TMI Tax Updates - e-Newsletter
December 22, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. ALLOWABILITY OF PRIOR PERIOD EXPENSES

   By: DR.MARIAPPAN GOVINDARAJAN

2. FURNISHING OF INVALID PERMANENT ACCOUNT NUMBER IN RETURNS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Legislative Business Transacted During Winter Session, Concluded On 20th December 2012

2. TRAI Specifies Access Facilitation Charges for Submarine Cable Landing Stations

3. Public Sector General Insurance Companies (PSGICs) to help in Spreading the Advantages of Insurance to the Rural Masses and in Marketing Micro Insurance Products to Further the Financial Inclusion Initiatives in the Country

4. Government Adopts Five Pronged Strategy to bring back the black Money

5. Income Tax Service Centres Established in Various Parts of the Country to Provide Facilities for the Income Tax Payers

6. Government Advises PSBs to take Number of Initiatives to increase the pace of Recovery and Manage NPAs

7. Loans to Install Handpumps to Marginalized Farmers by Cooperative Commenrcial Banks and Reginal Rural Banks

8. Janashree Bima Yojana and Aam Aadmi Bima Yojana Merged for better Administration and Services in Providing Life Insurance Cover to the Economically Backward Sections of the Society

9. Undisclosed Income of about Rs. 600 Crore Detected under DTAAs Since March 2009 and taxes of about Rs. 200 Crore Realized

10. Government intends to infuse Capital in Various Public Sector Banks to Cater to the Growing Credit needs of Productive Sectors of Economy and to help the banks in getting Prepared for Implementation of basel III Norms

11. Investor Awareness Programmes Conducted by The Ministry of Corporate Affairs

12. Competition Commission of India Enquiry against All India Motor Transport Congress

13. Central Monitoring Committee and Regional task Forces on Vanishing Companies

14. The issue of Uniform interest Rate on Savings Bank Account

15. Inter-Ministerial Group on Multi-Level Marketing Companies

16. FIRs against all the 87 Vanishing Companies and their Directors

17. Issuance of Notices by NPPA

18. Import of pharmaceutical ingredients

19. Production of Coir Fibre

20. Erroneous Trading Cases in NSE

21. Priority Sector Lending Norms for Foreign Banks

22. Electronic Payment System in Towns and Villages

23. Variation in Rate of interest by Different Banks

24. No Proposal to Reimpose Estate Tax again in Future

25. Public Investment Board

26. Complaints on Ponzi Schemes

27. Cartelization in Steel Sector

28. Marketing of Iron Ore by NMDC

29. Quality Standard on Import of Steel

30. Rise in Rural Steel Consumption

31. Exchange Rate of Foreign Currency Relating to imported and Export Goods Notified

32. Opening Statement by Prime Minister at Plenary Session of India-ASEAN Commemorative Summit

33. Telecom Regulatory Authority of India has today Released a Pre-Consultation Paper on ‘Review of Tariff for National Roaming’

34. Broadband on Demand - Migration from IPv4 to IPv6

35. Migrating to CTS 2010 standard - Submission of compliance report

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

37. Bilateral Trade between India and EU

Notifications

Companies Law

1. G.S.R. 906(E) - dated 19-12-2012 - Co. Law

Amend the Companies(Central Government's) General Rules and Forms,1956

Customs

2. 61/2012-Customs - dated 18-12-2012 - Cus

Amend in notification No 10/2008 – Customs, dated 15th January 2008, so as to further deepen the tariff concessions in respect of goods imported from Singapore under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore.

3. F. No. 437/76/2012-Cus. IV - dated 21-12-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Bhatinda Ceramics Private Limited., and others,

4. F.No. 437/77/2012-Cus. IV - dated 20-12-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - Volvo India Private Limited

5. 111/2012 - dated 20-12-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 21st December, 2012

6. 110/2012 - dated 14-12-2012 - Cus (NT)

Amends Notification No. 62/1994-Custom (N. T.) - Customs ports — Appointment for specified purposes.

7. 05/2012 - dated 20-12-2012 - Safeguard

Seeks to levy Safeguard Duty on Import of Carbon Black From China

Income Tax

8. 54/2012 - dated 17-12-2012 - IT

Double taxation agreement - Agreement with foreign countries or specified territories - Notified 'Specified Territory'

Circulars / Instructions / Orders

VAT - Delhi

1. 26 OF 2012-13 - dated 14-12-2012

Clarification regarding payment of tax on monthly basis by Quarterly Dealers whose tax liability exceeds one lakh rupees.

Income Tax

2. F. No. 19-Ad(ATD)/2012 - dated 13-12-2012

Instructions - E-Payment of Tribunal Fees the respective Challans are to be counter signed by the concerned bank manager or attested by the authorized Representatives or assessees themselves

FEMA

3. 63 - dated 20-12-2012

External Commercial Borrowings (ECB) for Micro Finance Institutions (MFIs) and Non-Government Organizations (NGOs) - engaged in micro finance activities under Automatic Route

4. 62 - dated 18-12-2012

Exim Bank's Line of Credit of USD 16.88 million to the Government of the Republic of Gambia

Companies Law

5. 41/2012 - dated 18-12-2012

Filling of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 01.04.2011- Corrigendum to General Circular No. 39/2012.

Highlights / Catch Notes

Income Tax

• No deduction u/s 80IA for net interest income from employee loans, margin money, and tax refund interest.

  Case-Laws - AT : Deduction u/s 80IA - whether the assessee is entitled to deduction u/s 80IA of the Act on the net interest income on employees loans & advances, interest on margin money and interest income on dues towards income tax refund - held no - AT
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• Court Rules Payment Year Crucial for Deductions u/s 43-B; Favoring Assessee on Tax Liability Payments.

  Case-Laws - HC : Disallowance u/s 43-B - amounts deposited in (PLA) - For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account - in favour of assessee. - HC
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• Section 194A: Partnership Act's Legal Framework vs. TDS Obligations on Partner's Interest Payments to Firm.

  Case-Laws - AT : TDS u/s 194A - payment of interest by the partner to the partnership firm - the position of legal relationship as prevailing under the Partnership Act should not be applied in abstract, only to the provisions of sec. 194A of the Act. - AT
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• NOSTRO Interest: Mutuality Principle Applies to Transactions with Own Head Office/Branches, Not with External Entities.

  Case-Laws - AT : There is a clear distinction between the NOSTRO interest earned/paid by the assessee from/to its own Head office/overseas branches and NOSTRO interest paid/earned to/from other than assessee's own Head office or branches. Whereas in the first situation, the principle of mutuality will apply and in the later case it will not. - AT
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• Trust's Fund Misuse Violates Section 13(1)(c), Revenue's Appeal Approved for Charitable Purpose Non-Compliance.

  Case-Laws - AT : Violation of sec. 13(1)(c) - As the assessee has failed to prove that application of fund by the trust was for charitable purpose appeal of revenue allowed. - AT
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• "Any Expenditure" in Section 37 Includes Both Expenses and Losses, Even Without Actual Payment by Taxpayer.

  Case-Laws - AT : The expression “any expenditure” used in section 37 is to cover both “expenses incurred”as well as an amount,which is really a “loss”,even though such amount has not gone out from the pocket of the assessee the advance written off by the assessee as irrecoverable is allowable as business loss - AT
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• Immunity Granted: Section 271AAA(2) Protects Assessee from Penalty Despite Delayed Tax Payments.

  Case-Laws - AT : Penalty u/s 271AAA - the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - AT
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• E-Payment of Tribunal Fees Needs Challans to be Countersigned by Bank Manager or Attested by Authorized Representatives.

  Circulars : Instructions - E-Payment of Tribunal Fees the respective Challans are to be counter signed by the concerned bank manager or attested by the authorized Representatives or assessees themselves - Order-Instruction
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• New Double Taxation Agreement Designates 'Specified Territories' to Prevent Double Taxation and Facilitate International Financial Transactions.

  Notifications : Double taxation agreement - Agreement with foreign countries or specified territories - Notified 'Specified Territory' - Notification
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Customs

• Safeguard Duty Imposed on Carbon Black Imports from China to Protect Domestic Industry and Ensure Fair Competition.

  Notifications : Seeks to levy Safeguard Duty on Import of Carbon Black From China - Notification
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• India-Singapore Trade Boost: Tariff Concessions Enhanced Under CECA for Specified Imports via Amended Customs Notification No 10/2008.

  Notifications : Amend in notification No 10/2008 – Customs, dated 15th January 2008, so as to further deepen the tariff concessions in respect of goods imported from Singapore under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore. - Notification
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FEMA

• Micro Finance Institutions and NGOs Can Access Foreign Funds via ECBs Without Prior Approval Under Automatic Route.

  Circulars : External Commercial Borrowings (ECB) for Micro Finance Institutions (MFIs) and Non-Government Organizations (NGOs) - engaged in micro finance activities under Automatic Route - Circular
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• Exim Bank Grants $16.88 Million Credit Line to Gambia for Economic Development and Infrastructure Projects.

  Circulars : Exim Bank's Line of Credit of USD 16.88 million to the Government of the Republic of Gambia - Circular
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Corporate Law

• Businesses Must File Balance Sheet & Profit and Loss in XBRL Mode for FYs Starting April 1, 2011.

  Circulars : Filling of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 01.04.2011- Corrigendum to General Circular No. 39/2012. - Circular
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Indian Laws

• Guidelines for Claiming Prior Period Expenses Under Indian Tax Law: Documentation, Timing, and Legal Precedents

  Articles : ALLOWABILITY OF PRIOR PERIOD EXPENSES - Article
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VAT

• Quarterly dealers with over Rs. 1 lakh tax liability must switch to monthly payments for better compliance.

  Circulars : Clarification regarding payment of tax on monthly basis by Quarterly Dealers whose tax liability exceeds one lakh rupees. - Circular
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Case Laws:

• Income Tax

• 2012 (12) TMI 671
  Disallowance u/s 43-B - amounts deposited in the Excise Personal Ledger Account (PLA) - Held that:- In the present case, the assessee had no option, but to keep the account, in respect of each excisable product (evident from the mandate in Rule 173G that it "shall keep an account current"). The latter part of the main rule makes it clear beyond any doubt that the assessee has no choice in the obligation, and cannot remove the goods manufactured by it, unless sufficient amounts are kept in credit. As decided in CIT And Another Versus C. L. Gupta And Sons.[2002 (11) TMI 82 - ALLAHABAD HIGH COURT] section 43B in clear terms provides that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which it was actually paid, irrespective of the previous year in which the liability was incurred for the payment of such sum as per the method of accounting regularly employed by the assessee. For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account - in favour of assessee. Disallowance of provision for warranties - Held that:- As decided in M/s. Rotork Controls India (P) Ltd. Versus CIT, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] a provision is recognized when an enterprise has a present obligation as a result of a past event & it is probable that an outflow of resources will be required to settle the obligation with a reliable estimate can be made of the amount of the obligation - The principle is that if the historical trend indicates that a large number of sophisticated good were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 - in favour of assessee.

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• 2012 (12) TMI 670
  Deduction u/s 80IA - whether the assessee is entitled to deduction u/s 80IA of the Act on the net interest income on employees loans & advances, interest on margin money and interest income on dues towards income tax refund adjustment from Essar Project Ltd. - held that:- the issue is covered by the decision of Apex Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] - assessee is not entitled to the deduction u/s 80IA of the Act on the interest - Decided against the assessee. Addition on account of provision for Income Tax Recoverable - reimbursement of income-tax - held that:- the amount paid by the power purchasers by way of tax on the amount of tariff charges received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the payments received by the assessee. By virtue of the obligation undertaken by the power purchasers to reimburse the tax to the assessee does not mean that it is not the income in the hands of the assessee. - payment of tax received by the assessee is a part of tariff charges as per agreements and, hence, it is an income in the hands of the assessee and, therefore, the said amount without allowing any deduction is liable to be included in the income of the assessee. - Decided against the assessee. Minimum alternate tax - Addition to book profit - Section 115JB - held that:- There is no dispute that under clause (i) of Explanation 1 to section 115JB of the Act there is a retrospective amendment made by Finance (2) Act, 2009 w.e.f. 1-4-2001, therefore, the book profit has to be recomputed in accordance with the above clause (i) of Explanation 1 to section 115Jb of the Act. - matter remanded back on this issue.

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• 2012 (12) TMI 669
  Penalty u/s 271(1)(c) or 271(1)(c) - unaccounted NRE account - Held that:- Shiv Prasad Jagat Ram Kala is the holder of the subject NRE account, wherefrom the money came to the assessee, and the same is evidenced by the Deed of Gift and the affidavit, both executed by the said Shiv Prasad Jagat Ram Kala. Shiv Prasad Jagat Ram Kala, or his family, could not be located at the address, which was furnished to the bank while the bank account was opened & in course of inquiry one family of Shiv Prasad Jagat Ram Kala located in a village who represented that Shiv Prasad Jagat Ram Kala, who is a member of their family, has no relationship with the assessee and held out that finance of Shiv Prasad Jagat Ram Kala could not permit him to make such a gift. Thus in the event, Shiv Prasad Jagat Ram Kala, whose address was given to the bank, and whose family was located at a village are different people, then, there is total failure on the part of the assessee to prove that Shiv Prasad Jagat Ram Kala, whose address was given to the bank, made the gift as the Deed of Gift and the affidavit alleged to have been signed by Shiv Prasad Jagat Ram Kala was not substantiated. The matter, therefore, squarely comes within the Explanation 1(B) to the Section and, accordingly, there is deemed concealment of the income by the assessee - set aside the order of the Commissioner and the Tribunal and restore the order of the AO - against assessee.

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• 2012 (12) TMI 668
  Non deduction of TDS - perquisite value of stock options allotted to its employees covered under the employees Stock Option scheme - Held that:- Decision of a Division Bench of this Court, dated 23.12.2011, in a batch of cases confirming the orders passed by a single judge of this Court directing the refund of the amounts paid by the assessees, as tax, with the interest payable thereon, as per the provisions of the Income Tax Act, 1961. Set aside the impugned order of the first respondent, dated 19.1.2007. Consequently, the second and the third respondents are directed to refund the tax amount to the petitioner, within a period of eight weeks from the date of receipt of a copy of this order - in favour of assessee.

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• 2012 (12) TMI 667
  Clause (2) to Explanation 5 to Section 271(1)(c) not applied - course of proceedings u/s 153A - Held that:- The said provision is available, not merely when the assessee, in his statement offers or surrenders, to tax the amount in question which is later assessed, but also complies with the other conditions, of having filed the return. The allusion to Section 139 (1) is significant in this regard, because a notice and consequent search assessment pursuant to Section 153A stands excluded, altogether, by virtue of the non-obstante clause to the latter (Section 153A) provision. Even if the other view, more favourable to the assessee were to be taken, and a return under Section 153A be assumed to be covered as one under Section 139 (1), the fact remains, that in this case, the assessee did not include it, pursuant to the notice issued, and instead chose to merely reiterate its return originally filed on 31-10-2005 The search, and the statement recorded under Section 132 (4), the assessee, on being issued with notice u/s 153A did not file any return. The notice under Section 153A was issued on 20-7-2006. It was only when assessment proceedings were taken up for consideration, did the assessee, by letter dated 14-8-2007, request, that its return, filed on 31-10-2005, be treated as its return filed in response to the notice under Section 153A. Much later, it sought to revise its computation, on 14-12-2007. Therefore, this Court is of the opinion that the “escape route”, provided by Clause (2) to Explanation 5 in this case, was not available to the assessee - the Tribunal did not commit any error of law appeal, being devoid of merits, is consequently dismissed.

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• 2012 (12) TMI 666
  Deduction u/s.80JJA - manufacturing fuel briquettes from bagasse - Held that:- Bagasse is a waste of the sugar factory. This waste is a bio-degradeable waste and the same is collected on consideration by the assessee from the factory. There could be no universal definition of the word “waste” to fetch. It is a neutral word and does not mean collection for consideration or collection without consideration. Thus it is an undisputed position that the assessee has collected bagasse from sugar factories after having made payment for the same. Therefore, the aforesaid requirement of collecting as provided under Section 80JJA is satisfied. It is a undisputed finding of fact that the collected bagasse has been used by the respondent-assessee to make briquettes for fuel as that indeed is the business of the respondent-assessee - in favour of assessee.

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• 2012 (12) TMI 665
  Indo-USA DTAA - payment received from ERAPL(USA) for providing assistance in client coordination titrated as Royalty under Article 12 - Held that:- As seen that the ERAPL serves certain multinational clients in India who have principal offices located outside India and the appellant has agreed to serve EARPL to help to act as coordinating agency as required by such multinational clients. For this purpose, the ERAPL has to pay to the appellant certain amount of annual billings. For the communication channel between ERAPL and its clients the client coordination fees paid to the appellant cannot be termed as Royalty because it is not a consideration for the use of right or to use any of the specified terms mentioned in the definition of Royalty under Article 12 of Indo US DTAA. Since the appellant admittedly does not have a permanent establishment India, the question of taxability of the impugned amount in India would not arise in the absence PE, as provided for in Article 7 of DTAA. In view of these facts, this ground of appeal is decided in favour of the appellant. Lower rate of tax - fees for included services(FIS) - CIT(A)directing to tax @10% instead of @15% - Held that:- As per the Article 12(2)(b) the rate of 10% is applicable in the case of royalty referred to in sub-paragraph of 3(b) and fees for included services as defined under this article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under Para 3(b) of Article. Since the amounts are not royalty being considered either 3(a) or 3(b), the rate of 10% on FIS is not correct. There is nothing on record that indicates that rate specified under Sub-Article (2)(b) is applicable and not (2)(a)(ii). Therefore, upholding the Revenue ground direct the AO to tax the above amounts confirmed by CIT(A) as FIS at 15% of the rate - in favour of revenue.

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• 2012 (12) TMI 664
  Prior period of expenses - the expenditure incurred by the employees of the assessee on account of travel which are of very petty sums. Once the employees have submitted their bills to the assessee company, the same has to be reimbursed. Insofar as the assessee is concerned, as and when the bills were submitted, payments have been made and has been claimed as business expenditure. - held that:- Looking to the fact that the assessee has a substantial turnover, such reimbursement of expenditure cannot be disallowed simply on the ground that travelling by the employees have been undertaken in the earlier years and bills by them are submitted in this year. - Since they are directly related to business of the assessee, the same has to be allowed. - Decided in favor of assessee. Foreign travel expenditure - business purposes - AO disallowed the claim of expenditure holding that the expenditure incurred is not for business purpose as the assessee has no business transactions i.e., sale or purchase with these countries. - held that:- The assessee, being a global company, which has business interest all over the world, such kind of business trip by senior officials cannot be disallowed simply on the reason that the assessee does not have direct transactions of sale or purchase from such countries. Such a myopic perception cannot be upheld in this era, as there can be several reasons in relation to the business. The term “wholly and exclusively for the business purpose” has a very wide meaning and the assessee’s perception as to what is the business purpose has to be given importance. The only requirement is that the assessee has to prove that such expenditures are genuine and for its business purposes. - Decided in favor of assessee. Advertisement expenses - The Assessing Officer disallowed the claim of the assessee on the ground that the services have been rendered in earlier years and, therefore, the same cannot be allowed in this year even if the bills have been raised by these parties in this year. - held that:- Since both the authorities have not examined this issue properly, matter remanded back. Ad-hoc disallowance of expenses - held that:- It is now a settled proposition of law that the Appellate Tribunal under section 254(1) of the Act, had no power to take back the benefit conferred by the Assessing Officer or enhance the assessment. Once the matter has been restored by the Tribunal, the income cannot be enhanced from what was determined at the time of original assessment proceedings, which was the subject matter of dispute before the Tribunal. - the enhancement of assessment by making 100% disallowance in respect of free food allowance cannot be sustained and the same is restricted to 50%, as was made by the Assessing Officer in the original round of proceedings. - Decided in favor of assessee.

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• 2012 (12) TMI 663
  Disallowance of Interest – Held that:- As AO has not given any finding that the interest free loans were given out of the borrowed funds on which interest was paid & has not examined the availability of surplus funds with the assessee which can justify interest free loans to the managing director no disallowance can be warranted - accepting the submission of the assessee that borrowed funds on which interest was paid had been utilized for the purpose of business of the assessee thus, the disallowance directed to be deleted - in favour of assessee. Business Promotion and Tour and Travelling expenditure - disallowance for want of sufficient proof – Held that:- As foreign travel is a necessary incident of the business of the Assessee but at the same time the inability of the Assessee to produce bills and purpose of foreign travel, calls for some disallowance - it would be just and fair to disallow 50% of the expenses claimed by the Assessee. Accordingly the disallowance is directed to be restricted to 50% of Rs.14,74,280/- - partly in favour of assessee.

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• 2012 (12) TMI 662
  Prior period expenditure - Power Lines Service charges excluded in the valuation of the current assets - hand over of power lines to KEB free of cost - whether assessee can claim the expenditure incurred by it for the earlier assessment years as a deduction of expenditure of the relevant assessment year - Held that:- The assessee has earned income from the said power lines and the same has also been offered in the years of receipt. By treating the expenditure as work-in progress, the assessee in the year in which the power lines are to be handed over in K.E.B, free of cost, has to set off the work-in progress, from the profits of the relevant year as the assessee is no longer going to earn income out of the said power lines. By debiting the expenditure to profit and loss account and credibility the closing stock, it is clear that the assessee has not claimed this expenditure as deduction in the earlier years. As held by the Hon’ble Courts in CIT Vs. Standard Radiators Pvt. Ltd [2005 (12) TMI 70 - GUJARAT HIGH COURT] wherever there is a change of method of accounting, for genuine reasons, there is every chances of claim of double deduction arising during the year on change of accounting. The necessity and the crystallization of the liability during the relevant period is to be consider for allowing the expenditure. Thus as the assessee has not claimed the expenditure in the earlier years and there is no claim of double deduction in the relevant assessment year & the assessee who has changed the method of accounting due to genuine reason of having to hand over the power lines to KEB can claim the expenditure relating to earlier years in this year, even if it results in double deduction - in favour of assessee.

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• 2012 (12) TMI 661
  Invoking of provisions of sec 154 and disallowance u/s 40(a)(ia)- Held that:- Provisions of Chapter XVII are relevant only for ascertaining the deductibility of the tax a source and not for the actual deduction and payment for attracting the provision of section 40(a)(ia). Since in the instant case, it is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in section 139(1), addition u/s. 40(a)(ia) cannot be made if the payment of tax deducted at source has been made before the due date of filing the return of income for the year under consideration. See CIT v. Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT ] Therefore, when the assessee‘s case was covered under the main provisions of existing law then there was no need to go to the issue of prospective or retrospective effect of the amendment in the provisions by the Finance Act, 2010 - in favour of assessee.

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• 2012 (12) TMI 660
  Deduction u/s 80HHC & 80IB - income derived from DEPB, duty draw back and premium on sale of DEPB - Following the decision of Supreme Court in case of M/s Liberty India Versus Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT on the income derived from DEPB and duty draw back, deduction under section 80HHC and 80IB cannot be allowed - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act. Penalty u/s 271(1)(c) - furnishing of inaccurate particulars – Held that:- Following the decision of Supreme court in case of COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS FVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee - No infirmity in the order of the CIT(A) - Merely because the assessee has a different perception of the situation than the Assessing Officer, even though, in the ultimate analysis, the stand of the Assessing Officer is to be upheld, it cannot be said that the assessee has concealed any particulars - in the result both the appeals of the Revenue are dismissed

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• 2012 (12) TMI 659
  Ex-parte order - assessee contested against non allowing proper opportunity of being heard - Held that:- CIT(A) has given eight opportunities to the assessee commencing from 30/06/2005 to 14/01/2011 & the order was passed by the CIT(A) on 10/02/2011. However, the concept of natural justice cannot be extended to an absurd limit of affording endless opportunity, to an assessee, who is not willing to avail of such opportunities, thus the ground of appeal, raised by the assessee is without any merit. Unexplained Cash Credits - Held that:- Following the decision of Kale Khan Mohammad Hanif Versus Commissioner Of Income-Tax, M. P. And Bhopal (1963 (2) TMI 33 - SUPREME COURT) onus of proving the source of any sum found credited in the books of the assessee is upon the assessee - the sanctity of the affidavit, filed by the assessee, patently uncorroborated by any evidence, cannot be accepted as having any legal consequence as mere filing of confirmatory letter does not discharge the onus that lays on the assessee. The payment through cheque merely indicates movement of fund and not the creditworthiness and genuineness of the transaction - The assessee has failed to discharge the onus cast on him within the meaning of section 68 as also under the general law - the assessee himself admitted non-traceability of such cash creditors - against assessee. Disallowance of Staff Welfare Expenses – Held that:- This disallowance has been made in the computation of income without giving any finding, whatsoever by AO thus disallowance is founded on surmises and conjectures, as not been supported by any evidence - disallowance need to be deleted - in favour of assessee. Disallowance of car running expenses & depreciation – Held that:- AO has disallowed 1/4th of care running expenses & depreciation in respect of personal use of the car without bringing any material on record - in the interest of fairness and justice, the disallowance is reduced to 1/10th in each head - partly in favour of assessee.

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• 2012 (12) TMI 658
  Undervaluation of closing stock - Rate of rice bran Held that:- In the remand report, AO did not brought any fresh material on the record to establish that the rate adopted by the assessee was not correct. The only basis of adopting enhanced rate of valuation was the report of Krishi Utpadan Mandi Samiti which cannot be considered as reasonable because these rates are determined in a particular manner which cannot be applied in all the circumstances and all the times for every quality of a particular product. The rates are dependent upon number of factors such as quality of produce, the prevailing rates in the market, content of moisture in the produce and demand in the market etc. Therefore, the observation of the A.O., that the rates fixed by Krishi Utpadan Mandi Samiti are reasonable and justified, do not have any rational or scientific basis. Thus the rate adopted by the AO is not justified - in favour of assessee.

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• 2012 (12) TMI 657
  Jurisdiction power u/s 263 by CIT(A) treatment to advance rent received Held that:- As special audit report categorically admits that the assessee has maintained his accounts on mercantile system, thus once it is accepted that the assessee is following the mercantile system of accounting, then the advance of rent received by the assessee cannot be treated as rent receipt during the year. This is also because the assessee has offered the advance rent as his income during the relevant assessment year to which it relates and the same has also been accepted. In the circumstances, finding of CIT u/s. 263 is erroneous and unsustainable in law and his liable to be quashed as without jurisdiction provided by the show-cause notice - appeal of the assessee allowed.

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• 2012 (12) TMI 656
  Unexplained Investment u/s 69 – Held that:- Profit arising from the sale of plots along with building is to be taxed under the head Capital Gain. Tribunal has taken into consideration the investment made in past year and held that the investment has been made from its books of account as all the entries are incorporated in books of account. No amount has been spent over and above recorded in the books of account. Therefore, there was no reason in not accepting the claim of the assessee. CIT (A) has also deleted the addition for the year under consideration following the order of Tribunal as all the facts have already been discussed by the Tribunal. Accordingly, Order of CIT (A) in this aspect as the issue has already been considered by the Tribunal while disposing the appeal for the assessment year 2005-06 is confirmed. Addition on account of interest on capital from partnership firm – Held that:- Where there is no tax effect of revenue, the authority would not fritter away its energy in fighting matters of this kind. The supplementary partnership deed has not provided any interest on capital to the partners. Accordingly the firm had not allowed interest on capital. If capital allowed by the firm is expenses of the firm and to that extent the income of the firm would reduce. The tax effect is hardly there. Therefore, the addition made by the AO is deleted - In the result, appeals of the department as well as cross objections of the assessee are dismissed.

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• 2012 (12) TMI 655
  Validity of assessment u/s 147 – Notice u/s 148 was issued on the basis of sufficient material on record, including the order u/s 263 – Order u/s 263 had been cancelled by the ITAT - Assessee had claimed deduction u/s 80IA which was observed to be non - genuine and non- admissible by the AO – Assessee contended that the assessments have been framed without issue of notice u/s 143(2) – Held that:- As the said notices u/s 148 were issued within six years i.e. within stipulated period. Following the principles of natural justice we deem it fit to restore the present issues back to the file of the CIT (Appeals) to decide the same de - novo in accordance with law after affording reasonable opportunity of hearing to the assessee. Remand back to CIT(A)

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• 2012 (12) TMI 654
  Unaccounted sales and purchases – Held that:- AO has estimated the additional purchases at Rs. 9,40,000/ - without bringing any material on record. At the same time, there is no satisfactory explanation on behalf of the assessee regarding the discrepancies pointed out by the AO in the books of account of the assessee. Thus considering the entire facts the addition of Rs. 85,000/ - will meet the ends of justice - addition sustained by the CIT(A) is on higher side - assessee gets a further relief of Rs. 3,85,000/ - on this count - appeals of assessee allowed partly. Addition on account of additional gross profit – Held that:- GP rate shown at Rs. 3,25,400/ - on the total sales of Rs. 50,05,936/ - is slightly on higher side when compared to GP rate of the preceding year . However, the fact remains that the assessee did not produce the books of account thus, the sales affected/shown are not subject to verification - thus considering the entire facts the addition reduced to Rs. 15,000/ - particularly when the sales affected/shown are not subject to verification - assessee gets a further relief of Rs. 15,000/ - on this account -appeals of assessee allowed partly. Addition u/s 68 - unsecured loan as non-genuine – Held that:- As in earlier year, the department has not doubted the credit worthiness of Shri Harbans Singh father of the assessee, who is regularly assessed to tax & considering the contention of the assessee that these funds were used by Shri Harbans Singh for purchasing demand drafts directly from the bank in favour of the supplier of the assessee to meet financial emergency of the assessee there is no merit in the contention of the DR that amount of Rs. 50,000/ - and Rs. 65,000/ - withdrawn by Shri Harbans Singh do not figure in the bank account of the assessee. In view of the above, the addition of Rs. 1,15,000/ - made by the Assessing Officer and confirmed the CIT(A) deserves to be deleted - in favour of assessee. Disallowance of expenses in part incurred for business – Held that:- The expenses in question relate to petrol , salaries, telephone etc. which are necessary for smooth running of a business. However, as per law, the assessee was required to produce supporting evidence to claim these expenses which are absent thus disallowance of certain amount is required to be made - ad hoc disallowance of Rs. 75,000/ - made by the AO is definitely on higher side, thus to meet the ends of justice the disallowance reduced to Rs. 50,000/ - - partly in favour of assessee.

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• 2012 (12) TMI 653
  Computation of Deduction u/s 10B – Whether interest received/ receivable from its customers on the delayed payments is treated as part of eligible profit – Held that:- As the factum of the nature of interest income received needs verification by the AO. In case said interest is received/ receivable by the assessee from its customers on the delayed payments, relatable to the export sales, then such interest is to be included as part of the eligible profits, for computing the exemption u/s 10B. However, where such interest due from the parties is not so relatable to the export sales made by the undertaking, then the assessee is not entitled to the benefit of exemption u/s 10B on such other incomes. Remand back to AO Eligible profit u/s 10B – Whether interest received from employees on housing loans are includible in eligible profit – Held that:- Following the decision in case of Joyco India P.Ltd. (2008 (9) TMI 416 - ITAT DELHI-D) that the interest receivable from employees on housing loans advanced to them by the assessee undertaking, being linked to the business of the undertaking and such interest , being included as business is eligible for the aforesaid deduction. In favour of assessee Deduction u/s 10B – Whether provisions written back are eligible for deduction u/s 10B – Held that:- There is no dispute that the above categories of expenses have been incurred by the assessee during the course of carrying of the eligible business of its industrial undertaking. Such reduction of expenses may not constitute income derived from the industrial under taking but all the same since such expenses in the past have reduced the eligible profits of the industrial under taking as a consequence the reduction in such expenses, which is portrayed by the “Provision no longer required written back” deserves to be considered to compute profits of the industrial undertaking eligible for deduction. In favour of assessee Deduction u/s 80HHC - Computation of indirect cost of trading goods which are to be worked out for computing deduction u/s 80HHC – Assessee is preparing a consolidated statements of P&L account for export of its manufactured items and of traded items - Held that:- As per the assessee, the AO had excluded only proportionate expenses related to export while assessee had excluded all the expenses related to manufacturing i.e. domestic as well as exports and at located only expenses which were common for trading as well as manufacturing. Therefore issue remand back to AO Adjustment of deduction u/s 80HHC while calculate book profit u/s 115JB – AO, while computing the book profits u/s 115JB, had made certain adjustments by re-computing turnover of the business i.e. on account of the income to which Sec. 10B applies and hence, also excluded the profits eligible for deduction u/s 80HHC – Assessee while calculating the book profits u/s 115JB had appropriated the income and expenditure of Sec. 10B in the same ratio which was used to calculate the deduction u/s 10B and reducing there from 100% of the profits, eligible for deduction u/s 80HHC - Held that:- As concluded from the facts of the case we find no merit in the allocation made by the AO of different components of income with different total turnover. Therefore, direct AO to recompute the book profits u/s 115JB. Issue remand back to AO

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• 2012 (12) TMI 652
  Doctrine of merger – Revision order passed by CIT u/s 263 – AO passed the order which is erroneous and prejudicial to the interest of the revenue –Assessee contended that re-assessment order got merged with the order of Tribunal because the Tribunal has allowed the full deduction which were denied during assessment proceedings and therefore, such order is not available for revision - Held that:- As the doctrine of merger would not be applicable because reassessment was confined only to the issue of deduction u/s 80HHC with and the assessment was not reopened for the purpose of examining the application of Sec. 80IB(13) r.w.s. 80IA(9) Validity of order u/s 263 - CIT argued that assessee had claimed deduction u/s 80IB as well as u/s 80HHC – Deduction u/s 80IB and 80HHC was allowed by the original assessment order dated 20.12.2005 – Held that:- Since the original assessment order has been passed on 20.12.2005 and therefore, the limitation would run from 1.4.2006 and expire on 31.3.2008 whereas the revision order has been passed on 23.3.2010 which is clearly barred by limitation. Appeal in favour of assessee

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• 2012 (12) TMI 641
  TDS u/s 194A - payment of interest by the partner to the partnership firm - held that:- The Act does not provide exemption to the interest paid/credited by a partner to his firm. - the Act treats a partner and a firm as different 'Person', - the position of legal relationship between a partner and his firm loses its importance/significance under the Income tax Act. - the position of legal relationship as prevailing under the Partnership Act should not be applied in abstract, only to the provisions of sec. 194A of the Act. - Decided against the assessee. Assessee in default - interest and penalty u/s 201(1) and 201(1A) - held that:- Let us consider about exigibility of interest u/s 201(1A) of the Act under the peculiar conditions prevailing in the instant cases, wherein the recipient of interest viz., the partnership firms have declared losses even after accounting for the interest paid by the assessees herein. Even if the assessees herein deduct and remit the TDS amount on the interest paid to the partnership firms, the same is liable to be refunded to the said partnership firms, as there is no tax liability in their respective hands. Under this situation, can it be said that the Government is deprived of the funds due to it or any loss is caused to the Government. It may be noted that the prevailing rate of interest chargeable/payable u/s 201(1A)/244A are different, i.e., the rate of interest payable u/s 244A is lesser than the interest chargeable u/s 201(1A) of the Act. Due to this disparity, a question may arise as to the correctness of the view taken by us in the preceding paragraphs. In our view, the rate of interest is prescribed by the Government on the basis of various factors. The main principle considered by us is that pronounced by the Hon'ble Courts, viz., that, interest is compensatory in nature for depriving funds belonging to the revenue/assessee. Hence the disparity in the rate of interest shall not have any effect on the said principle. On the issue of levy of interest u/s 201(1A) matter restored to DCIT(TDS) to verify whether or not the recipients of the interest income, viz., the partnership firms were liable to pay tax on that income and then take appropriate decision about the chargeability of interest u/s 201(1A) of the Act in the hands of the assessees herein in accordance with the principles discussed by us in the preceding paragraphs.

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• 2012 (12) TMI 640
  Interest income on NOSTRO and overseas placements maintained with branches outside India - deduction towards interest expenditure on such accounts. - interest income u/s 9(1)(v) - held that:- Tribunal in the case of ABN Amro Bank NV v. Asstt. DIT [2005 (8) TMI 294 - ITAT CALCUTTA-E] (SB) has held that the branch of the assessee bank cannot be treated as a separate entity. The transactions between the Head office and branch resulting into interest income or interest expenditure are to be viewed as transaction with self. On the basis of mutuality, it has been held that there can be neither any income in respect of interest earned from its overseas branches, nor there can be deduction for interest expenditure paid by the Indian branch to Head office or the other overseas branches. - the interest income of Rs. 4.88 crore which has resulted only from the assessee's dealings with its Head office or overseas branches cannot be charged to tax on the principle of mutuality will apply. Accordingly no tax can be levied on the interest earned by the assessee from its Head office or overseas branches. There is a clear distinction between the NOSTRO interest earned/paid by the assessee from/to its own Head office/overseas branches and NOSTRO interest paid/earned to/from other than assessee's own Head office or branches. Whereas in the first situation, the principle of mutuality will apply and in the later case it will not. No deduction on account of interest expenditure can be allowed which has been incurred by the assessee in relation to its own Head office and overseas branches. Both the grounds of assessee and revenue allowed.

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• 2012 (12) TMI 639
  Inadequate drawings - CIT(A) deleted the addition - Held that:- No reason to interfere with the findings of the CIT(A) as no evidence was brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are reasonable - against revenue. Unexplained investment/expenditure u/s 69B/ 69C - CIT(A)directed to treat as income from other sources - Held that:- No material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources - There being no good reason to interfere with the findings of the CIT(A) that the amounts offered by the assessee are to be assessed as income from other sources and not to be treated as an addition made under section 69B/69C as assessee is not the owner of the asset and he has not paid any amount more than the registered sale price - against revenue. Unexplained Cash - Held that:- Department had seized Rs..8.00 lakhs in assessee’s premises in the course of search. It is also not in dispute that an amount of Rs..6.00 lakhs was seized from assessee’s mother Smt. K. Rajeshwari. The Department having seized the cash of Rs. 14.00 lakhs, it has to give credit for such seized cash either in the hands of the assessee individual or in the hands of Shri V. Sankar (HUF) or mother of the assessee Smt. K. Rajeshwari. In the circumstances, no infirmity in the direction given by the CIT (A) in directing the AO to grant credit for a sum of Rs..14.00 lakhs in the hands of the assessee and in case, if credit is given for such cash seized in the hands of Shri V. Sankar (HUF) and Smt. K. Rajeshwari, the credit given in the hands of the assessee has to be withdrawn - against revenue. De novo assessment made under section 153(A) - Held that:- As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee.

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• 2012 (12) TMI 638
  Inadequate Drawings - Held that:- In the absence of any finding of fact that the appellant had infact “incurred” the estimated expenditure on drawings, during the relevant financial years, the addition made towards drawings u/s 69C is bad in law - thus pursuing the materials available on record there is no evidence on record for making these additions. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are unreasonable - no evidence brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings - against revenue. Unexplained Income - CIT(A) directing the AO to assess income under the head ‘other sources’ as against u/s 69B - Held that:- The order of the CIT (A) needs no interfere as he has recorded the finding of fact that the AO had only assessed whatever was offered by the assessee and such sum was not detected by the AO. As no material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources and not be assessed as unexplained investment under section 69B is confirmed - against revenue. Unexplained Cash - Held that:- The cash seized in the course of search at the residence of the assessee is out of cash balance available in the books of account of M/s. Everbright Exports, which is the proprietory concern of the assessee. The Everbright Export had been regularly assessed before the Assessing Officer at Vellore. It is located at Satyamangalam on the Chennai-Bangalore Highway and in the premises of this concern, books were maintained and were also subjected to audit under section 44AB. This concern exists right from 2004 and it is not an afterthought of the assessee later to the date of search. Therefore, CIT (A) deleted the addition made u/s 69 - against revenue. De novo assessment made under section 153(A) - Held that:- As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee. Deduction under section 10B - Delay in filing returns - Held that:- When the assessee is making a claim for the first time before the CIT(A) it is not proper and correct in rejecting the assessee’s claim on the ground that there is no claim made in the return of income when such claim is otherwise allowable - CIT(A) should have entertained the claim of the assessee on merits without rejecting the additional ground stating that no claim is made in the returns.

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• 2012 (12) TMI 637
  Violation of sec. 13(1)(c) - non application of Funds of Trust for Charitable purposes - diversion of funds - CIT(A) allowed the claim - Held that:- The claim of purchase of computers and equipments by the assessee could not have been accepted on its face value when it was not reflected in the books of accounts. Even the balance sheet forming part of the final accounts audited by a Chartered Accountant does not show the computers and other equipments as asset. A lapse of such magnitude cannot be wished away light heartedly as an oversight of the accountant. More so, when the assessee claims itself to be a trust promoted by the Government. The invoices raised by M/s Silicon Graphics (India) Pvt. Ltd., towards sale of computers and equipments were also in the name of Govt., of AP, Disaster Management Unit, Planning Deptt., and not in the name of assessee. These facts have not at all been examined by the CIT (A) while deciding the appeal. As decided in CIT vs. Durga Prasad More (1971 (8) TMI 17 - SUPREME COURT) that though apparent must be considered to be real until it is proved to be otherwise, a party who relies on a recital in a deed has to establish the trust of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals made in the document. As the assessee has failed to prove that application of fund by the trust was for charitable purpose appeal of revenue allowed.

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• 2012 (12) TMI 636
  Rejection of books of account - income estimation @ 8% on gross receipts - Sub-contract work - Held that:- AO did not have any incriminating material before him which was found as a result of search on the basis of which he could have come to a conclusion that the books of accounts maintained by the assessee were not correct. In the absence of any incriminating material, the AO is not justified in rejecting the books of account and estimate income in proceedings initiated u/s 153A, when regular assessment has been completed accepting the books of accounts. Unexplained Investment - Held that:- On perusal of materials available on record, it is seen that the assessee has explained that the amount of Rs.55 lakhs given as advance to the prospective seller of the land was pooled together from different persons by his father and the entire amount was paid by his father i.e. Rs. 25 lakhs by cheque from the joint account held with the assessee and balance amount of Rs.30 lakhs by way of cash by his father to the prospective seller Sri Saibabaiah. It is also a fact available on record that the receipt was executed by Sri Saibabaiah in the name of the assessee’s father, Sri N. Ramanaa Reddy. However, the source of this amount of Rs.55 lakhs stated to have been pooled together from different persons, have not been properly enquired into. No material has been brought on record with regard to the fact that the persons who stated to have advanced the amounts were having sufficient source of income or not as this fact has neither been examined by the AO nor the CIT (A) it is proper to restore the matter back to the file of AO who shall make proper enquiry to find out the source of Rs.55 lakhs given as advance for purchase of the land.

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• 2012 (12) TMI 635
  Cost of generator and transformer - miscellaneous structures v/s electrical equipment – CIT(A) deleted the addition - Held that:- The CBDT vide Instruction No. 3 of 2011 dated 9.2.2011 has revised the monitory limit for filing the appeals by the Department before the ITAT as raised to Rs. 3 lakhs

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• 2012 (12) TMI 634
  Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Considering the judgment of ACIT v. Inautix Technologies India (P) Ltd [2012 (12) TMI 615 - ITAT CHENNAI] Fluctuation is part of export turnover for the purpose of computation of deduction under section 10A. Engineering and design charges - Held that:- As per CBDT notification No. 890(E) dated 26.09.2000 specifying that engineering and design services are information technology enabled products entitled to be treated as software and when transmitted to foreign countries, they have to be treated as exports for the purpose of deduction under section 10A – in favour of assessee.

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• 2012 (12) TMI 633
  Trade advance written off - CIT(A) deleted the addition - Held that:- Trade advance in question was given during the course of business and the assessee has written-off the same in its books of account during the year. Since the assessee has filed evidence before the Revenue authorities to demonstrated the fact that these advances have, in fact, become bad,consequently, it was decided not to interfere with the findings of the Commissioner (Appeals) and hereby uphold the same - against revenue. As decided in CIT v. CIT v. WoodWard Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] the expression “any expenditure” used in section 37 is to cover both “expenses incurred”as well as an amount,which is really a “loss”,even though such amount has not gone out from the pocket of the assessee the advance written off by the assessee as irrecoverable is allowable as business loss under section 28 of the Act - Order of the Commissioner of Income Tax (Appeals)in allowing the claim of the assessee is sustained - against revenue

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• 2012 (12) TMI 632
  Jurisdiction power u/s 263 by CIT(A) - interest on electricity duties, water charges and electricity duty for the AY 2006-07 & for the AY 2007-08 also considered the issue with respect to amounts charged to accounts pending finalization of the payment of salary/wages - Held that:- The issue being subjudice the assessee being governed by the Accounting Standard under the Companies Act was burdened to provide for the accrued liability when the assessee has pointed out that there was no contingent liability provided in the impugned AYs. Provision for the pay revision is provided on the basis of labourers executing the work and labour Union in the Industrial Sectors. The enhanced pay bill which will be assigned to them later can be provided for by the assessee in view of it not being contingent but accrued on the basis of services rendered by the recipients. The change or credit arisen out of a contingency which at the time of occurrence could not be estimated correctly shall not construe the correction or error and change of asset and as such, such item shall not be treated as disallowable u/s.37. The Revenue cannot take both the stands for declining to allow the prior period expenses in the impugned AYs nor consider crystallization of the liabilities provided in the impugned AYs for the AYs just because pay revision occurs every five years applicable to the respective years in accordance with the price index. Therefore, the considered view that the issues raised by the CIT have either dealt with by us in assessee’s own case or the AO in the impugned AYs against which no loss to the revenue has been pointed out on a view of the CIT alone can be considered for assuming jurisdiction u/s.263. Mere change of opinion by the CIT has to have basis of an error having been committed coupled with the fact that it was prejudicial to the interest of revenue - the orders of the CIT passed u/s.263 quashed for the impugned AYs under consideration - in favour of assessee.

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• 2012 (12) TMI 631
  Denial of deduction u/s 80IB – Held that:- Claim of deduction u/s.80IB would be available only on the basis of obtaining the completion certificate from the local authorities in view of the fact when the housing project is approved by the local authorities on or after 1.4.2004 was to be completed within four years irrespective of the claim of deduction either on the basis of project completion method or on the basis of percentage completion method - as assessee has agreed to the proposition above AO is directed to allow the deduction as and when the certificate from the local authority for the project completion has been obtained by assessee - appeal allowed for statistical purposes. Application of AS-7 vs. AS-9 - Held that:- The projects, which completed as and when approval is sought has to be rendered income claiming deduction u/s.80IB which computation cannot be faulted. This indicates that the work-in-progress held as an asset by the assessee has already reduced the income for that year on account of project remaining incomplete. AO sought to tax @6.84% on Rs.3.82 Crores does not bear any correctness to the fact that the income as arisen to the impugned Assessment Year on incomplete projects when the majority of the projects were sold for more than the very turnover for the impugned Assessment Year. CIT(A) also confined himself to adoption of AS-7 as noted by AO without actually addressing the issue in the practical aspects of the business conducted, advance received, income on percentage on the advance to be considered and loss but not the least that the work-in-progress is a closing stock when the expenses have been allowed cannot be reduced on a percentage basis to find profit therein - Finding no merit in the bringing to tax the percentage of work-in-progress,thus direct deletion of the addition.

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• 2012 (12) TMI 630
  Interest and Service charges incurred for acquisition of share - Capital or Revenue – Held that:- The assessee is a limited Company claiming income from capital gains of Rs. 8,40,047 when the AO tried to bring down the cost of acquisition @ Rs. 67 per share to Rs. 62 per share was to be deriving income of Rs. 11,71,834 under the head “capital gains” when the difference being Rs. 3,31,787 was brought to tax by the AO was purely an imaginary figure having no basis whatsoever either in the books of account for the purpose of computation of capital gains nor for the purpose of disallowance of expenditure on the purported earning of dividend income under the provisions of Section 14A r.w.r. 8DD of the I.T.Rules - the expenditure incurred through the Portfolio Manager to acquire share, is a capital expenditure and attributable to cost of acquisition of share. In view of the matter, at no point of time can it be said that the assessee was to make an extra income of Rs. 3,31,787 which was a total imaginary figure brought to tax by the AO. When two imaginary figures could overlap for disallowance to taxation and it was only the case of the AO to disallow expenditure which has been legitimately claimed capitalised by the assessee which stands otherwise disclosed in the P & L account could not become a hypothetical figure on assumption and presumption when computation of Capital Gains has to necessarily include cost of acquisition also. This makes the addition fit for deletion - appeal of the assessee is allowed.

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• 2012 (12) TMI 629
  Penalty u/s 271AAA - Undisclosed Income – Enhancement in value of House Constructed and Trucks purchased - Held that:- No definition could be given to the “specified manner” insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. As assessee has made disclosure for the respective amounts but failed to specify the manner in which such income had been derived a there is no prescribed method to indicate the manner in which income was generated when the definition of “undisclosed income” has been defined in the Act itself when no income of the specified previous year represented “either wholly or partly” which onus lay upon the assessee stood discharged - As decided in DCIT Versus Pioneer Marbles & Interiors Pvt Ltd [2012 (2) TMI 261 - ITAT, KOLKATA] wherein entire tax and interest has been duly paid well within the time limit for payment of notice of demand u/s 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - Levy of penalty u/s.271AAA in the instant cases are not justified - penalty so levied cancelled - in favour of assessee.

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• 2012 (12) TMI 628
  Jurisdiction power u/s 263 by CIT(A) - Stock Shortages - Held that:- The assessee before us demonstrated that the purchases have been accepted by the AO and the amount was shown in the closing stock being held by the Government authorities on the basis of billing by the assessee when the sale price remains determined by them only - Thus assessee on demonstrating that the issues were dealt with by the AO in his order u/s.143(3) when he took note of the survey proceedings on 17.1.2008 for the impugned AY when the financial year closed on 31.3.2008. The gross profit is estimated at the time of survey which gross profit was on the basis of sales up to 31.3.2008. Moreover, it has been submitted that the valuation becomes erroneous to the extent that the purchases having been accepted, sales having been accepted and closing stock having been accepted, by no stretch of imagination can the amount be brought to tax being the stock difference in the middle of the year can be re-verified on assuming jurisdiction u/s.263 would be an exercise in futility. CIT(A) has again directed to verify the assuming of estimating of gross profit rate which could neither be an error or loss to the Revenue being prejudicial to the interest of Revenue, thus this issue could not be dealt with by the CIT u/s.263. Unexplained investment in construction of factory building - Held that:- Valuation here again on assumption or presumption was predominantly in the mind of the learned CIT. After verifying or observing the error, the learned CIT deleted the issue for reconsideration rightly noted that the revisionary power cannot be extended to the issue - no direction to the Assessing Officer by holding a different view alone on which revisionary power can be extended to. Disallowance of expenses - Held that:- Unable to satisfy with the contention of the CIT-DR that details of various accounts were to be called for when the details of unsecured loans, sundry debtors, purchases etc., which are grossly interconnected to the extent that the CIT himself does not know as to what would be done on calling the details thereof. The CIT was to assume jurisdiction u/s.263 when on the basis of assessment record he has found errors committed by the Assessing Officer prejudicial to the interest of Revenue. He cannot ask the Assessing Officer for roving enquiry based on a view which has also not been specified by him in his order.

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• 2012 (12) TMI 627
  Development fees and Corpus fund - Whether a part of the admission fees - Held that:- It was part of the admission fee and needed no separate treatment. Hence it is added to the income expenditure statement as income. The development fees received later on was from students was to be identified by the assessee over and above the corpus funds when the students were made aware that they are contributing the amount apart from development fees, tuition fees, bus fees and other annual charges. The assessee has submitted that the development fees was received to contribute to the building when the committee seeking such funds made it voluntary was therefore directly held as a liability to identify with the general fund when the major portion was from the students and the remaining was contributed by the managing committee - in favour of assessee. Corpus fund – whether Gift of land made by the Mg. trustee to the trust itself would not be assessable as unexplained investment - Corpus fund is the property of the Trust. The donors contributed the donations therefore could not form part of the income & expenditure account as prescribed by law. Assessing Officer misdirected himself to hold a view that Vidya Jyoti Trust was not the school which was seeking corpus funds or voluntary contribution in the form of building or general fund when all the property of the Trust has been created for the purpose it was registered u/s.12AA. Therefore, the contention of the CIT-DR is on the effort to identify the trust Vidya Jyoti Trust as different from the educational institution it runs for which purpose the CIT granted registration. The assessee has stated that the two donors corrected themselves to submit that it was school to which they applied for the corpus fund therefore negates the CIT(A) finding that the amounts be confirmed u/s.68, was declared as fund by the Trust who runs the School - Cross objection by the assessee-Respondent is bound to be allowed and appeal of the Revenue is dismissed.

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• 2012 (12) TMI 626
  Disallowance on account of bogus trade creditors - Assessee submit computer generated ledger copy, copy of bank statement of the assessee in which payments made and copy of sales tax assessment order of creditor by Assistant Commissioner (CT) FAC, for A.Y. 2006-07 – Held that:- As the AO has accepted the purchases effected from this party and the trading results have not been disturbed and addition has been made on the closing balance as on 31.3.2007. The AO has not found these transactions to be non-genuine with the help of evidence. The assessee produced the copies of bills, bank statement and the sales tax order. Therefore, respectfully following the order of the Tribunal in assessee’s own case and deleting the addition. Appeal decides in favour of assessee

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• 2012 (12) TMI 625
  Exemption u/s 10A & 10B - Development of Software - disallowance as said product was not manufactured at the premises of the assessee - CIT(A) allowed the claim - Held that:- Outsourcing is part and parcel of the manufacturing activity and helpful in producing product or article or thing. Assessee company is considered to have actually carried on the business of IT enable services being maintenance of website of the foreign client Technics, INC, USA through certain consultants on contract basis under the direct supervision and control of the assessee company in India land also in coordination with the personnel of the foreign client. The direct contract of the consultants engaged by the Indian company with foreign clients could not lead to the conclusion that such clients engaged by the Indian company are hired by the foreign company or they were under the contractual obligation to perform specified works directed by the foreign client. For all practical purposes the Indian company was under contractual obligation to the foreign client. And it was at freedom to get the export order executed by its own employees or by outsourcing the work to certain consultants or third parties. Hence the actual export of computer software programme of the maintenance of the website for the foreign clients cannot be considered to be bogus or fictitious, if the Assessing officer had any doubt regarding the possible collusion between the foreign client and India company for any over estimation of export proceeds or understating of Indian expenses necessary incriminating evidence should have been brought on record to prove such points. On the contrary a reference made by the AO to the transfer pricing authority at Hyderabad u/s. 92 of the Income Tax Act, 1961, it has been officially held by the concerned authority that the export proceeds shown by the assessee company for IT enabled services rendered comprising of wave maintenance for the foreign client could be taken as a correct reflection of the exports proceeds - appeal by revenue is dismissed.

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• 2012 (12) TMI 624
  Disallowance of traveling and conveyance expenditure – Held that:- Even though the assessee has explained before the CIT(A) that the expenses are meant for the purpose of business and are properly vouched and properly spent, accounted and paid by the company, the reasons elaborating the deficiencies in the vouchers and bills produced by the assessee, pointed out by the AO in the impugned assessment orders cannot be totally ignored - the disallowance worked out applying a straight rate 25% is excessive and unreasonable, thus a token disallowance of Rs.1.5 lakhs as against disallowance of Rs.12,28,516 made by the AO for AY 2004-05 and Rs.50,000 as against Rs.3,85,150 for AY 2005-06, would meet the ends of justice. Revenue’s grounds partly allowed. Professional services rendered outside India - Non deduction of TDS - Held that:- It is not the case of the Revenue that the payments were made form any office situated in India & also not on record that the foreign agents have any permanent establishment in India in that situation, the payments made by the branch office or the assessee situated outside India to agents outside the country may not fall within the provisions of sec.195(1) - against revenue. Subsidy receipt - revenue v/s capital - Held that:- Going through the STPI Scheme the issue whether the subsidy received by the assessee in the form of duty waiver on the import of capital goods, casting export obligations on the assessee, has to be re-examined in the light of the STPI Scheme as a whole, a copy of which is now filed before us. AO needs to conduct purpose test of the said subsidy on the one hand, in the light of the cited judgments, and the details of actual capital asset, in respect of which the assessee enjoyed the waiver of the duty on the other, before arriving at proper and legally sustainable decision in the matter. AO should also examine the applicability of the provisions of S.43(1) with its relevant Explanations before reaching any conclusions on the issue by passing a speaking order - thus restore the matter to the file AO for fresh consideration - in favour of assessee by way of remand.

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• 2012 (12) TMI 623
  Estimation of profit of manufacturing division - Held that:- Action of the CIT(A) in enhancing percentage of profit from civil contract works at 8% as against 5% estimated by the assessing officer and accepted by the assessee without giving any opportunity to the assessee is against the provisions of law and has to be rectified - store the matter to his file for readjudicating on this issue. Disallowance of expenditure - Non deduction of TDS - Held that:- Issue restored to file of CIT(A) to re-examine in accordance with law and after giving reasonable opportunity of hearing to the assessee whether expenditure is payable as on 31st March of every year have already been paid during the previous year without deducting tax at source and accordingly redetermine the amount of expenditure - appeal decided in favour of assessee by way of remand.

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• 2012 (12) TMI 615
  Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Held that:- Section 10A prescribes a formula for the arithmetic computation of deduction provides for the deduction in respect of profits derived by the undertaking from the export of articles or things or computer software - the Explanation to section 10A has defined the term export turnover refers to amount of sale proceeds received in foreign exchange. It also defines what are the items that are to be excluded from such definition. It is important to highlight that section 10A does not provide for exclusion of any item, including foreign exchange gain for the purpose of computing the eligible profits The Statement of Work & Invoice as submitted by assessee are such pieces of evidence which support her contention that the assessee-company is engaged in the development of software. To crown this fact, the evidence in the form of Transfer Pricing Order for assessment year 2002-03 dated 14.12.2005, in which the assessee-company has been treated as doing ‘software development’ cannot be ignored. Therefore, the exclusion of these expenses from export turnover is not correct. The decision of ITAT Chennai Special Bench in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] also supports the contention - in favour of assessee. If the expenses are excluded from the export turnover these should also be excluded from the total turnover as decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] - there has to be parity between the export turnover and total turnover. Interest u/s 234B - Held that:- Direct the Assessing Officer to recalculate the interest consequent upon the sustained addition. Inclusion of refunds from Central Sales Tax(CST) in eligible profits for deduction u/s 10A - Held that:- The assessee is entitled to a refund of the CST from the STPI Authorities on the basis of a ‘periodic statement’ detailing the indigenous purchases made. Thus, such a refund so generated has a direct nexus and connectivity with the eligible undertaking making it entitled for the deduction u/s 10A. In this regard, the decision rendered in the case of Dy. CIT vs Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C] also supports the above view - in favour of the assessee Provision of workstations - assessee has treated as loss from other sources - Held that:- Income from leasing activity cannot be considered as part of total turnover because this activity by itself cannot be considered as part of assessee’s business activity in the regular course. Therefore, no adjustment to the profits of eligible undertaking or to the total turnover is necessitated for the purpose of computing deduction u/s 10A - in favour of the assessee. Exclusion of expenditure incurred in foreign currency from export turnover for computing deduction u/s 10A - Held that:- The exclusion effected by the AO is not in accordance with the provisions of the Statute. The definition of ‘export turnover’ requires expenses included in export turnover to be excluded. Going through assessee’s paper book it can be concluded that the assessee is engaged in the business of ‘software development’ and not in providing ‘technical services’. The decision of ITAT, Special Bench, Chennai, in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] is directly on the issue and supports the claim of the assessee. Unyielding of revenue from export turnover - Held that:- The assessee has been consistently following Accounting Standard 9 issued by the ICAI and in case the action of the AO is endorsed the figure of total turnover will get reduced to a figure lower that the export turnover. Therefore, the ingredients that go to make up the export turnover should also be the same for the total turnover.

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• Customs

• 2012 (12) TMI 675
  Re-seizure orders - whether after expiry of the period of one year, the seizure of the goods or articles would be deemed to lapse under Section 110? - Held that:- As decided in JAYANT HANSRAJ SHAH Versus UOI [2008 (2) TMI 293 - HIGH COURT BOMBAY] effect of expiry of one year period (six months, if no extension is granted) after the seizure of goods etc under Section 110 when there has been no show cause notice under sub-clause (2) is amply clear. Upon expiry of the one year period (or six months, as the case may be) the goods are returnable to the person from whose possession they were seized. There is nothing in Section 110-A to detract from this consequence. The public interest in injecting a sense of efficiency by mandating an outer limit to seizure orders, whenever the customs authorities contemplate an adjudication proceeding, is self-evident. In the case of goods with limited shelf life, or “fast moving” electronic articles, or even garments, which reflect the latest trends, even such limited seizure may result virtually in a confiscation, because they may be rendered worthless upon release. In the light of the above discussion, the Petition has to succeed. It is declared that the effect of non-issuance of show cause notice under Section 124 in this case, has resulted in the operation of Section 110(2) and the statutory dissolution of the seizure order made in the case of the Petitioner's car. The said vehicle – released provisionally and subject to conditions under Section 110-A – shall be deemed to have been unconditionally released. If the Maserati car has not been released, the same shall be released within two weeks and the superdarinama is hereby quashed. The writ petition is allowed in the above terms.

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• 2012 (12) TMI 651
  Order of remand by the tribunal for de novo proceedings - whether in a remand order, an issue may be kept open or required to be concluded - held that:- since the Tribunal has remanded the matter for de-novo adjudication before the Adjudicating Authority, even the issue as to whether the First Secretary (Commerce) is a competent authority to furnish authentic trade information from ASEAN countries could have been kept open, so that the parties could have agitated this issue as well. Since that has not been done, we set aside that portion of the conclusion reached by the Tribunal and now direct the Adjudicating Authority to permit the Appellant to raise the aforesaid issue and after adjudication, pass a speaking order on the same.

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• 2012 (12) TMI 622
  Customs House Agents Licence - Held that:- As decided in SUNIL KOHLI & ORS Versus UNION OF INDIA & ORS [2012 (10) TMI 638 - SUPREME COURT] who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. There is no dispute that the petitioner had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984, which were existing prior to the coming into force of the new regulations in the year, 2004. Thus in such circumstances, this Court finds it appropriate to direct the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner, as per Regulation 9 of the Customs House Agents Licencing Regulations, 2004, within a period of eight weeks from the date of receipt of a copy of this order.

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• Corporate Laws

• 2012 (12) TMI 650
  Repayment and restoration to the Company in liquidation - liquidation proceedings - arlier the name of Sh.GC Bhandari, who was one of the promoter director of M/s B.T. Conductors Pvt. Ltd was dropped being died during pendency of the proceedings - whether in the capacity of legal representative, she can be impleaded as a respondent in the original Company Application No.29/1993. Held that:- As already noticed, even after application came to be filed seeking deletion of the name of late GC Bhandari from the array of respondents, time was granted to the counsel to inform regarding legal representative of the deceased, if any but the counsel also shown his inability regarding the legal representative and even after best efforts made from the office of OL, it could not be traced out and by introducing O.22 R.10-A CPC, the legislative intention behind was that it is the duty of the pleader to communicate to the Court regarding death of a party and to subsist the contract between pleader and the deceased party for the purpose and in these circumstances, the decision taken by the Court on the application filed by the Official Liquidator deleting name of the deceased respondent late GC Bhandari on 05/12/2008, requires re-consideration. The order passed way back on 05/12/2008 deleting name of respondent No.1 late GC Bhandari, in these facts and circumstances, deserves to be recalled.

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• 2012 (12) TMI 621
  Scheme of arrangement - reduction of capital or a scheme of arrangement or both - provisions of Article of Association - Utilizing a part of the share premium for payment of Dividend, does it amount to payment of paid up capital to the shareholders - conditions stipulated in section 390 to 394A - held that:- The court ought not, usually, to require that a reserve be set aside indefinitely to safeguard the interests of future creditors and shareholders. Anyone who gives credit to or acquires shares in the company after the reduction takes effect is, prima facie, adequately protected by existing statutory safeguards. (Grosvenor Press Plc. In Re (supra)). It is unnecessary, therefore, to set apart any further sums in the "special reserve". Instead of directing publication, of the causes and the reasons for reduction of capital, in the newspapers I consider it appropriate to direct the petitioner to add to its name, as its last words, the words "and reduced" for the period upto and until the end of the financial year 2012-13, and in the balance sheet, the profit and loss account, and the annexures thereto for the said year. Such usage would suffice to protect the interests of prospective investors and would safeguard public interest. All that this Court is required to do, in an application seeking its sanction for a scheme of arrangement involving reduction of capital, is to ensure that the statutory provisions have been complied with, and the scheme as a whole is fair and reasonable. The wisdom or otherwise of the scheme is for the shareholders to decide and, since all the shareholders, all the secured creditors, and around 80% of the unsecured creditors, who attended the respective meetings, have supported the scheme, it is not for this Court to go into the merits of the scheme or to sit in judgment over the wisdom of the shareholders of the company in seeking reduction of capital. Scheme of arragment involving reduction of capital allowed. Subject to conditions.

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• 2012 (12) TMI 620
  Right of the creditors for winding up petition - held that:- There is no dispute as to the claim of the petitioning creditor against the company. The claim is founded on dishonored cheques and even the primary basis of the claim stands admitted. The company did not reply to the statutory notice and has not indicated anything that would make the debt disputed or that would detract from the presumption of the company's inability to pay that arises under Section 434(1)(a) of the Companies Act. That the company has suffered an injunction in the Bombay High Court is of no consequence since the company cannot demonstrate that the injunction amounts to a security of value equal to or in excess of the petitioner's unimpeachable money claim. The order of injunction subsisting on the guarantors and the undertakings furnished by the guarantors pursuant to the order of the Bombay High Court are matters not relevant for assessing the company's inability to pay. As to the decisions cited by the company that a petitioning creditor's claim must be quantified, it must be appreciated that the petitioner has quantified its claim both in the statuary notice and in the petition; and it is only the company's assertion that since the value of the properties covered by the Bombay injunction against the company cannot be conveniently made, the quantified claim put forth by the petitioner should be regarded as an unascertained claim. Such argument does not appeal and is rejected. If the company pays off the entire amount, inclusive of interest and costs assessed at 3000 GM, within six weeks from date, the petition will remain permanently stayed.

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• Service Tax

• 2012 (12) TMI 674
  Sale of advertising space or time service - applicant is a Municipal corporation - seeking waiver of pre-deposit of demand of service tax and interest - Held that:- As per the provisions of Section 65(105) “taxable service means any service provided to any person by any other person in relation to sale of space or time for advertisement in any manner, but does not include “sale of space for advertisement in print media” and “sale of time slot by a broadcasting agency or organization”. In the present case, where the applicants are collecting taxes or license fee in respect of the permission granted for putting up advertisement boards on the private properties, the applicants have prima facie a strong case. In respect of advertising boards which were on the street light poles and in respect of the rent which is given to the advertising agency to set up advertising board, the applicants have not made out a case for total waiver of service tax. As the adjudicating authority by invoking the provision of Section 80 have waived the penalty, therefore, taking the demand in respect of the land which is given for setting up structures for advertising and in respect of advertisement on the street light on the poles for the normal period, the applicants are directed to deposit Rs.8.00 lakhs (Rupees Eight lakhs only) within eight weeks.

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• 2012 (12) TMI 673
  Claim for Refund - Whether the Service Provider for providing space in their buses was eligible for refund in respect of Service paid under the category of Courier Agency Service – Held that:- As decided in Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT OF INDIA] refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case opined in Tilokchand Motichand case [1968 (11) TMI 86 - SUPREME COURT OF INDIA]. As assessee has filed the refund claim after three years from the date of payment. Therefore the refund claim filed by the assessee hit by time limit and not filed within time limit of one year as per section 11B of Central Excise Act, 1944, thus correctly rejected by the Adjudicating Authority - appeal filed by revenue is allowed.

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• 2012 (12) TMI 672
  Business Auxiliary Service and Custom House Agent's services - denial of CENVAT Credit - Held that:- The appellant has been taking a plea before the authorities that the General Manager of the appellant was shown various heads of income, according to him which may not be for the services rendered. As against such an admission and also the evidence which is produced by the appellant it if found that the adjudicating authority has only considered all these incomes under the category of Business Auxiliary Service without classifying the same under which category services may fall as per the definition of Business Auxiliary Service prior to February 2007 and post February 2007 under CHA services. In the absence of any such finding, no conclusion can be reached in the matter. Also in the appellant's own case, the co-ordinate Bench has remanded the matter back to adjudicating authority - in favour of assessee by way of remand.

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• 2012 (12) TMI 644
  Demand of Service Tax - Assessee is a co-operative society - Assessee has set up a common effluent plant for providing effluent treatment to the units of the member industries – Held that:- Sec. 145 a retrospective exemption is granted in respect of the common facility set up for treatment and recycling of effluents and solid wastes, which is set up with the financial assistance of the CG. Reading of SCN that the assessee has set up the effluent plant with the aid of the Maharashtra State Government, the service provided by assessee is exempted under the retrospective exemption.

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• 2012 (12) TMI 643
  Delay in duty payment - penalty under Rule 27 or Rule 25 - seeking Waiver of penalty u/s 11AC – Held that:- As no intention on the part of the respondent assessee to evade any payment of duty and as soon as liquidity was available, duty was paid along with interest, thus following the decision in case of COMMISSIONER OF C. EX. & CUSTOMS Versus SAURASHTRA CEMENT LTD. [2010 (9) TMI 422 - GUJARAT HIGH COURT] penalty could not be levied under Rule 25 of the Rules and for the alleged default, the penalty was restricted to Rs. 5,000/- under Rule 27 of the Rules.

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• 2012 (12) TMI 642
  Non payment of service tax to the government - invoking extended period of limitation - Held that:- Assessee cannot escape the responsibility of ensuring that records are maintained in accordance with law and credits are availed and utilized properly. He did not made effort to find out even at any stage as to whether the service providers were in existence and whether they had paid service tax collected from them to the government. Thus failure on part of appellant proved the invocation of extended time limit for demand in this case is sustainable. Further, for the same reasons, the first appellant is liable to penalty also. Cenvat credit - denial as services used for both exempted and non exempted goods - Held that:- Admittedly the first appellant was engaged in the manufacture of animal feed which is exempted and was also engaged in trading activity & was obliged by law to maintain separate records failing which reverse the credit relatable to the trading activity. In fact there is no proposal for demanding 8%/10% on the exempted goods and therefore one has to take it that it is their case that the demand is on the ground that appellant was engaged in the manufacture of excisable goods and trading of other goods. Once the assessee is considered to be aware of statutory provisions relating to availment of credit and his activities, the normal conclusion of a ordinary prudent person is that the assessee had deliberately avoided reversing the credit attributable to trading activity and thereby suppressing/mis-declaring the fact of availment of credit to the department. Therefore the conclusions of the lower authorities to confirm the demand with interest and imposition of penalty has to be upheld - appeal filed by the first appellant has no merits and accordingly is rejected. Penalty on second appellant – Held that:- Shri Javed Shaikh, second appellant being an employee cannot be said that he derived any extra benefit because of the lapses it has not been shown that there was any motive on his part. Since penalty has been imposed on the first appellant penalty imposed on is set aside.

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• Central Excise

• 2012 (12) TMI 649
  Breach of principle of natural justice - Assessee paid the duty by availing the CENVAT Credit prematurely – AO issue SCN and issue notice for public hearing – Held that:- As the assessee had requested for adjournment of the personal hearing afforded them, which was also acknowledged, however, the impugned Order was subsequently passed ex parte without giving any finding for not granting adjournment. Issue needs to be remanded to the Commissioner to decide the case afresh, by granting the effective hearing to the Appellant. Issue remand back to AO

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• 2012 (12) TMI 648
  Cenvat Credit denied - services related to clearance of finished goods beyond the place of removal - nexus to manufacturing activities - Held that:- As decided in M/s. Lanco Industries Ltd. vs. CCE, Tirupathi [2009 (7) TMI 125 - CESTAT, BANGALORE] the credit of service tax paid on commission to agents is admissible. M/s. Cadila Healthcare Ltd. vs. CCE, Ahmedabad (2009 (8) TMI 172 - CESTAT, AHMEDABAD) the clearing and forwarding agents services is eligible for cenvat credit of service tax & in case of M/s. Nilkamal Crates and Bins vs. CCE, Vapi (2010 (2) TMI 232 - CESTAT, AHMEDABAD) credit of service tax under business auxiliary services or commission on export sales was held admissible. Thus all the decisions support the claim of the appellant that they are eligible for the benefit of service tax credit taken by them - in favour of assessee.

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• 2012 (12) TMI 647
  Clearance of samples without payment of duty - Demand of Duty and Imposition of Penalty u/s 11AC - Held that:- As the appellant vide letter dated 7.1.2003 in reply to the Show Cause Notice submitted that the samples were in the form of unpacked tablets and drawn from the bulk prior to packing stage. From this letter, it is clear that the tablets, which are dutiable were cleared without payment of duty from the factory of production. Therefore,no infirmity in the impugned order - against assessee.

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• 2012 (12) TMI 646
  Abatement of Duty - transportation charges, sales tax, dealer's profit and dealer's commission - Held that:- Abatement claimed towards transportation charges were on account of lorry rent, van maintenance, van depreciation, trolley hire and forwarding charges - figures were taken by the assessee from their Profit and Loss account and Balance sheet submitted before the Income Tax authorities and there is no specific challenge against these findings of the learned Commissioner. Moreover, the appellant (assessee) has not claimed that, in the written submissions filed with the adjudicating authority, he requested for supply of any records to be relied upon in support of his abatement claims. If that be so, the present grievance of the appellant with reference to the seized records is without bona fide - no iota of truth in the present grievance of the appellant that natural justice was denied to him - Commissioner granted further abatements after considering the submissions of the assessee and, accordingly, worked out the amount of Rs.1,23,146/- to be paid by him - In the result, this appeal gets dismissed.

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• 2012 (12) TMI 645
  Non-compliance of the stay order - seeking waiver of pre-deposit of impugned demands - Held that:- Appellant had complied with the Stay order passed by the Commissioner (Appeals) and only on the ground of non-communication the dismissal order passed by the Commissioner (Appeals) deserves to be set aside. - as the matter needs verification remand the matter back to the adjudicating authority to verify the relevant records in support of their claim made by the appellant.

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• 2012 (12) TMI 619
  Non payment of Duty - aluminium dross and skimmings - Waiver of pre-deposit of dues - Held that:- As decided in KEC International Ltd. vs. CCE, Jaipur-I (2012 (12) TMI 426 - CESTAT, NEW DELHI) aluminium dross and skimmings are liable to duty whereas on the contrary the Tribunal in the case of Vishal Pipes Vs CCE, Noida [2010 (4) TMI 314 - CESTAT, NEW DELHI] that same are not liable to duty. In view of the contrary decisions on the same issue, the pre-deposit of the dues is waived for hearing of the appeal and the Registry is directed to list this appeal on 6.12.2012 for hearing.

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• 2012 (12) TMI 618
  Shortage in consignment of waste paper - difference in invoice and bills of entry - Waiver of pre-deposit of duty, interest and penalty - Held that:- In some consignments there is a shortage of 5.61 MT, 15.810 MT and 84 MT respectively, thus in view of these huge shortages received in respect of the goods on which credit has been availed applicants have not made out a case for total waiver of duty - No financial hardship is pleaded - The applicants are directed to pre deposit an amount of Rs.4,00,000/- within eight weeks from order date.

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• 2012 (12) TMI 617
  Abatement on MRP value denied - cannot be applied to physician samples - seeking waiver of pre-deposit of duty and interest - Held that:- As the duty has been paid on MRP basis and the Revenue is not denying, therefore, the abatement cannot be denied. In view of this, pre-deposit is waived for hearing of the appeal - stay allowed.

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• 2012 (12) TMI 616
  Rectification of Mistake - no finding of the penalty imposed by the adjudicating authority in the final order - Held that:- As in the final order in the last para, it has been specifically held that penalty imposed under section (sic) 173Q and under Rule 25 of the Central Excise Rules is set aside. Thus it appears that the application is filed without reading the final order. In view of this, frivolous application is dismissed. Another miscellaneous application filed by the Commissioner of Customs praying that he may be permitted to sign the application for rectification of mistake dismissed as the ROM application is dismissed.

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