from tax payable under MAT u/s 115 JB - Assessee had made the payment of tax under normal provisions by comparing his total income u/s 115 JB before claiming rebate u/s 88E – Held that:- Following the decision in case of Horizon Capital Ltd. (2011 (10) TMI 489 - KARNATAKA HIGH COURT) that when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid u/s 88E is given deduction, by way of rebate, u/s 87. This is the mode in which tax already paid is handed back at the time of final computation. Issue decides in favour of assessee.

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• 2012 (12) TMI 486
  Penalty u/s 271(1)(c) – Whether penalty u/s 271(1)(c) can be levied on the additional income disclose in ROI filed in response to notice u/s 148 – Assessee deputed to India as an employee of Foreign Company – Filed his ROI declaring income as salary received India – AO issue notice u/s 148 – Assessee disclosed in ROI filed in response to notice u/s 148 additional income which he earned outside India from their employer – AO completed the assessment and initiated penalty u/s 271(1)(c) – Assessee argued that the position taken by the company and consequently by the assessee in original return of income was bonafide and was based on judicial precedent and it did not amount to concealment of income - Held that:- Following the decision in case of Glories Realty (2009 (1) TMI 526 - ITAT MUMBAI) that penalty is not an automatic consequence of addition to income. Penalty u/s 271(1)(c) can come into play only when the conditions laid down under that section are satisfied, concealment of income cannot be a passive situation and it implies that the person concealing the income is hiding, covering up or camouflaging an income. Therefore, penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation and made errors under bona fide beliefs. Appeal decides in favour of assessee

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• 2012 (12) TMI 485
  Depreciation on windmill – Depreciation on Transformer and civil works as part of windmill - Treating them as individual items or forming part of windmill – Charge depreciation @ 15% or rate of windmill – The assessee claim depreciation on windmill on the total amount - like electrical equipment, civil construction work for electrical yard, inner road laid for crane movement - The AO allowed depreciation @ 15% on electrical equipment i.e. transformer and meter and 5% on approach road - Held that:- Following the decision in case of Asian Handloom that Specialized foundation and specialized area specifically earmarked to facilitate a flow of wind without hindrance, and specialized electrical fittings and high tension lines are all basic requirements for a wind mill plant. None of these requirements including the premises can be seen detached from what is called a ‘wind mill’ since a wind mill to work these are essential. All these are necessary inputs going into ultimate cost of such wind mill. In favour of assessee Disallowance u/s 14A – Held that:- In view of the smallness of quantum of new investments made during the relevant assessment year to the tune of Rs.1,61,124/-, no addition is warranted. Issue decides in favour of assessee.

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• 2012 (12) TMI 484
  Assessee had received gifts during her marriage and credit the same in bank account – Such addition first made in hand of HUF where CIT(A) delete the same - Instead of filing appeal before Tribunal AO made addition in hand of assessee - Mere non-supply of copies of the statements which were recorded at the assessment stage would vitiate the entire proceedings – Held that:- Non-supply of copies of the statements which were recorded at the assessment stage of HUF is only procedural lapse but it cannot vitiate the entire proceedings. The AO of HUF had conducted a detailed enquiry. However, the additions were wrongly made in the income of the HUF. As per the findings of the AO sum was credited in the bank account of the assessee. Therefore, the same was liable to be taxed in the hands of the assessee and not in the hands of the HUF. The findings of the CIT(A) in the case of appeal filed by HUF cannot be applied in the present case for the reasons that prima-facie amount was not taxable in the hands of HUF. But, at the same time, that amount cannot escape tax liability. Non-supply of documents/statements by the Assessing Officer to the assessee can be termed as procedural lapse. Therefore, the amount is liable to the taxed in the hands of the assessee. Issue decides in favour of revenue. Disallowance of interest expense – AO argued that assessee had diverted the borrowed funds for non-business purposes – Held that:- As concluding from the facts of the case that it was categorically stated that the personal accounts and business accounts were separately maintained by the assessee and there was no inter-connection transaction between personal and business accounts. The assessee had advanced monies from her personal account. This fact is reflected from bank statement. Issue decides in favour of assessee

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• 2012 (12) TMI 483
  Disallowance of interest paid - Held that:- It is revealed from the orders passed by AO as well as the CIT (A) that interest was ‘paid’ during the relevant previous year, thus when interest has been paid during the financial year no disallowance could be made u/s 40(a)(ia) in view of Special Bench decisions in the case of M/s. Merlyn Shipping & Transports vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) - in favour of assessee. Unexplained credits - Held that:- The addition solely on the reasoning that cash was deposited in Smt. Indira Golechha's bank account before the loan was advanced by her to the assessee. This by itself cannot be a ground to disbelieve the advancement of loan of Rs.2,90,000/- to the assessee without making proper enquiry to find out whether the creditor had sufficient cash balance with her to advance the loan - Issue restored back to AO with a direction to make proper enquiry - in favour of assessee for statistical purposes. Excess Remuneration paid to Director - Disallowance u/s 40A(3) - Held that:- As entire amount was paid in cash in violation of provisions contained u/s 40A(3) disallowance of 20% out of the expenditure claimed is warranted - uphold the order passed by the CIT(A)- against assessee. Disallowance of capital loss - Held that:- Appeal proceeding being a continuation of assessment proceeding any omission or mistake in the assessment order can be considered by the CIT (A). The CIT (A) after examining the materials also found that the said amount is a capital loss - Addition of Rs.43,505/- is confirmed and ground raised by the assessee is rejected - against assessee.

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• 2012 (12) TMI 482
  Whether amended provision of Sec. 92C(2) which was applicable w.e.f. AY 2009-10 are equally applicable to appeals pending relating to previous years – Revenue in the present case to deny the assessee benefit for adjustment of +/-5% variation while computing ALP - Held that:- Though the amended proviso to sec 92C(2) was applicable w.e.f 1.10.2009 and following the decision in case of UE Trade Corporation India (P) Ltd. (2010 (12) TMI 224 - ITAT, NEWDELHI) it is a well-settled proposition that the statutory provisions as they stand on the first day of April of the assessment year must apply to the assessment of the year and the modification of the provisions during the pendency of assessment would not generally prejudice the rights of the assessee. Therefore, we find no justification in the action of the lower authorities in disentitling the assessee the benefit of +/-5% while computing ALP in terms of erstwhile proviso to sec 92C(2). Appeal decides in favour of assessee Adjustment of higher depreciation in calculation of ALP - Assessee has charged higher depreciation as compare to the rates prescribed under the Companies Act – Assessee claims that such excess depreciation was liable to the excluded while benchmarking the financial results of the assessee with those of comparable cases – Held that:- It was opined that the object and purpose of the transfer pricing is to compare like with the like and to eliminate differences, if any, by suitable adjustments. Therefore, it found justification on the part of the assessee in pleading that the profits be taken without deduction of depreciation. Allow adjustment after verification. Issue remand back to AO Adjustment of start-up cost in calculation of ALP – Assessee is in 1st year of operation and due to start-up cost profit margins are abnormally affected - Capacity utilization was not satisfactory – Held that:- Following the decision in case of Skoda Auto India P. Ltd.(2009 (3) TMI 249 - ITAT PUNE-A) as the plea set-up by the assessee for economic adjustments on account of under capacity utilization and being in start-up phase, is not something which is unreasonable and neither it is otiose to the mechanism of transfer pricing assessments. The matter requiring factual appreciation, the same is to calculated on reasonable basis. Therefore remanded back to the file of the AO No. of years for which financial data used to compute ALP of comparable companies - TPO in using the financial data of the comparable companies available at the time of assessment and that too only for the single year pertaining to the year under consideration - Assessee of having carried out the transfer pricing study on the basis of the financial data of the comparable companies for the prior two years – Held that:- Apart from making a generalized submission, such onus has not been discharged by the assessee on the basis of any credible or cogent material. In the absence of any substantive material being brought out by the assessee to justify the use of multiple data of prior two years and the manner in which it would influence the determination of transfer pricing in relation to the impugned international transaction. Issue decides in favour of revenue.

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• 2012 (12) TMI 481
  Addition on account of undisclosed income - Assessee was engaged in the business of financing – Addition made on the basis of some loose papers relating to loan found during search – Assessee contended that advances were made out of cash balance available which was lent, refunded and re-lent and received back – Held that:- Very mere amount has been shown towards drawings and other expenses. During A.Y. 2004-05 there is negative cash balance. Considering the additional income declared by the assessee and in absence of maintenance of regular books of accounts an amount of Rs. 2 lakhs on estimate in our opinion may be allowed as set off for investment in financing out of the income disclosed. The grounds raised by the assessee are partly allowed. Addition on account of cash found as undisclosed income – Held that:- Since the assessee in his statement recorded u/s. 132(4) has categorically admitted that the cash found is his extra income for the A.Y. 2007-08 and since the funds available as per the cash flow statement has already been given credit for the financing business, therefore, no further benefit can be given to the assessee towards the cash found during the course of search. Upholding the addition made by the AO. Issue decides in favour of revenue. Unexplained investment u/s 69A - Addition on account of notings in the loose papers regarding purchase of jewellery – Assessee submit that inherited jewellery was given for remaking the new jewellery – Held that:- As it is clearly mention on loose papers that weight of old jewellery given for melting valued out of which new ornaments made, therefore, no justification on the part of the learned CIT(A) for sustaining the addition. Accordingly the same is directed to be deleted. Issue decides in favour of assessee

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• 2012 (12) TMI 480
  Penalty u/s 271(1)(c) – Excess claim of depreciation - Devalued amount has been claimed in the form of depreciation and to that extent excess claim of depreciation has been made by assessee - Machineries are devalued by the company on its own accord even though the machineries are in operation – Held that:- As the statutory auditor itself had pointed out that the excess depreciation claim on certain items of P&M is not in conformity with the concept of block of assets. Inspite of such comments of the auditors the assessee did not reduce the excess depreciation claim while computing the total loss/income. Non-inclusion of Excise duty as per the provisions of section 145A – Held that:- While arriving at the closing stock no adjustment with regard to excise duty was made which is a deliberate violation of the provisions of section 145A. Disallowance of unpaid bonus u/s 43B – Held that:- The assessee has deliberately violated the provisions by not disallowing the unpaid bonus u/s. 43B Therefore, this is a deliberate attempt on the part of the assessee in furnishing of inaccurate particulars of income and making false claim of deduction. The provisions of section 271(1)(c) are clearly attracted. In favour of revenue

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• 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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• Customs

• 2012 (12) TMI 513
  Complaint has been filed by the Revision Petitioner/Complainant under Section 135(1)(9)(i) of the Customs Act, 1962 - held that:- A reading of the ingredients of Sub Section 2 of Section 245 of Cr.P.C. clearly shows that the Learned Judicial Magistrate is not clothed with an arbitrary power of discharge. As a matter of fact, there ought to be a ground or material on record to come to any favourable conclusion that no offence has been made. On going through the order of discharge passed by the trial Court in C.C.No.1228 of 1992 under Section 245 Cr.P.C., this Court is of the considered view that even though it has been observed in the order that for nearly 18 years no progress has taken place in the main case, inspite of numerous notices sent and also that the Petitioner/Complainant has not appeared before the Court and also not produced witnesses, this Court has to bear in mind an important fact that even though the complaint in question has been filed by the Complainant/Petitioner on 27.10.1992 and taken on file by the trial Court on 01.12.1992, for nearly 52 hearings or for nearly 19 years, the Respondent/ Accused has absconded and in any event, the order of discharge passed by the trial Court is only an automatic or a routine one and further, the said order of discharge passed by the trial Court is not a Judicious one considering the gravity of offence alleged. Moreover, when the offence alleged against the Respondent/Accused under Section 135(1)(a) of the Customs Act is of serious nature, then, the non-appearance of the Complainant/ Petitioner (Economic offence - cognizable and non-compoundable) for one or two days, may not matter much. - Decided against the accused / assessee.

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• 2012 (12) TMI 512
  Review of order of anti-dumping duty - appeal against the order of Tribunal - Held that:- The Tribunal has no power to review its own order. Rectification of mistake can be done only with in a period of six months from the date of order. In the absence of any statutory provision providing for review, entertaining an application for review or under the garb of clarification/modification/correction is not permissible. As decided in case of [SUPREME COURT OF INDIA COMMISSIONER OF C. EX., MUMBAI Versus OSWAL PETROCHEMICALS LTD 2010 (7) TMI 292] Court has categorically held that the statute does not provide any remedy by way of review. Tribunal cannot exercise review powers and only rectification of mistake can be made when it is not time barred. Miscellaneous application filed before Designated Authority (DA) for seeking clarification regarding continuance of post-decisional hearing - Held that:- Anti-dumping duty has not been revoked in respect of all the countries and in respect of Saudi Arabia, the anti-dumping duty has been revoked only from a subsequent date i.e. from 30-12-2011. As such, the post-decisional hearing is required to be undertaken by the DA in respect of the anti-dumping levy for the period it was in force in respect of the exports from Saudi Arabia as well as for exports from other countries for the full period. Since the six month period is already over the same will be extended by a period of another six months from the date the initial six month period has expired to enable the DA to carry out the direction contained in the final order of the Tribunal dated 11-8-2011.

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• 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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• Corporate Laws

• 2012 (12) TMI 511
  In the instant case(s) the foundation of the claim was a contract under BCCI i.e. an assignment of a proprietary right of BCCI in favour of the plaintiff and if the view taken is that BCCI did not have any proprietary right which was capable of being assigned and hence the plaintiff had no cause of action to sue, the finding being declaratory of the proprietary right of BCCI, ought to have awaited a written statement filed by BCCI. We only remind ourselves of the proverb: 'Haste makes waste' and its counterpart: 'Look before you leap'. The appeals and the cross-objection are disposed of setting aside the impugned judgment and decree dated November 08, 2012. BCCI granted two weeks to file written statement in all the three suits and likewise grant two weeks time to such of the contesting defendants who have not filed written statements. Replications would be filed within a week. Within a week thereof the applications for interim injunction would be taken up by the learned Single Judge for re-hearing.

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• 2012 (12) TMI 510
  Removal of Petition's (Chartered Accountant) name from the the register of members of ICAI, for a period of 1 year - It appears from the record that on the basis of the certificate issued by the petitioner in his capacity as CA, the Excise Department had made certain assessments and liability of the said company towards excise duty under Excise Act were assessed. Thereafter, it came to the notice of the Excise Department that the accounts and audit report submitted by the petitioner was inaccurate and there were several serious and material discrepancies and anomalies. In this view of the matter, the office of Commissioner of Central Excise, Surat lodged complaint with the institute of the Chartered Accountants of India. A Chartered Accountant has an obligation, not only statutory but also moral and social, to be absolutely and completely diligent and cautious and careful while preparing, signing and certifying Annual Accounts and/or Audit report. Several Government and private organizations and individuals rely on the report/certificate by Chartered Accountant and once a particular factual aspect or entries, etc. are prepared, signed and certified by Chartered Accountant they are ordinarily accepted without further probing or investigation. In such circumstances, the duty and obligation of being absolutely diligent, conscious and careful is multiplied manifold and a Chartered Accountant should not, and cannot take, such obligation or perform his duties lightly or casually. A mistake by a petty clerk or lower level accountant may be dealt with in different manner but a mistake by a Chartered Accountant cannot be treated with indifference or casually or lightly. A mistake by a clerk or an accountant, which may be considered or allowed or overlooked as inadvertent error, cannot be overlooked lightly or casually if committed by a practicing Chartered Accountant, more so when it is committed in Annual report duly certified by him as correct and authentic report. It has to be, and should be, dealt with seriousness which it would deserve. In present case, it is not possible to hold that punishment of removal of petitioner's name from the register for one year is harsh as compared to the proved charge. The decision as regards quantum of penalty is in the realm of the Disciplinary Authority and once misconduct is proved - and accepted as proved by the Court - then Court would not interfere with Disciplinary Authority's decision regarding quantum of penalty unless it is excessively disproportionate which amounts to or appears to be on the verge of victimisation. - Decided against the petitioner.

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• 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 516
  Condonation of delay - Non service of impugned order in appeal - Held that:- Commissioner (Appeals) has rejected the appeal on the ground of delay in filing the appeal before him but delay was for 32 days, which was within condonable limit of three months. As before the Commissioner (Appeals) the appellants have filed an application seeking condonation of delay along with an affidavit and medical certificate, which was not considered by the him and the condonation delay application was rejected for non-submission of medical certificate. Commissioner (Appeals) has also not decided the case on merit. Commissioner (Appeals) order is set aside and the matter is remanded back to re-consider condonation of 32 days delay taking into consideration the affidavit and medical certificate annexed to the COD application - in favour of assessee by way of remand.

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• 2012 (12) TMI 515
  Modification of Stay Order - directing to make the predeposit of 50% of the Service Tax - notice of hearing of the Stay Petition not served to Applicant - Held that:- Tribunal after having exercised jurisdiction for the purposes of passing an order for waiver of pre-deposit under the proviso to Section 35F cannot modify that order subsequently like an appellate authority, nor can keep tinkering with the order as and when applications for modification of the order are filed. It is significant to notice that the Supreme Court has ruled in C.C.E. v. A.S.C.U. Ltd.,[2002 (12) TMI 87 - SUPREME COURT OF INDIA] that the Tribunal does not even have the power to review its orders while exercising its appellate power under Section 35C when this is the legal position with regard to the exercise of the power in respect of the main appeal itself, it cannot be higher while passing orders in exercise of the power under the proviso to Section 35F, which is a provision stipulating the condition for maintainability of the appeal - Appeal is dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - miscellaneous Application for modification of the Stay Order dismissed.

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• 2012 (12) TMI 514
  Banking and other Financial services - Bank run by co-operative society - Demand of Service Tax - Held that:- Appellants contention that being a bank run by co-operative society, they would not be liable to pay Service Tax is not tenable and was not found favour with as relying on decision of M/s. Madhav Nagrik Sahkari Bank Ltd. vs. Commissioner of Central Excise, [2012 (3) TMI 283 - CESTAT, NEW DELHI] - demands accordingly confirmed. Simultaneous penalty u/s 76 & 78 - Held that:- As decided in CCE versus First Flight Courier Ltd. [2011 (1) TMI 52 - HIGH COURT OF PUNJAB AND HARYANA] that simultaneous penalties under section 76 and 78 are not warranted - while upholding the penalty u/s 76 and 77, set aside the penalty imposed u/s 78 of the Finance Act, 1994.

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• 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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• Central Excise

• 2012 (12) TMI 509
  Stay of demand - ex parte order - violation of principles of natural justice - Interest on differential duty on finalization of provisional assessment - held that:- It is, therefore, apparent that the Commissioner (Appeals) has proceeded to disregard the request of the petitioner for personal hearing despite the fact that the counsel has clearly sought time in view of the inability to appear on that particular date for this case on the ground that they are engaged before this Court. The petitioner also states that they have given intimation seeking adjournment on the above stated plea. There is nothing on record to show that the petitioner has been seeking adjournments frequently to avoid hearing. Unless and until it is shown that the conduct of the party is to avoid appearance without just or reasonable cause, there is no justification to decline grant of further time. On this score, the order passed in the stay petition without giving an opportunity of hearing to the petitioner appears to be arbitrary and there has been a violation of the principles of natural justice. The impugned order is passed without giving adequate opportunity to the petitioner. - Matter remitted back for fresh decision.

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• 2012 (12) TMI 508
  Waiver of pre-deposit – denial of the benefit of Notification No.10/97-CE dated 1/3/97 to the assessee in respect of certain goods which were supplied by them to certain public-funded research institutions – nature of the goods cleared by the appellant to such institutions – Held that:- Goods so cleared include boring machine, rotary table, base plates, cradle assembly and planetary gear box etc. - these items were used by customers for research-related purposes and therefore the benefit of the above Notification cannot be denied to the assessee - on the strength of the certificates of public-funded research institutions - waiver of pre-deposit allowed

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• 2012 (12) TMI 507
  Whether the credit on duty paid on inputs "end shields" and "stator housings" is available to the assessee as these inputs were exclusively used in the manufacture of exempted final products particularly when the assessee has paid 8%/10% of the price of the exempted final products to the department – Held that:- Submission of the assessee that the generators of 1000 KV and 1250 KV have been cleared by them reversing the credit equal to the amount of 8%/10% of price of exempted goods during the relevant period. It is their contention that the said reversal is in excess of total CENVAT Credit taken by them on all inputs used in the manufacture of exempted goods. To prove this fact, they have submitted a certificate from the Cost Accountant - Commissioner has not given any finding on this submission of the assessee – matter remanded back to the Commissioner

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• 2012 (12) TMI 506
  Waiver of pre-deposit - denial of cenvat credit – Held that:- applicant purchased certain quantity of duty paid grey fabrics and sent to M/s. Natraj Processors for processing. M/s. Natraj Processors availed credit in respect of the duty paid on grey fabrics and subsequently, without undertaking any processing, cleared the grey fabrics to the applicant under their invoices showing payment of duty - applicant availed credit on the strength of invoices issued by M/s. Natraj Processors - at the time of clearance of grey fabrics M/s. Natraj Processors, no duty has been paid or reversed - which was paid subsequently after three years - supplier of goods as well as the applicant unit have common Directors, hence, it cannot be said that the applicant unit was not aware of the fact that the supplier unit has not paid the duty - No financial hardship has been pleaded – assessee directed to make pre-deposit

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• 2012 (12) TMI 505
  Waiver of pre-deposit - alleged that appellant is engaged in the manufacture "Green House" classifiable under Chapter Heading 9406 of Central Excise Tariff Act, 1985, therefore, they are liable to pay excise duty – contention of the appellant is that the applicants are only supplying the material namely galvanized pipes, shade net, polythene sheets, G.I. wires, nylon ropes, nuts and bolts used for erection of these pipes and fixing of polythene sheets and shade nets to formers (sic), who in turn themselves make the 'green house' - Held that:- In the case of Srihari Greenhouse P. Ltd. (2011 (12) TMI 353 - CESTAT, MUMBAI ) unconditional waiver of pre-deposit was granted to the applicant - requirement of pre-deposit waived

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• 2012 (12) TMI 504
  Penalty under Section 11AC of the Central Excise Act – assessee availed CENVAT credit facility on the inputs received and, thereafter, these inputs were sent to the job-worker by following the procedure under Rule 4(5)(a) of the CENVAT Credit Rules,2004 - appellant failed to produce any evidence to show that they received the inputs after processing from the job-worker – Held that:- Rule 4(5)(a) of the CENVAT Credit Rules,2004 is self-explanatory, wherein the assessee is entitled to take credit on receipt of the inputs. Therefore, the appellant has not taken the credit with an intention to evade duty - appellant has already paid the duty along with interest, therefore, there is no contravention of the Rules or provisions of the Act with intention to evade payment of duty as required under Section 11AC of the Central Excise Act, 1944 for imposing penalty. Therefore, penalty imposed under Section 11AC of the Central Excise Act, 1944 is dropped but duty and interest already paid are confirmed

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• 2012 (12) TMI 503
  Waiver of pre-deposit – manufacture or not - appellant is engaged in the marketing of hydrogen gas cylinders - appellant receives 99.9% pure hydrogen gas from SIEL through pipeline at a pressure of 1000 to 1200 mmwc. This gas is filled in returnable gas cylinders with identification marking of the appellant and sold to various consumers - Department was of the view that filling and marketing of hydrogen gas cylinders with label amounted to manufacture in view of Chapter Note 9 of Chapter 28 of the Central Excises and Salt Act as applicable at that time – Held that:- It cannot be said that filling of liquid ammonia from tanker into smaller cylinders does not amount to repacking of gas from bulk packing - appellant directed to deposit

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• 2012 (12) TMI 502
  Power to condone delay - declaration under Rule 57G(1) indicated use of defective angles falling under 7216.90 as input but did not indicate mis-rolls falling under heading 7216.10 - defect in the declaration was sought to be rectified by declaration filed on 15-10-1996, four months after availing credit, on goods falling under heading 7216.10 – Held that:- Whether mis-rolls would be classifiable under 7216.10 or 7216.90 itself was in doubt - Assistant Commissioner had powers to condone the delay as per provisions of Rule 57G(5) - Deputy Commissioner has not recorded any reason for not exercising this discretion in this case. If a public authority is given a discretion to do a thing under a Rule and if chooses not to do so he is bound to record reasons for not exercising the discretion - Since this has not been done order of the adjudicating authority is not sustainable

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• 2012 (12) TMI 501
  Transaction value - manufacture of aerated water and edible syrup – alleged that appellant was charging different rates for clearance of the edible syrup at their factory gate from the three distributors and HCR - rate charged from HCR was 30% less than the rate charged from the other three distributors - whether HCR can be termed as a different class of buyer as compared to the three distributors of the appellant company – Held that:- Assessee can pay excise duty at lesser transaction price at which the goods were sold to one category of buyer provided he is able to show cogent reason as to how the buyer fall within different class of buyer - different price based on various rational commercial considerations like regional different taxes, quantity off-take, presence of competitors, future demand etc. - appellant not only averred that HCR was treated as different class of buyer but this fact is established from the record – In favor of assessee

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• 2012 (12) TMI 500
  Condonation of Delay of one and a half year - Held that:- The cause shown for delay that the Committee of Commissioners took a mistaken view of the law that the judgment of Hon’ble Supreme Court dismissing the civil appeal did lay down the law and confirmed the legal position settled by the Tribunal in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (2009 (5) TMI 419 - CESTAT, BANGALORE) is not sufficient to accept as Committee of Commissioners has accepted the impugned orders of Appellate Commissioner after considering all the aspects of the matter - Application for condonation of delay was dismissed as time-barred - against the appellant.

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• 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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• 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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