TMI Tax Updates - e-Newsletter
December 8, 2012

Case Laws in this Newsletter:

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

Articles

1. PAYMENT OF TAX IN CASES OF NEW SERVICES

   By: Dr. Sanjiv Agarwal

2. AUDIT OF SERVICE TAX ASSESSEES

   By: Dr. Sanjiv Agarwal

3. REPORT OF DEPARTMENTAL VALUATION OFFICER IS BINDING ON ASSESSING OFFICER

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. High Value IT Appeal Cases

2. Relief to Exporters

3. Willful Defaulters

4. Loan Melas for SCs/STs/OBCs and other Minorities

5. Interest Rate on Crop Loan; Interest Subvention Scheme for the Year 2011-12 Continued in 2012-13 as Well

6. Insurance Literacy Programmes

7. Manpower Shortage in IT Department

8. Information Regarding Tax Evasion

9. Insurance Funds to Infrastructure Sector

10. Rate of Interest on Home Loans

11. Interest Rate on Education Loans

12. Bank Loans to Artisans, Craftsmen and Weavers

13. Bank Branches open on Sundays

14. Loan to Agriculture and Micro, Small and Medium Enterprises

15. Steps Taken by the Centre to Promote Food Processing Industries in the North East

16. Usage of Indigenously Manufactured Communication Equipments

17. Reserve Price for 2G Spectrum

18. TRAI Initiates Action Against Access Providers For Non-Implementation of the UCC SMS Complaint Lodging Module

19. Bank finance for purchase of gold

20. RBI Announces OMO Purchase of Government of India Dated Securities for Rs.12,000 crore on December 11, 2012

21. Impact of FDI on SMEs

22. Additional Capital Requirements of Indian Banks

23. Circulation of Fake Currency Notes

24. Committee on Direct Cash Transfers

25. Illegal Trading of Shares

26. Innovation Fund for Inclusive Economic Growth

27. Loan given to Farmers during 2007-12

28. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

29. Government takes Several Initiatives to attract Foreign Investment

30. GAP between WPI and CPI; Government and RBI takes Several Measures to Contain Inflation

31. Bilateral Convention on Avoidance of Double Taxation between India and UK

32. Muslim Employees in LIC and other Insurance Companies

33. SEBI for Stronger Recovery Powers

34. Core Investment Companies - Overseas Investment (Reserve Bank) Directions, 2012

Notifications

Customs

1. 52/2012 - dated 6-12-2012 - ADD

Extend of anti-dumping duty upto one more year -‘Polyvinyl Chloride (PVC) Suspension Grade’, originating in, or exported from, Taiwan, People’s Republic of China, Indonesia, Japan, Korea RP, Malaysia, Thailand and USA,

2. 60/2012 - dated 6-12-2012 - Cus

Amendments in the notification No. 158/95-Customs, dated the 14th November, 1995 - Exemption to Goods when re-imported into India for repairs or for re-conditioning, regarding

3. 108/2012 - dated 6-12-2012 - Cus (NT)

Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified w.e.f. 07 December, 2012

Income Tax

4. 53/2012 - dated 5-12-2012 - IT

Rajiv Gandhi Equity Savings Scheme, 2012 - Corrigendum

Circulars / Instructions / Orders

DGFT

1. 35 (RE: 2012)/2009-2014 - dated 6-12-2012

New SION added bearing number C-2056 - Lead Free Powder regarding

2. 34/RE 2012)/2009-14 - dated 5-12-2012

Amendment in SION A-1189 - Sodium Silicate - Regarding.

Highlights / Catch Notes

Income Tax

• Assessees can claim additional depreciation on leased assets u/s 32(1)(iia) of the Income Tax Act.

  Case-Laws - AT : Additional depreciation u/s 32(1)(iia) – assessee would be entitled to additional depreciation u/s 32(1)(ii a) on the leased assets. - AT
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• Strict Adherence Required for Deductions u/s 10A; Delays in Filing Cannot Be Excused Without Justification.

  Case-Laws - AT : Deduction u/s 10A - Condonation of Delay in filing Return u/s 139(1) - Provisions of the proviso to Section 10A(1A) is mandatory and not merely directory - AT
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• Supreme Court clarifies procedure for notices u/s 148 of Income Tax Act; details steps for recipients to follow.

  Case-Laws - HC : In GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and Ors. [2002 (11) TMI 7 - SUPREME COURT], the Supreme Court clarified that “when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. - HC
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• High Court Clarifies Rental Income Tax Classification: Composite or Inseparable Letting? Impact on "Income from Other Sources.

  Case-Laws - HC : Rent received - whether the letting is a composite or inseparable letting - Income to be taxed under the head Income from other sources - HC
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• Charitable Society's Registration Revocation Overturned; Director of Income Tax (Exemptions) Deemed Unjustified in Action.

  Case-Laws - AT : Charitable Society - cancellation of registration on ground that Society is indulged in taking Forcible Donations - DIT (E) was not justified in cancelling the registration of the assessee society - AT
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• Section 43(6) Depreciation: Calculate on Original Cost, Not Reduced by Notional Depreciation, Due to No Prior Assessment.

  Case-Laws - AT : Depreciation - WDV u/s 43(6) - whether depreciation to be computed on original cost or cost reduced by notional depreciation for the earlier years - allowed on original cost since assessee was not assessed in earlier years - AT
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• Non-compete agreement income classified as commission under salary per Section 17 of the Income Tax Act.

  Case-Laws - HC : Income earned from non-Compete Agreement - nature of receipt of commission in addition to salary - the commission amount clearly was part of salary answering the description under the inclusive definition u/s 17 of the Act - HC
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Customs

• Anti-dumping duty on PVC from Taiwan, China, and others extended for one more year.

  Notifications : Extend of anti-dumping duty upto one more year -‘Polyvinyl Chloride (PVC) Suspension Grade’, originating in, or exported from, Taiwan, People’s Republic of China, Indonesia, Japan, Korea RP, Malaysia, Thailand and USA, - Notification
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• Amendment to Customs Notification 158/95: Exemption Conditions for Re-Imported Goods for Repairs Streamlined.

  Notifications : Amendments in the notification No. 158/95-Customs, dated the 14th November, 1995 - Exemption to Goods when re-imported into India for repairs or for re-conditioning, regarding - Notification
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• CHA License Revocation Possible for Fraud by Power of Attorney Holder; Principal Held Equally Responsible.

  Case-Laws - HC : Revocation of CHA license – if a power of attorney holder of a Customs House Agent commits fraudulent activities then the principal is responsible to the same extent. - HC
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DGFT

• DGFT Introduces New SION C-2056 for Lead Free Powder, Detailing Key Regulatory Updates for Stakeholders.

  Circulars : New SION added bearing number C-2056 - Lead Free Powder regarding - Public Notice
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• DGFT Amends SION A-1189: Key Changes in Sodium Silicate Import/Export Norms Impacting Trade Regulations and Compliance.

  Circulars : Amendment in SION A-1189 - Sodium Silicate - Regarding. - Public Notice
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Service Tax

• Court Rules Service Tax Dues Cannot Offset Export Duty Rebate Owed to Petitioner; Adjustment Not Legally Permissible.

  Case-Laws - HC : Adjustment of service tax demand with refund / rebate against export of goods - The alleged service tax dues to be payable by the petitioner, from the amount to be due to the petitioner as export duty rebate, cannot be sustained in the eye of law. - HC
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Case Laws:

• Income Tax

• 2012 (12) TMI 218
  Acquisition of Land - Enhanced Compensation - Interest accrued on additional compensation - held that :- Assessee became entitled to the enhanced compensation and interest pursuant to the award dated 26th February, 1990 passed by the Additional District Judge, Varanasi which award has been stayed by this Court vide order dated 24th September, 1990 in appeal preferred by the Collector, Varanasi - Staying the operation of the award would mean that the assessee became entitled to nothing till the matter is finally decided by this Court - interest income could not be taxed during the assessment years in question - order of the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.

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• 2012 (12) TMI 217
  Rectification u/s 154 - short levy of interest u/s 234A,234B - held that:- Ext.P4 order passed without furnishing the details sought for by the petitioner deprived her of an opportunity to file her objection to Ext.P2 and therefore Ext.P4 is an order passed in violation of the principles of natural justice - set aside Ext.P4 order and consequently Ext.P5 demand notice also - Respondent is directed to furnish the detailed working of the interest proposed in Ext.P2 to the petitioner on the production of copy of this judgment. Once the details are furnished, the petitioner will also be allowed to file her objection to Ext.P2 and will be afforded an opportunity of hearing and thereafter a consolidated order on Exts.P1 and P2 will be passed by the respondent - Writ Petition is disposed of.

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• 2012 (12) TMI 216
  Validity of Provisional attachment of Assets u/s 281B - Escapement of Income - held that:- This Power can be exercised during the pendency of any proceeding for assessment, so that the assessee does not fritter away or secrete his resources out of the reach of the department when the assessment is completed - provisional attachment order shall still remain in force for six months from date of assessment - Provided also that the period during which the proceedings for assessment or reassessment are stayed by an order or injunction of any court shall be excluded from the period specified in the first proviso."during the pendency of any assessment proceeding or proceedings in pursuance to reassessment that in order to safeguard the interests of the revenue, after recording reasons for the same in writing and seeking the approval from the concerned authority, an order for provisional attachment can be passed. In the present case, Assessment order was passed on 8.11.2012 and demand notice u/s 156 of the Act was issued on the same day granting 30 days time to the assessee to deposit the tax due - petitioner that the appeal has been filed against the said assessment order on 9.11.2012 and stay application has also been filed at a later date before the Income Tax Appellate Tribunal, New Delhi - to safeguard the interests of the revenue till the expiry of 30 days period allowed to discharge the liability of a huge amount of Rs. 2,10,57,87,648/-, learned counsel for the petitioner submitted that till 8.12.2012, the assets to the extent of Rs. 100 crores which are lying with the Bank shall not be utilised - Accordingly, while holding that the provisional attachment order Annexure P.2 dated 1.11.2012 and notices/letters dated 2.11.2012, appended collectively as Annexure P.9 shall also cease to operate after 8.11.2012, it is directed that in terms of the statement made by the Senior counsel for the petitioner, the assets to the extent of Rs. 100 crores shall not be utilised and shall remain in the same form till 31.12.2012. - It shall however, be open for the petitioner to approach the Tribunal for stay of recovery or for the revenue to take proceedings for recovery in accordance with law.

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• 2012 (12) TMI 215
  Transfer Pricing Adjustment - Use of Brand name/ trade name - Arm's length price - Payment of License Royalty - Expense incurred wholly and exclusively for the purpose of business - In assessee’s returns AO had disallowed sum of Rs.33.82 crores being 40% of the general license as not incurred wholly and exclusively for the purpose of business and that the royalty was excessive in the circumstances of the case so as to attract proportionate disallowance of 40% - held that:- Expenditure was neither excessive nor unreasonable, the same could not be disallowed u/s 40 A (2) of the Act - assessee has been able to discharge its burden namely it was a justifiable and reasonable business expenditure and thus should be allowed u/s 37 of the Act - Transfer Pricing Officer after detailed analysis and examination of the material on record concluded that pricing adjustment was unnecessary; therefore, the application of this amendment, made later, to the facts of this case especially in a context in which they have arisen, is academic - no substantial question of law arises, in these circumstances the appeal is dismissed. Decision in COMMISSIONER OF INCOME TAX Versus M/S NESTLE INDIA LTD [2011 (5) TMI 566 - DELHI HIGH COURT] followed.

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• 2012 (12) TMI 214
  Rectification / modification of order of Tribunal u/s 254 - discrepancy in the paper book submitted by the assessee before the tribunal - non furnishing the photocopy of FD - It has been explained by the petitioner that it was only after the receipt of the order of the Tribunal in the appeal that it came to know of the alleged discrepancy and had that been put to the petitioner in the course of the hearing before the Tribunal, it could have been explained by obtaining the necessary certificates from the bank even before the conclusion of the hearing. It was submitted that the petitioner could not have, even after due diligence and enquiry, been aware of the discrepancy and once he came to know of the same on receipt of the order of the Tribunal, he took steps to obtain the necessary certificates from the bank and produced them before the Tribunal along with the application for modification of the order of the Tribunal. It was further submitted that no prejudice would be caused to the Revenue if the certificates are directed to be examined by the Assessing Officer and a fresh decision be taken in the interest of justice. Held that:- matter remanded back to AO for due consideration of the documents sought to be placed on record through the Miscellaneous Application before the Tribunal.

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• 2012 (12) TMI 213
  Appeal against an order of Tribunal remanding back the matter to AO - held that:- An explanation, unless a suitable opportunity is given to verify the same, cannot be treated as a material brought on record. - An explanation pertaining to an entry made by the appellant ought to have had been explained at the time the survey was conducted. -He having had not done so, it was his obligation to explain the same to the Assessing Officer. - He did not do so. - He purported to give explanation before the first Appellate Authority thereby preventing the Assessing Officer to satisfy himself that the explanation is worthwhile. Therefore, the Tribunal was constrained to remit back the matter for re-assessment.

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• 2012 (12) TMI 212
  Penalty u/s 271(1)(c) - Service Charges - furnishing of inaccurate particulars - concealment of Income - on the basis of certain documents found during search which has no connection with the Appellant - Expenses/payments were made through a debit note raised to reduce the taxable profits of the appellant - held that:- Tribunal has reached a finding of fact that the appellant had filed inaccurate particulars regarding its income by showing false/exaggerated expenses - provisions of Section 271(1)(c) of the Act stand attracted - Making of a claim on admitted/disclosed facts is different from filing false/inaccurate particulars - details furnished by the appellant were found to be inaccurate leading to a concealment of income on the part of the appellant - no fault with the order of the Tribunal dated 14th May, 2010 upholding penalty u/s 271(1)(c) of the Act upon the appellant - no substantial question of law arises - appeal is dismissed with no order as to costs.

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• 2012 (12) TMI 211
  Exemption u/s 11 of the Act - whether business activities carried on by the assessee were incidental to the main aims and objects of the Trust which are of Charitable nature or not - In the present case business in Katha was carried on by the trustees or the Board of Directors and not by the beneficiaries of the trust - held that:- If a property is held under trust, and such property is a business, the case would fall under Section 11(4) and not under Section 11(4A) of the Act. Section 11(4A) of the Act, would apply only to a case where the business is not held under trust. - we are unable to accept the contention urged on behalf of the revenue before us that the provisions of Section 11(4A) are sweeping and would also take in a case of business held under trust. The mere fact that whole or some part of the income from Katha business is ear-marked for application to the charitable objects would not render the business itself being considered as incidental to the attainment of the objects. We are in agreement with the view taken by the CIT (Appeals) in his order for the assessment year 1992-93 that the application of the income generated by the business is not the relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. It was contended on behalf of the assessee that the mere letting out of the factory on lease w. e. f. 01.01.1992 does not amount to carrying on of any business. We are unable to accept this contention. Decision in the case of Thanthi Trust [2001 (1) TMI 80 - SUPREME COURT] distinguished - the observations of the Supreme Court must be understood and appreciated in the background of the facts in that case and should not be extended indiscriminately to all cases. It was contended on behalf of the assessee that in case we hold that the assessee-trust is not eligible for exemption because the Katha business was itself not held under trust, it would produce an anomalous or discriminatory result inasmuch as all that is required is for the settler of the trust to declare that the Katha business itself would be held in trust. It is not for us to comment on the contention; we cannot question the legislative wisdom and if there is really an anomalous or discriminatory resultant position, it is for the legislature to take care of it. It is not for us to enter "such a complex arena in which no perfect alternatives exist" All the appeals decided against the assessee and in favour of the Revenue.

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• 2012 (12) TMI 210
  Book profit u/s 115JB - Provision for warranty @4% of total sale value of products on scientific analysis - as provision for diminution in the value of assets - in case of a manufacture and sale of one single item the provision for warranty could constitute a contingent liability not entitled to deduction u/s 37 - obligations arising from past events have to be recognized as provisions as a result of past events resulting in an outflow of resources. As decided by court in case of M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] in concluding such warranty provisions were not contingent liabilities would apply with greater force to negate the claim by the revenue that such provisions are made for diminution in the value of any asset, so as to be covered by Explanation 1(i) to Section 115 JB of the Act - no substantial question of law arises for consideration. Provision in respect of “slow moving finished goods” - held that:- Assessee is dealing with sophisticated medical consumables which are used by the large public and if an inventory is not moving for sufficiently long period, it is considered to be non-productive or non-useable. The assessee had identified through SAP computer programme which took into consideration each and every item of slow moving finished goods lying at the end of each year and contained information in that regard. The assessee has properly identified such stock and has also followed in accordance with commercially accepted accounting principles of valuation and has put the realizable value for the purpose of valuing the same - CIT(A) was correct in law and on facts to have deleted the addition made by the AO which was based not taking into consideration the hard realities of assessee's business - The addition in our view, is properly deleted - concurrent findings as to the scientific and reasonable method adopted by the assessee in the facts of this case have been recorded after the facts were gone into in detail by the appropriate authorities. The Court does not find any reasons to disturb the said findings. On this ground too the revenue's claim has to fail. In view of the decision CIT Vs. Hindustan Zinc Ltd. [2007 (5) TMI 195 - SUPREME COURT], decided in favor of assessee.

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• 2012 (12) TMI 209
  Disallowance under section 14A of the Act - alleged that the assessee had not made any submission of expenses relating to investment or dividend of income, though indisputedly, certain expenses are bound to have incurred for earning the dividend income - Held that:- In terms of section 14A(2) of the Act, the condition precedent for the AO to determine the amount of expenditure incurred in relation to exempt income is that he must record his dis-satisfaction with the correctness of the claim of expenditure made by the assessee or with the correctness of the claim made by the assessee that no expenditure had been incurred - determination of the amount of expenditure in relation to exempt income under Rule 8D of the Rules would only come into play when the AO rejects the claim of the assessee in this regard - assessment order does not evince any such dis-satisfaction of the AO with regard to the claim of the assessee that no expenditure had been incurred - matter is remitted to the file of the AO to be decided afresh in accordance with law Sale of shares – Business income or capital gain – alleged that assessee company engaged in the business of purchase and sale of shares, showed part of the purchase and sale in its profit and loss account – Held that:- Shares/securities in the nature of capital asset are shown under the head Long Term Investment and accordingly gain/loss thereon is shown under the head capital gain - shares/securities in nature of trading/revenue assets that is held for disposal in the ordinary course of business are classified under the head current investment and accordingly profit and loss thereon is shown under the head income from business and profession - there was no occasion, as such, to conclude that all disposal of shares, whether under stock in trade or as investment, should be assessed only as the business income of the assessee, merely for the fact that the assessee was a trader in shares Disallowance of interest expenditure on account of alleged non-business use of the borrowed funds – alleged that the assessee had borrowed funds and had given interest free loans to its sister concerns – Held that:- no evidence was brought on record by the AO to show any divergence of funds by the assessee to its sister concerns. No disallowance of interest was called for either in respect of interest on Marging Financing or regarding interest on vehicle loan - Schedule 10 of the accounts which shows a total of Rs. 7,28,217/- by way of interest and financial charges, does not depict any interest by way of corporate loans - No part of the sale proceeds executed on account of Fortis has been proved to have been diverted to parties who have been providing interest free advances - interest on vehicle loan, these had been provided to City Finance and ABN Amro Bank. Again, there is nothing on record to suggest the assessee having diverted these loans to the account of the parties that had been providing interest free advances - appeal filed by the assessee is treated as allowed for statistical purposes

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• 2012 (12) TMI 208
  Sales Tax Incentive – Capital vs Revenue - Following the decision of Hon’ble Apex Court in the case of [Sahney Steel and Press Works Ltd. And Others Vs. Commissioner of Income Tax 1997 (9) TMI 3 - SUPREME COURT ] held that:-. Under the Incentive Scheme of the Government, assessee is only entitled to deferment of sales-tax payment, calculated at a percentage of fixed capital investment. In fact, according to him, the sales-tax incentive will be treated as a deferred loan and the assessee is required to reimburse the said loan to the government - amounts in question are to be treated as capital receipt - Since the facts of the year under consideration are identical, respectfully following the above decision of the Tribunal in assessee’s own case for AY 2006-07, assessee’s appeal is allowed. Gratuity to book profit for computation of MAT liability u/s 115 JB - When the assessee has a defined gratuity plan and the liability of the gratuity has been ascertained on the basis of actuarial valuation as per the assessee’s gratuity plan, it cannot be said that the liability of the gratuity is unascertained liability. Therefore, the addition of the provision for gratuity while computing the book profit is uncalled for. The same is deleted - assessee’s appeal is allowed. Expense on foreign travel of Directors – held that:- Burden is upon the assessee to establish that the expenditure was incurred wholly and exclusively for the purpose of business. In respect of foreign travel, the only explanation given by the learned counsel was that the directors’ foreign traveling was for exploring the business opportunities abroad. However, this explanation was too vague and also unsubstantiated - no justification to interfere with the orders of lower authorities in this regard - assessee’s appeal is rejected - In the result, appeal of the assessee is partly allowed.

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• 2012 (12) TMI 207
  Re-assessment proceedings - proceedings u/s 147 were initiated on the ground that the assessee has claimed excess deduction u/s 80HHC – Held that:- AO accepted the returned income claiming the deduction u/s 80HHC of the Act - Once this was done, the AO has no jurisdiction to go on making further additions, while the same has been done by the AO in this case - AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the assessment proceedings though the reasons for such issue were not included in the notice; however, if after issuing a notice under s. 148, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as matter of fact not escaped assessment, it is not open to him independently to assess some other income – in favor of assessee

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• 2012 (12) TMI 206
  Disallowance of Demat charges – section 14A - Held that:- CIT(A) is on this basis that proportionate interest on investment of Rs.1793.51 lacs should be on the basis of average rate of interest paid by the assessee - The average rate of interest has been worked out by Ld. CIT(A) @ 6.57% and disallowance at this rate was confirmed by him and this has been worked out at Rs.1,17,91,794/- is against the amount of disallowance made by the A.O. - This aspect of the order of Ld. CIT(A) is reversed and the A.O. is directed to compute the interest to be disallowed u/s 14A @ 6.57% Penalty u/s 271(1)(c) - Disallowance under section 14A of the Act - Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(21)(c) - no penalty is justified in respect of disallowance made by the A.O. u/s 14A of the Income tax Act, 1961 - penalty appeal of the revenue is dismissed.

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• 2012 (12) TMI 205
  Income from civil contract business - computation of income u/s 44AD - It has also been observed by the AO that since the income was shown by applying the provisions of section 44AD of the Act, therefore admittedly the assessee had not maintained the books of accounts. - The AO has finally concluded that for the year under consideration as per DVO the cost of expenditure was at Rs.19,65,615/- as against that the assessee had shown Rs.10,66,553/-, therefore the balance of Rs.8,99,062/- was held as unaccounted investment u/s.69 of IT Act. - held that:- order of CITA(A) deleting the addition upheld - decided in favor of assessee. Reassessment – alleged that assessment is reopened based on DVO report – Held that:- Return was filed on 25/10/2004 and on the basis of the DVO’s report, vide a notice u/s.148 dated 20/04/2006 the case was reopened - A case can be reopened if the AO has in his possession a specific information so as to form an opinion that there happened to be an escapement of income - for the years under consideration admittedly the assessee had declared the net income by taking the shelter of section 44AD of IT Act. It is also been gathered that regular books of account have not been maintained by the assessee – against assessee

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• 2012 (12) TMI 204
  Remuneration to partners - interest income - whether business income or income from other sources for the purpose of computation u/s 40(b) - financial charges (income) were treated by the assessee as “business income” - While claiming the remuneration to partners the said income was considered. – the financial charges are earned as per the provisions of section 56 of I.T. Act. The AO has concluded that the assessee was not entitled to include such interest receipts while working the amount of remuneration to partners u/s.40(b) of IT Act. - – Held that:- Assessee is not in a money lending business but the transaction was nothing but dove-tailed with the business activity of the assessee - appeal of the Assessee is allowed

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• 2012 (12) TMI 203
  Penalty under section 271(1)(c) – Held that:- Department had not discharged its burden of proving concealment and had simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, and that penalty could not be levied - penalty proceedings and assessment proceedings both are separate proceeding and the explanation given during penalty proceedings is required to be considered by the assessing authority which in the present case has not been done - assessee’s funds are mixed funds i.e. the own fund and interest bearing funds - AO has not specifically pointed out during the assessment proceedings or in the penalty proceedings that the funds which are interest bearing and having used for non-business purposes i.e. the AO has not brought on record the diversion of funds. Therefore on surmises and conjectures, the AO cannot levy the penalty u/s. 271(1)(c) of the Act – In favor of assessee

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• 2012 (12) TMI 202
  Interest income - cash system versus accrual system – Held that:- Under Section 145(1) of the Act, income chargeable under this head shall subject to the provisions sub-section (2) be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. - As already noticed the assessee is following the cash system of accounting. Therefore the interest cannot be assessed on accrual basis - in respect of OFCPN/DDB, the interest thereon could not be assessed on accrual basis since the assessee had followed cash system of accounting – In favor of assessee Capital gain - transaction of Interest Coupon Strips – short term or long term – Held that:- Capital gains arising on the sale of the deep discount bonds should be assessed as long term capital gains on the footing that he held them for a period of more than 12 months starting from 23-9-2000 before they were sold on 20-3-2002 - assessee is entitled to the exemption under Section 54EC as claimed – In favor of assessee Capital gain - Non Convertible Debenture - deduction u/s.54EC – Held that:- the capital gain should be assessed as Long Term Capital Gain on the footing that the period of holding of Deep Discount Bond is more than the period prescribed. - gain in question was to be taxed as long term capital gain - in consequence thereupon the assessee should also be entitled for exemption u/s.54AC of IT Act. - ground of the assessee is allowed

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• 2012 (12) TMI 201
  Addition on account of reconciliation difference in the closing stock of natural gas – Held that:- Loss of about 4% of purchases is reasonable subject to verification. Instead of verifying the percentage of loss, the AO reproduced his earlier order. The loss of 3.4% is borne out by audited accounts, which is lower than the average loss of about 4% - no reasonable cause to make the disallowance of reconciliation loss by stating that the details of stock lying in pipe lines were not furnished in qualitative or quantitative terms. What had to be verified was whether the loss was in the vicinity of 4%, which has been held to be reasonable by the Tribunal – addition deleted

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• 2012 (12) TMI 200
  Depreciation on the rented building – Held that:- Area of self occupation and let out has not been specified. CIT (A) had only directed to allow depreciation on the W.D.V. of the rented portion of the building. Since assessee had not filed all rent agreements which specify the area - assessee shall submit all the necessary agreements and also the evidences to justify the claim of the self occupied area of the building - matter restored to the file of the Assessing Officer Addition on account of depreciation on mould and dies - alleged that the claim of depreciation was made on the moulds and dies. These assets were leased out. The income from letting out of these moulds and dies is to be assessed as income from other sources – Held that:- Whether the rental income received by the assessee of Rs.12 lacs pertains to the rental of moulds and dies. To whom these assets were let out - All these facts are necessary to ascertain the correct nature of the income and only then the claim of depreciation on these assets could be entertained. Whether the depreciation is to be allowed for passive use or it has to be allowed under section 57(ii) of the Income-tax Act. Under which head of income the rental income received on account of letting out moulds and dies is to be assessed – matter remanded to the file of Assessing Officer Addition of expenses incurred on exempted income on the ground that not allowable under section 14A of the Income-tax Act - issue regarding expenditure under the head building repairs, rates and taxes and insurance had not been thrashed out properly – Held that:- Some of the buildings or parts thereof were let out and the income from the same is being assessed as income from house property, on which deductions are allowed as per sections 23 & 24 of the Income-tax Act - facts need clarity about the expenses to which these expenses pertain – matter remanded to the file of Assessing Officer - appeal of the revenue is allowed for statistical purposes.

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• 2012 (12) TMI 199
  Addition on account of cancellation charges realized from clients default in payments of installments – Held that:- Assessee has filed conformation from all the buyers whose booking were cancelled during the year under consideration. All these buyers have confirmed the receipt of the entire booking amount through account payee cheques without deducting any cancellation charges - Since the assessee has discharged its onus by filing their confirmations from the buyers in respect of the amount received after cancellation without charging any cancellation charges, therefore - addition deleted Addition on account of interest on account of delayed payments – alleged that assessee group is having the practice of charging interest payments on delayed payments of ground rent and installments - addition was made on the basis of statement of Jaideep recorded by Investigation Wing on 3.08.2007 wherein he has admitted to have paid interest of Rs.6,500/- in cash to the assessee – Held that:- Statement recorded before the Investigation Wing does not corroborate with the seized material where the interest payment shown as Rs.49,783/- whereas Jaideep only admitted Rs.6,500/- as interest - no opportunity was provided to cross examine – matter remanded to Assessing Officer - appeal is allowed for statistical purposes

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• 2012 (12) TMI 195
  Disallowance of commission payment – CIT u/s 263 held that the order of the AO is erroneous and prejudicial to the interest of revenue - the assessee had incurred expenditure in the form of commission paid to various parties for services rendered during the course of sale of iron ore - All the commission payments were made through account payee cheques and tax was duly deducted at source from commission payments – Held that:-As the CIT though said in his order that there is no proper enquiry by the AO, he, instead of directing the AO to carry on further enquiry from the point where he has stopped, disallowed the entire commission payments. This is not proper. The CIT is required to cause enquiry himself regarding the genuineness of payments of commission or got it done from the AO. AO is directed to examine the entire issue and if he finds the assessee has incurred any commission payments wholly and exclusively for the purpose of business commensurate with the services rendered by the respective parties. Remand back to AO

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• 2012 (12) TMI 194
  Additional depreciation u/s 32(1)(iia) – Whether assessee can claim additional depreciation u/s 32(1)(iia) on assets given on lease - Assessee engaged in providing P&M on lease - Installation of machines was in the factory of customers – AO argued that since assessee is not the actual user of machines therefore not entitled for additional depreciation – Held that:- There is no dispute that the assessee in this case satisfies both the above conditions of Section 32(1)(iia). The section does not stipulate that the assessee should use the P&M in the business of manufacture or production of any article. Following the decision in case of First Leasing Company Of India Ltd. (1998 (7) TMI 19 - MADRAS HIGH COURT) held that the assessee would be entitled to additional depreciation u/s 32(1)(ii a) on the leased assets. In favour of assessee Deduction u/s 80G – Exemption u/s 35(1)(ii) - Assessee has made donation to Auroville Foundation, under the Ministry of HRD - it claimed deduction u/s 35 (1)(ii) - application for renewal of exemption u/s. 35(1)(ii) made by Aravali foundation, was not disposed of by the CBDT - assessee was unable to produce the notification renewing the exemption – Assessee made an alternate claim for deduction u/s 80G - Held that:- Nevertheless there is violation of Rule 46A, as the CIT(A) has admitted a Certificate dt. 26th October,2010 given by the Foundation, without giving the AO an opportunity to examine the same. Issue remand back to AO Addition on account of excess interest paid u/s 40A(2)(b) - Assessee was paying interest @ 10% to two parties - Whereas it was paying interest at 8% to the Directors of the Company - The difference of 2% was disallowed – Held that:- AO has failed to make out a case that funds at a lower rate of interest than 10% were available in the market. assessee company has paid interest to banks @ 13%, which is indicative of the fact that the funds were not available in the market at a rate lower than 10%. Issue decides in favour of assessee

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• 2012 (12) TMI 193
  Deduction u/s 10A - Condonation of Delay in filing Return u/s 139(1) - held that:- Provisions of the proviso to Section 10A(1A) is mandatory and not merely directory - no deduction u/s 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified u/s139(1) - Order of CIT(A) is just and in accordance with law and the ground raised by the assessee is liable to be dismissed.

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• 2012 (12) TMI 192
  Re-opening of Assessment - procedure - Notice u/s 148 - held that:- in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and Ors. [2002 (11) TMI 7 - SUPREME COURT], the Supreme Court clarified that “when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. We are of the view that the procedure envisaged by the Supreme Court in the judgment cited supra should be adopted and followed in the present writ petitions as the judgment is based on fairness and transparency in the action of the assessing authority in reopening the assessment. We therefore, issue the following directions : The assessing officer shall furnish the reasons recorded for reopening the assessment in WP(C) 6310/2000 and 6320/2000. This shall be done within three weeks from today. On receipt of the reasons recorded, the petitioner shall file its objections to the same within 15 days thereafter. In respect of WP(C) 6308/2010, the petitioner shall file its objections to the reasons for reopening the assessment within 15 days from today. All the objections filed by the petitioner in the four writ petitions shall be disposed of by the assessing officer on or before 31st January, 2013 by appropriate orders passed in writing and those orders shall be served on the petitioner within reasonable time thereafter.

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• 2012 (12) TMI 191
  Rent received - Income from other sources vs Income from house property - whether the letting is a composite or inseparable letting - Was the Tribunal correct in holding that the rent received by the appellant was assessable as ‘income from other sources’? - held that:- tribunal has found that these three cases are of composite leases in which a consolidated rent has been fixed. Contention of the assessee that the fittings and fixtures and other installations in the let out premises were installed only at the desire of the lessee and in such circumstances, the income should properly be assessed under the head “income from house property” as mandated by Section 22 of the Act was rejected by the ITAT. Applicability of Judgements - held that:- The provisions of Section 56(2)(iii) were not required to be considered. The controversy before us is different namely, whether the rental income is to be assessed as property income or “income from other sources”. Therefore, it cannot be said that the judgment of the Calcutta High Court in CIT Vs. Shambhu Investment PVT Ltd. [2001 (3) TMI 77 - CALCUTTA HIGH COURT] or the judgment of the Supreme Court [2003 (1) TMI 99 - SUPREME COURT] which confirmed the judgment of the Calcutta High Court are authorities for the proposition that is being canvassed before us on behalf of the assessee. Here, the question that arises for decision is whether the letting was inseparable and therefore Section 56(2)(iii) was rightly invoked by the assessing officer. That question did not fall for decision either before the Calcutta High Court or before the Supreme Court in the judgments cited above. Income to be taxed under the head Income from other sources - substantial question of law has to be answered in the affirmative and against the assessee.

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• 2012 (12) TMI 190
  Validity of assessment passed u/s 147 when A.O. while completing re-opening assessment, did not make any addition on reasons recorded and made different addition - Held that:- Assessment was reopened on ground that assessee has obtained accommodation entries in the form of share application money/capital gains/gifts etc, which escaped assessment but while making addition, A.O. made addition on different transaction that of sale of shares. Admittedly the reasons recorded and additions made are different transactions. A.O. had jurisdiction to reassess income other than income in respect of which proceedings u/s 147 were initiated but he has no jurisdiction in doing so when the very reason for initiation for those proceedings cease to survive. The legislature can not be presumed to have intended to give blanket powers to the A.O. that on assuming jurisdiction u/s 147 regarding assessment or reassessment of escaped income, he would go on making scrutiny enquiry and thereby including different items of income not connected or related with the reasons to believe on the basis of which he assumed jurisdiction. Therefore, jurisdiction acquired by the A.O. u/s 147 is not in accordance with law. Therefore, the order of the A.O. is liable to be quashed - Decided in favor of assessee.

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• 2012 (12) TMI 189
  Dis-allowance u/s 14A - expenses attributable to exempt income - Held that:- Admittedly, assessee was having sufficient interest free funds to cover the investment made in shares of which income is exempt u/s 10. In case of CIT vs. Hero Cycles Limited (2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT ) it has been held that disallowance u/s 14A is not permissible where no nexus between the expenditure incurred and income generated has been established. If the investment is made out of the assessee’s own interest free funds, no disallowance can be made u/s 14A - Decided in favor of assessee Depreciation on trucks used for its own business for transportation of milk from collection centre to the processing plants of the assessee company - higher depreciation @ 30% as claimed by assessee or 15% - Held that:- Issue is squarely covered in favour of the Revenue by the judgment in the case of CIT vs. Anupchand & Co.(1999 (6) TMI 25 - MADHYA PRADESH HIGH COURT ) Dis-allowance of deduction u/s 80-IB - AO on observation that assessee was having two units (deduction is available u/s 80IB on Kosi unit) and and utilise common funds to earn income, apportioned income between two units on sale basis and dis-allowed deduction in respect of Dholpur unit - Held that:- CIT(A) rightly rejected the AO’s formula of apportion method of other income on the basis of sale between two units on observation that once the assessee is maintaining separate Profit & Loss account for the unit on which section 80-IB is available, deduction u/s 80-IB is to be calculated accordingly - Decided against Revenue Dis-allowance of deduction u/s 80-IB in respect of other income viz Insurance claim, other charges, interest received, miscellaneous receipts and scrap sales - Held that:- Insurance claim in respect of receipt/income on goods damaged in transit is eligible for deduction u/s 80-IB, however insurance claim of car is rightly disallowed. Deduction u/s 80-IB - Held that:- In respect of other charges it is observed that these are petty amounts on account of difference in sale bills which is pertaining to the assessee’s business and such petty receipts are income derived from Industrial Undertaking. Therefore, deduction u/s 80-IB is allowed. Deduction u/s 80-IB - Interest received - Held that:- Interest income accrued to the assessee, from investment in bank could not be treated as income derived from Industrial Undertaking merely because the original nucleus funds which had yielded the interest came from an Industrial Undertaking. Deduction u/s 80-IB - Miscellaneous receipts comprising of cancellation charges against supply order of SMP and income transfer from H.O v- Held that:- Cancellation charges against supply order is income derived from Industrial Undertaking. Therefore, the same is allowable u/s 80IB. Other petty amount of transfer from HO is treated to be same nature. Deduction u/s 80-IB - Scrap sales - Held that:- Scrap sale is income derived from Industrial Undertaking and allowable u/s 80IB Addition on account of interest attributable to the payment of Income Tax - increase in interest cost presumed to be towards payment of huge income tax - Held that:- Assessee was having sufficient own funds, therefore, such lump sum disallowance on presumption basis is not warranted. Therefore, the same is deleted. Addition towards capital work-in-progress - lump sum dis-allowance on presumption basis that the borrowed fund has been used for the purpose of capital work-in-progress - Held that:- Issue is squarely covered in favour of the assessee by the judgement of the Apex Court in the case of DCIT vs. Core Health Care Limited (2008 (2) TMI 8 - SUPREME COURT OF INDIA). Dis-allowance of deduction u/s 80IB on the ground that the assessee made purchase of finished goods and sold the same - Held that:- A.O. had disallowed the claim of the assessee u/s 80-IB on presumption basis without determining the exact amount of disallowance. It is not the case of the A.O. that the said amount is not from the Industrial Undertaking. Such disallowance of deduction u/s 80IB is not sustainable in law.

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• 2012 (12) TMI 188
  Shipping company - denial of benefit of presumptive taxation prescribed under Chapter XII-G in respect of ships chartered in by it under “slot charter” arrangement, for want of “valid certificate” defined in S115VX - Held that:- Section 115VA overrides the provisions of computation of business income prescribed in sec. 28 to 43C and the income computed as per Chapter XII-G on presumptive basis shall be deemed to be the profits and gains of the business of operating qualifying ships. It is noteworthy that benefit of Chapter XII-G is available to the tonnage tax company only in respect of the income from the business of operating qualifying ships and it is necessary to show that the ships chartered in under “Slot Charter” arrangement are also “Qualifying ships” by producing the “Valid certificate”? In view of aforesaid, it is held that CIT(A) was right in law in denying the benefit of presumptive taxation for want of valid certificate – Decided against assessee

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• 2012 (12) TMI 187
  Charitable Society - cancellation of registration on ground that Society is indulged in taking Forcible Donations - assessee, a registered society having one of the objects to establish and maintain the institutions for imparting education - donations collected from various persons including the parents of the students for the enhancement of the infrastructure on account of increase in the number of students - donations were also received from other members of the society under the head “building funds” - Held that:- In the case of assessee, schools were imparting education as per aims and objects of the society. Poor and needy children are also admitted and imparted free education. The amounts of donations were duly reflected in the books of assessee. Donations were received from various other persons other than parents of wards. These donations were received during the year not only during admission period. These amounts have been included in computation of income. Hence, DIT (E) was not justified in cancelling the registration of the assessee society - Decided in favor of assessee

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• 2012 (12) TMI 186
  Foreign company – engaged in supply of GSM Mobile Telecommunication system comprising of hardware and software to various cellular companies operation in India – Revenue contending assessee having business connection in India and has a permanent establishment in the form of a dependent agent establishment – income from licensing of software amounted to receipt of royalty – Held that:- It is observed that facts and circumstances of these years are the same as in the previous years. Issues are squarely covered in favour of the assessee by the judgement of the Jurisdictional High Court in the assessee’s own case for the earlier Assessment Years wherein it was held that since goods were manufactured outside India and even the sale has taken place outside India. Thereby, no part of the income accrued to the assessee in India. Payment received by the assessee was towards the title and GSM system of which software was an inseparable part incapable of independent use and it was a contract for supply of goods. Therefore, no part of the payment therefore can be classified as payment towards royalty. Because the installation contractor is a subsidiary of the assessee holding company would not, by itself, give rise to a business connection. Therefore, assessee did not have any business connection in India. In view of this, it is not necessary to go into the issue whether the assessee had any Permanent Establishment in India or not during the relevant period in India or not.- Decided in favor of assessee. Regarding levy of interest charged u/s 234B it is held that levy of interest was not justified, inasmuch as the assessee had no obligation to pay any advance tax as tax was deductible at source on its income that was chargeable to tax in India.

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• 2012 (12) TMI 185
  Admission of additional evidence on alleged violation of Rule 46A - addition made for amount representing loans received, for the absence of confirmations from the creditor parties of the assessee - matter remanded back to AO by CIT(A) on assessee's submission that AO had never required the assessee to file the confirmations - AO, during remand proceedings, invoking the provisions of section 133(6), directly required the creditor Companies to furnish the particulars of their transactions with the assessee, the same being complied by creditors - AO did not submit any remand report to the CIT(A) despite reminders - CIT(A) deleted the addition on the basis of the confirmations and other supporting documents, explanations - Revenue now contesting the same Held that:- It is worthy of note that whereas the confirmations filed by both the creditor Companies in compliance u/s 133(6) in the remand proceedings are dated 25.06.2010 and were also received by the ITI on 25.6.10 itself, the assessee Company’s written submissions and application for additional evidence before the CIT(A) are of 26.3.10. This shows that it was after the filing of the application for additional evidence before the CIT(A), that the evidence was filed before and considered by the AO three months thereafter. Thus, the Department cannot have any grievance against the CIT(A) having entertained additional evidence at the back of the AO, particularly when the AO was duly supplied with the confirmations and all connected material and the AO, having considered the same, did not furnish any remand report before the CIT(A) inspite of reminders. The CIT(A) never entertained any additional evidence at all and deleted the addition on the basis of the aforesaid material filed with the AO in the remand proceedings. On merits also it is seen that the assessee had duly discharged its onus u/s 68. In the result, the appeal filed by the Department is dismissed.

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• 2012 (12) TMI 184
  Addition made in respect of FDRs found at the assessee’s premises in the course of survey –question which was asked from one of the partners of the assessee at the time of survey and in reply, it was informed that the FDRs belonged to family members out of which some of them stated to be staying outside India. Since the funds of those relatives are managed by the assessee, therefore the FDRs were found in possession of the assessee - AO had not been able to conclusively prove that those FDRs were in fact the property of the firm - addition deleted – In favor of assessee Difference in the stock of tobacco – Held that:- It was explained that 3915 bags containing 1,09,620 Kgs. of tobacco belonged to one M/s.Pinak Pani Traders and that firm was yet to lift the material - Due to the absence of a confirmation from the said party, the AO had rejected the explanation - assessee has placed the correspondence with those parties and the response of the Accountant of the firm as per his statement recorded - enquiry was made in respect of the stock lying in the three go-downs belonging to the assessee-firm. It was stated that stock belonged to Ambica Trading Co. out of the total sales made. It has also been stated that goods were sold to Pinak Pani Traders and part of the bags were yet to be delivered - appellant’s claim of partial lifting of stock or partial delivery of stock was not contradicted by the AO - addition deleted – In favor of assessee Addition on account of excess tobacco dust of 68,638 KG, short kandi stock of 8905 KG and short pashari stock of 16,655 KG – Held that:- Reconciliation has been filed in respect of the shortage of stock and that reconciliation was confronted to the AO during the course of remand proceedings but that explanation was not controverted. The assessee has undisputedly maintained quantitative details of purchases and sales, as is evident from the correspondence placed on record addressed to the AO - assessee has furnished a reconciliation statement to the AO. The said reconciliation was duly considered by ld.CIT(A) and, therefore, held that the said apparent difference was duly reconciled. Since the Revenue Department has not expressed any reservation in respect of the reconciliation – addition deleted – In favor of assessee

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• 2012 (12) TMI 183
  Depreciation - WDV u/s 43(6) - whether depreciation to be computed on original cost or cost reduced by notional depreciation for the earlier years - held that:- It is not in dispute that the provisions do not envisage any notional allowance and the Assessing Officer thus cannot work out such notional allowance and reduce the same from the depreciation claimed. The words actually allowed means actually allowed in the course of assessment. The assessee was not liable to be taxed and hence, no assessments were framed for the earlier years - Decided in favor of assessee. Change in method of accounting - bonafide or not - change from cash basis to accrual basis - interest income - held that:- Once the fact is admitted that for the said period, the assessee was not liable to tax, to say that the assessee should not have changed the method of accounting for the said period is ignoring the obvious, namely, the change is based on the advice received from the Consultant to adopt the prescribed accounting standards. - Decided in favor of assessee.

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• 2012 (12) TMI 182
  Addition – net profit rate applied by the CIT(A) at 6.5 % as against net profit rate of 4.7 % shown by the assessee. – assessee is a Company doing work of construction - search - unaccounted money on purchase and sale of property – alleged that the assessee company had shown low gross profit by pointing out that the assessee has not furnished the required detailed – Held that:- The verifiable expenses which are to the extent of fixed in nature, also for element of variability as is clear from above table - CIT(A) has considered net profit rate of 6.5 % at constant and fixed rate for all the years, which is not correct. As per our considered view, the disallowance if at all has to be made, had to be made after considering the verifiability of these expenses year on year basis. - AO directed to disallow the expenses as per the calcuation sheet. Addition on account of sale of plot - held that:- Agreement to sale was found during search indicating sale consideration at Rs. 1,42,70,256 - property was sold for this much of consideration and Rs. 20 lakhs was also paid in advance - assessee had received Rs. 71 lakhs out of which Rs. 41 lakhs had been accounted for and the balance of Rs. 30 lakhs received in cash was not recorded in the books of account, which was also offered as income from undisclosed sources. Since the alleged cancellation deed was found during course of search accompanied by the statement recorded u/s 132(4) clearly indicate that there was no cancellation of plot. Accordingly, the Assessing Officer was justified in treating the difference in sale consideration actually disclosed in the return as compared to the sale consideration found recorded on the sale agreement, which was found during course of search - addition upheld

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• 2012 (12) TMI 170
  Reopening Assessment - bogus share application money - Undisclosed Income - assessee stating that documentary evidence regarding identity and creditworthiness of the share applicants and the genuineness of the transactions were produced - AO Concluded on the basis of enquiry report of Investigation wing - Held that:- Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators - Decided in favor of assessee.

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• 2012 (12) TMI 169
  Interest on Customs Duty Demand - held that:- Amount paid was not penal in nature as much as it was as per the declared policy of the government and occasioned by the failure of the assessee to meet its obligations. The amount being interest was compensatory and not penal according to the Tribunal - Assessing Officer has not pointed out which provision of law was violated by the assessee. Even if in any adjudicatory proceedings under Customs Act the word “penalty” is used, that cannot be determinative of the nature of the payment, nor can the Assessing Officer conclude that the assessee did something that was an offence or was prohibited by law. There is nothing brought on record by the Revenue to show that the payment was hit by the Explanation below Section 37(1) of the Act - in favor of Assessee. Disallowance of Interest paid u/s 43B - whether the amount of Rs.12,37,206/- constituted only interest paid on the directions of the DRT, towards the composite liability of the assessee or in respect of the bank guarantee liability - Held that:- Assessing Officer’s order should have been more specific, after taking into consideration the question whether the sum of Rs.12,37,206/- or any part of it was to be paid towards guarantee fee or interest. It is only the guarantee fee which would not attract Section 43B of the Act; if it is interest, then it would fall within its mischief. Consequently the matter is remitted to the Assessing Officer for a fresh determination in terms of the previous directions towards segregating the amount and ascertain the true nature and character of the sum of Rs.12,37,206/- in favour of the Revenue - appeal is partly allowed in the above terms.

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• 2012 (12) TMI 168
  Income earned from non-Compete Agreement - nature of receipt of commission in addition to salary - Income from salary vs Income from business - Contract of Service or Contract for Service - Agreement was entered into in dual capacity - salary in capacity as an employee of UC and non-compete fees for not taking away business of the firm - held that:- The mere fact that two agreements existed does not necessarily imply that the payment made under one agreement is not to be regarded as part of salary, when undisputably all the work done under the agreement was performed by the employee for the benefit of the employer. The fact that the employer utilised the same employee to perform different types of work under two separate agreements does not give to such payments a character other than that of "salary", having regard to the wide definition of the term in Section 17(1) of the Act - Contract is Contract of Service where Employer - Employee relationship exist - assessee, in this case, also continued his employment with the firm, and was given commission for doing what he was normally expected to do, i.e. work for the said firm in his area of expertise. He was given salary for that; in addition, he was also given commission for not competing with his employer, during his employment, in regard to the same line of business, in which he worked as an employee of the firm. Therefore, the commission amount clearly was part of salary answering the description under the inclusive definition u/s 17 of the Act - question of law is answered in favour of the revenue, and against the assessee.

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• 2012 (12) TMI 167
  Right to carry on any business - Capital gain or Business Receipt - Assessee concern was taken over by ICT-SD Engineering Consultants Pvt. Ltd. and assessee received Rs.1,20,00,000/- in terms of MOA and by subsequent agreement 45% shareholding - held that:- As decided by court in case of Commissioner of Income-tax Versus Mediworld Publications (P.) Ltd [2011 (4) TMI 503 - DELHI HIGH COURT] that the right to carry on any business has been recognized by the Legislature as a capital asset, taxable u/s 55 (2)(a) of the Act and not taxable u/s 28(va) thereof - no infirmity in the appellate order of the Tribunal. No substantial question of law therefore arises.

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• 2012 (12) TMI 166
  Deduction u/s 10B, 80I and 80HH - Apportionment of common head office expenses – Whether common HO expenses can be apportion to the various units on the basis of their respective turnover for the purpose of calculation of deduction u/s 10B, 80I and 80HHH - the accounts for these units were separately maintained – Assessee had taken the contention that the expenses incurred was for the overall management of the units as well as for providing finance - Held that:- No, Revenue had no grievance as regards the order passed by the Tribunal for preceding years 1984-85 onwards and that the expenses incurred were pure and simple administrative expenses, monitoring the requirements of finance and other action which are necessary in running of the business. In favour of assessee

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• 2012 (12) TMI 165
  Block Assessment - Protective assessment - Assessee being an individual filed return in capacity as Kartha of HUF - AO referred to the order of the assessment relating to 1982-83, rejected the claim that he was owning an extent of 20.88 acres of agricultural lands in the status of HUF – AO held that the property were held jointly and not as HUF property holding it as ancestral property - the property was Joint family property, the entire income from the lorries and the lands were assessed at the hands of the assessee in the status as individual. Assessee produce additional evidence in the form of Encumbrance certificate, that possession as belonging to HUF and partition deed dated 24.2.1981 which showed the family partition between the assessee and his brother and also providing maintenance for his father. Held that:- The nature of encumbrance therein and cannot spell on the holding of the property and right from 1952, 1980 to 1984 to 2000, the property had not been subjected to any encumbrance. The partition deed allotted an extent of 4.63 acres alone, there are no material to show that the balance extent of 16.25 acres, were, infact, joint family property and not an individual property. In respect of division of family property and not of joint property. It may be noted that the statement that the expression that parties henceforth would have only blood relationship and nothing beyond are found normally only in partition of HUF joint family and not in respect of division of property held jointly. Except to the extent of 4.63 acres of land found as HUF property, the assessment as regards other extent of 16.25 acres in the individual hands is confirmed. In favour of assessee

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• 2012 (12) TMI 164
  Validity of assessment made u/s 158BC - limitation period prescribed u/s 158BE - Revenue herein conducted search initiation operation on 12.12.2001 - A Prohibitory order was issued on 13.12.2001 and panchanama evidencing the seizure of materials was also drawn - On 08.02.2002 15.02.2002, further panchanamas were drawn evidencing issuing of prohibitory order without being in pursuance of any fresh authorisation Assessee contended that assessment order was passed on 27.02.2004, hence, beyond the period of limitation - Revenue took the view that the assessment made u/s 158BC on 27.02.2004 was within the limitation prescribed u/s 158BE read with Explanation 1 for passing the order u/s 158 BC. Held that:- Once the warrant of authorisation has been issued and the premises is searched and the search party leaves the premises, there is the end of the search and what could be postponed is only seizure of the articles and issuance of prohibitory order ; however, limitation for the completion of the block assessment begins on the conclusion of the search and issuance of panchanama and in case of single authorisation, the moment such party leaves the premises by drawing of the panchanama noting conclusion of the search, the limitation period begins As to the search completed on 13.12.2001 with drawing of the panchanama and the search party leaving the premises, the mere fact that the panchanama contain the observation that search continues per se would not enable the search party to keep the search in a suspended animation to carry on the search in future date to contend that the limitation has to be worked out on the last panchanama drawn ie. 15.02.2002, thus calculating the limitation from 15.02.2002. Accepting the case of the assessee that the limitation ends on 31.12.2003. In favour of assessee

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• Customs

• 2012 (12) TMI 231
  Offence u/s 135 of Customs Act,1962 - bailability of offences - held that:- we had, by our Order of 11th March, 2011, stayed the arrest of the petitioner in connection with the subject-matter of the said file, presuming that the same would be relating to the offences under the Customs Act, 1962. However, in the petition for vacating the said interim order, it has now been brought to our notice that the subject-matter of the said file has nothing to do with the offences under the Customs Act but under the provisions of the Foreign Exchange Management Act, 1999, and Prevention of Money Laundering Act, 2002, referred to hereinabove, in respect of which we have not expressed any opinion regarding the bailability of offences thereunder. The subject-matter of the writ petition, as has also been submitted today, being confined to the question of bailability in respect of offences under the Customs Act, we allow the petition for vacating the interim order and dispose of Writ Petition ( Crl .) No.57 of 2011 by indicating that, as far as the petitioner's submission with regard to the provisions of the Customs Act is concerned, the same stands covered by the decision of this Court in Om Prakash & Anr . [2011 (9) TMI 65 - SUPREME COURT]. We also indicate that the interim order regarding stay of arrest in connection with the file, referred to hereinabove, is vacated and the respondents would be permitted to proceed in accordance with law as far as the offences under the said file are concerned.

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• 2012 (12) TMI 230
  Penalty – confiscation - Non-notified items – Held that:- In case of non-notified items, the onus to establish the smuggled nature of goods is on the Revenue - appellant has produced on record copies of invoices showing sale of the zinc in question - supplier has also deposed in his statement to the above effect. Failure on the part of the Revenue to locate the supplier cannot be held to be conclusive proof of his non-existence - confiscation of seized zinc and penalty set aside

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• 2012 (12) TMI 229
  Smuggled goods – confiscation and penalty – Held that:- In case of non-notified goods u/s. 123 of Customs Act, the onus to prove that they have illegally entered the country lies very heavily upon the Revenue - same has to be discharged by production of tangible and positive evidence by the Revenue - goods after import become the part of the stock of identical goods already available in the country. Failure on the part of the person possessing such goods to establish that the same were legally imported cannot lead to ipso facto conclusion that the same were smuggled - imposition of penalty upon the appellants were not justified

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• 2012 (12) TMI 181
  Whether software imported by the respondent-assessee is exempt being computer software – appeal against the order of the tribunal [2010 (6) TMI 374 - CESTAT, NEW DELHI] - Held that:- prior to notification dated 11th February, 1998, in several decisions it was held that software imported by telecom operators was covered by the term “computer software” and these decisions were not upset and set aside by the Supreme Court. It was in these circumstances that the Revenue decided to interpret and has issued amending Notification No. 3/1998 dated 11th February, 1998. The Larger Bench of the Tribunal after examining the controversy came to the conclusion that the amending notification should not be given retrospective effect. - Decided against the revenue.

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• 2012 (12) TMI 163
  Service of Notice - held that:- dservice on the address shown as per the record is a service of the order in terms of Section 153 of the Customs Act. No other method is permissible. The department has shown by the original file to show despatch on 08.03.2012 by speed post acknowledgement due. Therefore, the service is in order. Violation of principles of natural justice - held that:- It is incumbent on the counsel to have verified the address when he received the appellate authority's order and intimated it to the authorities in the de novo proceedings so as to change the address -The counsel states that he had intimated so. But no proof has been shown or filed to support it. - said plea is also rejected - Hence, considering all these aspects, this Court opines that the petitioner is not diligently prosecuting the matter. Since there is lack of bona fides, petitioner is not entitled to any relief and accordingly, the writ petition is dismissed.

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• 2012 (12) TMI 162
  Revocation of CHA license – alleged that CHA sublet his licence by signing blank papers – Tribunal had found that those persons to whom the appellant had given blank signed papers had cheated the Government and it was not surprising that bulk of the amount was recovered after the fraud was detected. The appellant handed over signed blank documents to others and allowed them to operate in his name. After the commission of fraud by such persons, the appellant put forward the plea of alibi. Tribunal further recording findings in categorical terms that the license given to the Customs House Agents is not an instrument to seek rental income for putting signatures on blank documents. It has also been found that during the period in question the appellant was not doing any active job of Customs House Agent and was busy only signing the documents and that there was no reason to give any opportunity to the appellant to seek such income exposing the revenue to huge risk. Held that:- there is no error in the order passed by the Tribunal. - if a power of attorney holder of a Customs House Agent commits fraudulent activities then the principal is responsible to the same extent. Decision in the case of Sri Kamakshi Agency v. Commissioner of Customs, Madras (2000 (11) TMI 144 - HIGH COURT OF JUDICATURE AT MADRAS) followed.

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• 2012 (12) TMI 161
  Import of diamond without payment of duty - shortage of 72095.55 Carats of diamonds - value addition - Notification No. 177/94-Cus., dated 21-10-1994 - maintenance of proper account of import, consumption, utilization of the imported diamonds - redemption fine – initially CESTAT decided the case in favor of assessee but decided the appeal against the assessee after remanding the matter back to the CESTAT by the Apex Court - Held that:- No documents supporting the import of the above diamonds - Respondents found a shortage of cut and polished diamonds on stock taking as well as excess of cut and polished diamonds - Respondent have been able to establish the illicit procurement of cut and polished diamonds by the Appellant - in favour of revenue

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• Corporate Laws

• 2012 (12) TMI 160
  Quashing Impugned notice u/s 13(4) of SARFAESI Act - admitted liability for the principal amount and interest - held that:- Petitioners committed default in payment of dues even after he is granted flexible time schedule to carry out his commitment - benefit of this interim order shall not ensure to them and the respondents shall be at liberty to dispossess the petitioners forthwith - Dismissed as withdrawn - open to the petitioners to take recourse to the remedies available to them in accordance with law.

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• 2012 (12) TMI 159
  Leave to defend filed by defendant no.2 - Non maintainability of suit - principal borrower is a sick company - Held that:- As decided in Raheja Universal Ltd. Versus NRC Ltd. [2012 (10) TMI 233 - SUPREME COURT] unless the suit proceedings are in the nature of 'execution, distress or the like', the suit can continue - scheme for rehabilitation or restructuring of a sick industrial company undertaken by a specialized body like the BIFR/AAIFR should, as far as legally permissible, remain obstruction free and the events should take place as pre-ordained, during consideration and successful implementation of the formulated scheme - suit has to continue and no permission is required under Section 22 of the SICA. No denial of the merits of the matter as stated in the plaint that the defendant no.1 executed the agreement dated 17.11.1998, and which binds the defendant no.1 to pay the amount of Rs. 65,00,000 plus interest. Since the debt is an unsecured debt, interest at 12 ½ % will be payable. Plaintiff cannot therefore be allowed interest at 25% per annum simple in view of Usurious Loans Act as that plaintiff is not a banking company or other notified company as per the Usurious Loans Act hence not exempted from application of the provisions of Usurious Loans Act as applicable to Delhi and therefore the contractual rate of interest cannot prevail in the face of the statute. No doubt arises that for the liability of the defendant no.1 company, who was the principal borrower, the defendant no.2 stood as a guarantor for payment of the principal amount of the loan of Rs. 65 lacs. - The triable issues in law which entitle leave to defend are only bona fide triable issues. On every disputed question of fact an issue has to be framed, but, it is only a bona fide triable issue which entitles leave to defend. In my opinion, mere technical defences, and which of course are also without any basis in view of the categorical language of the agreement dated 17.11.1998, read with the averments in the plaint, shows that there does not arise a triable issue entitling leave to defend. The issues raised in the leave to defend application are only moonshine and do not entitle the defendant no.2 for leave to defend.

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• Service Tax

• 2012 (12) TMI 234
  Demand of Service Tax - self service - services provided to units/branches of M/s SAIL (assessee) - held that:- There is no dispute that the applicant is an unit of M/s SAIL and the other units are also part of M/s SAIL. - Service provided to self is not liable to service tax - applicants are able to make out a prima facie case for total waiver of pre-deposit in their favour - stay granted. Decision in the case of INDIAN OIL CORPORATION LTD. Versus COMMISSIONER OF C. EX., PATNA - [2007 (5) TMI 135 - CESTAT, KOLKATA] followed.

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• 2012 (12) TMI 233
  Cenvat Credit - 'rent a cab' - Following the decision of court in case of [Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT] held that:- As per Rule 14 of the Cenvat Credit Rules, 2004 - As is clear from the definition any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service - If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business - merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit - Rule 3 of the Cenvat Credit Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit, the service tax leviable under section 66 of the Finance Act and paid on any input service received by the manufacturer of a final product - Decided in favour of the assessee.

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• 2012 (12) TMI 232
  Waiver of pre-deposit of Duty - Held that:- Works Contract in question are divisible into two components for supply of materials and providing services. Issue whether the activity can be taxed as service is not examined and the provisions of Article 366 (29A) of Constitution not considered because that was not relevant to the issue before the court. Claim that the activity that is sought to be taxed was done before 16-05-2005 was not substantiated by documents before the lower authority though they stated that they would produce such evidence within 15 days from 31-08-2010, the date of hearing before adjudicating authority. It appears that the applicant is raising arguments in piecemeal before different authorities for delaying the process of early conclusion of the proceedings and delaying payment of tax involved. The appellants have submitted some documents after hearing of the stay petition but before the issue of this order - Considering the various aspects held that this is not a case for complete waiver of pre-deposit of tax arising from the impugned order – applicant directed to make a pre-deposit of 50% of the tax demanded within six weeks from the date of receipt of this order for admission of the appeal.

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• 2012 (12) TMI 197
  Admissibility of Cenvat credit - Outdoor Catering Service availed by the appellant in their premises for providing canteen facility to their employees - held that:- If any amount is recovered from the employees, credit of service tax on such amounts cannot be taken as Cenvat credit - matter cannot be decided finally in favour of either party for the reason that the criteria laid down by high Court was not examined by lower authorities. Therefore, Revenue will be right to make verification and make demand to the extent consideration for service is recovered from employees - appeal filed by Revenue is rejected.

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• 2012 (12) TMI 178
  Demand of service tax - allegation that the appellant was promoting banking and financial services for funding loan by the lending bank to enable the potential customer to purchase vehicles and such service attracts service tax under the category of “business auxiliary service” – Held that:- Appellant was in receipt of Rs. 50,00,000/- for the service of aforesaid description provided while it was dealer of Hyundai Cars - appellant deliberately withheld the taxes due and liability to pay was not postponed by circular issued - circular was issued 10 months after due date of discharge of tax liability with interest as stated by the appellant - When the appellant discharged tax liability 10 months before the circular was issued, this clearly demonstrates that the intention of the appellant was to use public money due to state, undue benefit was enjoyed and no good reason exists for waiver of penalty - law was introduced in July, 2003, it shall be proper to penalise the appellant to the extent of 25% of the service tax demand - penalty levied under section 76 is waived. Appeal is partly allowed

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• 2012 (12) TMI 157
  Rebate claim under rule 18 - Duty paid on export of goods - Assessee is engaged in manufacturing yarns for domestic as well as export market - Assessee had filed the appeal before the Tribunal during the year 2010, no order of stay had been obtained against the respondents, with regard to the recovery of the amounts due from the petitioner. Rebate earned by the petitioner, by way of refund of excise duty paid by it, had been adjusted towards the amount of service tax due to the government, under the power conferred by Sec. 87(a) of the Finance Act, 1994, read with Sec. 11 of the Central Excise Act, 1944. Held that:- The alleged service tax dues to be payable by the petitioner, from the amount to be due to the petitioner as export duty rebate, cannot be sustained in the eye of law. The stay petition filed by the petitioner along with the appeal, in Appeal No.ST/217/2010, had been dismissed by the Tribunal, as infructuous, only due to the fact that the amount said to be due from the petitioner had been appropriated by the second respondent. Therefore it is appropriate to set aside the appropriation by the second respondent, towards the alleged liability of the petitioner, from the amount refundable to it, as export duty rebate. Appeal remand back to Tribunal

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• Central Excise

• 2012 (12) TMI 228
  Cenvat Credit - rent-a-cab services - transportation of workers/employees from their factory to homes and back - for sending sick employees to hospital - for transporting children of employees/workers to school/tuition centres and back - Input Service - Cenvat credit demand, Interest and Penalty - nexus with manufacture of Goods - held that:- service of rent-a-cab service availed for bringing employees to the factory and dropping them back home is covered by the definition of Input Service and appellant had rightly claimed Cenvat Credit. Decision in C.C.E., Bangalore vs. Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] and C.C.E., Bangalore III vs. T.G. Kirloska Automoiive Pvt. Ltd [2011 (4) TMI 206 - KARNATAKA HIGH COURT]; that also judgment of Hon’ble Punjab & Haryana High Court in the case of C.C.E., Chandigarh I vs. M/s Federal Mogul Goetze (India) Ltd [2011 (9) TMI 120 - PUNJAB AND HARYANA HIGH COURT] is followed. cenvat credit in relation to the ambulance services - held that:- Factory owner is under legal obligation to ensure basic medical facility for the welfare of the employees who may suffer from injury in accident or may suddenly fall sick. In the instant case, hiring of ambulance for carrying sick employees to the hospital for treatment is extension of the aforesaid legal obligation of the assessee - health of the workers in a factory has direct relation to its output - service tax paid on ambulance service i.e rent-a-cab service for ambulance, by the appellant in respect of welfare of employees has nexus with the production of final product - Com has fallen in error in disallowing aforesaid cenvat credit to the appellant. Cenvat credit for transportation of employees children to schools/tuition centres - is a welfare activity which is not covered by the definition of Input Service - cenvat credit demand of Rs.62,435/- is upheld along with interest, rest of cenvat credit demand is set aside. Since the issue involved in this appeal relates to interpretation of the provisions of Cenvat Credit Rules, penalty of Rs.10,000/- imposed on the appellant is also waived.

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• 2012 (12) TMI 227
  Disallowance of Cenvat credit - Recovery of Cenvat credit with Interest and Penalty - inputs/capital goods and services utilised by the appellant in the research and development centre had no direct or indirect nexus with the manufacture of final product(Department) - appellant seeking waiver of condition of duty demand, interest and penalty - held that:- Appellant who is manufacturer of motor vehicles is required to submit prototype of the vehicle for test by agency specified under the rules before starting actual production of motor vehicle for sale. Therefore, any charge incurred in research and development unit would fall within the definition of Input service, capital goods or input service for the purpose of availing cenvat credit - impugned order is not sustainable as nexus with manufacture is established and thus this is a fit case for grant of waiver of duty demand, interest and penalty pending appeal - after waiving the conditions ofi pre-deposit, impugned order is set aside and remand the matter back to the Commissioner concerned for de novo adjudication in the light of the Motor Vehicles Rules, 1989 after giving opportunity of being heard to the party as the above plea has been raised for the first time before the Tribunal in the interest of justice - Appeal is decided accordingly.

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• 2012 (12) TMI 226
  Calculation of entitlement of DTA sale - 100% EOU - Exim Policy - whether deemed export is equivalent to physical export - held that:- Tribunal in its impugned order held that once Development Commissioner giving permission to the appellant, a 100% EOU, to sell goods in DTA up to a specified value. Revenue cannot go beyond the permission and dispute it holding that for fixing the limit only physical exports and not deemed exports should have been taken into account - no merit in the appeal filed by the Revenue and accordingly, reject the same. Decision in GINNI INTERNATIONAL LTD. Versus COMMISSIONER OF C. EX., JAIPUR [2001 (9) TMI 165 - CEGAT, COURT NO. IV, NEW DELHI] followed.

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• 2012 (12) TMI 225
  Cenvat credit – appellants received goods along with invoices on which they have taken input duty credit - alleged that goods were purchased from the market and that there were no duty paying documents evidencing payment of duty to the Central Excise Department – Held that:- They cannot be given duty credit, if the supplier from whom they have purchased the goods has not paid the duty to the Central Excise Department in the first place - If the appellants have been given invoices showing payment of duty without the supplier having paid the duty, there are legal recourses available to the appellants to obtain compensation from the supplier. There is no reason why the Central Excise Department should compensate them because they had entered into transactions which someone who has duped them by giving them such invoices on which credit cannot be taken by them - appellants directed to pre-deposit equal to 50%

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• 2012 (12) TMI 224
  Unaccounted goods – seizure – Held that:- Non-accountal of excisable goods produced by a manufacturer in the prescribed RG-I register is contravention of the provisions of Rule 10 of the Central Excise Rules, which attracts confiscation of the unaccounted goods and penalty on the manufacturer under Rule 25(1)(b) ibid. Therefore, the unaccounted goods under seizure have been correctly ordered to be confiscated and penalties have been correctly imposed on the appellant company and its Directors. However, looking to the fact that appellant company had gone to the Settlement Commission and have discharged the duty liability as determined by the Settlement Commission, the redemption fine is reduced

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• 2012 (12) TMI 223
  Refund claim - goods cleared to 100% EOU - unjust enrichment – Held that:- Certificate given by the buyer of the respondent that no excise duty was paid by them to the respondent - as the respondent was entitled to clear the goods without payment of duty and it was only on account of delay in permission on the part of the department - Merely because the duty element stands reflected in the excise invoices, by itself, cannot be the basis to hold that such excise duty was recovered by them from their customer, who is 100% EOU and such, is not liable to pay excise duty - respondent cannot be called upon to establish by other evidence that the said duty has not been passed on to their buyer – refund allowed

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• 2012 (12) TMI 222
  Penalty whether mandatory - Section 11AC or Rule 25 - intention to evade payment of duty – Held that:- A mandatory penalty equal to the duty (neither more nor less), short paid or not paid or erroneously refunded is payable if such non-payment or short payment or erroneous refund was due to fraud, collusion, wilful misstatement or suppression of facts etc. under Section 11AC. - Rule 25(1) does not envisage mandatory penalty equal to duty, the rule only provides penalty upto duty payable on such contravening goods or Rs. 2,000/- whichever is higher. However, from the above it does not follow that provisions of Rule 25(1) would not apply in case the ingredients of fraud, wilful mis-statement or suppression etc. are not present. Otherwise the provisions of Rule 25(1) would be rendered otiose. Proposal in the show cause notice was for imposition of penalty for contravention of Rule 4 and Rule 8 ibid, under Section 11AC read with Rule 25(1) - there is no suppression of facts before the Department of wilful mis-statement or fraud or evasion of duty - this is not a case where the penal provisions can be upheld or that where the penalty can be imposed - provisions of Section 11AC are para-materia to the provisions of Rule 25(1)(d) so far as the contravention of any of the provisions of Rules with intent to evade payment of duty is concerned - penalty is not imposable under Rule 25 – in favor of assessee

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• 2012 (12) TMI 221
  Cenvat credit - service tax paid on the insurance on vehicle, finished goods, cash in transit and insurance on cash box – Held that:- insurance service may be indirectly connected to the manufacturing or other activity but that may be in relation to manufacture or various other business activities enumerated in Rule 2(l) of Cenvat Credit Rules, 2004. This establishes the dependability of input to the output. Unless the vehicle is used otherwise than serving the purpose of manufacture or providing of service, the insurance paid to cover risk should not go out of consideration to grant Cenvat credit - considering inevitability of insurance to make the assessee risk free for carrying out its manufacturing operation and other activities related thereto or to the services relating to inclusive aspects under Rule 2(l) cenvat credit allowed

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• 2012 (12) TMI 220
  Admissibility of cenvat credit - cenvat credit demand in respect of MS angles, Channels, CTD bars, sheets etc. used for fabrication and erection of supporting structures of the machinery, this credit has been taken during Nov. 1994 - August 1995 period – Held that:- With effect from 16-3-1995 goods of chapter 73 were not mentioned in the new definition. The eligibility of capital goods modvat credit of M.S. angles, channels, sections, CTD bars etc. used for fabricating and erecting supporting structures for machinery has to be examined on the basis of definition of “capital goods” - portion of the impugned order disallowing Modvat credit in respect of MS Angles, Channels, Sections, bars, etc. used for supporting structures for machinery for the period prior to 16-3-1995, is set aside and the portion of the order disallowing the Modvat credit in respect of these items for the period w.e.f 16-3-1995 is upheld - appeal partly allowed

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• 2012 (12) TMI 219
  Disallowance of credit - discharge of additional customs duty from DEPB account - Notification No. 96/04-Cus. was issued on 17-9-2004 – Held that:- In absence of specific provision of law, there cannot be any artificial construction of law, that can be made to make law unworkable - when the bona fide of the appellant is not doubted and law was under confusion stage authority cannot proceed against the appellant to disallow Cenvat credit - appellant was also in dark to ascertain the proper position of law, in view of travel of the litigations from 2002 to 2010 from Tribunal to High Court. Therefore, noticing no mala fide, the appellant also succeeds on limitation - appeal is allowed partly

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• 2012 (12) TMI 180
  Valuation of wast and scrap - cost + 15% - CAS 4 - Rules 8 and 9 - Respondent cleared to other units of theirs - waste and scrap of cast iron generated in the course of manufacture of textile manufacture on payment of duty on assessable value of Rs.3/- per kg - Revenue demanding differential duty of Rs.1,35,718/- and interest thereon and also proposing a penalty as respondent should have paid duty on assessable value estimated at 115% of the cost of production of the goods - held that:- As respondent has paid an amount of Rs.1,59,900/- as differential duty on the waste and scrap in question after the impugned order was passed - respondent further submits thus without verifying any of these facts the department now has gone on appeal demanding a lower amount than what is accepted by the appellants - no valuation issue survives for a decision on the particular facts of this case - appeal is therefore dismissed.

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• 2012 (12) TMI 179
  Waiver of pre-deposit - SSI Exemption - whether the applicant is required to reverse the CENVAT credit in respect of inputs lying in stock – Held that:- Show-cause notice was issued under Rule 14 of the CENVAT Credit Rules 2004 read with Section 11A of CEA, 1944 and show-cause notice was confirmed by the Original Authority under Rule 14 of the CCR 2004 - Commissioner (Appeals) in para 11 of the Order-in-Appeal has given a finding that Rule 14 is not applicable in the present case - assessee while opting for SSI exemption is not required to reverse the CENVAT credit - pre-depoist is waived

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• 2012 (12) TMI 177
  GTA service on outward transportation - admissibility of Cenvat Credit – Held that:- Cenvat credit on GTA service from the factory to the port of export would be available - appellants are rightly entitled for the Cenvat credit of the service tax paid on GTA service utilised for transportation of the export goods from the factory to the port of shipment

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• 2012 (12) TMI 176
  Demand of Duty and penalty - clandestine removal – shortage and excess stock – Submission of the appellants that they have now improved their accounting system by adopting computerized accounting and the matter under consideration occurred was just before such computerized accounting was put in place - Held that:- Large number of final products the appellants were manufacturing and the difficulty in maintaining proper accounts of such variety of goods both in packed condition and in bulk - errors are on account of errors in accounting rather than due to clandestine removal because of the fact that discrepancies have been noticed involving both excesses and shortages - this is a case of improper accounting rather than a case of clandestine removal of inputs and finished goods - appellants are required to maintain proper accounts of inputs and finished goods available with them as per Central Excise Rules - duty demanded and penalty set aside

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• 2012 (12) TMI 175
  Refund - manufacture of various photographic chemicals - assessees were clearing empty MS. Drums/HDPE/PP/LDPE bags/PVC drums and cans, in which the raw materials were received by them without payment of duty – alleged that duty was required to be paid by them on the sold empty containers - duty was being paid by them under protest – Held that:- Empty containers of modvatable raw materials do not attract duty at the time of their sale - show cause notice having not been issued, the deposits made by the appellant cannot take the colour of the ‘duty’ so as to invite the limitation provisions - appellants were admittedly not required to pay the said duty and the refund claim does not pertain to the routine payment of duty in the ordinary course of the business where such refund claim requires scrutiny from the angle of limitation as also from unjust enrichment angle – refund allowed

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• 2012 (12) TMI 174
  Application for modification of stay order - SSI Exempted - Extended period of limitation - Whether the brand name RIAT can be said to be owned by the appellant company – limitation – Held that:-In that order, the merits of the case and also the question of time bar, had been considered and it had been found that in respect of the same, the appellant have not been able to establish prima facie case. As discussed above, on the question as to whether the brand name RIAT can be said to be owned by the appellant company and on which the bulk of the duty demand of Rs. 59,49,884/- is based, the judgment of the Apex Court in the case of Prince Valves Industries v. CCE, Chandigarh (2006 (2) TMI 172 - SUPREME COURT OF INDIA) appears to be against the appellant. Even the appellant’s plea that there is an assignment deed dated 17-6-2006 assigning the brand name RIAT to M/s. Riat Tools Pvt. Ltd. and, hence, for the period w.e.f. 17-6-2006 the SSI exemption cannot be denied to them also does not help them in view of the Tribunal’s judgment in the case of VEE GEE Faucets P. Ltd. v. CC, Gurgaon (2010 (3) TMI 710 - CESTAT, NEW DELHI) cited by the learned DR. The appellant’s plea with regard to limitation had also been considered in the stay order dated 21-4-2011 and had not been found acceptable in the background of the fact that they had not intimated the department that the brand name RIAT being used on their goods does not belong to them and the same is still registered in the name of M/s. Riat Machine Tools. Miscellaneous application dismissed.

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• 2012 (12) TMI 173
  Levy of excise duty followed by penalty and interest – Held that:- Colour of the sugar is lost with the passage of time - It is quite common when reprocessing is done some loss is bound to take place - That has been rightly appreciated by the appellate authority - preponderance of probability is in favour of the respondent to hold that the order of the Commissioner (Appeals) does not suffer from legal infirmity - Revenue’s appeal is dismissed

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• 2012 (12) TMI 172
  Classification of the product Bio-Control Agents - under Heading No. 30029030 based upon the precedent decision or under Heading No. 38.089910 – Held that:- Appellant have placed strong reliance on the precedent decisions of the Tribunal, the Adjudicating Authority has chosen to ignore the same and have decided the issue independently, without taking note of the earlier judgments - fair process of adjudication requires the adjudicating authority to deal with each and every plea raised by an assessee and specifically the decisions, which apparently covers this issue - matter remanded to the Commissioner for de novo decision

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• 2012 (12) TMI 171
  Penalty on broker dealing the goods liable to confiscation - appellant acted as a broker only and was not concerned with issuance of invoices without supply of goods - prior to 1-3-07, the provisions of Rule 26(2)(ii) were not available - Hon’ble High Court has held that in spite of non-applicability of Rule 26(2) penalty could be levied as the appellant in that case was concerned in selling or dealing with the goods which were liable to confiscation - Rule 25(1)(d) and Rule 26(1) were also applicable – Held that:- Said observations were made in respect of the persons concerned with the selling of the goods and issuance of the invoices - appellant neither sold the goods nor issued the invoices and has acted only as a broker on commission basis - penalty has been imposed upon on him under Rule 26 without mentioning any sub-rule - appellant is entitled to unconditional stay from the condition of pre-deposit as also from recovery

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• 2012 (12) TMI 158
  Determined the annual production capacity - Extended Period of limitation - Assessee is manufacturer of the rerolled product of non-alloy steel - Duty of the Excise is leviable in terms of the provisions of Section 3A of the Central Excise Act, 1944 - Based on the capacity of production of their factory - the annual capacity determined by the assessee under Sub Rule 3 of Rule 3 of the Rules of 1997 was 3044.531 for F.Y 1996-97 metric ton against which the actual production of the Revenue was 6095.795 metric ton F.Y 1996-97 – Commissioner review his own order retrospectively, for the determination of the annual production capacity - SCN was issued on the basis of annual capacity of production of assessee's unit under Rules of 1997 w.e.f. 01.09.1997 will be as per actual production of the year 1996-97 and demanded differential duty for the year 1997-98 and 1998-99. Held that:- The duty leviable for the produce of the mill in excess to the annual capacity of production determined by the formula under sub-Rule 3 of Rule 3 will be the quantity leviable for the duty. In Rule 5, even after declaring that actual production of the mill will be the annual capacity of the production shall be determined by the formula under sub-Rule 3 of Rule 3, but it has been restricted to apply for only financial year 1996-97. In view of the Rule 5 also, even actual production of previous year i.e. for the F.Y 1996-97, by application of the deeming Clause under Rule 5, that is not the basis annual capacity of production for the subsequent years. Therefore said notice was barred by the period of limitation of six months. In favour of assessee

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• CST, VAT & Sales Tax

• 2012 (12) TMI 235
  Uttarakhand Value Added Tax Act - duplex coated board, mill board and grey board - whether the products manufactured by the respondent can be said to be articles of packing – Held that:- Boards are articles of packing - in commercial world and in common parlance, user of such boards is as articles of packing and, accordingly, would come within the inclusive meaning of articles of packing mentioned in entry No. 9 of Schedule II(B) of the Act

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• 2012 (12) TMI 198
  Kerala Value Added Tax Act - Evasion of tax – alleged that appellant/petitioners are in arrears of tax for which goods can be detained as provided under section 47(4) of the Kerala Value Added Tax Act, 2003 - appellant/petitioner submits that section 47(4) does not authorize recovery of arrears of tax by detaining goods under transport at the check-post – Held that:- There is no provision in section 47(4) to detain the goods until full arrears are paid. However, section 47(4) does not bar the Department from exercising right of attachment and sale of the detained goods under transport under other provisions of the Act or under the Revenue Recovery Act for recovery of arrears if the dealer does not clear arrears or at least makes arrangement for payment of arrears as a condition for release of goods - commodity brought is not for sale but is capital goods for installation in the factory which is a matter which the assessing officer/ check-post authorities or departmental officials can verify after release of goods - appellant will furnish a post dated cheque drawn on a local branch of a nationalized bank for Rs. 10 lakhs in favour of their assessing officer towards arrears of tax

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• Indian Laws

• 2012 (12) TMI 196
  Validity of Appointments - crieteria for seniority - appeal barred by limitation - appeal seeking removal of the special batch recruits being in violation of the rules - held that:- Fixation of seniority in the backdrop of ad hoc initial appointment - respondents therein were neither appointed by the competent authority on the recommendations made by the Board which was constituted by the Governor of Haryana nor were they placed on probation as required under the rules and, therefore, their ad hoc period could not be counted for the purpose of fixation of seniority. Thus, emphasis was laid that when appointment is made without following the procedure prescribed under the rules, the appointees are not entitled to have the seniority fixed on the basis of the total length of service. In essence, it has been ruled that when the appointment is made de hors the rules, the appointee cannot claim seniority even if his appointment is later on regularized - there is violation of the recruitment rules, the recruitment is unsustainable. State is a model employer and it is required to act fairly giving due regard and respect to the rules framed by it. But in the present case, the State has atrophied the rules. Hence, the need for hammering the concept. Secretary, State Of Karnataka And vs. Umadevi And Others [2006 (4) TMI 456 - SUPREME COURT], the Constitution Bench, while discussing the role of state in recruitment procedure, stated that if rules have been made under Article 309 of the Constitution, then the Government can make appointments only in accordance with the rules, for the State is meant to be a model employer. further, In Mehar Chand Polytechnic & Anr. vs. Anu Lamba & Ors.[2006 (8) TMI 514 - SUPREME COURT], Court observed that public employment is a facet of right to equality envisaged under Article 16 of the Constitution of India and that the recruitment rules are framed with a view to give equal opportunity to all the citizens of India entitled for being considered for recruitment in the vacant posts. Thus, role of the State as a model employer with the fond hope that in future a deliberate disregard is not taken recourse to and deviancy of such magnitude is not adopted to frustrate the claims of the employees. It should always be borne in mind that legitimate aspirations of the employees are not guillotined and a situation is not created where hopes end in despair. Hope for everyone is gloriously precious and a model employer should not convert it to be deceitful and treacherous by playing a game of chess with their seniority. A sense of calm sensibility and concerned sincerity should be reflected in every step. An atmosphere of trust has to prevail and when the employees are absolutely sure that their trust shall not be betrayed and they shall be treated with dignified fairness then only the concept of good governance can be concretized - all the appeals are dismissed leaving the parties to bear their respective costs.

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