TMI Tax Updates - e-Newsletter
December 20, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise Indian Laws

TMI SMS

• Cenvat credit - Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. - Tri

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• Deduction u/s 80IC -interest awarded in an arbitration proceeding for delayed payments to be recorded as business income and not as income from other source -HC

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Articles

1. RAJIV GANDHI EQUITY SAVINGS SCHEME, 2012

   By: DR.MARIAPPAN GOVINDARAJAN

2. NO SERVICE TAX PAYABLE FOR PRE SCHOOL EDUCATION

   By: Dr. Sanjiv Agarwal

News

1. Contribution of States in Exports

2. Under-Recovery on Diesel Effective 16.12.2012 goes remains high level of Rs 9.28 per litre OMCs Incurring Under-Recoveries of Rs 411 Crore per day Daily Crude Oil Price for Indian Basket falls to US$ 106.39 per barrel on 14.12.2012

3. Global crude oil price of Indian Basket Rises to 107.18 US$ /bbl on 18.12.2012

4. Concession to Senior Citizens

5. Spectrum Charges from Merged Companies

6. Manufacturing of Telecom Equipments

7. Change in Land Usage Policy of Non-Processing Zones of SEZs

8. Decline in Exports

9. Salient Features of the Companies Bill 2011

10. Government for Stable Tax Regime, says the Finance Minister

11. Proposal by Coffee Board to Increase Subsidy Limits

12. Contribution of States in Exports

13. Several initiatives taken for Development of Electronics Hardware Manufacturing: Shri Kapil Sibal consultative Committeee meeting of Ministry of Communication and IT held

14. India-Asean Trade to Reach $100 Billion Mark by 2015, Says Anand Sharma Second India-ASEAN Business Fair 2012 Begins

15. Royalty on Coal Revised

16. Competitive Bidding of Coal Mines

17. Measures to Expedite Coal Projects

18. Mid-Quarter Monetary Policy Review: December 2012

19. Compliance with the Requirements of Corporate Governance

20. Indian Accounting Standards

21. Competition Commission of India Action Against Carmakers

22. Leather Industry

23. Auction for Sale (Re-issue) of ‘8.07 per cent Government Stock, 2017-JUL’

24. Auction of Government of India Dated Securities

25. Professional Misconduct / negligence of a practicing Chartered Accountant

Notifications

Customs

1. F.No. D-22011/06/2012 (Part I) - dated 12-11-2012 - Safeguard

Safeguard investigation concerning imports of Hot Rolled Flat products of Stainless Steel of 304 grade into India from China PR-Preliminary findings-Reg.

SEZ

2. S.O.2503(E) - dated 15-10-2012 - SEZ

Set up a Multi-product Special Economic Zone at Dimapur in the State of Nagaland;

Circulars / Instructions / Orders

DGFT

1. 39 (RE-2012)/2009-2014 - dated 19-12-2012

Allocation of 10,000 MTs of white sugar for the year 2012-13 (October, 2012- September, 2013) for export to EU under CXL Quota.

2. 38 (RE:2012)/2009-2014 - dated 18-12-2012

Amendments in Appendix 5 of the Handbook of Procedures (Vol.I)

3. 37 (RE 2012)/2009-2014 - dated 17-12-2012

Enlistment of agencies authorized to issue Certificate of Origin – Non-Preferential.

Highlights / Catch Notes

Income Tax

• Statute Bars Assessment Officer from Reassessing Income for 1998-2001; Past Accumulated Income Year Set for Taxing.

  Case-Laws - HC : Reassessment - The statute having thus fixed the assessment year in which the entire past accumulated income falls to be taxed, it is impermissible in law for the assessing officer to entertain a reason to believe that income chargeable to tax for the assessment years 1998-99 to 2000-01 had escaped assessment. - HC
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• Land in Special Zone Remains Agricultural Without Infrastructure or Non-Agricultural Use Proof.

  Case-Laws - AT : Mere inclusion of land in the special zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. - AT
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• Netting Principle: Linking Sale Proceeds Delay with Borrowing Repayment Delay, Impacting Interest Income and Liability.

  Case-Laws - HC : Principle of netting or set off - The delay in payment of the sale proceeds and the delay in repayment of the borrowing are both intertwined; one gives rise to interest income and the other gives rise to interest liability. - HC
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• Section 54E Tax Benefit Applies to Sale of Depreciable Assets, Regardless of Capital Gains Computation Method.

  Case-Laws - HC : Exemption u/s 54EC - sale of depreciable assets - the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - HC
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• Tax Deduction at Source Doesn't Automatically Make a Receipt Taxable: Understanding Mutuality Principle.

  Case-Laws - AT : Concept of mutuality - mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature - AT
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• High Court Rules Arbitration Interest for Delayed Payments as Business Income for Section 80IC Tax Deduction Purposes.

  Case-Laws - HC : Deduction u/s 80IC - interest awarded in an arbitration proceeding for delayed payments under a contract was to be recorded as business income and could not be treated as "income from other source" - HC
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• Deemed Dividends and Money Lending: Object Clause Alone Insufficient for Exception u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - merely stating in the object clause that the business of the assessee company was money lending cannot be held that the case of assessee falls under exceptional circumstances not to treat the deemed dividend. - AT
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• Tax Case: Misclassification of Benefits as Perquisites Instead of Deemed Dividends u/ss 2(22)(a) and 2(24)(iv.

  Case-Laws - AT : Deemed dividend u/s 2(22)(a) - perquisite u/s 2(24)(iv) - CIT(A) is not justified to hold that it is perquisite benefit given by HPPL to its shareholder and not the transfer of occupancy rights to its shareholders. - AO has rightly held that the value of flats received are nothing but dividend given in the form of assets by HPPL. - AT
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• Derivatives Losses Can Offset Delivery-Based Profits as Both Deemed Speculative Under Income Tax Laws.

  Case-Laws - AT : Loss from derivatives transactions is to be allowed to be set off against the profit arising out of delivery based transactions as both are speculative/deemed speculative transactions. - AT
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• Section 2(22)(e) Applied: Transactions Deemed as Dividends, Not Trade Advances, Says Tax Authority.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - Assessee has only given a colour to the transactions so as to characterise the same as in the nature of trade advance. Therefore provisions of section 2(22)(e) are clearly attracted - AT
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• Reopening Tax Assessment for Mandatory Scrutiny Isn't Grounds for Believing Income Escaped Assessment Under Departmental Rules.

  Case-Laws - AT : Re opening of assessment - rules of Department requiring a compulsory scrutiny of such cases, cannot in any way be deemed as a reason to believe that there was escapement of income. - AT
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DGFT

• DGFT Updates Appendix 5 of Handbook of Procedures to Streamline Trade Processes and Enhance Compliance.

  Circulars : Amendments in Appendix 5 of the Handbook of Procedures (Vol.I) - Public Notice
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• DGFT Updates List of Authorized Agencies for Non-Preferential Certificates of Origin in International Trade Compliance.

  Circulars : Enlistment of agencies authorized to issue Certificate of Origin – Non-Preferential. - Public Notice
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SEZ

• New Multi-product SEZ in Dimapur, Nagaland to Boost Investment, Offer Tax Incentives, and Create Jobs.

  Notifications : Set up a Multi-product Special Economic Zone at Dimapur in the State of Nagaland; - Notification
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Service Tax

• Services Within Factory Premises Exempt from Service Tax on Cargo Handling.

  Case-Laws - AT : Cargo Handling Service – Demand of Service Tax - any services provided within the factory premises would not come under the definition of Cargo Handling Services. - AT
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• Cenvat Credit Denial Invalid if Based Only on Centralized Registration Rejection; Focus on Substantive Compliance.

  Case-Laws - AT : Cenvat credit - Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. - AT
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Central Excise

• Manufacturing Activities Liable for Excise Duty Despite Service Tax Payments on Installation Services.

  Case-Laws - AT : Manufacture - Service Tax - where an activity amounts to manufacture assessee can not escape from excise liability on the ground of payment of service tax under the category of Installation and commissioning services - AT
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Case Laws:

• Income Tax

• 2012 (12) TMI 611
  Reassessment - Can the assessing officer, to reopen an assessment, entertain a “reason to believe” which is contrary to the statute? - Exemption u/s 10(21) - Accumulation of income u/s 11(2) - - held that:- Two important conditions for the applicability of section 147 are (a) income chargeable to tax must have escaped assessment and (b) assessing officer must have reason to believe so. When section 11(3) treats the accumulated income of the past year of the petitioner as income of the assessment year 2001-02, there can be no question of any income escaping assessment in the past assessment years i.e. the assessment years 1998-99 to 2000-01. It follows that the assessing officer cannot entertain any reason to believe that income chargeable to tax for those years had escaped assessment. Even assuming that there was breach of any statutory conditions under which the exemption was granted to the petitioner under section 10(21), the entire accumulated income of the earlier years cannot be taxed in those years by reopening the assessments for those years. Section 11(3), which is made applicable to section 10(21), itself provides that the entire accumulated income shall be deemed to be the income of the assessee of the previous year in which the breach of the conditions or the contingency occurs. The statute having thus fixed the assessment year in which the entire past accumulated income falls to be taxed, it is impermissible in law for the assessing officer to entertain a reason to believe that income chargeable to tax for the assessment years 1998-99 to 2000-01 had escaped assessment. Notice issued u/s 148 quashed. - Decided in favor of assessee.

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• 2012 (12) TMI 610
  Sale of land - whether a land is agricultural land or not - CIT(A) assumed that once the land fall within the limits of the Hyderabad Airport Development Authority (HADA) constituted under A.P. Urban Areas (Development) Act it is a 'municipality' under section 2(14)(iii) of the Income Tax Act, 1961. - the land in question is classified in the Revenue records as agricultural land - assessee has not applied for conversion of this agricultural land for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. Held that:- HADA was formed by the notification under Urban Area (Development) Act, 1975 with a view to promoting and securing planned development of the area in and around the proposed international Airport at Shamshabad. - HADA is basically and essentially a creation of the Act of State Legislature consisting of persons appointed by the State Government on salary basis. The Board Members are not elected by the people and there is no element of people choice being represented in any manner in the constitution of the Board. The Board functions strictly under the supervision and control of the State Government and does not hold or possess a "local fund". Being so, HADA cannot be called as a local authority. - HADA cannot be treated as a 'Municipality' and as such the agricultural lands situated within the jurisdiction of HADA do not constitute capital asset. - Decision in the case of Commissioner of Income-tax v. Murali Lodge [1991 (6) TMI 38 - KERALA HIGH COURT] followed. Mere inclusion of land in the special zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into non-agricultural land at the relevant point of time when the land was sold by the assessee. The agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. When the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset.

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• 2012 (12) TMI 609
  Reassessment - "fees for technical services" within the meaning of Section 9(1)(vii) - interest-free loan - interest under Section 9(1)(b) of the Act as well as under Article 11 of the Agreement for the Avoidance of Double Taxation entered into between India and USA. - business connection - held that:- where the existence of a business connection was held to depend on the facts of each case, we are of the view that there was prima facie material in the possession of the Assessing Officer to form a tentative belief that Section 9(1)(i) was attracted. This reason by itself constituted a relevant ground to reopen the petitioner's assessments. The assessing officer was justified in taking the prima facie view that CISPL constituted the petitioner's permanent establishment in India. - So far as the assessability of the interest under Section 9(1)(v) is concerned it would appear that clause (b) of Section 9(1)(v) is applicable. Writ petition against the issuance of notice u/s 148 dismissed with a cost of Rs. 75,000 - Decided against the assessee.

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• 2012 (12) TMI 608
  Exemption u/s 10(13A) - deduction from salary - payment of rent for residential accommodation - held that:- The ground on which the claim for exemption under Section 10(13A) was rejected by the assessing officer was that the salary receipts by the assessee from M/s Sahara India Mass Communication cannot be assessed under the head “salary”, but should be assessed under the head “income from other sources”. The assessing officer has however not brought any material to show that the relationship between the M/s Sahara India Mass Communication and the assessee was not that of a master and servant. - Deduction allowed - Decided in favor of assessee. Principle of netting or set off - Addition on account of interest paid by the assessee on loan taken for purchase of an exempted asset - held that:- The right to receive the interest and the liability to pay interest arose in respect of the same period and out of the same event i.e. non-payment of the sale proceeds in time. The delay in payment of the sale proceeds and the delay in repayment of the borrowing are both intertwined; one gives rise to interest income and the other gives rise to interest liability. We are of the view that this affords sufficient nexus between the two so as to justify the applicability of the principle of netting. Judgment of the Supreme Court in CIT vs. Dr.V.P.Gopinathan (2001 (2) TMI 10 - SUPREME COURT) is against the claim of the assessee but a closer look at the facts shows that the judgment of the Supreme Court in Keshavji Ravji & Co. vs. CIT (1990 (2) TMI 1 - SUPREME COURT) is closer to the assessee's case on principle. - The netting principle was adopted in CIT vs. Shri Ram Honda (2007 (1) TMI 86 - HIGH COURT, DELHI). Decided in favor of assessee.

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• 2012 (12) TMI 607
  Exemption u/s 54EC - Capital gain on depreciable assets being short term capital gain - held that:- the assessee cannot be denied exemption under section 54E, because, firstly, there is nothing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Section 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in section 48 and 49. Secondly, it is well established in law that a fiction created by the Legislature has to be confined to the purpose for which it is created. It is true that Section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In the other words, where the long term capital assets has availed of depreciation, then the capital gain has to be competed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gains has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - Decided in favor of assessee.

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• 2012 (12) TMI 606
  Transfer pricing - Arm's length price - TNMM method versus CUP method - comparables - held that:- if the composite income is taken into consideration then the assessee has earned more in contrast to the rates to which earlier third party has charged. While applying CUP Method, there could be internal CUP or external CUP. - The internal CUP could be available if the assessee or one of its group entities entered into comparable transaction with an unrelated party where the goods or services under consideration are same or similar. - On the other hand, in an external CUP, transaction between two independent enterprises involved comparable goods or services under comparable conditions. Here, in this case, the internal CUP, 'ANL Singapore' cannot be applied as it is an AE having related party transactions. There are also no external CUP for making any comparison in the relevant year as the earlier agency agreement with the third party CMAPL had expired prior to September, 2003 and rates which were applicable in the earlier years cannot be made applicable in this year. Thus, the rates of the earlier agreement will not be appropriate parameter for determining the ALP for the international transaction undertaken by the assessee with its AE in the current assessment year. In these circumstances, the CUP Method fails in this case for benchmarking the ALP. Both the parties have agreed that TNMM Method should be most appropriate method for benchmarking the ALP. - TPO has neither examined the comparables nor the application of TNMM Method for benchmarking the ALP in relation to the international transactions. Even the CIT(A) has not called for any remand report from the TPO or the AO asking for any comment upon the comparables shortlisted by the assessee. The comparables have to be examined objectively and the TPO should be given an opportunity to rebut the same. - Matter remanded back to TPO, who will require the assessee to furnish comparables into similar line of business and activities and examine the same for benchmarking the ALP. Decided partly in favor of revenue.

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• 2012 (12) TMI 605
  Concept of mutuality - held that:- there is no finding by any of the authorities below that services are rendered to non-members. - As long as services are rendered to the members, even for a remuneration, the same will be covered by the principles of mutuality. As far the allegation that members have deducted at source from payments to the assessee and for this reason, the receipt is to be taken as taxable receipt, it is only elementary that conduct on the part of the person making payment cannot determine character of receipt in the hand of recipient. The mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature. - The plea of the assessee for tax exemption on the ground of mutuality, therefore, must succeed. - Decided in favor of assessee.

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• 2012 (12) TMI 604
  Estimation of gross profit - rejection of books of accounts - held that:- Undisputedly, if the books are duly audited and if they are produced before the AO, the burden lies upon the Revenue to show that the books are defective or incomplete, in order to estimate reasonable income from turnover. However, in the instant case the assessee has not furnished relevant details and nowhere in the assessment order it is indicated that the assessee has furnished the books of account. - the contention of the assessee that no addition can be made in the event of not giving a specific finding with regard to the defect in the nature of books, deserves to be rejected. - Decided against the assessee. Rate of GP - Since itemised details were not furnished the learned CIT(A), based on the available material, accepted the GP sheet as prepared by the assessee and while arriving at the GP ratio at 22.22% the gross loss works out to Rs.2.09 crores. It is well settled that while estimating the income it is difficult to maintain exactitude. So long as the estimate is reasonable, based on the facts available on record, the appellate authorities should not interfere with the estimate made by the lower authorities. In the instant case no fresh material was furnished before us to indicate that even the CIT(A) has committed an error in restricting the GP ratio (loss) to 22.22%. - Decided against the assessee.

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• 2012 (12) TMI 603
  Deduction u/s 80IC - income derived from industrial undertaking - nature of interest income - held that:- In Govinda Choudhury's case (1992 (4) TMI 8 - SUPREME COURT) the Hon'ble Apex Court held that the interest awarded to the respondent-assessee therein in an arbitration proceeding for delayed payments under a contract executed by him was to be recorded as business income and could not be treated as "income from other source". - Decided against the revenue.

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• 2012 (12) TMI 602
  Penalty u/s 271(1)(c) – AO made addition of expense incurred to earn exempt income u/s 14A – Impose penalty u/s 271(1)(c) on said addition – Held that:- Following the decision in case of Sunash Investment Co.(2006 (12) TMI 266 - ITAT MUMBAI) that no penalty u/s 271(1)(c) can be levied on account of disallowance of pro-rata interest expenditure by invoking the provisions of sec.14A. No contrary view has been brought on record by the learned Departmental Representative. Therefore delete the penalty. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Income voluntarily offered to tax – AO included the said amount in the total income and impose penalty u/s 271(1)(c) thereon – Held that:- As similar income was offered for taxation in earlier AY on which the AO chose not to impose penalty u/s 271(1)(c). AO could not place any material on record to show that the assessee came forward to offer the said income for taxation only due to his corner in this regard. There is nothing in assessment order to divulge that the assessee offered income pursuant to any detection by the Revenue. Rather it is suo moto offering by the assessee. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Imposed on disallowance of depreciation on the Ozone grant – During course of proceedings the assessee surrendered its claim of depreciation on capitalization of grant – Held that:- Mere fact that the assessee agreed not to claim depreciation on the amount of Ozone subsidy during the course of assessment proceedings cannot be a good ground for imposition of penalty. The initial view of the assessee that it was entitled to depreciation, based on the judgment of the Hon’ble Supreme Court), can be found fault with. Thus, it cannot be said that the assessee made a mala fide claim in the shape of depreciation on the Ozone grant received from the State Government. Issue decides in favour of assessee

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• 2012 (12) TMI 601
  Disallowance for non-deduction of Tax u/s 40(a)(i) – Assessee utilizes the internet search engine to buy space in advertising on the internet on behalf of its clients - The search engine renders this service outside India through internet – AO made addition considering the same as technical services - Held that:- As the hosting services did not involve use or right to use by the assessee any industrial, commercial or scientific equipment and no such use was actually granted to assessee. Uploading and display of banner advertisement on its portal was entirely the responsibility of the service provider. Therefore payment was not in the nature of royalty or technical service but the same was in the nature of business profit and in the absence of any PE in India, it was not chargeable to tax in India following the decision in case of Yahoo India (P.) Ltd(2011 (6) TMI 162 - ITAT, MUMBAI). Appeal decide in favour of assessee

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• 2012 (12) TMI 600
  Penalty for concealment of income u/s 271(1)(c) - Assessee claim 100% depreciation in the concerned assessment year without noticing the amendment for the year - AO had initiated penalty u/s 271(1)(b) - CIT issued notice u/s 263 since the AO had failed to initiate penalty proceedings u/s 271(1)(c) - CIT has set aside the assessment to the AO for fresh consideration - Held that :- As the AO had taken a conscious decision not to levy penalty under section 271(1)(c) and the contention raised had not been properly addressed by the CIT. W.e.f 01/06/2002 CIT is authorized to initiate and levy penalty under section 271(1) and therefore, there was no necessity to set aside the assessment for fresh consideration. Case remand back to CIT.

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• 2012 (12) TMI 599
  Disallowance u/s 14A r.w. Rule 8D of expenditure incurred on earning exempt income – Held that:- Total expenditure debited by the assessee in its P&L account for the year ended 31.3.2008 is only Rs.1,68,385 and out which, assessee itself disallowed a sum of Rs.1,06,897 while computing its income leaving a balance sum of Rs.61,488 which was duly explained in respect of taxable income. Therefore no such disallowance shall be allowed. Appeal decides in favour of assessee Sale of share taxable as capital gain or business income - Assessee has only four scripts of shares and out of which scripts of shares of three companies were purchased in the preceding assessment year and only share of one company was purchased during the year - Assessee sold the said shares of all four companies in the assessment year under consideration - Held that:- Neither the frequency nor volume of transaction could be said to be very high and the period of holding is also substantial. Therefore, the income of the assessee from purchase and sale of share transactions is to be assessed under the head “capital gain” and not under the head “business income”. issue decides in favour of assessee

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• 2012 (12) TMI 598
  Deduction u/s 80HHC - AO to recompute the deduction u/s 80 HHC by reducing the 90% of the net amount and not gross amount of interest & rent income – Held that:- Following the decision in case of ACG Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA) wherein it has been held that ninety percent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head “PGBP”, was to be deducted under clause (1) of Explanation (baa) to section 80 HHC for determining the profits of the business. Appeal allow in favour of assessee & issue remand back to AO Adjustment in Profit for claiming deduction u/s 80HHC – Whether insurance claim received by the assessee on stock in trade is liable to be reduced to the extent of 90% received while calculating the eligible profits – Held that:- As the insurance claim received on damage of goods/raw material and has direct nexus with the business income. Therefore, insurance claim received by the assessee on stock in trade is not liable to be reduced to the extent of 90% received while calculating the eligible profits. Issue decides in favour of assessee. Adjustment of VAT refund in computing eligible profit u/s 80HHC – Whether Sales Tax remission/refund has been included as business profits it is eligible for deduction u/s 80 HHC - VAT refund received are on revenue account and routed through profit and loss account – Held that:- Following the decision in case of Alfa Laval India Ltd. (2003 (9) TMI 43 - BOMBAY HIGH COURT) The expenses on these accounts have earlier inflated the cost of purchases / production cost and, therefore, these receipts are nothing but abatement of purchase / production cost and is thus integral part of the manufacturing operations and has to be assessed under the head PGBP. Appeal decides in favour of assessee.

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• 2012 (12) TMI 597
  Addition u/s 41(1) of sundry creditors - No purchases and sales were made during the year under consideration - Said amount was taken by the assessee as an advance for sale in earlier years – Held that:- The assessee has filed a copy of account of the said party, according to which, the payments have already been made to the said party. The payments have been shown to be debited to the bank account of the assessee and copies of bank accounts are also filed. Issue decides in favour of assessee Applicability of notification - Derivative transaction treated as speculative transaction – AO notice that transactions entered into by the assessee before 29th December 2005 covered under u/s 43(5)(d) – CBDT notified on 25th January 2006 regarding exclusion of derivative transaction from Sec 43(5) - Held that:- Following the decision in case of Claris Lifesciences (2008 (8) TMI 579 - GUJARAT HIGH COURT) once the approval is granted in the relevant previous year, and in the absence of anything indicated to the contrary, the approval has to be taken as effective from the beginning of the relevant year. Hence the derivate transactions, entered into by the assessee at the recognized stock exchanges even prior to the date of notification in the relevant previous year, are to be treated as covered by the exclusion clause set out in Sec. 43(5)(d). Issue decides in favour of assessee

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• 2012 (12) TMI 596
  Income from sale of Land - Capital Gain or business income – Whether land sold by assessee was agricultural land or capital asset – AO argued that the distance between Village and Municipal Corporation is less than 8 km - Held that:- As concluding from the fact of the case AO is not justified in treating the assessee’s solitary transaction of sale of part of its land holdings on ‘as it is and where it is’ basis without recording it as its stock-in-trade as assessee’s business income. Assessee’s land can be held as agricultural land situated beyond 8 kms outside the Gurgaon Municipal limits and that the area population of residents of the village Fazilpur Jharsa being below 10000, the assessee’s asset is outside the purview of capital asset. In favour of assessee Undisclosed Income – AO made addition as undisclosed income, instead of agricultural income as claimed by the assessee – AO argued that land was not cultivated and also the party to whom the agricultural produce was claimed to have been sold was nonexistent – Held that:- As the assessee had furnished a copy of Girdwari & certificate issued by the Sarpnach. As per these documentary evidences, the assessee had discharged its onus. Therefore, AO was not justified in rejecting assessee’s contention with regard to the said agricultural income. In favour of assessee

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• 2012 (12) TMI 595
  Addition u/s 68 as cash credit – Share application money – AO has instituted enquiry u/s 133(6) from the share applicant’s - Held that:- Following the decision in case of Orissa Corporation Pvt. Limited (1986 (3) TMI 3 - SUPREME COURT) that AO did not pursue the matter further with the share applicants nor required the assessee to produce them or further material in that regard, it has to be accepted that the appellant has discharged the burden that lay upon him u/s 68. Issue decides in favour of assessee Prior period expense – Disallowance of expenses relating to earlier years – Held that:- Any reference to the return of income or computation filed with the return of income showing claim made for deduction of expenses in the impugned year nor did he make verification of the facts himself. Therefore issue remand back to AO

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• 2012 (12) TMI 594
  Deduction u/s.80-O - Deduction in respect of royalties, etc., from certain foreign enterprises - Whether the consideration received by the assessee was for use outside India of patent, invention, design or registered trade mark – Assessee enter into no. of agreements from dated 11.10.91 to 23.10.1998 – Held that:- the appellant is in no position to “allow use” of the designs and that Bosch is free to use the designs, in any case. In the circumstances, it cannot be held that the fees received from outside India were for use of the designs but can only be considered as fees for services rendered. Assessee has attempted to camouflage its claim for deduction u/s.80-O of the Act for AY 2001-02, so as to be in conformity with the amended provisions of law, though the nature of services remained the same as it existed prior to AY 98-99. Therefore, Assessee has failed to establish its claim for deduction on the basis of the conditions contemplated by the amended provisions of law. In favour of revenue Levy of interest u/s 220(2) - Assessee contended that notice of demand u/s 156 was not issued and served - therefore the very levy of interest u/s 220(2) was not warranted – Held that:- Following the decision in case of Central Provinces Manganese Ore (1986 (5) TMI 3 - SUPREME COURT) that appeal against levy of interest in the present case would be maintainable. Therefore direct the AO to consider the claim of the assessee afresh in the light of the submissions made before us challenging the levy of interest. Issue remand back to AO

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• 2012 (12) TMI 593
  Disallowance of 50% unmarked sales promotion expenses – AO made addition due to absence of bills and vouchers - Expenditure includes commission on number of cases sold and lifted - Incentive to increase sales by the depots located at various parts of the country – Held that:- As the assessee rightly contended the fact that such expenses are necessary and part of the business. The only factor which goes against the assessee is the absence of bills and vouchers. In the given facts and circumstances, restrict the disallowance of sales promotion expenses to 25% of unmarked sales promotion expenses. Issue partly allowed in favour of assessee Disallowance of the employees contribution to ESI and PF – Deposit beyond the due date but before filling of ROI – Held that:- Following the decision in case of AIMIL Limited (2009 (12) TMI 38 - DELHI HIGH COURT) that Sec.43B extended to employees’ contribution as well which are paid after the due date under the PF law but before the due date for filing the return. Allow deduction. In favour of assessee Disallowance of interest u/s 14A – Expense in relation to earn exempt income - Whether interest expenses relatable to borrowed funds which are used for making investment in the share capital of a firm can be said to be expenditure incurred for earning income not includible in the total income – Held that:- The intend of the assessee not to earn tax free income in the form of share of profits from the firm. Once it is found that the provisions of Sec.14-A are applicable then irrespective of the fact that there was no receipt of share of profits from the firm in the present year or the argument that the disallowance cannot exceed the amount of share of profits received from the firm, cannot be accepted. Therefore, disallowance has to be sustained. In favour of revenue

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• 2012 (12) TMI 592
  Transfer Pricing – Interest free advance to foreign associated enterprises – Held that:- As the TP adjustment is possible only in cases where comparable uncontrolled transactions entered into between two enterprises are established. Unless such an uncontrolled transaction is identified, no ALP adjustment is possible. The interest determined AO and confirmed by DRP is not an arms length rate determined in comparable uncontrolled transaction and therefore order be set aside in conformity with the Tribunal’s findings in the assessee’s own case for earlier years. In favour of assessee Disallowance of expenditure u/s 14A – AO disallow 5% of the dividend as expense incurred in relation to earn exempt income – AO argued that other expenses on corporate establishment should also be considered u/s 14A - Held that:- The disallowance u/s. 14A of the Act in the present case is restricted only to indirect expenses. The Assessee’s calculation is based on the time spent by the functionaries responsible for making investment of cash surpluses. Therefore, the quantum of disallowance estimated at 5% is on the higher side. An estimate of 2.5% of the dividend income in our view would be just, fair and reasonable. Issue partly allowed Set Off of losses – STP units claim deduction u/s 10A – Whether loss incurred by STP/SEZ unit is set off against income from Non STP/SEZ unit for same assessment year – Held that:- Following the decision of Tribunal in assessee’s own case in favour of the assessee. Set-off of loss allowed. In favour of assessee Contribution to Trust - Payment of such contributions as deferred compensation to the employee-director who separated from the Company is a payment by the trust on behalf of the assessee and hence eligible for deduction u/s 37(1) – Held that:- As the specific prohibition in Sec.40A(9) and keeping in mind the principle that when there are specific provisions governing a deduction then the general deduction allowable u/s.37(1), cannot be invoked, the disallowance made by the Revenue authorities had to be sustained. In favour of revenue Alternative claim of the Assessee that in the event of the disallowance being sustained, the action of the AO in allocating the aforesaid expenses to the profits of the units eligible for deduction u/s.10A which had gone to reduce the profits eligible for deduction u/s.10A cannot be sustained. The AO is therefore directed to computed the enhanced profits on which eligible deduction u/s.10A should be allowed. In favour of assessee Allocation of common expense – Expenses incurred by HO allocate to units which are eligible for deduction u/s.10A – Held that:- Following the decision in assessee’s own case for earlier years that when direct expenses of rates and taxes were known in respect of unit whose income is deductible u/s 10A then otherwise allocation cannot be made. The allocation of common expenditure cannot be made on the basis of revenue generated. Hence, direct expenditure disallowed by the AO is confirmed and disallow of 20% of common expenditure. In favour of assessee Deduction u/s 10A - AO refused to allow deduction u/s.10A on profits generated by overseas software development - AO was of the view that the revenue generated by the above Software Development Centers abroad are included in the revenues shown by the STP / SEZ units – Held that:- The issue requires to be remitted back to the AO and accordingly do so with a direction to the AO to follow the decision of Tribunal. Issue remand back to AO Exclusion from income while allowing deduction u/s 10A - AO excluded interest income, income generated from sale of scrap and exchange fluctuation – Held that:- Following the decision in case of assessee’s own case for earlier years that, as the amount received from the sale of scrap cannot be excluded for the purpose of computing deduction u/s 10A, foreign exchange gain due to fluctuation in the rate of rupee is to be included in the profit of the undertaking and is to be considered as eligible for deduction u/s 10A. And in respect of interest income AO has not treated the interest income as income from Other sources or has not held that such income does not belong to the undertaking to which section 10A is applicable. In favour of assessee Deduction u/s 10A – Whether deemed export is also part of export sale for the purpose of calculating the deduction u/s 10A – Held that:- Following the decision in assessee’s own case on identical issue and decided the issue against the assessee. In favour of revenue Computation of total turnover for claiming deduction u/s 10A – AO excludes the Foreign taxes (VAT/GST) from the total turnover while computing deduction u/s.10A – Held that:- Following the decision in assessee’s own case for earlier years that once this sum is not included in export turnover, then the same cannot be included in the total turnover. In favour of revenue

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• 2012 (12) TMI 591
  Rejection of books – Adoption of higher net profit rate @ 12% by AO - Assessee is a partnership firm engaged in the construction of roads – CIT(A) reduce net profit rate to 8% - Held that:- Following the decision in assessee’s own case there must be valid ground with revenue to enhance the net profit rate to 12%. In absence of these, addition cannot be sustained. In favour of assessee Addition on account of interest income - Assessee has not shown bank interest, whereas TDS was claimed as per TDS certificate - Assessee contended that interest figure debited to the P&L account is the net figure – Held that:- Since the assessee has not produced books of account and failed to establish his case for setting off of interest paid against the interest income, which is assessable u/s 56. Following the decision in case of Dr. V. P. Gopinathan (2001 (2) TMI 10 - SUPREME COURT) that where an assessee had invested money in a fixed deposit, in a bank, on interest and had taken loan, on the security of that deposit from the same bank, on interest, the interest paid by the assessee, on the loan would not go to diminish his income from interest, on the fixed deposit, paid by the bank. In favour of revenue Addition on account of margin on sub-contract works – To the tune of 6% which was half of net profit - Assessee claimed that value of sub-let work be reduced from its gross receipts - AO was of the opinion that the assessee had not produced books of account and he would definitely retain some profit margin – Held that:- Following the decision in case of Pran Nath Gupta (2009 (11) TMI 53 - PUNJAB AND HARYANA HIGH COURT) that the payment made to subcontractors is to be deducted from Gross receipt. In favour of assessee

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• 2012 (12) TMI 582
  Deduction u/s 80IA & 80HHC - Interest Income, Commission Income, Export incentives and Currency Exchange Gain - Held that:- Tribunal has not considered the judgment of the Supreme Court in Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT] regarding the deduction u/s 80IA on Interest Income thus restore the issue back to the Tribunal for a fresh decision after duly considering all the relevant aspects of the matter. As decided in CIT v. Rachna Udyog [2010 (1) TMI 38 - BOMBAY HIGH COURT ] & CIT Tax 8 Versus M/s Syntel Limited [2009 (12) TMI 689 - BOMBAY HIGH COURT] the difference on account of exchange rate fluctuation is liable to be allowed under s. 80IB. Deduction u/s 80HHC - As the interest income in the present circumstances as 'Business income’, it will merit inclusion at the first instance and thereafter 90% of the net interest is to be allowed as decided in the ACG Associated Capsules Pvt. Ltd. v. CIT [2012(2) TMI 101 - SUPREME COURT OF INDIA] As in terms of the judgment of the Supreme Court in Topman Exports v. Commissioner of Income Tax (2012 (2) TMI 100 - SUPREME COURT OF INDIA) AO directed to compute the deduction under Section 80HHC.

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• 2012 (12) TMI 576
  FIS - article 12 of India-US DTAA - Marketing and management fees - Fees for included services (FIS) - the employees of the assessee visited India - held that:- the scope of section 9(1)(vii) is somewhat different in comparison with the Article 12(4)(b). In order to rope in any amount within the purview of FIS under the Article 12(4)(b) of DTAA, which has been invoked by the AO, it is essential that the payment should be to make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. On the contrary, there is no such requirement of making available any managerial, technical or consultancy services . Simple rendition of such services is sufficient. It is not the case of the Revenue that the assessee made available some managerial, technical or consultancy services to WNS India. The amount of Rs. 41.02 crore cannot be considered as FIS, naturally the amount received by the assessee on this score needs to be examined from the angle of taxability under other provisions. Royalty - reimbursement of international telecom connectivity charges - held that:- the term "royalty" has been defined in the DTAA as per Article 12(3). Such definition of the term "royalty" as per this Article is exhaustive. Pursuant to the insertion of Explanation (5) by the Finance Act, 2012, no amendment has been made in the DTAA to bring the definition of royalty at par with that provided under the Act. Subject matter of the Explanation is otherwise not a part of the definition of Royalty as per Article 12. As such, it is clear that the contention of the learned Departmental Representative that the retrospective insertion of Explanation 5 to section 9(1)(vii) should be read in the DTAA also, cannot be countenanced. This amount can be considered as royalty only in the hands of the owner or lessor or any other person entitled to permit the use of equipment and earning income in his own right from allowing the use of such equipment to others. By no stretch of imagination an intermediary, who makes payment to the owner of equipment on behalf of some person and then gets reimbursed for the said payment, can be considered as an owner or lessor etc. of the equipment so as to be considered u/s 9(1)(vi). The said amount may be considered as royalty in the hands of MCI WorldCom and other international operations under the provisions of the Act, who own the equipment and allowed use or right to use such equipment to WNS India. The assessee in the instant case simply paid a sum of Rs. 6.14 crore to MCI WorldCom etc. in the first instance and then recovered the same from WNS India. Thus it is evident, the said sum is not royalty even as per section 9(1)(vi) of the Act. Determination of correct nature of reimbursement of international telecom connectivity charges - held that:- The international telecom connectivity charges are not related in any manner with the rendering of marketing and management services. By no standard, such a claim for reimbursement of expenses can be considered as division of the contract price so as to gain some tax advantage. - Once it is held that there is no profit element in such reimbursement, it becomes manifest that the gross income of Rs. 6.14 crore recovered by the assessee from WNS India is equal to the same amount paid by it to MCI WorldCom etc., thereby leaving no surplus liable to tax under Article 7 of the DTAA.

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• 2012 (12) TMI 575
  Accommodation entries - Income escaping assessment - reassessment u/s 147 - held that:- As regards the challenge to the reopening of proceedings is concerned, the Court is satisfied that the notice under Section 147 reflected due application of mind to objective material furnished to the AO, i.e. by way of Investigation Report which could have given rise to a bonafide belief, legitimately falling within Section 147. The materials produced before the AO and also discussed by the AO in the remand report were taken into consideration. Furthermore, it is not as if the entire amount of Rs.55,44,816/- which was shown to be the balance in the bank account of the appellant is sought to be added back. In that regard, the assessee’s explanations were somewhat accepted. The Revenue has proceeded on the footing that the appellant provided some services and charged him only to the commission reasonably earned by it, i.e. Rs.1,10,896/-. Being a pure question of fact, this Court cannot, exercising jurisdiction to consider substantial questions of law, convert it into a third Court of fact and examine the concurrent findings. - Decided against the assessee.

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• 2012 (12) TMI 574
  Disallowance of quantity discount u/s 40A(2)(b) - the dispute is for free cells and not trade discount. - the free cells scheme is on the basis of sales at the point of stokist and, therefore, details of free cells passed on to various stokists is necessary to determine whether free cells were actually passed on or not. Regarding this argument of the assessee that distribution of free cells is by way of quantity discount and, therefore, the same is not covered u/s 40A(2b), - held that:- it was decided by Ld. CIT(A) that the assessee has claimed costs in respect of distribution of free cells in the P & L account and, therefore, it amounts to claim of expenses. - Decision of CIT(A) confirmed. - Decided against the assessee. Disallowance of royalty of Rs.4,45,53,651/- by invoking the provisions of Section 40A(2b) - TPO has made addition on account of payment of royalty on the ground that the assessee did not provide details of cost of development of technology by the separate enterprise and the information relating to payment of royalty by other group companies. - held that:- the claim of assessee is not correct that those documents were furnished by the assessee before Ld. CIT(A) and before us also, these documents are not submitted by way of compliance of the relevant Tribunal rules and, therefore, the same are not admitted - Decided against the assessee. Deduction u/s 80IB - assessee failed to file mandatory form No. 10CCB with the return of income - held that:- even if it was a procedural requirement and the assessee could not submit the same along with return of income for any reason, there could not be any reason for non-submission of the same before the completion of the assessment proceedings and the assessee in the present case has not submitted the same even during assessment proceedings. - Decided against the assessee. Computation of eligible profit - reduction of interest on overdue customers and on staff loan - held that:- if deduction is not allowable to the assessee u/s 80-IB, individual item of income is not required to be examined for eligibility of deduction u/s 80-IB - Decided in favor of assessee.

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• 2012 (12) TMI 573
  Block assessment - undisclosed stock - held that:- the respondent has offered in the aggregate an amount of Rs.41,51,082/- as taxable income for the Assessment Year 1996-97. The aforesaid amount includes an amount of Rs.28,59,171/- being the undisclosed income disclosed in the seized Balance Sheet from the residence of the respondent's partner. Once, the revenue has accepted the amount of profit shown in the seized Balance Sheet then there was no justification to make any further addition from that very seized Balance Sheet as sought to be done by the Assessing Officer. Further, it is very pertinent to note that neither during the course of the search, nor during the block assessment proceeding the Revenue found any evidence or material to support that the respondent was in possession of undisclosed stock valued at Rs.53,98,229/. Further, the finding of the authorities below is essentially a questions of fact. Therefore, the reframed question does not give rise to any substantial question of law. - Decided in favor of assessee.

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• 2012 (12) TMI 572
  Capital expenditure or revenue expenditure - huge expenditure towards machinery / plant made, which extended the life time - the assessee is engaged in the business of manufacturing of automotive gaskets, radiators & CFJS at its units. - held that:- Expenses that were incurred on purchase of band knives for use in splitting machine. - The nature of the item indicates that it is spare parts which require frequent replacement. - the expenditure was incurred on removing the roller jammed in order to make it functional. Therefore, this amount was also considered as revenue expenditure. - In respect of item No. 4, no new asset came into existence which was capable of producing any saleable items. - Decided in favor of assessee. Remuneration to Direction - disallowance u/s 40A(2)(b) - held that:- Shri R.R. Biswas is a qualified person and he was employed in a professional capacity with the assessee-company and there was increase in the sales by 26.87% in the current year as compared to earlier year, this finding of the fact is not rebutted by the Revenue - Expenditure allowed - Decided in favor of assessee.

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• 2012 (12) TMI 571
  Deemed dividend u/s 2(22)(e) - assessee (director) has taken unsecured loan from Krishna Beads Industries Private Limited - held that:- the assessee has failed to establish that the substantial part of business of the company is money lending and the loans and advances received to the assessee is the in the ordinary course of money lending business. Unless the assessee establishes that money lending business was the substantial part of the business of the company and the loans and advances received during the course of money lending business, the assessee will not fall under the exceptional circumstances provided in section 2(22)(e)(ii) for the purpose not to include the calculation of deemed dividend. Further, merely stating in the object clause that the business of the assessee company was money lending cannot be held that the case of assessee falls under exceptional circumstances not to treat the deemed dividend. - Decided against the assessee.

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• 2012 (12) TMI 570
  Revision u/s 263 - held that:- no reason whatsoever set out in the show cause notice as to why the Commissioner was of the view that the assessment order is erroneous and prejudicial to the interest of the revenue. Unless the Commissioner specifically sets out such reasons in the show cause notice, and hears the assessee on the same, it is not open to him to exercise his revision powers under section 263 of the Act. The manner in which impugned order is passed leaves a lot to be desired, and it does not show any application to mind. Such an action cannot meet any judicial approval. In any case, unless categorical finding is given about what is wrong in the order, the matter cannot be set aside to file of the Assessing Officer for fresh examination. - Decided in favor of assessee.

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• 2012 (12) TMI 569
  Deemed dividend u/s 2(22)(a) - perquisite u/s 2(24)(iv) - the benefit received by the assessee on account of occupancy rights of the premises - assessee is a shareholder of HPPL, which is a closely held company - held that:- assessee has received occupancy rights in the premises on perpetual basis and in lieu of which, assessee to hold shares in HPPL and also to give interest free refundable deposit of Rs. 18 lakhs towards proportionate land cost and development cost. Assessee is also entitled to transfer the occupancy rights by way of sale and transfer of block of assets and create third party rights subject to transferee deposit the required amount of interest free refundable security deposit and assessee thereafter to give possession to the transferee. CIT(A) is not justified to hold that it is perquisite benefit given by HPPL to its shareholder and not the transfer of occupancy rights to its shareholders. - provisions of section 2(24)(iv) of the Act does not apply to grant of occupancy rights by HPPL to the shareholder, i.e. assessee herein. AO has rightly held that the value of flats received are nothing but dividend given in the form of assets by HPPL.

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• 2012 (12) TMI 568
  Disallowance of expense incurred in relation exempt income u/s 14A r.w Rule 8D – Whether provision of Sec. 14A attracts on expense incurred to earn tax free income from SEZ unit – Held that:- As the similar issue has a been considered by the Tribunal in assessee’s own case for AY 2007-08 that the investment or expenses incurred to earn income from SEZ, do not merit reckoning in computing disallowance u/s 14A. Therefore, AO is not justified for making the disallowance u/s.14A r.w. Rule 8D to consider the investment made in SEZ unit whose income is not includible in the total income of the assessee. Issue decides in favour of assessee Disallowance of interest u/s 14A in respect of dividend income – Held that:- The assessee has earned dividend which is not includible in the total income of the assessee as it is exempt as per sec 10(34/35). To earn the said dividend from the investment, it is a fact that assessee must have incurred some administrative cost to maintain portfolio. Therefore issue remand back to AO for making a reasonable disallowance u/s.14A.

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• 2012 (12) TMI 567
  Share transactions in a particular case should be treated as investment activity or trading activity – Assessee consider income from sale of shares as Capital Gain – Held that:- The shares which have been sold within three months constitute about 90% of transactions. The pattern of transactions clearly shows that the assessee is trading in shares and is not an investor. Therefore such income shall be treated as business income In so far as long term capital gain is concerned, those shares have been sold after one year and, therefore, considering the holding period, volume and frequency, the income declared by the assessee as long term capital gain is reasonable.

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• 2012 (12) TMI 566
  Nature of Income – Whether the royalty income has to be considered as business income or as income from other sources - Assessee had handed over its Hotel, management and control on royalty basis treat it as business income – AO held that the royalty was nothing but payment received by the assessee on letting out of the hotel premises, treat as income from other sources - Held that:- It is a case of commercial exploitation of the assets owned by the assessee. Moreover, we also note that both in the earlier years and subsequent years the department had accepted the income as business income and, therefore, the doctrine of consistency is also in favour of the assessee. Appeal decides in favour of assessee Addition on account of cash deposit in bank u/s 68 – Assessee contended that cash deposit being money deposit by partner towards capital – AO’s ground was that there is time gap between cash withdrawal from partners bank account and deposit in assessee account – Held that:- As the introducing partner is doing his own business also and is regularly assessed to tax and cash withdrawals as well as introduction of cash in the firm are reflected in his accounts about which no dispute has been raised. Therefore, merely on the ground that there was time lag between the cash withdrawals and the deposits, addition cannot be justified as there is no legal bar on a person keeping money in cash. There is also no material placed on record to show that the cash withdrawals by partner had been used for some other purpose and were not available for cash deposits in the bank account of the firm. Appeal decides in favour of assessee Addition on account of cash deposit in current account u/s 68 – Assessee had handed over its hotel business on royalty basis – Said account in the name of hotel and hold by such another person who manage the control of hotel – Held that:- Such bank account had been duly disclosed in the balance sheet of Hotel and maintained separate P&L Account and Balance sheet for Hotel which he was running as per conducting agreement on payment, of royalty. Therefore no justification of such addition by AO. Appeal decides in favour of assessee

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• 2012 (12) TMI 565
  Whether loss from derivative transactions is eligible to set off against profit arising out of delivery based transactions – Whether delivery based purchase and sale of shares is deemed to be speculative business - Assessee is engage in both delivery and non-delivery based and derivatives transaction of shares & securities – AO treated the equity derivatives F&O losses upto 25.01.2006 as speculative loss - Provision of Sec. 43(5)(d) will be applicable vide Board Circular from date 25.01.2006, loss/profit arising on derivative transactions in equity futures and options at BSE/NSE was to be treated as business loss/profit – Held that:- Where an assessee is a company whose business consists in any part of the purchase and sale of shares of other Companies, it shall be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of such shares. Whether or not it is a profit or loss that has resulted from carrying on such business, is a consideration which is alien to the meaning of what constitutes a speculation business by the explanation to Section 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of an other speculation business. Therefore, loss from derivatives transactions is to be allowed to be set off against the profit arising out of delivery based transactions as both are speculative/deemed speculative transactions. Appeal decides in favour of assessee

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• 2012 (12) TMI 564
  Deemed dividend u/s 2(22)(e) - Company from sufficient reserves has advanced to a Director substantial interested - Assessee contented that this is a trade transaction and the advance was given for purchase of contiguous land since the company was not authorised to purchase non-agricultural land in his name – Held that:- As the assessee has received advance from the company on 07-11-06 and 08-11-06 and whereas the payments for land have been made on 08-06-06 and 26-10-06. Assessee has only given a colour to the transactions so as to characterise the same as in the nature of trade advance. Therefore provisions of section 2(22)(e) are clearly attracted in the facts and circumstances. Appeal decides in favour of revenue

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• 2012 (12) TMI 563
  Production/process Loss – Assessee engaged in the business of manufacturing and supply of iron and steel - Assessee claimed burning loss on actual basis - AO restricted the burning loss @ 6% on basis that the proper records and quantitative details are not maintained regarding production of steel and loss are not with line of similar industries - Held that:- As the burning loss cannot be static and it varies from case to case and largely depends on the raw material used. Burning loss is very subjective phenomenon and it depends on various facts and circumstances and so this cannot be precedent for all industries engaged in the manufacturing steel and iron. Appeal decides in favour of assessee

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• 2012 (12) TMI 562
  Nature of service in order to calculate export turnover u/s 10B - Whether the expenses incurred in foreign currency on onsite software development outside India was to be excluded from export turnover – Assessee contended that it was not rendering any technical services outside India to any third party, but the foreign currency expenses incurred were in connection with its own staff in foreign branch in foreign country - Held that:- Since the fact of the case was not similar as quoted by assessee in his favour. Therefore, admittedly these were related to technical services rendered outside India. Hence decides in favour of revenue Assessee has not raise separate billing for such expense to its clients – Held that:- Once expenses of the nature mentioned in clause (iii) of Explanation 2 to Sec. 10B are incurred, these will have to be excluded from export turnover, whether or not billings of the assessee specifically mentioned such items. Even if such expenses other than on technical services, are incurred in India, it still has to be excluded from export turnover. Appeal decides in favour of revenue & remand back to AO Exclusion of expense from total turnover calculated in relation to Sec. 10B – Held that:- The items which were excluded by the AO from export turnover by relying on clause (iii) of Explanation 2 to Sec 10B, will have to be excluded from total turnover also for the purpose of computing deduction u/s 10B. Issue decides in favour of assessee & remand back to AO

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• 2012 (12) TMI 561
  Reassessment u/s 147 – Whether reopening of assessment without giving the reasons for reopening sought by the assessee, will render whole proceedings unlawful and illegal – Held that:- No, the whole proceeding shall not be rendered as unlawful and illegal. The procedure, that was mandatory to be followed when a notice u/s 148 was issued. If the said procedure is not followed, orders of lower authorities have to be set aside and matter remitted back to AO for doing the assessment after supplying copies of reasons recorded. It is a curable procedural infirmity and the matter has to go back to the point where the defect occurred so as to cure of such defect, and continue with the proceedings in accordance with law. Therefore order of AO set aside & matter remand back to AO

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• 2012 (12) TMI 560
  Additional depreciation on the windmill - Assessee was having three divisions - Whether each of divisions can be considered independently for the purpose of claiming additional depreciation u/s 32(1)(iia) – AO argued that installed capacity would not increase by 10%, taking into consideration installed capacity of the entire company instead of individual unit – Held that:- If the weaving division is considered independently, undisputedly, the capacity had increased by almost 80%. In the nature of business of the assessee, in yarn manufacturing, we are of the opinion that the weaving division can be considered as a separate undertaking. Its expansion having resulted in installed capacity by going up more than 10%, additional depreciation was indeed allowable. Issue decides in favour of assessee Whether failure to file Form 3AA along with ROI, could result in denial of the additional depreciation – Held that:- Following the decision in case of Parry Agro Industries Ltd. (2006 (5) TMI 63 - KERALA HIGH COURT) that non-production of audit report can only be considered as procedural lapse and assessee having cured the lapse before completion of assessment, a disallowance could not be made for this reason. Issue decides in favour of assessee

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• 2012 (12) TMI 559
  Deemed Registration u/s 12A - Exemption under Sections 11 and 12 - Held that:- As per the assessee, it had submitted Form No.10A for the purpose of such registration as early as 7.12.2000. Nevertheless, having not received any order on such application, assessee submitted one more application on 13.12.2008. The CIT acted on second application and granted it registration under Section 12A with effect from 1.4.2008. Thus submission of second application by the assessee on 13.12.2008 will not efface the effect of its earlier application on 7.12.2000. The legal consequence arising out of such application will continue unblemished. If the assessee had made an application on 7.12.2000 in Form No.10A for a registration under Section 12A and if such application was not dealt with by the Department either by issuing an order denying registration or by issuing an order granting registration, thus in absence of an order either denying registration or granting registration, where the statutorily allowed time for dealing with an application in this regard had expired, registration would be deemed as granted - matter has to go back to the file of the A.O. for verifying whether assessee had indeed made an application prior to the impugned assessment year, before the appropriate authority for registration under Section 12A in Form 10A - The CIT(Appeals) did not put this issue before the AO while asking for a remand report. - Matter remanded back to AO to verify the facts.

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• 2012 (12) TMI 558
  Re opening of assessment - international transactions exceeded Rs. 15 Crores - Held that:- As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] for resorting to Section 147, the basic condition to be satisfied is that A.O. should have a reason to believe that income chargeable to tax had escaped assessment. As in the present case turnover of an assessee in international transaction exceeding Rs. 15 Crores, and rules of Department requiring a compulsory scrutiny of such cases, cannot in any way be deemed as a reason to believe that there was escapement of income. No reasonable man can come to such a belief based on such a reasoning. There was no relevance of the reason cited, with the reopening done. Therefore the re-opening suffered from a fundamental flaw. Upward adjustment to the arm's length price to its associate enterprises - Rejection of internal comparables and TNMM analysis based on internal comparables by TPO - Held that:- ITAT in the preceding assessment year concluded that the assessee was justified in undertaking internal bench marking analysis on stand alone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm’s length price in respect of international transactions undertaken with the associated enterprise. It was further concluded that the TPO had no mandate to have recourse to external comparables when, in the present case, internal comparables were available, which could be applied for determining the arm’s length price of international transactions with AEs - The Revenue have also not placed any material so as to enable us to take a different view in the matter in the present year. Transfer pricing adjustment based on TNM method are to be applied on transaction levels and not at enterprise level. If that be so, nothing stops an assessee from making internal TNM study, for justifying the value of its international transactions, as long as it can show that it had sufficiently uncontrolled transaction with non-AEs, which could give a meaningful analysis. The benchmarking that has to be done in TNMM can be either with an external party or based on segmental result of the assessee itself. International transfer pricing methodology does not reject an internal TNM method or stipulate that TNMM based could be based only on external comparables. In a nutshell, the view taken by the lower authorities that TNMM could not be adopted on internal analysis, cannot be accepted. Admittedly, the PLI for AE transaction was 3.91% only as per assessee’s own working, against 4.4% for non-AE transactions. Thus by adopting 4.4% as the comparable PLI, the expected operating profit on operating cost of Rs. 22,52,92,028 will be Rs. 99,12,849/-. The operating profit shown by the company is Rs. 88,61,863/-. So, the upward revision that can be made by adopting ALP will be Rs. 10,50,986.23. A.O. is directed to consider this amount as the upward adjustment necessary on account of fixation of ALP. Ordered accordingly.

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• Customs

• 2012 (12) TMI 589
  Initiation of proceedings under CHALR 2004 - actively engaged in High Sea Sales and diversion of goods Held that:- High Sea Sales agreement at the time of clearance was examined by the officers who cleared the goods and there is no allegation that the said agreement is fabricated one entered by the parties to the contract. Further, the High Sea Sales agreement have been executed prior to imports, therefore, proceedings under CHALR 2004 cannot be initiated for this act of the appellant. Appellant was not in the knowledge of the diversion of goods by the importer. Moreover, the appellant has arranged the transportation of the goods and goods have been handed over to the representative of the importer at Kalamboli Weigh Bridge where the appellant had asked to deliver the goods to the importer. This fact has been confirmed by the transporter during the course of their statement recorded, therefore, the allegation that appellant was actively involved in the diversion of the goods is not sustainable - allegation leveled against the appellant for violation of Regulation 13(d), (e) and (n) of CHALR 2004 is not sustainable - in favour of assessee.

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• 2012 (12) TMI 554
  Classification – Refrigerator originating from Thailand - benefit of notification No. 85/04-Cus - assessing officer classified the goods under CTH 84181090 on the ground that the goods under importation were combined refrigerators-freezers, fitted with separate external doors and therefore, not eligible for the aforesaid exemption – Held that:- Classification of combined refrigerator-freezer with separate external doors would be under sub-heading 8418.10 and not under 8418.21 as was being followed by certain customs field formations. Accordingly these goods are not covered under sl.No. 50 of notification No. 85/2004-Cus dated 31-8-2004 – in favor of revenue

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• 2012 (12) TMI 553
  Penalty – smuggling of foreign currency for consideration – Held that:- Foreign currency was recovered from one Shri Iqbal Suleman while boarding a flight of Oman Airways to Dubai. Shri Suleman in his statement recorded under Section 108 of the Customs Act named the appellants who helped him in taking the currency in the airport without disclosing to the Customs authorities for the consideration of Rs. 4,000/-, i.e. Rs. 2,000/- each - appellants also admitted that they had received, on earlier occasions also, gifts from Shri Suleman such as mobile phones etc. The appellants being in the security staff of the Oman Airways are to look after security of the passengers - for the safety of passengers travelling by air, the persons like the appellants being in the security staff can do anything for a monetary consideration – In favor of revenue

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• Corporate Laws

• 2012 (12) TMI 588
  Company in liquidation - liquidator rejected the part of claim made by the bank - held that:- the Official Liquidator cannot be said to have committed any illegality in declining to admit the claim in relation to the interest from 19.10.2002 to 31.04.2009, being the period after the date of the order of the winding up; and in relation to the other expenditure as incurred without taking permission from the Court or approval of the Official Liquidator. Of course, the Official Liquidator would be making final payment in accordance with law after the adjudication of all the claims.

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• 2012 (12) TMI 587
  Loss of shares - request for 'stop transfer' is received by the company/STA from the previous registered holder - Rectify the register of members by substituting the name of respondent No. 1 in place of respondent No.3 qua 100 shares - Held that:- The appellant company was duty bound not to transfer these shares once it was brought to its notice that the shares had been lost and a proper NCR had been lodged with the police. It was incumbent upon the company to give notice to the last holder i.e. respondent No. 3 to surrender his share certificates within 21 days mentioning the details of the claim made by the previous registered holder. These guidelines/ Instructions which were binding upon the company have not been adhered to. Submission of the appellant that respondent No. 1 had slept over his right for this intervening period of two years i.e. 13.11.2006 up to February, 2008 appears to be a mis-directed submission as appellant company had itself on 27.02.2008 notified respondent No.1 that the transfer deeds for the said shares had been produced by one Lalit Kumar Goyal for which the objections had been sought from respondent No. 1 which were duly replied on 11.03.2008 and at the cost of repetition, a second set of documents including the NCR complaint was again filed along with this letter. The letter of 27.02.2008 had asked for a copy of the FIR regarding the loss of shares/injunction order for stop transfer, the SEBI Regulations postulate that either the FIR/copy or an acknowledged police complaint or a copy of the injunction order for stop payment had to be furnished. The requisite document i.e. copy of the acknowledged police complaint of 11.05.2006 was already with the company but it was again sent on 11.03.2008 with a request to stop the transfer up to 30.04.2008 (which was even otherwise not an unreasonably long period) to obtain the other necessary documents to establish the claim of the petitioner. Ths in this background, the impugned order holding that the appellant company is at fault and guilty of a wrong transfer suffers from no infirmity. Appeal is without any merit.

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• 2012 (12) TMI 556
  Winding-up petition - held that:- The documents relied and referred by both the Counsel itself shows that there are various questions, which need to be adjudicated first before accepting the averments of the Petitioner. Unless the transactions based upon which the present Petition is filed by the Petitioner has binding force and unless it is declared accordingly in view of the challenge so raised, I am inclined to observe that the present Company Petition, as filed, is not sufficient to pass the winding-up order against the Respondent-Company. There is no foundation to accept and exercise the discretion that the Respondent-Company "neglect to pay due and "payable/agreed amount". The Petitioner is not remedyless to recover the amount. - Petition dismissed.

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• 2012 (12) TMI 555
  Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. Certified copy of the order be filed with the Registrar of Companies within 30 days from the date of receipt of the same. The whole or part of the undertaking, the property, rights and powers and also all the liabilities and duties of the Transferor Company No. 1 to 2 be transferred to and vest in the Transferee Company without any further act or deed - Upon the Scheme coming into effect, the Transferor Companies shall stand dissolved without winding up. Order of amalgamation will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law - Petitioner Companies would voluntarily deposit a sum of Rs. One lac in the Common Pool fund of the Official Liquidator within three weeks from today - Petition is allowed.

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• FEMA

• 2012 (12) TMI 590
  Remittance out of India without having imported any goods on the basis of the forged bogus documents. - allegation based on statement - held that:- the Adjudicating authority has in her order very clearly rerecorded as a fact that there is no retraction on record. In case, there has been any retraction the appellant would have challenged the same and produced the retraction before the Tribunal or called upon the respondents to produce the retraction which according to him was in possession of the respondent. However, no such exercise or even an attempt to the same appears to have been carried out before the Tribunal. Order of tribunal directing the appellant to pre deposit 50% of the penalty amount i.e. Rs. 25 lacs out of Rs. 50 lacs imposed by the Adjudicating authority sustained.

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• 2012 (12) TMI 557
  Whether the Tribunal was justified in directing the appellant to deposit 50% of the penalty Rs. 35 lacs imposed by the Adjudicating Authority for the purposes of hearing the appellant's appeal under the Foreign Exchange Regulation 1973 ('FERA 1973') on merits? - held that:- The emphasis before the Tribunal on the part of the appellant appears to have been financial hardship and for that purpose had filed an affidavit contending that he is in no position to deposit the penalty amount and in support thereof contends that he is even not an Income Tax assesee. This is difficult to accept in the light of the appellant's contention that he was an independent person and was carrying on import business on his own and in that regard had remitted and amount of US$ 29,91,100/- during the period January to April 1991 on his own. The order of the Tribunal dated 25/1/2008 directing the appellant to deposit 50% of the penalty amount i.e. Rs.17.50lacs out of Rs.35lacs imposed upon him is reasonable.

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• Service Tax

• 2012 (12) TMI 614
  Waiver of pre-deposit, interest & penalty – Scientific and Technical Consultancy Services u/s 65(92) - Held that:- Prior to May, 2008 service tax is payable on receipt basis. Assessee has not received any amount towards rendered service at all although they have made entries in their books of account. Stay granted.

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• 2012 (12) TMI 613
  Cargo Handling Service – Demand of Service Tax - Assessee being an individual rendering services to M/s. J.M. Baxi & Co. as regards loading & unloading of cargo – Held that:- If an individual is undertaking activity of loading and unloading of cargo, it would not come under the purview of service tax as Cargo Handling Services. Following the decision in case of MODI CONSTRUCTION COMPANY (2011 (4) TMI 598 - JHARKHAND HIGH COURT) held that any services provided within the factory premises would not come under the definition of Cargo Handling Services. In favour of assessee

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• 2012 (12) TMI 612
  Cenvat credit denied - application for inclusion of GTA service in the centralized registration pending - Held that:- Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. Apart from the fact that during the said period, the application was pending in the office of Deputy Commissioner, without their being any decision taken by him on the same, there is otherwise no dispute about the availability of the credit to the appellant. The substantial benefit, if otherwise available, cannot be denied on the technical and procedural grounds - appellant was otherwise entitled to the benefit of Cenvat credit of Service Tax paid on GTA services, so received by them, the denial of the same on the ground that the credit was availed on the basis of invoices raised by their head office is neither justifiable nor warranted. Tax paid on the freight for dutiable transportation of the goods from the depots is also admissible as credit considering the earlier decision of the Tribunal in the case of appellants own case, vide Order dated 15.12.11 - in favour of assessee.

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• 2012 (12) TMI 581
  Refund claim - Cenvat Credit on Service Tax distributed by the Head Office - Denial as Head Office was not registered as Input service distributor - Held that:- Requirement for registration came only in 2006 and prior to this there was no such requirement. Therefore, what is required to be seen is whether the input service in respect of which the credit is taken is required for providing the output service and has nexus with the rendering of the output service. If the nexus can be established, the appellant would be rightly entitled for the credit of the service tax paid thereon. Service tax paid on leased telecom lines - denial of Refund claim - Held that:- Appellants are rightly entitled for Service tax credit and refund thereon for the reason that the exports are undertaken electronically and to undertake this export they need dedicated lines from their office premises to the telecom authorities, who will receive the data for transmitting the same abroad. Without these dedicated lines, the appellant cannot deliver the output service and, therefore, leasing of telecom lines by the telecom authorities is an eligible input service as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. No export of Output Service - Held that:- The view adopted by Revenue that appellant has not exported the output service because the service was transmitted through telecom service providers in India is completely irrational as when data is transmitted through electronic medium, it has to be first transmitted to a server of the telecom authorities in India and thereafter uplinked/transmitted to the foreign service recipient - foreign service recipient has received the output service and has made payment in convertible foreign exchange to the appellant towards the services received, payment has been received by the Head Office of the appellant unit in Bombay whereas they are situated in Nashik and the appellant needs to produce evidence to show that the payments which were received in convertible foreign exchange in Bombay related to the exports made by the units at Nashik - remand the matter to the original adjudicating authority subject to verification of these facts through documentary evidence to consider the refund claim of the appellant - in favour of assessee by way of remand.

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• 2012 (12) TMI 580
  Application for Modification - applicant submits that they have paid the entire amount of service tax - waiver claimed of pre-deposit of Duty, Interest and Penalty - Held that:- Contention of Applicant was that there was a bonafide belief that they have paid the entire amount of service tax and that the statement was made before this Tribunal on 23/05/2012 on the basis of certificate issued by the Chartered Accountant wherein it has been stated that the demand raised in the show-cause notice, the whole of the service tax has been paid. As per the applicant the amount payable is only Rs. 6,24,51,219/-, which has been paid. But as per Revenue entire amount of service tax in dispute was Rs.18,08,18,228/- In the interest of justice, the applicant directed to make a pre-deposit the balance amount of service tax in dispute apart from already made along with 25% of penalty as directed by this Tribunal by order dated 28/06/2012 within a further period of eight weeks and report compliance. Show-cause notice has been replied by the appellant and they have tendered unconditional apology for the inconvenience caused to this Bench, therefore, withdraw the show-cause notice issued to the applicant.

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• 2012 (12) TMI 579
  Discharge of service tax liability by the agent of the assessee - payment of service tax under the wrong head - Held that:- In this set of facts, service tax liability has been discharged by Matrix on the above said activity cannot be denied merely on the ground that it has paid under Advertisement Agency Service. As M/s Matrix has paid the service tax under the category of Advertisement Agency Service that does not mean that M/s Matrix has not paid service tax on behalf of the appellant. By mere paying the service tax liability under wrong head does not meant that service tax liability has not been discharged. - In this case, appellant has appointed M/s Matrix as her agent to discharge her service tax liability on her behalf and same has been discharged by M/s Matrix. - In favour of assessee

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• Central Excise

• 2012 (12) TMI 586
  Confiscation of goods - Held that:- The finding of the Tribunal that the goods found in the factory are confiscated has not been challenged by the respondent before this Court. Therefore, no decision is called for in this regard. Redemption fine reduced by Tribunal - Held that:- Reasons provided by the Tribunal as to the facts and circumstances which had led it to reduce redemption fine from Rs.2 lakhs to Rs.50,000/- only is not provided - Tribunal is required to reconsider the issue of imposition of redemption fine. Duty Demand - 9120 kgs. of Sikandar Gutka of printed laminated flexible film rolls found in the godown of the transporter - Tribunal allowed the appeal - Held that:- The Tribunal has failed to consider that the adjudicating authority had in his order recorded a finding that the respondent were not recording production in production slips/records so as to evade payment of excise duty. However, the order of the Commissioner (Appeals) placing reliance upon the statement of an employee of the respondent to the effect that the only factory in Mahad area, manufacturing printed laminated film rolls was that of the respondent No.1. Further the statement of the respondent No.3 and his employee were ignored by the Tribunal merely on the ground that their statement in the absence of corroboration by any independent evidence cannot be accepted. There is no analysis of why the orders of the lower authorities holding the "Sikandar Gutka" printed laminated flexible film rolls were liable for confiscation and that respondent No.1 is liable to pay excise duty of Rs.2.57 lakhs is bad in law - restore the matter to the file of the Tribunal for fresh consideration - appeal in favour of Revenue.

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• 2012 (12) TMI 585
  Manufacture - immovability - assembly botorized blinds - stay - held that:- the fabric is fixed to the Aluminum tubes in the factory and besides this, in the case of motorized blinds, the motor is also fixed in these tubes at this stage. Therefore, the blinds which are chargeable to duty under Tariff sub-heading 39252000, 630300 and 70199000 came into existence in the factory premises and these blinds are installed at site. Prima facie, we are also of the view that since these blinds can be shifted, though in dismantled condition, the same cannot be said to be part of immovable property. Though the appellant plead that during the period of dispute they were registered with the central excise authority for payment of service tax, earlier under Heading "installation services" and subsequently under "work contract services", it is not known as to whether their activity of assembly of roller/vertical blinds had been disclosed by them from the central excise authorities. In any case, the question of limitation being a mixed question of law and facts can be examined only at the time of final hearing. Thus this is not a case of granting un-conditional waiver from the provisions of Section 35F and as such, the amount of Rs.15 Lakh paid by the appellant, during investigation, is not sufficient for safeguarding the interests of revenue. Though the appellant pleaded that they have paid the service tax of Rs.14 Lakhs, this service tax is obviously on the service component. The appellant company is, therefore, directed to deposit an amount of Rs.7 lakhs within a period of 8 weeks from the date of this order on deposit of this amount the requirement of pre-deposit of balance amount of duty demand, interest thereon and penalty and the requirement of pre-deposit of penalty by General Manager of the Appellant company shall stand waived.

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• 2012 (12) TMI 584
  DTA clearance by 100% EOU - Whether assessee would be eligible for concessional rate of duty under notification no.23/03-CE in respect of the DTA sales for which there was no permission from the Development Commissioner - DTA sales made by assessee were in excess of the permitted DTA sales upto 31.3.2008 - On the payment of duty at the concessional rate under Notification No.23/03-CE – Further, the assessee made DTA clearances from 1.4.08 to 31.09.2008, without the permission from the Development Commissioner at concessional rate of duty - Revenue contended that, DTA sales made in excess of the permitted value and without approval were not eligible for concessional rate – Held that:- For the period 2007 -2008, the DTA clearances made by the appellant were in excess of the permitted clearances by an amount and the same cannot be said to be in accordance with the provisions of para 6.8 of the Foreign Trade Policy and hence, would not be eligible for concessional rate of duty The period 1.4.2008 to 30.09.2008, the assessee not produced any letter from the Development Commissioner permitting the DTA clearances for this period. In absence of the Development's letter, it cannot be said that during this period the appellant had achieved positive NFE or that DTA clearances were within 50% of the FOB value of the exports. In view of this, we are of the prima facie view that for this period also, the appellant would not be eligible for concessional rate of duty under Notification No.23/03-CE. In favour of revenue

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• 2012 (12) TMI 583
  Non obtaining Central Excise registration - whether the fabrication of miter bends, reducers of iron & steel from the duty paid pipes would amount to manufacture? - Held that:- Appellant had been awarded a contract of water supply project of supply of water to Amerli district consisting the work of fabrication, supply, laying and jointing water transmission main from Botad in Bhavnagar district in Chavda in Amreli district on turn key basis with all civil, mechanical and instrumentation work by Government of Gujarat vide letter dated 24.09.99 - for execution of such project, appellant was given a site wherein appellant procured duty paid pipes and used the same for execution of pipe line project and the said miter bends, reducers of iron & steel were fabricated from duty paid pipes at their work shop situated at the site at Botad. Demand on the appellant on these miter bends and reducers confirmed only on the ground that it was done so at their work shop and removed from work shop to the site for further use in the laying of pipe line for water project but this stand of the lower authorities seems to be incorrect, as the address as well as the show cause notice specifically talks about the reducers and the bends being fabricated at their site at Botad. Thus the fabrication of these items at site for the use at site is not liable for duty as has been held in the case of DODSAL PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BANGALORE [2005 (10) TMI 118 - CESTAT, MUMBAI] - in favour of the appellant.

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• 2012 (12) TMI 552
  Refund – appellants made export of Readymade Garments and filed a refund claim under the provisions of Rule 5 of Cenvat Credit Rules, 2002 read with Notification No. 54/2001-CE - Revenue submitted that Notification No.54/2001 is issued under provisions of Section 3 of the Central Excise Act and fixing tariff value in respect of readymade garments @ 60% of the retail sale price. As the appellant had not fixed any retail sale price, therefore, taking into consideration the price as per market value declared in the shipping bill is taken into consideration as maximum retail price (MRP), refund rejected – Held that:- There is no requirement of fixing the RSP on the goods for export - as the readymade garment has not been notified under Section 4A of the Central Excise Act, there is no requirement for fixing the RSP on the readymade garments which were exported therefore, provisions of Notification No.20/2001-CE are not applicable - rejecting a part of the refund claim by taking into consideration the provisions of Notification No. 20/2001-CE, is not sustainable

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• 2012 (12) TMI 551
  Waiver of pre-deposit – appellant-company, registered as input service distributor, was distributing input services to various manufacturing units of theirs during the material period - they were also engaging themselves in a trading activity - Held that:- It is not the case of the department that any duty or tax was payable on the trading activity - entire credit was utilized for payment of duty of excise on the dutiable final products - manufacturing units were lawfully utilizing the entire credit for payment of duty on the dutiable final products. Trading activity was not one of the taxable services under Section 65 of the Finance Act 1994 and, therefore, there was no question of payment of service tax on that activity by the manufacturing units of the company - manufacturing units could not have been expected to maintain separate accounts. The show-cause notices appear to disclose self-contradictory stand of the revenue with reference to the fact of this case - appellant also seems to have a good case on limitation against the impugned demands - in favor of assessee

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• 2012 (12) TMI 550
  Eligibility of credit taken on the capital goods/input services used in laying down railway line for about 10 Kms. from the factory to the nearest railway station and in laying the pipeline from the factory to nearby dam – Held that:- Credit accumulated can be utilized only when they started manufacturing final products and clear them - They could not utilize the credit so far and that it will take time before they can utilize the credit accumulated and also undertakes not to utilize the credit till the Appeal decided – pre-deposit waived

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• 2012 (12) TMI 549
  Waiver of pre-deposit - manufacture of motor vehicles and motor vehicles parts – alleged that certain quantity of motor vehicles which were cleared to the depots and were subsequently transferred to other depots and cleared on the higher value – Held that:- Applicant produced data regarding such goods and submitted that in majority of cases applicants have sold the goods at lower value on which the duty has been paid at the time of clearance from the factory - in view of the definition 'place of removal' and in view of the provisions of Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods Rules, 2000 - applicants have made out a strong case for total waiver of pre-deposit - Stay petitions allowed

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• 2012 (12) TMI 548
  Provisional assessment - whether the respondents are liable to pay interest on finalization of the assessment if the differential duty has been paid before the finalization of the assessment – Held that:- Assessee is not liable to pay interest on the differential duty paid by them before the finalization of the provisional assessment

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• 2012 (12) TMI 547
  Defaulted in payment of duty – alleged that there is a violation of Rule 8 (3A) of Central Excise Rules inasmuch as they are strictly prohibited from utilizing CENVAT credit during the default period – Held that:- Directing the appellant to pay the demanded amount in cash and allowing credit of the said amount (no such order has also been passed by the authorities below) would amount to double payment of duty. However there is clear violation of provisions of Rule 8(3A) of Central Excise Rules - appellant directed to deposit

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• 2012 (12) TMI 546
  Quantification of demand - assessee is disputing the computation of the demand – Held that:- Full value of machinery items which are traded, is taken into consideration whereas as per the provisions of Rule 6 of the Cenvat Credit Rules, the value in case of trading shall be different between the sale price of the cost of goods sold or 10% of the cost of goods, whichever is more - demand is not sustainable - amount already deposited is sufficient for hearing of the appeal. The pre-deposit of the remaining amount of duty, interest and penalty is waived. Stay petition allowed.

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• 2012 (12) TMI 545
  Waiver of pre-deposit – alleged that the applicants were taking non refundable amount from the customers as security deposit in respect of the reusable containers used in the manufacture of bottled water and Revenue wants to add this amount to the assessable value to the MRP - applicants submitted that the cost of reusable containers has been amortized and included in the MRP – Held that:- Applicants submitted the documents on 28.11.2011 such as copies of certificate of the Chartered Accountant dated 20.3.2003, Expenses Summary Statement as per Trial Balance as on 31.3.2000, copy of worksheet of landed cost of packing materials, copies of purchase invoices of packing materials etc. In spite of submitting these documents, the same were not taken into consideration while passing the impugned order - matter is remanded to the adjudicating authority

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• 2012 (12) TMI 544
  Denial of cenvat credit - CENVAT credit availed in respect of the structural items used for the fabrication of sugar silos and weighbridge - invoices are seen mentioned in the Chief Engineer's statement which indicates that the HR coils covered by the invoices were used in the fabrication of sugar silos - same set of invoices and the same structural items are seen stated in the Chief Engineer's statement which also indicates the end-use as sugar silos – Held that:- Chief Engineer's statement specifies the structural items and also states that these were used in the fabrication of weighbridge. There is no evidence to show that the weighbridge fabricated out of the structural items covered by the above three invoices is located within the factory premises of the respondent - order is sustained to the limited extent of grant of CENVAT credit of Rs.78,185/- which was availed by the respondent on the following invoices viz. No.201, 209 and 210 dt.08/09/2006, No.2089 and 2378 dt.19/02/2007 and No.2113 dt.20/02/2007. Any further CENVAT Credit allowed by the Commissioner (Appeals) shall stand denied to the respondent - credit so quantified by the original authority shall be recovered from the respondent without interest or penalty.

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• 2012 (12) TMI 543
  Remission of Duty – clearance of excisable goods from the factory of a Hundred Percent EOU. - calculation of duty - held that:- The provision under Rule 21 of Central Excise Rules is for goods manufactured in a factory and goods have been lost or destroyed by natural causes or unavoidable accident before removal from factory. This provision is clearly not applicable. Sections 13 and 23 of Customs Act are applicable to goods imported into the country and which are not yet cleared out of the customs area. These provisions are not clearly applicable. The argument that these goods are to be treated as imported goods is being raised apparently for the reason that duty at rate prescribed in Customs Tariff is being demanded. This is not the correct position. Duty being demanded is excise duty. Duty payable is calculated at rates prescribed in Customs Tariff. Imposition of Penalty - held that:- There are mitigating factors in favour of the appellant. Revenue has not been able to prove any mala fide intentions of the appellant - penalty imposed on the appellants is set aside - Thus appeal is allowed partially.

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• Indian Laws

• 2012 (12) TMI 578
  Appointment of Mr. Pradip Kumar as Judicial Member of Customs Excise and Service Tax Appellate Tribunal [CESTAT] - he was a practising Advocate in the Calcutta High Court as well as before the CESTAT for over twenty years mainly dealing with the customs, excise and service tax matters. On 22nd April, 2006 he appeared for an interview before the Selection Committee for the post of Member [Judicial] in CESTAT. On being duly selected, he assumed charge as Member [Judicial] in the CESTAT on 22nd November, 2006. Service conditions of the Member of the CESTAT are governed by Customs, Excise and [Service Tax] Appellate Tribunal Members [Recruitment and Conditions of Service] Rules 1987 [hereinafter referred to as the “Rules”]. The controversy in the present proceedings is limited to the interpretation of Rule 8 and Rule 9 [2] of the aforesaid Rules. Under the Rules, Member of the CESTAT is put on probation for a period of one year [Rule 8(1)]. The order of discharge, being based upon the report of the President, is clearly stigmatic and could not have been passed without giving an opportunity to the respondent to meet the allegations contained in the report of the President, CESTAT. Although, the High Court had allowed the writ petition of the respondent only on the ground that there had been a violation of Rule 9(2), we have come to a conclusion that the order of discharge was vitiated being colourable exercise of power, stigmatic and punitive in nature and such order cannot be sustained in law. In our opinion, the order of discharge is arbitrary and therefore violates Article 14 of the Constitution. The appellant - Pradip Kumar is entitled to be reinstated in service. He shall be entitled to full back wages during the period he has been compelled to remain out of service. Union of India is directed to release all consequential benefits to the said Pradip Kumar within a period of two months of the receipt of a certified copy of this order.

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• 2012 (12) TMI 577
  RTI - secrecy - Bihar Public Service Commission - Queries related to providing the names, designation and addresses of the subject experts present in the Interview Board, names and addresses of the candidates who appeared, the interview statement with certified photocopies of the marks of all the candidates, criteria for selection of the candidates, tabulated statement containing average marks allotted to the candidates from matriculation to M.Sc. during the selection process with the signatures of the members/officers and certified copy of the merit list. The answer book usually contains not only the signature and code number of the examiner, but also the signatures and code number of the scrutiniser/co-ordinator/head examiner. The information as to the names or particulars of the examiners/co- ordinators/scrutinisers/head examiners are therefore exempted from disclosure under Section 8(1)(g) of the RTI Act, on the ground that if such information is disclosed, it may endanger their physical safety. The possibility of a failed candidate attempting to take revenge from such persons cannot be ruled out. On the one hand, it is likely to expose the members of the Interview Board to harm and, on the other, such disclosure would serve no fruitful much less any public purpose. Furthermore, the view of the High Court in the judgment under appeal that element of bias can be traced and would be crystallized only if the names and addresses of the examiners/interviewers are furnished is without any substance. The element of bias can hardly be co-related with the disclosure of the names and addresses of the interviewers. Bias is not a ground which can be considered for or against a party making an application to which exemption under Section 8 is pleaded as a defence. Bihar Public Service Commission is not bound to disclose the information asked for by the applicant under Query No.1 of the application.

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