TMI Tax Updates - e-Newsletter
December 27, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. Deduction under new section 80CCG w.e.f. 1st April,2013 in terms of the Rajiv Gandhi Equity Savings Scheme, 2012- a complex deduction with lot of conditions and contingencies- apparently an avoidable deduction by new small investors.

   By: DEVKUMAR KOTHARI

2. WHETHER THE WIDOW OF AN EMPLOYEE IS ENTITLED TO GET FAMILY PENSION UNDER THE EMPLOYEES FAMILY PENSION SCHEME, 1971 ON THE FAILURE OF THE EMPLOYEE TO EXERCISE HIS OPTION UNDER THE SCHEME?

   By: DR.MARIAPPAN GOVINDARAJAN

3. RBI CIRCULAR ABOUT NBFC - THERE SEEMS A MISTAKE ND CONFLICT IN EXEMPTION FOR NBFC. Small companies should not be allowed to invite and accept deposits from public.

   By: DEVKUMAR KOTHARI

4. A BANK EMPLOYEE AQUITTED IN APPEALLATE CRIMINAL PROCEEDINGS IS LIABLE TO BE PROCEEDED UNDER CLAUSE 19(3) (d) OF BIPARTITE SETTLEMENT, 1966

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Year End Review for the Department of Communications & Information Technology

2. Anand Sharma Announces Measures to Boost Exports Government AIMS to Move to Positive Territory in Exports

3. Licensing of Land for Development of Projects in Public Private Partnership mode at various Major Ports

4. Disinvestment of 12.5 percent paid up equity capital of Rashtriya Chemicals and Fertilizers Ltd.

5. Export of additional 25 lakh tonnes of wheat from Central Pool Stocks of Food Corporation of India

6. MSP for wheat for 2012-13 season to be marketed in 2013-14

7. Allocation of foodgrains from Central Pool at BPL prices to Uttar Pradesh Government for Kumbh Mela, 2012-13

8. Auction for Sale of Government Stocks

9. Auction for Sale (Re-issue) of ‘8.20 per cent Government Stock, 2025’

10. Auction for Sale (Re-issue) of ‘8.12 per cent Government Stock, 2020’

11. Auction for Sale of a New Government Stock of 30 Years

12. Auction of Government of India Dated Securities

13. Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)

Notifications

Companies Law

1. G.S.R.931(E) - dated 24-12-2012 - Co. Law

The Companies (Central Government's) General Rules and Forms (Seventh Amendment) Rules 2012 - Form 18 Has Been Substituted

2. G.S.R. 930(E). - dated 24-12-2012 - Co. Law

The Companies Directors Identification Number(Third Amendment) Rules 2012-DIN1

3. F.No. 5/80/2012- CL V - dated 24-12-2012 - Co. Law

The Companies Directors Identification Number(Third Amendment) Rules 2012-DIN 4

Customs

4. 58/2012 - dated 24-12-2012 - ADD

Anti-dumping duty on the import of Phthalic Anhydride, originating in or exported from Korea RP, Taiwan and Israel.

Circulars / Instructions / Orders

VAT - Delhi

1. F.3(33)/P-II/ VAT/ Misc./2006/ - dated 26-12-2012

DVAT 51 reconciliation return Qtr 1 to 4 of 2011-12 extended to 28/02/2013

Service Tax

2. F. No. 137/22/2012 - dated 30-11-2012

Amendment in Form ST-1 consequent to restoration of accounting codes

DGFT

3. 08(RE-2012)/2009-14 - dated 24-12-2012

Registration of contracts with DGFT for export of sugar.

4. 40/(RE-2012)/2009-2014 - dated 24-12-2012

Modification in the description of Import Item No. 1 of SION No. H – 471 of Plastic Product Group.

Highlights / Catch Notes

Income Tax

• Court Rules Diagnostic Centers Not Industrial Undertakings for Tax Deductions u/s 80-IA; Legislative Change Needed.

  Case-Laws - HC : Deduction u/s 80-IA - Diagnostic Centre - an industrial undertaking - While the benefit which might flow to the general public if diagnostic facilities are deemed industrial undertakings is undeniable, as it would probably result in lower cost of diagnosis of diseases and conditions, yet that result cannot be achieved by doing violence to the statute, in the guise of interpretation. The remedy (to this perceived mischief) is clearly elsewhere. - HC
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• Search Hardship Doesn't Extend Rights or Broaden Jurisdiction Under Article 226 in Search or Requisition Cases.

  Case-Laws - HC : Assessment in case of search or requisition - while a certain degree of hardship which would occur to any assessee whose premises are searched, that does not afford it any higher right or confer greater remedies, or expand the scope of a limited jurisdiction under Article 226. - HC
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• Commissioner of Income Tax (Appeals) Can Address Reopening of Assessment Issues in Pending Appeals.

  Case-Laws - HC : Re opening of assessment - even the question whether the petitioner was afforded a reasonable opportunity could be gone into by the CIT( Appeals) before whom the appeal is pending. - HC
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• Section 50C Inapplicable to Leasehold Transfers: Only Affects Ownership Rights for Capital Gains Valuation.

  Case-Laws - AT : Applicability of sec 50 C on transfer of Leasehold Rights – provision of Section 50C would not be applicable on the transfer of lease hold rights on the land. - AT
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• Software Sale Payments Classified as 'Royalty' u/s 195 of Income Tax Act Due to Copyright Transfer Rights.

  Case-Laws - AT : Sale of Software – Royalty – TDS u/s. 195 - the right that is transferred in the present case is the transfer of copyright including the right to make copy of software for internal business, and payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to Section 9(1)(vi). - AT
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• CIT Applies Doctrine of Lifting the Veil u/s 263 for Accurate Tax Assessment in Revisionary Proceedings.

  Case-Laws - AT : Revisionary u/s 263 - The observations of CIT clearly indicate that he invoked the doctrine of lifting the veil. The doctrine of substance or form is generally applicable to the assessment proceedings and not the revisionary proceedings. - AT
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• Unexplained Income and Shifting Onus: Assessee Must Clarify if AO Finds Doubts u/s 68 Proceedings.

  Case-Laws - HC : Unexplained income u/s 68 - the concept of “shifting onus” does not mean that once certain facts are provided, the assesse’s duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. - HC
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• Services Needing Managerial Skill Not Managerial u/s 9(1)(vii) IT Act; TDS Non-Deduction Unjustified.

  Case-Laws - AT : Non deduction of TDS - Merely because some managerial skill is required to render the services, it would not make the services to be managerial services as envisaged in Explanation 2 to section 9(1)(vii). - AT
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• High Court Confirms Deduction u/s 80IA for Profitable Priority Industry Without Offsetting Other Losses.

  Case-Laws - HC : Deduction u/s 80IA - assessee is entitled to a deduction on the entire profits of one priority industry without deducting loss in the other priority industry - HC
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• Short-Notice Termination of Manufacturing Agreement Sparks Dispute Over Capital vs. Revenue Expenditure Classification.

  Case-Laws - AT : Short Notice Pay for Termination of Toll Manufacturing Agreement – Capital vs Revenue Expenditure – Business expediency was not established by the assessee - Expenditure not allowable. - AT
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• Assessee cannot deduct mortgage redemption amount u/s 48 when calculating capital gains from land sale.

  Case-Laws - AT : Sale of land – repayment of the mortgage debt - assessee cannot claim the redemption amount as deduction under the unambiguous provisions of section 48 to arrive at the capital gains - AT
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• AO Cannot Reassess u/ss 147/148 If Section 143(3) Assessment is Pending with Section 142(1) Notice Issued.

  Case-Laws - AT : Re opening of assessment – the AO cannot enter into jurisdiction for reassessment u/s 147/ 148 when there was time left for completion of assessment under section 143(3) for which notice under section 142(1) had already been issued and the assessment proceedings had already been started. - AT
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• Rejection of Accounting Books Doesn't Justify Additional Tax, Court Rules Against Extra Income Tax Imposition.

  Case-Laws - AT : Trading Additions – rejecting of books of accounts - even if the books having been rejected, no addition is called for - AT
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Indian Laws

• Key Tax Questions Answered for Qualified Foreign Investors in India u/s 115AD.

  News : Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)
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Service Tax

• Appellant Entitled to Refund of Input Service Tax Credit for SEZ Activities; Unjust Enrichment Principle Not Applicable.

  Case-Laws - AT : Refund of input service tax credit for the activities undertaken within the SEZs - As the appellant has exported the output service the principle of unjust enrichment does not apply - AT
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• Extended Limitation Period Not Applicable; No Mis-Declaration or Penalties Under Finance Act; Revenue Neutral Case.

  Case-Laws - AT : Reverse charge - revenue neutral - extended period of limitation - it cannot be said that there was mis-declaration or suppression in the action of the appellants rendering them liable to penalty under various Sections of the Finance Act - - AT
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• Buses Not Classified as "Cabs" u/s 65(20) for Service Tax; Impacts Transportation Service Taxation.

  Case-Laws - AT : Rent-a-cab service - it appears that the buses did not fit in the definition of "cab" under Section 65(20) - AT
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Case Laws:

• Income Tax

• 2012 (12) TMI 789
  Deduction u/s 80-IA - Diagnostic Centre - an industrial undertaking - assessee established a new MRI unit - ITAT allowed the claim - Held that:- A joint reading of Section 80IA and Section 33B states the first condition spelt out in sub-section (2) (iii) is that the industrial undertaking “manufactures or produces any article or thing”, the second condition is that the “article or thing” should not be listed in the Eleventh schedule. The third aspect is that Section 33-B contains a somewhat wider definition of “industrial undertaking”, it posits that the unit should be an “undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining”. As decided in Insight Diagnostic and Oncological Research Institute P. Ltd. v. DCIT [2003 (4) TMI 79 - BOMBAY HIGH COURT] the CT scan machine as installed in a diagnostic centre is not an industrial undertaking for the purpose of business manufacture. In this connection, one must read the expression “industrial undertaking” in the context of the Income Tax Act and not in the context of the Industrial Disputes Act and, if so read, it is clear that the activity should be of production of any article or thing and any activity which primarily concerns production of any article or thing would fall in the category of industrial undertaking…… - the report of patients coming from the CT scan machine did not amount to manufacture or production of article or thing and therefore, one of the basic tests laid down in CIT v Shaan Finance Pvt. Ltd (1998 (3) TMI 8 - SUPREME COURT) is not satisfied The unit or undertaking must engage in production of an article or thing – be it in the context of Section 32A or Section 10 (15). Such consideration is equally important and relevant for applicability of Section 80-IA by virtue of Sub-section (2) (iii) of that provision. What emerges from all these decisions, and the relevant provisions – i.e. Sections 80-IA and 33-B that the unit or activity is deemed an industrial undertaking, if it is involved in production of goods or articles - as in the present case there is no change of the article, the intention of the service provider is not to produce the article – the film is the medium in which what is recorded is made available for interpretation by the physician or doctor. If it can be more conveniently given in a pen drive or even over the internet, the question of production of goods or article would not arise - in favour of the revenue While the benefit which might flow to the general public if diagnostic facilities are deemed industrial undertakings is undeniable, as it would probably result in lower cost of diagnosis of diseases and conditions, yet that result cannot be achieved by doing violence to the statute, in the guise of interpretation. The remedy (to this perceived mischief) is clearly elsewhere.

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• 2012 (12) TMI 788
  Rectification of mistake - the decision on the issue of profit attributable to the PE of the assessee in India has been decided by the Tribunal ignoring or overlooking Article 7(3) of India UK DTAA - Held that:- The controversy involved in relation to the issue was correctly understood by the Tribunal and even the reasons given by the CIT(Appeals) to give relief to the assessee on the said issue were identified by the Tribunal. One of the reasons so given by the CIT(A) as identified by the Tribunal was based on Article 7 of the India-UK treaty and the said Article including para 3 thereof was not only reproduced by the CIT(Appeals) in paragraph No. 6.5 of his impugned order but the same was also discussed and dealt with by him in paragraph No. 6.12 of the said order before giving relief to the assessee relying on the same. As clearly mentioned by the Tribunal in paragraph No. 141 of its order, the legal position applicable to the issue was carefully considered by it which obviously included Article 7(3) of the India-UK treaty relied upon by the CIT(Appeals) and after taking the same into consideration, it was held by the Tribunal that the provisions of Article 7(1) in India-UK treaty included the same results as sought to be achieved by Article 7(1)(c) of the UN Model Convention. Accordingly, relying on the UN Model Convention commentary on this issue, a considered view was taken by the Tribunal that the connotation of "profits indirectly attributable to permanent establishments" did extend to incorporation of the force of attraction rule being embedded in Article 7(1). Keeping in view this text and context of the order of the Tribunal, it cannot be said that the Tribunal has ignored or overlooked Article 7(3) of India-UK treaty while rendering its decision on this issue and that there is any mistake apparent from record in the order of the Tribunal on account of non-consideration of the said article as alleged by the assessee. Contention raised on behalf of the assessee that the scope of Article 7(1)(c) of U.N. Model Convention is limited to activities carried on in India only, it is observed that the Tribunal has taken a considered view on interpretation of the said Article that the entire profit relating to services rendered by the assessee whether rendered in India or outside India, in respect of Indian Project is taxable in India and it is not permissible to review the decision of the Tribunal in the guise of rectification u/s 254(2) - The decision in the present case, thus has been rendered by the Tribunal on its own facts and by applying the provisions of different Treaty. Thus it cannot be straightway inferred that the same is contrary to the decision of the Hon'ble Supreme Court in the case of Ishikawajima-harima Heavy Industries Ltd. (2007 (1) TMI 91 - SUPREME COURT ) giving rise to a mistake apparent from record - Miss application dismissed.

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• 2012 (12) TMI 787
  Installation expenditure - Revenue v/s Capital - Held that:- This Court recalls the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1974 (10) TMI 3 - SUPREME COURT] that whether an expenditure necessary to bring an asset into existence and to put it in working condition was capital or revenue - The test “all expenditure necessary to bring such aspects into existence and to put them in a working condition” is a determinative test for installation and other charges needed to effectuate the working condition of the leased equipment. In this case clearly the authorities have applied the test and held the expenditure in question (Rs.1,35,05,869/-) to be properly falling in the capital field. No reason to differ with them - in favour of the revenue. Software expenses - Revenue v/s Capital - Held that:- The Tribunal had the benefit of considering all the documents which included the lease agreement with Bharti Telenet and the license agreement dated 11.11.1996 whereby the assessee secured license to exploit the software, provided it procured hardware as per agreed specification and also complied with order by the lessor UB Vest. The software as well as hardware were made an integral part of the arrangement. The software apparently caters to the hardware. In this case, it is necessary for the kind of software to cater to diverse activities such as billing regarding user and analyzing such like activities to promote speed and efficiency. That the parties chose to have a composite arrangement is one factor which the Tribunal was entitled to take into consideration. The Tribunal in our opinion correctly held that the test to discern whether the expenditure incurred by the assessee in this regard was capital or revenue did not in any manner differ from the content or character which were applicable while considering issue No.1 - no reason to differ from the Tribunal - in favour of the revenue. Write off as bad debt as a business loss - Held that:- As held by Tribunal MOA & AOA shows sufficiently the intention of the assessee to pursue certain main objects. The frequency of the activity is sought to be highlighted as giving rise to a continuous and organized activity. As held by AO the main activity of the assessee company was the business of promoting, establishing telecom services. By no stretch of imagination can it be said that the assessee was engaged in the business of money lending. Since the business of the assessee was not that of money lending, it cannot be said that the sum in question represents money lent in the ordinary course of the business of money lending carried on by the assessee. Therefore, the claim of the assessee did not fall within the parameters of provisions of section 36(1)(vii) r.w.s. 36(2). The sum in question should be allowed as a deduction as a business loss cannot also be accepted, since the sum in question was not incurred as expenditure in the ordinary course of business of the assessee - as decided in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME COURT] inter-corporate deposit was not a trade debt or part of any money-lending business - no error in the findings by the Tribunal on this - in favour of Revenue.

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• 2012 (12) TMI 786
  Assessment in case of search or requisition - Notice u/s 153A - assessee contested on no material which would implicate in the earning of any undisclosed income was unearthed during the search - Held that:- There exists sufficient and relevant material which could form the basis of the satisfaction note and the reason to believe that the petitioner has earned income which was not disclosed to the income tax authorities. Section 153A was introduced by the Finance Act, 2003 w. e. f. 01.06.2003 and it provides for assessment in the case of search or requisition. It is mandatory for the assessing officer, whenever there is a search under section 132, to issue notice to the person searched requiring him to furnish the returns of income for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted. There is an Explanation to the section which provides that all other provisions of the Income Tax Act shall apply to the assessment made under this section, which means that the provisions of section 142, 143, etc. are applicable and these provisions ensure that reasonable opportunity is afforded to the petitioner to put forth his case. Therefore, unable to accept the contention of the petitioner that he would be put to harassment because of the notices issued under section 153A. The section is couched in mandatory language which implies that once there is a search, the assessing officer has no option but to call upon the assessee to file the returns of the income for the earlier six assessment years. It is not merely the undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, including both the income earlier disclosed and income found consequent to the search, would be brought to tax. There is also a time limit for completion of the assessment under section 153A which is prescribed in section 153B. In these circumstances the petitioner's contention that he would be put through unnecessary harassment is a non-starter. He has to face the assessment proceedings and participate in them, in case he has evidence or material to show that he has not earned any income which is not disclosed to the income tax authorities or to rebut the material gathered during the search, it is perfectly open to him to do so - while a certain degree of hardship which would occur to any assessee whose premises are searched, that does not afford it any higher right or confer greater remedies, or expand the scope of a limited jurisdiction under Article 226. The present petition is therefore speculative, and misconceived - writ dismissed - costs quantified at Rs.75,000/- payable to the Prime Minister s relief fund to be paid by assessee.

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• 2012 (12) TMI 785
  Re opening of assessment - whether a pre-condition for issuance of notice u/s 147/ 148 are satisfied ? - Royalty or Technical Fee received - India USA DTAA - Held that:- The declaration of law by the Supreme Court in Calcutta Discount Co. v. ITO, (1960 (11) TMI 8 - SUPREME COURT) applies squarely to the facts in this case it was held by the Supreme Court that the duty of the assessee to make full disclosure extends to primary facts. Once that is done, it is the AO's duty to draw the conclusion and inference flowing from the disclosure so made. The assessment record reveals that the Master licensing agreement (MLA) had been placed on the record of the AO in the very first instance when the assessment was completed under section 143(3). Thereafter the reassessment proceedings were initiated in November, 2003 and completed in March, 2005; for those proceedings too what drove the Revenue to issue notice and reopen the proceedings was the master licensing agreement and the nature of "royalty income". The assessing officer in that instance consciously after going through the material concluded that the rate of taxation was 15% in the reassessment proceedings. The scope was the same as in the original proceeding and in the first reassessment proceedings i.e. the taxability of the royalty income under section 44D - the assessment record reveals that the MLA had been placed on the record of the assessing officer in the very first instance when the assessment was completed under section 143(3). Thereafter the reassessment proceedings were initiated in November, 2003 and completed in March, 2005, for those proceedings too what drove the Revenue to issue notice and reopen the proceedings was the master licensing agreement and the nature of "royalty income". AO in that instance consciously after going through the material concluded that the rate of taxation was 15% in the reassessment proceedings. The scope was the same as in the original proceeding and in the first reassessment proceedings i.e. the taxability of the royalty income under section 44D - the conclusions drawn by the CIT (Appeals) and ITAT cannot be faulted in law. The substantial question of law is answered in favour of the assessee.

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• 2012 (12) TMI 784
  Re opening of assessment - assessee contested against non furnishing of “reasons to believe” - Held that:- The decision in G.K.N Driveshafts (India) Ltd. Versus ITO And Others (2002 (11) TMI 7 - SUPREME COURT) gives an indication that the requirement of passing the speaking order would provide an opportunity to the assessed to challenge the same by way of a writ petition under Article 226. To afford the assessee an opportunity to put before the tax authorities his point of view, before the reassessment proceedings are completed The basic requirement of the statute is the recording of the “reasons to believe” under Section 147. That done, all the Supreme Court opined was about the necessity of providing reasons for issuance of notice under Section 147, if the same are sought, to afford a reasonable and fair opportunity to the assessee to file his objections, and dispose of the same by a speaking order. The rest has been left to the Court's concern to be dealt within individual cases. Having regard to the facts and circumstances, this Court is of the opinion that even the question whether the petitioner was afforded a reasonable opportunity could be gone into by the CIT( Appeals) before whom the appeal is pending. It is open to the assessee to urge the question of denial of opportunity along with the other issues on merits. All rights and contentions are expressly reserved.

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• 2012 (12) TMI 783
  Deduction u/s 80IB – Denial of Profit from DEPB - gross sale v/s net sales - Held that:- This issue is no more res integra in view of the judgment of M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] wherin held that deduction u/s 80-IB cannot be allowed on the amount of DEPB and duty drawback credited to the profit and loss account - the case of M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] relied upon by assessee is not applicable to the fact situation prevailing in these grounds - against assessee. Exclusion of interest on fixed deposits from eligible profits for the purposes of deduction u/s 80-IB and 80HHC - Held that:- As decided in Pandian Chemicals Ltd. v. CIT [2003 (4) TMI 3 - SUPREME COURT] interest income does not qualify for deduction u/s 80-HH as it cannot be characterized as having been derived from industrial undertaking in the language of section 80-IB also, similar expression - Rs.derived from’- has been employed which is there in section 80-HH. As the interest on fixed deposits from bank cannot be held to be Rs.derived from’ eligible undertaking, in our considered opinion, the same cannot qualify for deduction u/s 80-IB. As the interest income in the present circumstances as 'Business income’, it will merit inclusion at the first instance and thereafter 90% of the net interest is to be allowed as per the mandate of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012(2) TMI 101 - SUPREME COURT OF INDIA] - direct the AO to reduce 90% of the net interest income after verifying the amount liable to be deducted from the gross interest receipt Deduction u/s 80-IB - Exchange fluctuation gain – Held that:- Assessee was held to be eligible for deduction in respect of foreign exchange gain relying on CIT v. United Riceland Ltd. []. No contrary judgment has been brought to notice - ground of appeal allowed. Deduction u/s 80HHC on processing charges and Scrap sales – Held that:- As decided in CIT v. Dresser Rand India Pvt. Ltd. [2010 (4) TMI 153 - BOMBAY HIGH COURT] following the judgment in the case of K.Ravindranathan Nair [2007 (11) TMI 10 - SUPREME COURT OF INDIA] the amount of processing charges are not eligible for deduction u/s 80HHC but deserves to succeed insofar as the question of deduction u/s 80-IB on the amount of processing charges is concerned - the assessee to be eligible for deduction u/s 80HHC / 80-IB on the amount of scrap sales. Deduction u/s 80HHC on DEPB license - Held that:- As per M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] the assessee cannot be denied deduction u/s 80HHC on DEPB licenseb - in favour of assessee. Addition in respect of MODVAT Credit – Held that:- Amount of tax, duty, cess etc. is liable to be included in the value of purchases, sales, opening and closing stock. It is not appropriate to include the closing Modvat in the figure of closing stock without modifying the figures of purchases, sales and opening stock as confirmed in CIT Versus MAHALAXMI GLASS WORKS P. LTD. [2009 (4) TMI 182 - BOMBAY HIGH COURT]- restore the matter to the file of A.O. for deciding it afresh in accordance with the afore-noted judgements and the provisions of section 145A - These grounds are, therefore, allowed. Disallowance on account of life membership fee of N.S.C.I. – Held that:- The issue raised in this ground is fairly settled in assessee’s favour in view of the binding precedents of the Hon’ble High Court in the case of Otis Elevator v. CIT [1991 (4) TMI 53 - BOMBAY HIGH COURT] on the point - in favour of assessee. Deduction u/s 80HHC - Rate difference, Discount received and Sundry expenses written off – Held that:- Assessee could not produce any material on record to indicate the details of such amounts. Also in the appeal of the assessee as well as Revenue, the third item has been mentioned as “Sundry expenses written off”. It is obvious that the Rs.write off’ of any amount is always debited to the Profit and loss account and hence there can be no question of any deduction on such amount. Be that as it may, the availability of deduction u/s 80-IB / 80HHC cannot be adjudicated in respect of these three amounts unless their nature is clearly put forth - set aside the impugned order and remit the matter back to AO for deciding this issue afresh.

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• 2012 (12) TMI 782
  Delayed PF Payments u/s 43B – Following the decision of court in case of [CIT vs Cranes Ltd, 2007 (10) TMI 386 - BOMBAY HIGH COURT] if payment have been made during the financial year or before filing of return amount in question has to be allowed - matter should be remitted back to the file of the AO to verify the claim made by the assessee. Disallowance on gifts and presentation – Held that:- Although expenditure incurred was wholly and exclusively for carrying out business but expenditure without evidence were not allowable - FAA has power coterminous with AO, but then his duties are same as that of the AO. Any adverse inference has to be confronted to the assessee before deciding an issue against the assessee - matter should be restored back to the file of the AO for fresh adjudication. Disallowance of Commission – Held that:- Though assessee has claimed that necessary evidences were produced, yet from the order of the AO, it is clear that factum of rendering of service was not established. FAA has doubted the genuineness of the papers, but did not afford an opportunity to the assessee to rebut his conclusions. As FAA should have confronted the assessee with his above findings & as the AO had no occasion to go through the paper, so, in the interest of justice,the matter remitted back to the file of the AO. Disallowance of Bad Debts – Held that:- Once assessee writes off the bad debts in his Books of Accounts he has to prove nothing - as decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - Appeal of the assessee stands partly Allowed.

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• 2012 (12) TMI 781
  Applicability of sec 50 C on transfer of Leasehold Rights – Held that:- From the plain reading of the language of Section 50C (1), it is clear that value of land or building or both adopted or assessed or assessable by the Stamp Valuation Authority shall, for the purpose of Section 48, deemed to be full value of consideration accruing as a result of such a transfer. Section 50C(1) is of a deeming provision and it extends only to land or building or both. Such a deeming provision has been incorporated to substitute the value adopted by the Stamp Valuation Authority in place of consideration received or accruing as a result of transfer. The deeming provisions as contemplated in Section 50C however does not extend to lease rights in a land - Thus, respectfully following the decisions Atul G. Puranik Versus ITO [2011 (5) TMI 576 - ITAT, MUMBAI] & DCIT Vs. Tejinder Singh [2012 (3) TMI 47 - ITAT, KOLKATA] provision of Section 50C would not be applicable on the transfer of lease hold rights on the land. Thus going through the material placed on record like copy of agreement dated 5-11-1974 between MIDC and the assessee and the agreement dated 16-10-2006 between the appellant and Karamtara Engineering (P) Ltd. and also the valuation adopted by the Stamp valuation authority, it can be fairly concluded that it is a transfer of leasehold rights therefore, the finding given by the CIT(A) for non applicability of Sec 50C are confirmed - appeal filed by the department dismissed.

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• 2012 (12) TMI 780
  Sale and Purchase of Shares – Business Income vs Capital Gain - Held that:- Appellant has earned business income on non delivery based transactions for A.Y.2004-2005 but that does not mean that income earned on sale of shares held as investment can be taxed as business income in the subsequent years. The appellant has made clear distinction between delivery based and non delivery based transactions and admitted income accordingly and except for A.Y.2004-2005, the appellant did not indulge in any non delivery based share transactions. Thus even shares purchased as investment had to be sold within a short time depending on the market conditions. Thus, the sale of shares was only with a view to protect the amount invested by the appellant which would not convert the investment into stock-in trade. It is found from the balance sheet filed that the appellant held shares as investment and after transferring the shares in the name of the appellant the shares were sold as evidenced by the demat account and the STT was paid at a higher rate application to the investor and stand of the A.O. is no longer valid in the light of the decision of CIT Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - in favour of assessee.

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• 2012 (12) TMI 779
  Depreciation on fixed assets utilized for the charitable purpose – Society registered u/s 12A – Held that:- Following the decision of court in case of DIRECTOR OF INCOME TAX VERSUS VISHWA JAGRITI MISSION [2012 (4) TMI 289 - DELHI HIGH COURT ] having regard to the consensus of judicial opinion on the precise question it is held that claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles – no infirmity in the order passed by CIT(A), affirm the order of CIT(A) and dismiss the appeal filed by the revenue - Appeal of Revenue dismissed.

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• 2012 (12) TMI 778
  Additions u/s 40A(3) - assessee had shown 19.27% Gross Profit (GP), AO fixed the GP at 26.52%. FAA reduced it to 25% - Held that:- Additional residential accommodations granted to the tenants upto 10% and assumed for commercial premises that additional area would be 20%. It is a fact that the rates for commercial premises on ground floor command higher rates than the residential flat on ground floor. The very fact that the stamp duty rate at the relevant time was Rs.9830/- per sq ft against the residential premises rate of Rs.4660/- per sq ft also substantiates the contention of the appellant - it is established by the appellant that the premises held by Mrs. Chandrika Shah was a commercial premise as certified by the Government agency. Also appellant stated that if the commercial area originally held is converted into residential area based on the rate prevailing in that area, the space allocable to Mrs. Chandrika Shah would be higher than the area considered by the AO. Considering all the above and considering the fact that the net profit is estimated at 25% of the sales As it is a matter of estimation and that also in a search and seizure related matter & assessee has admitted that expenses outside the books were incurred opined here that 2% reduction in the formula adopted by the FAA will meet the end of justice. AO is directed to recalculate the income of the assessee @ 23% of the cost of the sales (sales minus profit). Section 40 A(3) disallowance - As in a matter where income is determined on estimate basis, there is no need to make further additions including additions made u/s. 40A. Upholding the order of the FAA, in this regard, the appeals filed by the Revenue dismissed.

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• 2012 (12) TMI 777
  Undisclosed capital gains - assessment order passed by AO u/s 153A/153C - Held that:- Admittedly no search operation was conducted at the premises of the assessee and no document was recovered from the premises of the assessee CIT(A) has not decided this issue despite a specific ground raised by the assessee and the observation of CIT(A) that the constitutional validity of provisions of Section 153A/153C was challenged and any ground of appeal challenging the constitutional validity of the forming the provisions. CIT(A) has not decided this issue of his jurisdiction and validity of assessment despite the fact that of specific ground had been raised by the assessee. In interest of justice remit back this matter to CIT(A) to decide afresh after providing reasonable opportunity of being heard to assessee - in favour of assessee allowed for statistical purposes. Disallowance of Depreciation,Levy of Interest u/s 234A, 234B,234C,234D and Penalty U/S 271(1)(c) - Held that:- As main issues are remitted back to the file of CIT(A) for fresh adjudication hence, the inter-connected issue is remitted back to the file of CIT(A) for fresh adjudication - in favour of assessee allowed for statistical purposes.

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• 2012 (12) TMI 776
  Sale of Software – Royalty – failure to deduct tax u/s. 195 - assessee in default u/s. 201(1) - Held that:- Analysis of the DTAA, Income Tax Act, Copyright Act that the payment would constitute 'royalty' within the meaning of Article 12(3) of the DTAA and even as per the provisions of 9(1)(vi) as the definition of 'royalty' under clause 9(1)(vi) is broader than the definition of 'royalty' under the DTAA as the right that is transferred in the present case is the transfer of copyright including the right to make copy of software for internal business, and payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to Section 9(1)(vi). In view of the provisions of Section 90 agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the non-resident Companies would amount to 'royalty' within the meaning of Article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty, thus it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 - the facts of the present case are similar to the facts involved in M/s. Samsung Electronics Co. Ltd. v. DCIT (International Taxation) [2012 (8) TMI 112 - ITAT BANGALORE] therefore respectfully following the said order appeals of the assessee dismissed - against assessee.

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• 2012 (12) TMI 775
  Revisionary powers used by CIT(A) - order of the A.O. was erroneous – Capital Gain - Held that:- The observations of CIT clearly indicate that he invoked the doctrine of lifting the veil. The doctrine of substance or form is generally applicable to the assessment proceedings and not the revisionary proceedings. Further, the AO, has considered the issue in question, applied his mind and did not invoke the provisions of Section 45(4). In the present case, pertaining to capital gains on leasehold property rights the said transaction has been duly considered by the AO, as is evident from the questionnaire issued and reply submitted by the assessee. Further, the assessee has filed documentary evidence, indicating, the date of transaction, as well as the date of retirement of the said partner. Right in leasehold property in question has already been sold much before the date of retirement & had nothing to do with retirement of partner & do not fall with in the purview of Distribution of assets. It is well settled proposition that, where AO has taken legally permissible view, CIT cannot acquire revisional jurisdiction u/s 263 merely because another view is possible - appeal of assessee is allowed.

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• 2012 (12) TMI 774
  Disallowance of Expenses - non discharge on SCN - Held that:- The production of books of account and vouchers was not obligatory on the appellant for want of issue and service of notice u/s 143(2). Assessee has failed to produce copy of PAN and also failed to obtain information regarding service of notice sent through Speed Post from Postal Authority. Under the circumstances where the Department in reply to RTI application of the assessee it was clearly stated that the assessee may obtain information from Post Office that on whom this notice was served. These facts clearly show that the assessee has failed to discharge its onus and also failed to rebut the presumptions regarding service of notice. Contrary to this, Revenue has reasonably discharged its onus as per the facts noted above based on which the notice under section 143(2)was sent by Speed Post on the address which is the address in accordance with section 282 - order of CIT(A) is, therefore, set aside and the order of Assessing Officer is restored on the issue. Set aside the finding of CIT(A) in respect of non-issuance of notice under section 143(2) and quashed the assessment, therefore, the CIT(A) is required to give finding after recording complete facts on merit of the case - appeal of the Revenue is allowed and allowed for Statistical purposes.

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• 2012 (12) TMI 763
  Re opening of assessment - BAH India as an agent of the USA entity - fees for technical services - Held that:- Although the amount payable by BAH India to the USA entity was debited by BAH India to the profit & loss account and was also claimed as expenses, no RBI approval was obtained for remitting the said amount in foreign exchange as required by relevant provisions of Foreign Exchange Regulation Act during the year under consideration. As claimed the said amount did not constitute income of the year under consideration for want of the RBI approval as no income chargeable to tax in India could be said to have accrued in the absence of the required approval from RBI reliance placed on the decision of in the case of Kirloskar Tractors Ltd. (1998 (2) TMI 117 - BOMBAY HIGH COURT) wherein held that the approval of RBI having been received in the subsequent years and the relevant amounts also having remitted during those years, liability could be said to accrue or arise in such subsequent years though the same pertained to the earlier years. Reliance has also been placed on another decision of Hon'ble Bombay High Court in the case of Dorr-Oliver (India) Ltd. v. CIT [1998 (1) TMI 42 - BOMBAY HIGH COURT] wherein it was held that collaboration agreement being subject to Government approval, deduction of sum paid as compensation and fees under collaboration agreement was allowable only upto the date till the agreement enjoyed approval by Government of India and not for any subsequent year. Thus the judicial pronouncements discussed above clearly support the stand of the assessee that income on account of the amount payable by BAH India to the USA entity could be said to have accrued to the said entity only on receipt of the required approval from RBI and there being no such approval received during the year under consideration, the same could not be taxed as income in that year. The decision of the Hon'ble Supreme Court in the case of LIC v. Escorts Ltd. (1985 (12) TMI 289 - SUPREME COURT OF INDIA) thus was rendered in a different context and in a different set of facts and the same cannot support the stand of the Revenue in the present case - delete the additions made on this count by the AO - in favour of assessee. Method of accounting - royalty and fees for technical services - Held that:- Keeping in view the language so employed in the case of Seamens Aktiengesellschaft (2012 (12) TMI 737 - BOMBAY HIGH COURT) & CSC Technology Singapore Pte. Ltd. (2012 (4) TMI 189 - ITAT DELHI) considering the relevant provisions of DTAA between India and Germany royalty and fees for technical services should be reckoned for taxation only when it is actually received by the assessee and not otherwise - royalty/FTS which had accrued as income to a foreign company, could not be taxed in the source country (being India) unless this amount had been received by the foreign company - thus the amount payable by BAH India to the USA entity could not be brought to tax in India during the year under consideration as fees for technical services as per the relevant provisions of the DTAAs since the same had not been paid to the said entity - in favour of assessee.

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• 2012 (12) TMI 762
  Unexplained income u/s 68 - CIT(A) deleted the addition - Held that:- An assessee’s duty to establish that the amounts which the AO proposes to add back, u/s 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant’s PAN particulars, or bank account statement, surely its relationship is closer than arm’s length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be reopening of such investor’s proceedings. That apart, the concept of “shifting onus” does not mean that once certain facts are provided, the assesse’s duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. As decided in A. Govindarajulu Mudaliar v CIT, (1958 (9) TMI 3 - SUPREME COURT) whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature - Having regard to the totality of facts and circumstances, particularly the remand report, which was not considered by the CIT (A) and the ITAT in its proper perspective, this Court is of the opinion that the question of law requires to be answered in favour of the revenue.

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• 2012 (12) TMI 761
  Non deduction of TDS - shooting of films held outside India - payments made in foreign exchange to overseas services providers - application u/s 195(2) - India - U.K. DTAA - Held that:- This issue is squarely covered in favour of the assessee by the decision of in the case of GE India Technology Centre P. Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] wherein held that if the relevant payment does not contain the element of income taxable in India, the payer cannot be made liable to make an application u/s 195(2). Merely because some managerial skill is required to render the services, it would not make the services to be managerial services as envisaged in Explanation 2 to section 9(1)(vii). Keeping in view the nature of services rendered by the overseas service providers to the assessee the said services cannot be treated as technical services within the meaning given in Explanation 2 to section 9(1)(vii). As in agreement with the CIT(Appeal's) that the said services rendered outside India by the overseas service providers in connection with making logistic arrangement are in the nature of commercial services and the amount received by them from the assessee for such services constitutes their business profit which is not chargeable to tax in India in the absence of any PE in India of the said service providers. The requirement of knowledge of local laws on the part of the service providers to render the services such as obtaining the permissions for shooting from the local authorities or for arranging insurance of the crew members and shooting equipments would not change the basic nature of the services which otherwise are commercial services. The assessee, therefore, was not liable to deduct tax at source from the said payments and the AO was not justified in treating the assessee as in default u/s 201 - in favour of assessee.

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• 2012 (12) TMI 760
  Deduction under section 80IA - CIT(A) deleted the additions on account of disallowances u/s 153A - infrastructure projects where the assessee is merely a work contractor or developer - Held that:- According to sub-clause (a), clause (i) of sub-section (4) of section 80-IA, the word 'it' denotes the enterprise carrying on the business. The word 'it' cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Government or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular, dated 18-5-2010, such activity is eligible for deduction under section 80-IA(4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicate that the assessee is eligible for deduction under section 80-IA(4). The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. Nothing either on facts or in law, which distinguishes, the already existing position as on the date of search and in the proceedings under section 153A read with 143(3), which substantiates the denial. Accept for the interpretation, as made out by the AO, there is nothing, which could substantiate the disallowance. In the entire proceedings upto the hearing before us, the department has not even said that there was either no agreement between the assessee and the state government or there is any change in the agreement entered into by the assessee and the government department. In fact the DPB filed by the department there are letters exchanged, written by the assessee and various government departments, which indicate that the assessee was awarded the job, wherein the assessee had placed the bank guarantee for Rs. 2,61,62,400, against the tendered cost. This proves beyond doubt that the assessee, itself was doing the development of infrastructure facility, on behalf of the government, besides placing its own funds at risk and peril - thus no disallowance u/s 80IA(4)warranted - in favour of assessee. Deduction u/s 80IA on the amounts written back under section 41(1) - Held that:- It is not the case of the department that these liabilities were non business. When the liabilities which have been written back/offered to tax by the assessee pertains to the business, then it has to be added back as a business income. CIT(A) has also taken note of the fact that the assessee was having two types of projects, i.e., which qualify for deduction under section 80IA and which do not qualify. But here, in the instant case, we are concerned with domestic projects, and the ceased liabilities are emanating from the normal course of business of the assessee. Hence the liabilities written back would be added to the claim of deduction under section 80IA. Since the assessee also has non-80IA projects and it has been accepted by the assessee that these written back liabilities would also pertain to non 80IA projects, in these circumstances, the assessee and the CIT(A) were very reasonable in allocating the income offered under section 132(4) on account of cessation of liabilities under section 41(1) in proportion of the turnover of 80IA project and non 80IA projects - no reason to deviate from the finding reached by the CIT(A) to direct the AO to add the proportion of offered amount of Rs. 1.95 crores to the income eligible for deduction under section 80IA for assessment year 2005-06.

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• 2012 (12) TMI 759
  Deduction u/s 80IA - whether the amount of loss suffered in the Avitech Division was rightly set off against the profits from the eligible vaccine unit - Held that:- A fair and objective reading of the record would reveal that the assessee’s claim was inadmissible under Section-80IA because the second Unit was located within the same premises and could not, therefore, be characterised as a “separate undertaking”. Once the assessee decided to open the separate division in the same premises, he cannot claim the benefit of Section 80IA as far as that activity is concerned. In none of the orders of AO or CIT (A) no such contention that the Avitech undertaking was located within the same premises as the other poultry vaccine division or undertaking was raised before the Tribunal. Certainly, the grounds recorded by the Tribunal do not reflect this. Being a pure question of fact, this Court would not interfere with the conclusions of the authorities below on this aspect. As far as the legality of the conclusions are concerned, the Court notices that the Tribunal and the CIT (A) relied upon the ruling of the Supreme Court in CIT v. Canara Workshops [1986 (7) TMI 5 - SUPREME COURT] assessee is entitled to a deduction on the entire profits of one priority industry without deducting loss in the other priority industry - no substantial question of law arise.

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• 2012 (12) TMI 758
  Short Notice Pay for Termination of Toll Manufacturing Agreement – Capital vs Revenue Expenditure – Held that:- The test of commercial expediency cannot be reduced to the shape of a ritualistic formula, nor can it be put in a water-tight compartment. All that the law requires is that the expenditure should not be in the nature of capital expenditure or personal expenditure of the assessee and it should be wholly and exclusively laid out for the purposes of the business. It is well-settled that items of expenditure are to be considered from the point of view of a normal, prudent businessman. Business expediency was not established by the assessee at any stage of hearing, including hearing before us, for making payment to CCL in violation of the agreement. If sanctity of agreement can be ignored for the sake of argument, even then the vital question of establishing business expediency remains unanswered. In the case under consideration there is neither any danger of dent to the goodwill of the assessee nor adverse affect was looming large over the business carried on by the assessee-breach of agreement was not by the assessee. If CCL without giving stipulated notice terminated the agreement, then goodwill of the CCL would have been at stake. If any step for maintaining confidence had to be taken then that step had to be of CCL. In these circumstances we are of the opinion that if the AO could not find nexus between the expenditure incurred and the purpose of the business in the said transaction, he was justified. Business expediency was not established by the assessee at any stage of hearing, including hearing before us, for making payment to CCL in violation of the agreement. If sanctity of agreement can be ignored for the sake of argument, even then the vital question of establishing business expediency remains unanswered. - order of AO is upheld – Appeal by assessee is dismissed.

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• 2012 (12) TMI 757
  Unexplained Expenditure u/s 69C – Shortage of Cash – Held that:- The appellant’s books has been obtained and it transpires that all the payments have been made through Bank of India and there is apparently no correlation with any of the amount appearing in the seized papers - addition made is hereby deleted. Difference in Stock – Held that:- Impugned addition made by the Assessing Officer merely on the presumption that the assessee kept changing his version about difference in stock and no justifiable reason was adduced in the assessment order for making the addition, therefore, the CIT(A) rightly deleted the same. Unexplained Purchase of goods – Held that:- Additions made on the plea that bill no. 4 dated 19.1.2007 of M/s Guru Nanak Traders for an amount of Rs. 3,55,000/- was found at the business premises of the assessee. The assessee tendered in his statement that the goods mentioned in the bills have not been delivered till date and were transported through Sanjay Transport Company of Jabalpur on 20.1.2007 only. Identically bill bearing no. 76 dated 20.1.2007 of M/s Jeetu Steels for Rs.1,20,365/- was found which was issued in the name of Shreenath Traders. The assessee claimed that he did not purchase the goods appearing in the bill. On perusal of the observations the explanation offered by the assessee justification in the conclusion of the CIT(A) exists - appeal of the revenue having no merit therefore, dismissed.

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• 2012 (12) TMI 756
  Unexplained Addition u/s 69 – mis match of dates as mentioned in the bokiyam agreements and in the statements recorded from the tenants - Held that:- It remains a fact that each of the persons, who were examined had confirmed the payment of bokiyam there is a fair chance that when statements were recorded, concerned tenant could have made a mistake as to the exact dates of payments. None of the authorities sought any explanation from the assessee for the mismatch of dates. None of the authorities sought any explanation from the assessee for the mismatch of dates. Assessee had produced affidavits, which was not considered by the Commissioner of Income Tax(Appeals). Assessee has to be given a chance for explaining the mismatch of dates and justify how the bokiyam receipts could be considered as a source of investment for the supri street property - in favour of assessee for statistical purposes.

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• 2012 (12) TMI 755
  Disallowance of electricity expense - apartment in a building by the name `Heera Panna’ - Held that:- As the assessee could not evidence the said claim that the apartment, belonging to a close relative, is being used as a conference room, i.e., for meeting the patients, etc. the disallowance stood restricted to Rs. 16,497/-, on the assessee leading evidence to the effect that the actual expenditure qua the said apartment had been wrongly assumed by the AO, and was in fact only at the said amount Liability becomes due for payment by the year-end or not? - Held that:- This is as undisputedly all the bills in the present case stand raised only in the month of April, 2007. In fact, the amount does not become due for payment immediately on the raising of the bill, as certain time lag is necessary for its communication to the payer, besides allowance of certain time period for effecting the payment is also necessary. The due date, which represents the last date for payment, though not clarified, would only be subsequent to the raising of the bill, which itself is in the second week of April, 2007 - in favour of assessee. Non deduction of TDS - technical services covered u/s. 194J – Held that:- With regard to the application of section 194J, i.e., qua technical services payment made to under-graduate students, undergoing three-year diploma in Ophthalmology, leading to the qualification of an Ophthalmology Assistant, paid during third (final) year of their course. The students are enrolled for the program after passing Class 12. It is only after the successful completion of this program that they would qualify as professionals, capable of rendering either professional or technical services. The same is only an allowance to an apprentice or an intern, rightly termed as a stipend, which is defined as a sum of money paid to the students for living expenses. As regards the balance payment (of Rs. 7,79,740/-) to the doctors undergoing post graduation, rather super-specialty courses, the same are highly technical courses, admission to which it is severely restricted and regulated, and only upon meeting high standards of professional competence prescribed for the purpose and is not covered under the provisions of sec.194J. Following the decision of in case of Merilyn Shipping and Transports vs. Addl. CIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM ] provisions of section 40(a)(ia) would apply only to the amount outstanding as at the year-end. The assessee’s alternate ground is also to be allowed, even as no amount of stipend is liable for disallowance u/s. 40(a)(ia) of the Act - assessee succeeds. Disallowance of various expenses in part – Held that:- Onus to prove the expenditure to the satisfaction of the AO is on the assessee. Besides, the expenditure claimed is u/s. 37(1), which, therefore, has necessarily to be proved as having been actually incurred and, further, wholly and exclusively of the purpose of the assessee's business. When the factum of the expenditure is not proved, which can only be on the basis of some reliable evidences/ materials, which have been found missing in the present case, a part disallowance by the Revenue cannot be faulted with - Disallowance of expense is restricted to 10%, as against 20% by the Revenue to meet the ends of justice. Disallowance of Discount - Held that:- Addition of Rs. 1 lakh to cover the leakage of Income is not on account of enhancement in income, as stated by the AO, who in fact has disallowed the discount presumed to have been allowed by the assessee on his receipts. No basis whatsoever, including the absence of the patient register, to infer the assessee as having allowed the discount against every bill raised by it and, secondly, of the same being not genuine - no merit in his sustenance of the said disallowance by CIT(A) and is therefore deleted - In the result, assessee's appeal is partly allowed.

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• 2012 (12) TMI 754
  Setting Aside of Assessment u/s 263 – Held that:- Appeals filed by the assessee for both the years were on substantially different issues, vis-à-vis the issues for which proceedings under Section 263 were initiated and completed by the Commissioner of Income Tax, therefore CIT(Appeals) was obliged under law to deal with the grounds taken by assessee for the respective Assessment Years, since orders under Section.263 did not cover these aspects. Set aside the orders of the CIT(Appeals) for both the Assessment Years and remit the matter back to him for re consideration - appeals of the assessee for both the years allowed for statistical purposes.

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• 2012 (12) TMI 753
  Statutory exemption u/s 10(10C) – disallowance as VRS Benefit exceeding T.D.S. certificate amount - Held that:- Decided in favour of assessee relying on Sail Dsp Vr Employees Association 1998 Versus Union of India And Others.[2003 (2) TMI 46 - CALCUTTA HIGH COURT] wherein held that it is a deferred payment of the benefit receivable under the voluntary retirement scheme. Therefore, it would not be payment of salary outside the scope of section 10(10C). The characteristic cannot be changed because of stretching over the period of payment of dues under the scheme - against revenue. Claim u/s 10(10AA) as well as relief u/s 89(1) – disallowance for want of evidence - Held that:- CIT(A) not justified in refusing the claim of assessee by simply stating that the revised computation was filed on 30.10.2006 and the time limit for filing revised return was available upto 31.03.2005. It is further observed that in order to claim relief u/s 89(1) of the IT Act the assessee is supposed to furnish the details in the prescribed form. Therefore, in the interest of justice we set aside both the issues to the file of AO to decide the same after giving a reasonable opportunity of being heard to assessee. Charging of Interest u/s 234D – Held that:- AO is directed to re-compute the same after giving effect to this order - appeal of assessee is partly allowed for statistical purposes.

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• 2012 (12) TMI 752
  Sale of land – Long Term Capital Gains - Whether repayment of the mortgage debt created by the assessee, is an expenditure incurred in connection with the transfer of mortgaged asset allowable under section 48(i) - Held that:- As decided in Salay Mohamad Ibrahim Sait Versus Income-Tax Officer And Another [1994 (5) TMI 18 - KERALA HIGH COURT] the amounts spent for discharge of the mortgage is not liable to be deducted in the computation of capital gains under section 48 of the Act. Assessee is not entitled to the deduction of the expenditure incurred to remove encumbrance created by the assessee himself - CIT(A) has fell in error in allowing the appeal of the assessee and in coming to the conclusion that transfer of property has taken place way back in the financial year 1988-89. Moreover, it was the liability of the assessee to redeem the mortgage. The assessee cannot claim the redemption amount as deduction under the unambiguous provisions of section 48 to arrive at the capital gains - Impugned order of the CIT(A) is set aside and allow the appeal of the Revenue - appeal of Revenue is allowed.

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• 2012 (12) TMI 751
  Additions on account of unexplained investment on construction of house - deduction of Cost of construction incurred by the tenant - internal decoration of the building was carried out by the tenant - Held that:- CIT(A) found that, the quality of material used was not of very high quality and he personally supervised the construction and taken care to purchase the material in person. - After considering the argument of the assessee, it is reasonable to allow 15% relief towards purchase of materials and self supervision. - The amount spent by the tenants was worked out at Rs. 7,39,850/-. This was not given credit by the Assessing Officer. It is common practice now a days to do internal work like decoration, furnishings, etc. by the corporate tenants to improve the ambience of the building. The order passed by the CIT(A) is a well-reasoned and detailed order giving valid reasons for partly allowing the appeal of the assessee. - Revenue's appeal dismissed.

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• 2012 (12) TMI 750
  Interest Income – Business Income v/s Income from Other Sources – Held that:- There is no direct nexus between interest income and income derived out of exports therefore, the lower authorities are justified in treating the interest income as income from other sources - This common ground is accordingly dismissed. Rent received from its employees against allotting them dwelling units – Held that:- Nature of the recovery made from the employees is that the recovery goes to reduce the staff welfare expenses in the hands of the assessee-company. The rent recovery made from the employees is not an independent income or a different source of income. The assessee is providing residential quarters to the employees against which a nominal rent is recovered from them. The recovery ultimately reduces the cost in the hands of the assessee. Therefore, the recovery is in the nature of business income. This is because it reduces the business expenditure - rent recoveries as business income in the hands of the assessee company – in favour of assessee. Recovery of pay for notice period and other recoveries from employees for certain facilities like telephone calls and similar utilities,these recoveries are in the nature of business income are to be treated as business income in the hands of the assessee - appeals filed by assessee are partly successful. Deduction of expenditure incurred in foreign exchange from total turnover profits from business – Held that:- As the export sales are more than 75% of total sales. CIT(A) has failed to appreciate that after the amendment to section 10B with effect from 1-4-2001, the eligible deduction would be profit proportionate to the export turnover upon total turnover. The CIT(A) has rightly held in favour of the assessee because the provision for full exemption was omitted from the statute book only with effect from the assessment year 2002-03. Therefore, the provision does not apply to the impugned assessment year 2001-02 - This issue is accordingly decided against the Revenue. Depreciation allowance – Held that:- Issue is remitted back to the AO for adjudicating the issue after examining the relevant materials afresh. The issue is remanded back to the Assessing Officer - In result,appeals filed by the assessee are partly allowed.

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• 2012 (12) TMI 749
  Brokerage Expenses – adoption of Fair Market Value - reference u/s 142A - Held that:- Assessee has filed his objection on 16.12.2009 alongwith documents which were forwarded by the AO to AVO, who has given revised report dated 23.12.2009, which was not confronted to the assessee, which is contrary to the provisions of section 142A AO is duty bound to give assessee an opportunity of being heard such report and making such assessment meaning thereby before completion of the assessment, the AO has to give an opportunity of being heard to the assessee, which has not been granted to the assessee and is contrary to the provisions of section 142A. In the interest of justice, order passed by first appellate authority is not according to law - impugned order deserves to be cancelled, same is cancelled and set aside the issue to the file of AO to decide the issue in dispute afresh in accordance with law after giving opportunity of being heard to the assessee for substantiating the claim and dispute especially on the objections filed by the assessee - AO has to decide the same after providing sufficient opportunity to the assessee before completion of the assessment - appeal of assessee is allowed for statistical purposes.

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• 2012 (12) TMI 748
  Eligibility of deduction u/s. 80IC(2) - Initial Assessment Year - Held that:- Accepting to the issue that commercial production and not trial production determines the beginning of manufacture or production of articles or things. However, when actual production has began and sales has also been effected of manufactured goods and there is no sales return, that such production is still a trial production just because the consent order from the Pollution Control Board, Assam has not been received to begin the manufacture or produce any articles or things or commences operation as required u/s. 80IC is unsustainable. The facts in the present case clearly show that the assessee has began to manufacture the calcinated petroleum coke using the raw material of petroleum coke before 31-3-06 and the sale of finished products would clearly establishes the commencement of operation. In the circumstances, ‘initial assessment year’ for the assessee to claim deduction u/s. 80IC(2) is the year 31-3-96 relevant to the AY 1996-97. Coming to the claim of the assessee that it has capitalized the expenditure till 18-9-96 and the same has also been accepted by the revenue, not convinced by the said claim as nothing stopped the assessee from claiming expenditure thereto as a revenue expenditure. There is no assessment order for the AY 1996-97 or 1997-98 specifically accepting the claim of the assessee. Further, there is also no scrutiny assessment order accepting the claim of the assessee that the initial AY in the case of the assessee for claiming of deduction u/s. 80IC is the AY 1997-98. In the circumstances the initial assessment year for the assessee for claiming of deduction u/s. 80IC(2) is held as the assessment year 1996-97. Consequently, the assessee would not be entitled to claim of deduction u/s.80IC(2) for the impugned AY 2006-07. In the circumstances, the finding of CIT(A) stands reversed and that of the AO restored - in favour of revenue.

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• 2012 (12) TMI 747
  Unexplained Cash Credits – Held that:- The assessee had provided complete addresses of all the persons from whom the assessee had received the advances. The explanation of the assessee that advance so received was for the purpose of purchase of gold jewellery having been purchased for few of the persons have been debited to their accounts and rest of the persons because of the price rise in the gold, the gold could not be purchased and the amount was returned up to 31.03.2006. During the remand proceedings, the AO chose to examine 19 persons out of which 3 persons had expired for which the relevant documents to confirm the advance were submitted, is not under dispute. As regards the rest of 16 persons, they were examined and had confirmed that the said advance was given by the assessee. This is also not under dispute. The assessee out of Annexure-B chose to file confirmations of 23 persons, which were filed is not under dispute. Thus when the AO was in the possession of complete addresses of each every depositors, it was the duty of the AO to call for the information, confirm or examine them to find out the identity, creditworthiness and genuineness of the transaction. But the AO chose not to act and use powers vested with him u/s 131 or u/s 133 (6). When the assessee had discharged the onus of proving identity, creditworthiness and genuineness of the transactions, there is no reason of making any addition on account of unexplained cash credits, which in fact, are the trade creditors. AO directed to delete all the additions - in favour of assessee.

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• 2012 (12) TMI 746
  Re opening of assessment – Held that:- Once the notice under section 142(1) had been issued, the machinery for assessment was already set in motion for the words in section 142(1) for the purpose of making assessment under this Act, the AO was required to complete the assessment u/s 143(3) without issue of notice u/s 148, on or before the expiry of period ending on 31.12.2008 under section 143(3). Though assessment has been made in the present case on 26.12.2008 – with out issuing notice under section 143(2). At the same time, the AO cannot enter into jurisdiction for reassessment u/s 147/ 148 when there was time left for completion of assessment under section 143(3) for which notice under section 142(1) had already been issued and the assessment proceedings had already been started. Therefore, the notice issued u/s 148 by the AO was bad in law and therefore, assessment so framed was bad in law and therefore, assessment so framed is quashed - in favour of assessee.

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• 2012 (12) TMI 745
  Unexplained Opening Capital Balance – Held that:- Except in respect of FDs with M/s. Duncan Industries and cash in hand, all other investments have been substantiated and also accepted by the AO. The assessee brought evidence to show that FDs with M/s.Duncan Industries Limited were made before 1-4-09 and consequently, it is not liable to be treated an unexplained expenditure/investment and the addition of Rs.4,05,000/- on a/c of FDs with M/s. Duncan Industries Ltd stands deleted for the AY 2000-01 under appeal - assessee’s appeal is allowed. Unaccounted Cash - in - hand - Held that:- Holding of cash of Rs.3,03,000/- from the date of creation of the will of assessee’s Mother till 31-3-99 has been produced and will is also not a registered will no evidence whatsoever has been placed to substantiate the claim - claim amount of Rs.3,79,685.89 including the cash of Rs.3,03,000/- does not find any merit - in the circumstances, the addition of Rs.7,84,685.89 stands reduced to Rs.3,79,685.89. Disallowance of business loss and interest on bank O/D – Held that:- Assessee has not placed any evidence to substantiate his claim as shown in the trading and P & L account in these circumstances, thus disallowance of business loss as made by the AO and confirmed by the CIT (A) does not call for any interference - against assessee. Disallowance of bank interest on O/D - Held that:- Assessee has converted the FDs into MIS with West Bengal State Co-operative Bank Ltd. As the assessee has not been able to substantiate the use of the O/D for business, finding of the AO in disallowing the same and as confirmed by CIT (Appeals) is on right footing and does not call for any interference- against assessee. Legal expenses – Disallowance as not shown in the original return - Held that:- A perusal at the assessee’s paper book copy of the bill shows that a bill from the advocate has been placed by the assessee detailing the expenditure and that has not been examined by the Assessing Officer. In the circumstances issue is restored the file of AO after granting adequate opportunity of hearing to the assessee to substantiate his claim - in favour of assessee for substantial purposes. Payment made to Land Broker - Held that:- Assessing Officer has not disputed the existence of agreement or veracity of agreement. The agreement having been accepted, the expenditure incurred by the assessee on account of agreement is liable to be allowed - AO directed to delete the disallowance being the amount paid to the land broker while computing the long-term capital gains - in favour of assessee.

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• 2012 (12) TMI 744
  Trading Additions – rejecting of books of accounts - Held that:- The stock is valued on physical verification by the management adopted in the earlier years and has been accepted by the department consistently and there is no change in the method of accounting. In this regard, there is nothing shown by the assessee before any authorities that why the stock register of one thousand items or above cannot be maintained or not possible to be maintained. Therefore, when closing stock and opening stock are valued on the estimated basis, having no relevance with the quantitative details of purchases and sales, then any figure as estimated by the management is on adhoc figure of closing stock and therefore, directly effects the Gross Profit of the assessee and the profits deduced cannot be said to be accurate. In the facts and circumstances of the present case, no infirmity in the order of the A.O. who has rightly invoked the provisions of section 145(3) in rejecting the books of account - in favour of revenue. Estimation of income - Held that:- There was fluctuation in the exchange rate, increase in the cost of manufactured items and other over head expenses and the assessee has discarded the export of high value items which attributed to GP rate in the earlier years at 60-62% as compared to the GP rate of 22-24% on regular items. These aspects were not taken into consideration by the AO. The estimates by the AO cannot be on surmises and conjectures. There has to be some material on record to make such estimation. The case of its Sister concern is quite distinguishable on the facts as that in that case, the assessee had been declaring GP rate of about 58% in the preceding three years whereas the assessee had declared 39% during the assessment year 2004-05 and 31.11% in the assessment year 2005-06. Therefore, the percentage of G.P. rate declared in the case of Sister concern is quite different in the preceding years to that of the assessee in the preceding years as has been accepted by the department - thus even if the books having been rejected, no addition is called for - in favour of assessee.

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• Customs

• 2012 (12) TMI 773
  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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• 2012 (12) TMI 743
  Penalty levied u/s 117 of Rs. 1,00,000/- - Non approval of the Commissioner of Customs for management, operation and maintenance of warehousing facilities - Held that:- Section 117 of Customs Act 1962 provided for a penalty not exceeding Rs. 10,000/- during the relevant period when offence was committed. The amount of Rs. 10,000/- (not Rs. 1,00,000/-) is not the minimum or is a mandatory penalty. It is the maximum limit for imposition of penalty. Although the law had been violated but the intention was not malafide - mens rea is not required for imposition of penalty u/s 117 thus this is a case wherein a nominal penalty is required to be imposed and not the maximum penalty - penalty of Rs. 1,000/- would meet the ends of justice - in favour of assessee as directed.

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• Corporate Laws

• 2012 (12) TMI 772
  Scheme of Amalgamation - Held that:- Upon sanction of the Scheme, all the employees of the Transferor entity shall become the employees of the Transferee Company without any break or interruption in their services - all the property, rights and powers representation filed by the Regional Director, Northern Region and no objection by the Official Liquidator, the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation - The Petitioner Companies will comply with the statutory requirements in accordance with law with filing certified copy of the formal order with the ROC within 30 days - order will not be construed as an order granting exemption from payment of stamp duty or any other charges - Petitioner Companies would voluntarily deposit a sum of Rs. 1 Lac in the Common Pool fund of the Official Liquidator within three weeks from today.

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• 2012 (12) TMI 771
  Extension of bid payment period - Winner of bid did not pay sale consideration even during time for which he was seeking extension, sale was to be cancelled and earnest money seized - whether the appellant in whose favour a sale came to be confirmed by order dated 22.02.2006 on certain terms and conditions as provided in the tender having committed default - Held that:- The applicant having failed to comply with the payment time-table then filed Company Application wherein it is clear from the prayer made in the Judges' Summons and the affidavit filed in support of the Judges' Summons that what was prayed was extension of time only up to 31.08.2006 and the reason set out for seeking such extension wherein it was stated that, "on account of serious sickness in the family of one of its active partners and also on account of other reasons beyond its control". This Court has an additional reason to deny the prayer /relief to the appellant-applicant because the prayer for extension of time stood granted in favour of the applicant as extension was granted up to 15.09.2006. It will not be inappropriate to remind oneself that extension sought for was only up to 31.08.2006, whereas the Court granted extension up to 15.09.2006 and therefore, on that short ground, the appellant-appellant must fail in getting any relief from this Court. The submission made by applicant that he could not act within the period extended because there was OJ Appeal No.43 of 2005 pending and it was decided that Company Application No.327 of 2006 (praying for extension) will be considered after OJ Appeal No.43 of 2005 is decided, which came to be decided only on 01.08.2008, this makes the case of the appellant-applicant no better, because if the bonafides of the appellant-applicant are to be tested, it has not been placed on record that between 11.06.2006, which was the last date for payment as per the sale confirmation order and 15.09.2006, till which date the extension was granted, any substantial payment was made by the applicant, except making an application to permit him to make payment. No right is created in favour of the appellant-applicant after 20.06.2011. Whatever rights the applicant is having, are flowing from order dated 22.02.2006. The question which is required to be answered by this Court is whether in light of the clear terms and conditions prescribed in the tender and prescribed order dated 22.02.2006, any right of the applicant survived and the answer of this Court is, 'NO' - no relief can be granted to the appellant-applicant, thus the appeal fails and dismissed. Directs the Official Liquidator to refund the amount deposited by the appellant-applicant towards sale consideration. The Court makes it further clear that the appellant-applicant will not be entitled to refund of Earnest Money Deposit. It is also made clear that this refund will be without any interest payable thereon. The amount shall be refunded only after the property is put to sale and the sale price is realized by the Official Liquidator.

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• 2012 (12) TMI 742
  Quashing and setting aside of appointment of Member/Acting Chairman of BIFR - whether the impugned order dated 31.10.2011 and the approval of the ACC i.e. instead of 3 years up to age of 65 years is valid or not - Held that:- Respondent No. 4 Member/Acting Chairman of BIFR was appointed as Member of BIFR vide Notification dated 20-10-2008 and following old practice it was inadvertently specified in said Notification that respondent No. 4 was appointed for a period of 3 years w.e.f. date of assumption of charge, and as per said Notification, his tenure would come to an end on 13-10-2011. Vide impugned Notification dated 31-10-2011, respondents modified earlier Notification and made it applicable till respondent No. 4 attained age of 65 years, i.e., 9-1-2013 or till abolition of BIFR or until further orders, whichever event occurs earliest - It is not in dispute that as per Section 6 of SICA, the Chairman and Member shall hold an Office not exceeding 5 years or till he or she attains the age of 65 years - no merit in the instant petition. As per Section 6 of the SICA, the member/Chairman can hold an office for a period of not exceeding 5 years or till he or she attains the age of 65 years.ACC is the competent authority, who has to take decision out of the proposal made by the concerned Ministry. In the present case, note prepared by the Secretariat of ACC and proposal sent by the Ministry were put up before the ACC. After perusing the same, the ACC approved the appointment of respondent no. 4 till he attains the age of 65 years or till abolition of BIFR or until further orders, whichever event occurs the earliest. Undisputedly, as per past practice the tenure of the members have been 3 years. However, the ACC has not done anything contrary to the Act or contrary to the proposal sent by the Ministry. The ACC simply ignored the term of 3 years and rest of the proposal has been approved as it is. The ACC is not bound to take decision, as it is, the proposal placed before it. It being the competent authority empowered to take any decision permissible in law.

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• Service Tax

• 2012 (12) TMI 794
  Condonation of Delay of 388 days - Held that:- The delay has consciously occurred in the hands of the appellant. The huge gaps between two actions like sending the order to the Circle office, advise of the advocate, subsequent visit of the Accounts Officer and handing over of papers to the advocate, reflects upon very casual approach adopted by the appellant which cannot be considered to be reasonable. As such no reason to condone the huge delay of 388 days - stay petition and appeal dismissed as barred by limitation.

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• 2012 (12) TMI 793
  Refund of input service tax credit for the activities undertaken within the SEZs - Business Auxiliary Services - Held that:- As clarified by the Board in the Circular no. 105/8/2008 dated 16.09.2008 it is for the jurisdictional Excise/Service Tax authorities to deal with the refund claims filed by the SEZ units. Therefore, it is very clear that the appellant is eligible for refund of service tax paid which was not required to be paid under section 11B of the Act itself, provided that the appellant has filed the refund claim within the prescribed time-limit and the bar of unjust enrichment does not apply. As the appellant has exported the output service the principle of unjust enrichment does not apply - remand the case back to the original adjudicating authority to examine the claim with respect to the time-limit involved and if the refund claim is in time, to sanction it - in favour of assessee by way of remand.

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• 2012 (12) TMI 792
  Reverse charge - revenue neutral - extended period of limitation - External Commercial Borrowings (ECB) under "Banking and Other Financial Services" - Liability to pay Service Tax - Held that:- Appellants were eligible for CENVAT credit for the amount paid as Service Tax and, therefore, this is a situation which was revenue neutral and by not paying the Service Tax immediately, appellants have lost more than Rs.26,00,000/- paid by them as interest which would not have become payable if Service Tax was paid promptly and taken as credit. No service recipient would evade payment of Service Tax and become liable to pay interest which cannot be taken as credit. Therefore, it cannot be said that there was mis-declaration or suppression in the action of the appellants rendering them liable to penalty under various Sections of the Finance Act, in view of the fact that the demand itself is time barred since extended period could not have been invoked. Since appellants are not contesting demand for Service Tax and interest paid by them, the confirmation of demand for Service Tax and interest thereof has to be upheld as not contested and penalties have to be set-aside - appeal is allowed to the extent of penalties imposed under various sections which are set-aside.

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• 2012 (12) TMI 791
  Denial of Cenvat Credit - seeking waiver of pre-deposit, Interest and Penalty - Custom House Agents service, Telephone service, Insurance service and repairs and maintenance of factory and vehicles services - Held that:- Cenvat credit in respect of Custom House Agents service was in connection with the export of goods from the port as held in the case of Rolex Rings Pvt. Ltd (2008 (2) TMI 295 - CESTAT, AHMEDABAD) credit of service tax paid on these services is admissible to the applicant. Service tax paid on telephone and insurance charges in respect of plant and machinery and employees are also covered by the decision of Keltech Engineers vs. CCE [2008 (1) TMI 96 - CESTAT BANGALORE]. Insurance charges in respect of goods in transit - This service is availed by the applicant after removal of the goods from the factory to their buyers and it is not covered in the definition of the input service under the Cenvat Credit Rules. Therefore, applicant is directed to make pre-deposit of Rs. 15,000/- within four weeks and report compliance on 12/10/2012.

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• 2012 (12) TMI 766
  Repair and Maintenance Service of Government buildings and public roads - seeking waiver of pre-deposit of the Service Tax, interest and penalty - Held that:- In respect of maintenance and repair of public roads and Government buildings are exempted from Service Tax with retrospective amendment made by section 97 and 98 of the Finance Act, 2012. In respect of the demand of commercial construction, the construction is of administrative block of Municipal Corporation of Chandrapur and out of which certain area is used for commercial purpose and in respect of other demands such as Survey and Map Making services, site formation and clearance, excavation and earth moving and demolition services,this is not a case for complete waiver of pre-deposit. Thus the applicant is directed to deposit Rs.10 lakhs apart from the amount already paid within a period of six weeks & pre-deposit of the remaining amount of Service Tax, interest and penalty shall stand waived and recovery of the same is stayed during pendency of appeal.

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• 2012 (12) TMI 765
  Rent-a-cab service - Waiver of pre deposit and stay of recovery - Held that: From the terms and conditions of the agreements, it appears that the buses did not fit in the definition of "cab" under Section 65(20) and the transactions between the Corporation on the one hand and the appellants on the other are not to be considered as squarely falling within the ambit of "rent-a-cab" service. Certain factors emerging from the nature of transactions appear to be incompatible with the features of the rent-a-cab scheme - Waiver of predeposit and stay of recovery in respect of the adjudged dues in all these appeals is granted.

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• 2012 (12) TMI 764
  Waiver of pre-deposit towards Input Service Credit - CIT(A) remanded the matter back to verify as to where the impugned Capital Goods were used and who paid for the same - Held that:- As decided by in the case of Commissioner vs. Orient Crafts Ltd. (2010 (11) TMI 178 - CESTAT, DELHI) Commissioner (Appeals) dealing with an appeal in relation to Service Tax, is not empowered to remand any matter, but he has to decide the matter by himself, thus Commissioner (Appeals') Order in the present case remanding the matter to the lower Adjudicating Authority is not sustainable, therefore need to be set aside - remanded back to Commissioner (Appeals) to the decide the matter afresh providing a reasonable opportunity of hearing to the Appellant - in favour of assessee by way of remand.

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• Central Excise

• 2012 (12) TMI 770
  Invoking extended period of Limitation - Suppression of facts – Held that:- As decided in HYDERABAD POLYMERS (P) LTD. Versus COMMISSIONER OF C. EX., HYDERABAD [2004 (3) TMI 66 - SUPREME COURT OF INDIA] once the earlier Show Cause Notice, on similar issue has been dropped, it can no longer be said that there is any suppression. The extended period of limitation would thus not be available. As in the present case department had issued a show cause notice dated 28.08.2008 demanding duty for the period from April 2004 to June 2008 invoking extended period under proviso to Section 11A(1) on the ground that the process undertaken by the appellant amounts to manufacture and they had suppressed the relevant facts from the department. On the basis of the same facts the department has issued show cause notice for subsequent period from July 2008 to 4.12.2008 on 6.7.2010 again invoking the extended period, which in view of the Apex Court's judgement in the case of Nizam Sugar Factory (2006 (4) TMI 127 - SUPREME COURT OF INDIA) is not permissible - in favour of assessee.

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• 2012 (12) TMI 769
  Cenvat credit denied - ISD has availed cenvat credit of the invoices issued by the service provider - Waiver of the pre-deposit of Duty, Interest and Penalty - Held that:- The provisions of Service Tax Rules cannot be invoked for denying the cenvat credit of the input services which were availed by the ISD and distributed. It is undisputed that the ISD has received the services and taken the credit and distributed services to various locations, including current appellant. Thus the appellants have made out a prima-facie case for the waiver of the pre-deposit of the amounts involved.

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• 2012 (12) TMI 768
  SSI Notification No.8/2003-CE – denial as use of others Brand Name/Trade Name – Penalty - Held that:- As per the provisions of SSE Notification No.8/2003-CE & as decided in CCE, TRICHY Versus GRASIM INDUSTRIES LTD. [2005 (4) TMI 64 - SUPREME COURT OF INDIA] if the goods are manufactured with the brand name which resembles to the brand name registered with the other person, the manufacturer is not entitled for the benefit of the Small Scale Exemption Notification Admittedly, the brand name PYRO ELECTRIC is registered with M/s. Pyro Electric Instruments Goa Pvt. Ltd. and the applicants are manufacturing goods with the brand name by adding the word INSTRUMENTS the manufacturer assessee is not entitled for the benefit of Notification - the applicants failed to make out a case for total waiver of duty, thus directed to deposit Rs.25,00,000/- within a period of eight weeks & report Compliance.

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• 2012 (12) TMI 767
  Clandestine clearances of M.S. Ingots - Duty Evasion - Penalty u/s 11AC – Held that:- Duty evasion of Rs. 2,49,079/- is based on shortage of 77 M.T. of M.S. scrap vis-a-vis the balance recorded in the RG-23A register. The stock taking had been conducted in presence of Shri S.P. Gupta who accepted the shortage and had even debited an amount of Rs. 1,20,551/- representing the Cenvat credit availed on this quantity. In view of this, the appellant's plea that shortage was not real shortage is difficult to accept. Therefore, the duty demand of Rs. 2,49,079/- based on the presumption that the 77 M.T. of M.S. scrap found short had been used for manufacture of M.S. ingots which were cleared clandestinely without payment of duty appears to be on strong footing. The appellant have not shown the purchase of scrap/sponge iron valued at Rs. 4,43,89,566/- during November 2008 - January 2009 period is their books of account. Therefore, the department justified in presuming that this scrap/sponge iron was used in unaccounted manufacture of M.S. ingots which were cleared without payment of duty and without issue of invoicing. The fact that the appellant had declared an unaccounted income of Rs.85 lakhs for 2007-2008 to Income tax authorities also indicates that they were having substantial unaccounted sales. The presence of a truck fully loaded with scrap, found in the appellant's factory also indicated that they were purchasing M.S. scrap their principal raw material without any invoices - not a case for total waiver - directed to deposit the balance amount of duty demand i.e. Rs. 70,42,769/- alongwith interest and Shri Jiwan Singla, Director of the appellant company an amount of Rs.4,00,000/- within a period of eight weeks from the date of this order.

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• 2012 (12) TMI 741
  Denial of Cenvat Credit - input service distributor - services of M/s. Ernst & Young Pvt. Ltd. were used for the project of Certified Emission Reduction Sale of Carbon - Held that:- The services availed from M/s. Ernst & Young Pvt. Ltd., were admittedly for modernisation of the power plant of the appellant. Such power plant is used for manufacture of paper which is liable to Central Excise. In addition, if the appellant, by way of entering into an agreement with the England based company gets profit by way of earning carbon credit, it cannot be held that said services of M/s. Ernst & Young Pvt. Ltd., were for the purpose of earning the credit. Show cause notice itself admits the factum that the consultancy service provided by M/s. Ernst & Young Pvt. Ltd., to the appellants was to facilitate them in installing projects of high technical equipments to the power plant in which fossil fuel like rich husk are used which reduces carbon emission. They again submitted that installing projects of high technical equipment is nothing but Modernisation of a factory and as per Cenvat credit Rules, 2004, services used in relation to modernisation are eligible for Cenvat credit. Admittedly, the main activity of the appellant is to manufacture paper for which electricity is used from captive power plant & as the paper being manufactured by them is leviable to excise duty no reason to deny the benefit of Cenvat credit availed on the said services - in favour of assessee.

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• 2012 (12) TMI 740
  Cenvat Credit denied - Non mentioning or incorrect address of the appellants on the invoices - Held that:- As Services availed were for sales promotion and those were rightly availed by appellant, distantly located units of the appellant availed the benefit of cenvat credit in a distributed fashion which is otherwise guarded by Revenue by a centralised registration process. No doubt, mere submission of document shall not ipso facto grant relief to claimant but once the facts and circumstances of the case bring out the identity of the receipient of service, denial of cenvat credit may cause absurdity and when claim is otherwise permissible - Cenvat Credit allowed - in favour of assessee. Transportation of staff by bus - Held that:- In absence of evidence whether Transport facility is used either for manufacture or in relation to manufacture or providing output service, thus in absence of nexus and integrity, the appellant fails to succeed - Cenvat Credit disallowed - against assessee.

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• 2012 (12) TMI 739
  SSI exemption under Notification No.1/93-CE - denial of exemption as goods selling under brand name belonging to another person - whether just by adding the word "Dugar" before the word "Tetenal" and using the brand name "Dugar Tetenal" on the goods would disentitle the respondent company for the benefit of SSI exemption - Held that:- As decided in CCE, Trichy Vs. Rukmani Pakkwell Traders 2004 (2) TMI 69 - SUPREME COURT OF INDIA] that use of part of brand name or trade name of another person, so long as it indicates a connection in the course of trade, would be sufficient to disentitle the person for the SSI exemption. As it is not disputed that the word "Tetenal" used along with the "Dugar" on the goods manufactured by the respondent company is the brand name of M/s. Tetenal Vertribs GmBH, Germany, with whom the respondent had technical collaboration and as such, the word "Tetenal" indicates a connection in the course of trade with M/s.Tetenal Vertribs GmBH, Germany. We, therefore, hold that the impugned order extending the benefit of SSI exemption under Notification No.1/93-CE to the respondent company in respect of the goods cleared with the brand name "Dugar Tetenal" is not sustainable and is liable to be set aside - in favour of Revenue.

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• 2012 (12) TMI 738
  Rectification of mistake - Held that:- There is no dispute of availment of credit of duty paid by the current appellant, by their sister unit to whom the goods were cleared. The assessee having paid the duty liability before issuance of Show Cause Notice and there being no malafide attached to such under-valuation, the interest liability confirmed by the lower authorities needs to be set aside - final Order needs rectification - nin favour of Assessee.

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• Indian Laws

• 2012 (12) TMI 790
  RTI application to Superintendent in the State Excise Department (PIO) - information regarding the persons appointed through a reservation category, their names,joining and appointed date the report of Caste Verification Committee of the persons selected from the reserved category the persons whose caste certificate is forwarded after due date - whether there is any violation of principles of natural justice in the present case? Held that:- The appellant had received the application from respondent No.2 requiring the information sought for on 3rd January, 2007. He had, much within the period of 30 days (specified under Section 7), sent the application to the concerned department requiring them to furnish the requisite information. The information had not been received. May be after the expiry of the prescribed period, another letter was written by the department to respondent No.2 to state the period for which the information was asked for. This letter was written on 11th April, 2007. To this letter, respondent No.2 did not respond at all. In fact, he made no further query to the office of the designated Public Information Officer as to the fate of his application and instead preferred an appeal before the Collector and thereafter appeal before the State Information Commission. In the meanwhile, the appellant had been transferred in the Excise Department from Nanded to Akola. If the appellant was given an opportunity and had appeared before the Commission, he might have been able to explain that there was reasonable cause and he had taken all reasonable steps within his power to comply with the provisions. The Commission is expected to formulate an opinion that must specifically record the finding as to which part of Section 20(2) the case falls in. For instance, in relation to failure to receive an application for information or failure to furnish the information within the period specified in Section 7(1), it should also record the opinion if such default was persistent and without reasonable cause. It appears that the facts have not been correctly noticed and, in any case, not in their entirety by the State Information Commission. It had formed an opinion that the appellant was negligent and had not performed the duty cast upon him. The Commission noticed that there was 73 days delay in informing the applicant and, thus, there was negligence while performing duties. If one examines the provisions of Section 20(2) in their entirety then it becomes obvious that every default on the part of the concerned officer may not result in issuance of a recommendation for disciplinary action. The case must fall in any of the specified defaults and reasoned finding has to be recorded by the Commission while making such recommendations. Negligence per se is not a ground on which proceedings under Section 20(2) of the Act can be invoked. The Commission must return a finding that such negligence, delay or default is persistent and without reasonable cause. Thus it may be concluded that the Commission, in the present case, has erred in not recording such definite finding. The appellant herein had not failed to receive any application, had not failed to act within the period of 30 days (as he had written a letter calling for information), had not malafidely denied the request for information, had not furnished any incorrect or misleading information, had not destroyed any information and had not obstructed the furnishing of the information. Besides finding that any of the stated defaults have been committed by such officer, the Commission has to further record its opinion that such default in relation to receiving of an application or not furnishing the information within the specified time was committed persistently and without a reasonable cause. Use of such language by the Legislature clearly shows that the expression shall appearing before recommend has to be read and construed as may . The appellant here had shown that the default, if any on his part, was not without reasonable cause or result of a persistent default on his part. On the contrary, he had taken steps within his power and authority to provide information to respondent No.2. It was for the department concerned to react and provide the information asked for. In the present case, some default itself is attributable to respondent No.2 who did not even care to respond to the letter of the department dated 11th April, 2007. The cumulative effect of the above discussion is that unable to sustain the order passed by the State Information Commission dated 26th February, 2008 and the judgment of the High Court under appeal. Both the judgments are set aside and the appeal is allowed - direct the State Information Commission to decide the appeal filed by respondent No.2 before it on merits and in accordance with law.

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