Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 11, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Royalty income earned from the OEMs on network equipment -In view of the specific clauses in the agreement between OEM's and Indian parties, it is clear that the software didn't have an independent use and is a integral part of the hardware without which the hardware cannot function. The software supplied was a copyrighted article and not a copyright right - Not taxable u/s 9 - AT
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Re computation of income - first sett-off the carry forward speculative losses against the speculative profit and then set-off the business losses - beneficial circulars issued by the CBDT are binding on the income tax authorities - HC
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Penalty u/s 271D for violation of Section 269SS - ITAT deleted the penalty as assessee had taken the loan only from her father-in-law and the transaction was genuine - order of ITAT confirmed. - HC
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As per section 139(1) r.w.s. 80A(5) it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction in the return itself - AT
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Notice u/s 143(2) – notice under section 143(2), cannot bar the Assessing Officer from processing the revised return under section 143(1)(a) of the Act - HC
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TDS – payment of interest is made to a Corporation established by a State Act – notified institution u/s 194A(3)(iii)(f) - Sec. 194A(1) not applicable - AT
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Annual information return – AIR is not filed within time prescribed - Imposition of penalty is in accordance with the provisions of section 271FA - HC
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Set off of loss/unabsorbed depreciation from windmill – Not in a position claim deduction u/s 80IA being loss - Section 70(1) comes to the rescue of the assessee - Sec. 80IA(5) cannot override Sec. 70(1) - HC
Customs
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Return of goods seized - permission from the Ministry of Environment and Forest - goods seized in September/October 2010 - circular was issued on 04.07.2012 - said circular is not applicable in this case - HC
FEMA
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Order of preventive detention - the order of the preventive detention being exceptional measure by way of social defence ought to be used with great deal of care and circumspection. - HC
Corporate Law
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Infringement of copyrights - unlicensed/pirated software contained in hard disks, compact disks, floppy disks including any CD Writers/Burners, or any other material infringing or aiding in the infringement of the Copyright of the Plaintiffs - Cost of Rs. 5 Lacs imposed - HC
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Winding up petition - debt recovery which is barred under the law of limitation - even if this period of 21 days excluded under Section 15(2) of the Limitation Act, the winding up petition would still be barred on the date of filing by 1 day. - HC
Service Tax
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Classification of service - Sub-broker to the main stock broker - Once the appellant is out of purview of section 65 (101), its activity was rightly covered by the Business Auxiliary Service - AT
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CENVAT credit – Conduct of the appellant does not reflect to be fair when public money was enjoyed without credit being available on record therefore penalty shall be levied. - AT
Central Excise
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Penalty - CENVAT credit on G.T.A. - CENVAT Credit received and utilized both for traded as well as manufactured goods were duly accounted for in the CENVAT Credit register - No Penalty - AT
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Personal Penalty under Rule 26 - department could not bring out that he was looking after the day to day working of the factory and they could not bring out any knowledge on the part of the appellant in the shortage found in the factory. - Penalty waived - AT
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CENVAT Credit on rent a cab service - CENVAT Credit on rent a cab has been allowed - AT
VAT
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Validity of notice issued u/s 23 of MVAT - the present is not a case where by a subsequent amendment, limitation has been enlarged even though the limitation prescribed under the earlier legislative provision has expired - no merit in the Petition. - HC
Case Laws:
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Income Tax
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2013 (2) TMI 220
Penalty u/s 271(1)(c) - furnishing of inaccurate particulars - assessee voluntarily offered Rs.30,63,310/- for tax. - It was stated that the amount was shown in the capital account and was not shown as a capital receipt. But since the issue had arisen, it was being offered as taxable income. - held that:- The admitted position is that the amount of Rs.30,63,310/- was shown by her in the return. That being the position, it cannot be said that there was any concealment. There is no dispute about the fact that the amount was correctly mentioned and therefore, there is also nothing inaccurate in the particulars furnished by her. The only error that seems to have been committed was that it was not shown as a capital receipt. But as soon as this was pointed out, the error was accepted and the amount was surrendered to tax. - No penalty - Decided in favor of assessee.
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2013 (2) TMI 219
Royalty income earned from the OEMs on network equipment - Whether CIT(A) was justified in upholding the taxability of royalty income earned by Qualcomm Incorporated, from the Original Equipment Manufacturers ('OEMs') of CDMA mobile handsets and network equipment, who are located outside India, under S. 9(1)(vi) (c) - Article 12(7)(b) of the India USA DTAA - levy of interest under section 234A & B - Held that:- Qualcomm Incorporated the appellant were a company incorporated in the USA engaged in development and licensing of CDMA technology granted license to 'use and sell CDMA technology' to the unrelated Original Equipment Manufacturers ('the OEMs'), who were non-resident and were located outside India, in consideration for royalty. The licenses granted by the appellant to the OEMs were used for manufacturing of handsets and network equipments, which, in turn were sold to various parties located outside India and in India. Reopening of assessment - Held that:- A perusal of the reasons and the material demonstrate that the Appellant is the owner of patents pertaining to CDMA technology and that the Appellant earns royalty from such patents and that CDMA mobile services/technology has been launched and used in India. This information and material, in our considered opinion is sufficient, prima facie, to come to a conclusion that the Appellant has earned certain income in India. The information by way of press releases, newspaper articles etc. could lead any reasonable person to believe at that the Appellant who owns several patents pertaining to CDMA technology would have income, as such, technology is used in India. In our opinion the AO had an honest belief, and has come to a conclusion, as a rational man would, based on the material that income chargeable to tax has escaped assessment. The satisfaction in question is that of the AO at that point of time. It cannot be said that the AO had no cause or justification to suppose that income has escaped assessment. The phrase 'reason to believe' cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. Whether the material would conclusively prove the escapement of income is not the concern at this stage. Thus find no force in the contention of the appellant that the reasons recorded are not clear or irrelevant and therefore we are unable to quash the reopening of the assessments on this score - against assessee. Enhancement of income by the C.I.T(A) - Held that:- As decided in Jute Corporation [1990 (9) TMI 6 - SUPREME COURT] & CIT v. Kanpur Syndicate [1964 (4) TMI 18 - SUPREME COURT] the power of the Appellate Assistant Commissioner is coterminous with that of the Income-tax Officer. The first appellate authority can do what the AO can do and also direct him to do what he has failed to do. In the present case, the fact that the Appellant also earns royalty income from network equipment was before the AO. This fact was also discussed by the AO in her assessment order. The AO enquired into the matter by issuing a questionnaire, calling upon the Appellant to give reply/information with respect to the royalty income from network equipment. Thereafter, the AO concluded the assessment by taxing only the royalty income from handsets. A reading of the assessment order clearly brings out the fact that this source was always part of the assessment proceedings. However while quantifying the royalty income, the AO did not bring the royalty income arising from network equipment to tax. Hence the same would not constitute a new source of income and therefore the income can be enhanced by the CIT(A) u/s.251 of the Act. CIT(A) has rightly exercised his jurisdiction under section 251 to enhance income of the Appellant - against assessee. The license to manufacture products by using the patented intellectual property of the appellant had not been used in India as the products were manufactured outside India and when such products were sold to parties in India it couldn't be said that OEMs had done business in India. Sale in India without any operations being carried out in India would amount to business with India and not business in India. The patents of the appellant were used for manufacture of handsets and infrastructure equipments which were sold worldwide. No patents of the appellant had been used for customization of handsets. Technology for manufacturing products was different from products which were manufactured from the use of technology for which the appellant had patents. The role of appellant ended when it licensed its CDMA technology for manufacturing handsets and when it collected royalty from OEMs on these products There was no finding that the OEMs had carried on business in India or a part of the sale consideration was attributable to any sale or licensing of software carried out in India. When OEM's itself were not brought to tax, to hold that the appellant was taxable was not correct. The provision of Section 9(1)(vi)(c) covers cases where the right, property or information has been used by the non-resident payer (OEM) itself and is so used in business carried on by OEM's in India & a case where the right, property or information has not been used by the non-resident payer (the appellant) itself in the business carried on by it, but the right, property and information had been dealt with in a such manner as would result in earning or making income from a source in India. In the present case, the OEMs had not carried on business in India. The OEMs couldn't be said to have used the appellant's patents for the purpose of business in India. The source of income is the activity that gives rise to the income. In the present case, the right, property or information licensed to OEMs related to the manufacture of the products and, hence, the source was the activity of manufacturing. The source of royalty was the place where patent was exploited, viz, where the manufacturing activity took place, which was outside India. Hence, the Indian parties would not constitute source of income for the OEMs. In view of the specific clauses in the agreement between OEM's and Indian parties, it is clear that the software didn't have an independent use and is a integral part of the hardware without which the hardware cannot function. The software supplied was a copyrighted article and not a copyright right. The software was only used with the hardware and was not independent of the equipment or the chipset. Since no separate consideration was paid by Indian parties for licensing of the software and the consideration was paid only for the equipment which had numerous patented technologies, the sale could not be divided or broken down into different components.Thus, the royalty earned by the appellant couldn't be brought to tax in India under Section 9 - in favour of the assessee. As the royalty in question cannot be brought to tax under the Income Tax Act, 1961, need not go into the question of applicability under DTAA between India and USA as it would be an academic exercise. Regarding levy of interest under S. 234A as decided in the case of CIT v. Anjum Ghaswala (2001 (10) TMI 4 - SUPREME COURT) held that the levy of interest under S. 234A to be mandatory in nature - against assessee. Interest under S.234B will not be levied as decided in the case DIT v. Jacabs Civil Incorporated and Mitsubishi Corpn. And Ors (2010 (8) TMI 37 - DELHI HIGH COURT) is in favour of the assessee
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2013 (2) TMI 212
Re computation of income - first sett-off the carry forward speculative losses against the speculative profit and then set-off the business losses to the extent of the balance speculation profit and other income - Held that:- There is no merit in the appeal and no substantial question of law arises. Circular No.23D of 1960 dated 12.9.1960 of the CBDT which conceded that speculation losses carried forward from previous years may be first set off against the speculation profits before being set off against any other current profits, if that procedure is more beneficial to the assessee There is no dispute that the circular (supra) has not been withdrawn and therefore would still govern the treatment to be given to the brought forward speculation losses though it was issued under the 1922 Act. It is not the case of the revenue that the provisions of section 24 of the old Act and section 73 of the new Act are materially different and therefore the circular can have no application under the new Act. The order of the Tribunal is in conformity with the legal position that beneficial circulars issued by the CBDT are binding on the income tax authorities see Navnit Lal Zaveri vs. K.K.Sen (1964 (10) TMI 16 - SUPREME COURT) - appeal dismissed as without merit.
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2013 (2) TMI 211
Penalty u/s 271D for violation of Section 269SS - ITAT deleted the penalty as assessee had taken the loan only from her father-in-law and the transaction was genuine - Held that:- In the light of the relationship between the assessee and her father-in-law, the Tribunal has rightly held that the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for purchase of property and the source had also been disclosed during the assessment proceedings. If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. See Commissioner of Income Tax V. Lakshmi Trust Company [Commissioner of Income Tax V. Lakshmi Trust Company] - in favour of assessee.
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2013 (2) TMI 210
Disallowance u/s 40 (ia) - excise duty refund - Held that:- As decided in M/s Shree Balaji Alloys v. CIT [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] the refund of excise duty by the assessee has to be treated as Capital Receipt in view of Section 80IB then there is no escape from the conclusion that such income would not be subjected to any tax - against revenue.
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2013 (2) TMI 209
Reopening of assessment - assessee claimed exemption u/s 10 (22) - whether addition u/s 68 was possible even where the income of the appellant was exempt under Section 10 (22) ? - Held that:- CIT has held that if the AO had reasons to believe that the appellant trust was not being run for its genuine object and was being run for private profit of family members of the trustees, AO should have reported the matter to the CIT, who could have initiated proceedings for withdrawal of exemption. ITAT has upheld the order of AO. The very receipt of money by the appellant for the purpose of running the activities of educational institutions itself has been doubted by the ITAT. Hence the ITAT is justified in going into the facts which was incidental to the question of law raised and no estoppel plea can be raised by the assessee. Further, it was noticed by AO that in a suit filed between Trust members, there was asset sharing compromise was arrived at. Thus from the overall facts and circumstances, it is evident that unless it is proved that the income derived is covered under Section 10(22) of the Income Tax Act, 1961, it cannot be decided as to whether addition of the same under Section 68 of the Income Tax Act, 1961, is possible or not. Therefore, on the facts and circumstances of this case, this court deems it appropriate to remand the matter for consideration of the assessing officer in the light of the legal position and observations to locate the source of income.
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2013 (2) TMI 208
Deduction u/s 80P - when the taxpayers have not filed the returns of income within the time limit provided u/s 139(1) or 139(4) or within the time specified in the notice u/s 142(1) of the Act, whether such taxpayers are entitled for deduction u/s 80P - invoking the provisions of section 80A(5) - Held that:- Section 139(1) make it mandatory for every taxpayer whose total income exceeds the maximum amount which is not chargeable to income-tax before grant of deductions u/s 10A, 10B and deduction under Chapter VIA of the Act to file the return of income. As in the present case all the taxpayers' income exceeded the maximum amount which is not chargeable to income-tax before grant of deduction under Chapter VIA therefore, it is not only mandatory but also statutory requirement that all the taxpayers have to file the return of income before the due date prescribed u/s 139(1). Under section 80A(5), the legislature made it mandatory that the claim under Chapter VIA under the heading "C.- Deductions in respect of certain income" has to be made in the return. If the contention of the assessee is accepted, then the person, who files the return of income and fails to make a claim of deduction in the return of income either by ignorance or otherwise may not get the benefit, but a person who has not filed the return of income may be in a better position to claim the benefit. It is settled principles of law that in order to avail benefits under the beneficial provision, the conditions provided by the legislature has to be complied with. Therefore,the mandatory provisions contained in section 139(1) r.w.s. 80A(5) it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction in the return itself - against assessee. Notice ought to have been issued u/s 148 - Held that:- A bare reading of section 147, clearly shows that, the assessing officer has to believe that the income chargeable to tax has escaped assessment. Section 148(2) makes it mandatory to record reason for such belief. Therefore, the jurisdiction to issue notice u/s 147 is the belief of the assessing officer with regard to escapement of income from assessment. Therefore, the taxpayer cannot compel the assessing officer to issue notice u/s 148 for regularization of the return filed belatedly. When the assessment proceedings are admittedly pending on the date of filing of belated return no one could say that any income chargeable to tax has escaped assessment. Unless and until, the assessment proceedings initiated by the assessing officer by issuing notice u/s 142(1) culminated either by an assessment order or otherwise by operation of law, it not be able to be said that any part of income chargeable to tax has escaped assessment. Thus as no income could be said to be escaped assessment at that point of time the contention of the taxpayer that notice ought to have been issued u/s 148 for regularizing the returns filed u/s 139(4) has no merit at all. Disallowance u/s 40a(ia) - applicability of provisions of section 194A - assessee contested being a registered as co-operative societies - Held that:- As decided in Moolamattom Electricity Board Employees' Co-operative Bank Ltd, In Re & Ors [1998 (7) TMI 53 - KERALA HIGH COURT] for the purpose of understanding the cooperative society, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative Societies Act. Therefore, the Kerala High Court found that the co-operative societies are exempt from provisions of section 194A. Also see Income-tax Officer & Anr v. Thodupuzha Urban Co-operative Bank Ltd & Anr [2003 (7) TMI 49 - KERALA HIGH COURT] - addition u/s 40(a)(ia) is deleted - in favour of assessee. Disallowance of contribution made to pension fund and gratuity fund - taxpayers are not eligible for exemption u/s 36(1)(iv) - Held that:- Section 2(38) of the Income-tax Act defines "recognized provided fund." which was recognized by the Chief Commissioner or Commissioner as per the rules contained in Part A of the Fourth Schedule to the Income-tax Act is considered to be a recognized provident fund. The second part of section 2(38) clearly states that when a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952, then that fund also has to be treated as recognized provident fund. When the contributions are made to group gratuity fund established by the LIC of India and the funds established by the State government and if it could not be considered as recognized fund within the meaning of section 2(38) such payment has to be allowed u/s 37(1) since it relates to the business expenditure as found by the Madras High Court in the case of C.I.T. v. Kattabomman Transport Corporation Ltd [1998 (9) TMI 2 - MADRAS HIGH COURT]. Therefore, the orders of lower authorities are set aside and the issue is remitted back to the file of the assessing officer to examine the scheme of the funds established by the LIC group gratuity fund and the funds established by the State Government in exercise of its executive powers u/s 80A of the Kerala Co-operative Societies' Act and thereafter decide the issue in accordance with law. Disallowance of bad debt u/s 36(1)(viia) - Held that:- Section 36(1)(viia) provides for deduction of bad and doubtful debt made by a scheduled bank or a non scheduled bank or a co-operative bank other than primary agricultural credit society or primary co-operative agricultural rural development bank not exceeding 7 ½% of the total income computed before making deduction under chapter VIA of the Act. In this case, the specific claim of the taxpayers is that they are not bank but they are primary agricultural credit society. Therefore, obviously, the provisions of section 36(1)(viia) are not applicable to the taxpayers. As AO has already allowed part of the provision for bad and doubtful debts therefore, the taxpayers cannot have any grievance. Accordingly, the orders of the lower authorities are confirmed.
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2013 (2) TMI 207
Stay application rejected - petitioner directed to pay a sum of Rs.56 crores by 31.01.2013 and thereafter the assessee shall pay Rs.10 crores per month by the last date of the month till the demand of Rs.222.76 crores was completely paid out - Held that:- While in the previous year when similar issues were raised only 22% of the entire duty demanded was required to be deposited while the balance was stayed, in the present year the Tribunal has been unduly harsh on the petitioner by requiring it to deposit/adjust 60% of the tax demanded which also includes a sum of Rs.150 crores which pertain to covered issues. Since the Tribunal in the earlier years on the very same issue has conclusively indicated in the order dated 03.02.2012 that the petitioner had a prima facie case, the Tribunal in the present case ought to have also held accordingly. If that were to be the position, then the Tribunal ought not to have deviated from the practice adopted in the previous year by requiring the petitioner to make a deposit of the said sum of Rs.56 crores in addition to the adjustment of Rs.166 crores. Thus direct that no further recoveries be made against the petitioner till the disposal of the appeal by the Tribunal.
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2013 (2) TMI 206
Reassessment u/s 147 - Cash credit in the book - the income-tax return for the assessment year 2006-07 was submitted - notice was issued under section 143(2) - cash credit found in the books – Held that:- Section 68 is a special provision of the Act which empowers the Assessing Officer to tax any cash credit found in the books of the assessee if the nature and source thereof are not established by the assessee. In the present case, the identity of the three parties from whom the assessee has received cash is doubtful since they do not exist at the addresses given and the TIN numbers mentioned in respect of them are fictitious as per the information received from the State Government.- In the case of CIT v. Sophia Finance Ltd. [1993 (8) TMI 62 - DELHI HIGH COURT] it was held that it is immaterial as to whether the amount so credited is given the colour of a loan or a sum representing sale proceeds or even receipt of share application money. The aforesaid fact came to the notice to the AO while conducting assessment proceedings for the assessment year 2008-09 and, therefore, there was a reason to believe in the matter that the income chargeable to tax has escaped assessment in the peculiar facts and circumstances of the case. In the case of CIT v. Kelvinator of India Ltd. reported in [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] it has been held that reassessment proceeding cannot be initiated only upon the mere change of opinion - However, in the present case reassessment has not been done only upon the mere change of opinion - petitioner-company is having an alternate remedy in the matter as per the provisions of the Income-tax Act, 1961, - Decided against assessee
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2013 (2) TMI 205
Notice u/s 143(2) – validity of intimation u/s 143(1)(a) ubsequent to issuance of notice under section 143(2) of the Income-tax Act for regular assessment – Assessee filed original return on January 31, 1997 declaring the total income of Rs. 6,97,59,206 – Thereafter filed a revised return on March 30, 1998 declaring the loss of Rs. 74,97,579 in which expenses amounting to Rs. 8,14,55,626 were further claimed – Revised return was processed under section 143(1)(a) of the Act on December 14, 1998,on a total income of Rs. 9,86,85,952 – Held that:- Intimation under section 143(1)(a) was issued for the revised return while the notice under section 143(2) was issued for the original return of income. The revised return was filed by the respondent on March 30, 1998, i.e., after the receipt of notice under section 143(2) dated March 11, 1997. Said notice under section 143(2), cannot bar the Assessing Officer from processing the said revised return under section 143(1)(a) of the Act. Moreover, the assessment order dated April 23, 1999, was passed by the Assessing Officer under section 144 of the Income-tax Act, 1961, on the basis of the original return filed on January 31, 1997, and not on the basis of the revised return filed on March 30, 1998 – Order passed by the the Tribunal set aside – Appeal filed by Department allowed – In favour of revenue.
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2013 (2) TMI 204
Short Charge of TDS – Whether Section 194A(1) is applicable where payment of interest is made to a Corporation established by a State Act – Discrepancy found in the amount of tax deduction at source in respect of interest paid to Ghaziabad Development Authority and Ganga Jal Pariyojna, Ghaziabad – Held that these are the corporation established under the State Act, covered under entry no.39 where any Corporation established by a Central, State or Provincial Act is a notified institution, the provisions of section 194(1) are not applicable – Since these are the notified institution under section 194A(3)(iii)(f), therefore, the provisions of section 194A(1) are not applicable – Decided in favour of assessee.
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2013 (2) TMI 203
Annual information return – If AIR is not filed within time prescribed under the Act, penalty should be imposed or not – AIR was filed with a delay of 202 days – Director of Income Tax (CIB) imposed penalty of Rs. 20,200 – Held that:- No fundamental right or personal right of the petitioner is found to have been infringed. Otherwise too, the petitioner has got efficacious alternative legal remedy to challenge the said order, but the same is not found to have been filed by him – Imposition of penalty is in accordance with the provisions of section 271FA of Income-tax Act – Therefore writ petition failed stay application also stands dismissed – Against the assessee.
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2013 (2) TMI 202
Set off of loss/unabsorbed depreciation – Whether loss/unabsorbed depreciation of the eligible business under section 80-IA(4) can be set off against the income of other non-eligible business – assessee is in the business of manufacturing of super enameled copper winding wires – Assessee also put up a windmill for power generation – In statement of income he set off the loss/unabsorbed depreciation from windmill i.e. eligible business with the income from the business of manufacturing of super enameled copper winding wires i.e. in eligible business – Held that:- It is a generally accepted principle that deeming provision of a particular section cannot be breathed into another section. Therefore, the deeming provision contained in section 80-IA(5) cannot override section 70(1) of the Act. The assessee incurs loss after claiming eligible depreciation. Hence, section 80-IA becomes insignificant since there is no profit from which this deduction can be claimed. Section 70(1) comes to the rescue of the assessee, whereby he is entitled to set off the losses from one source against income from another source under the same head of income. However, once set off is allowed under section 70(1) from the income from another source under the same head, another deduction on the same count is not permissible, i.e., during the subsequent years if the assessee makes surplus profits after claiming eligible allowances and he is entitled to claim deduction under section 80-IA, the earlier benefit given under other sections of the Act should be taken into account before granting deduction under section 80-IA. Therefore set off was allowed – Against the revenue.
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Customs
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2013 (2) TMI 200
Return of goods seized - no show cause notice issued to the petitioners within one year of the date of seizures - department relied on circular No. 27/2011 issued by the CBEC dated 04.07.2011 which clarifies that a permission from the Ministry of Environment and Forest would be required - Held that:- Section 110(2) specifically mandates that when any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months or within the further extended period of six months (totaling one year) of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. See Jatin Ahuja v Union of India and Ors [2012 (12) TMI 675 - DELHI HIGH COURT] The goods in question had been seized in September/October 2010, whereas the circular was issued much later on 04.07.2012. Therefore, the said circular would not apply to the facts of the present case - in favour of assessee.
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2013 (2) TMI 199
Direction to pay interest u/s 28 AB on the full amount of the duty by Settlement Commission - Held that:- Under section 127B, the jurisdiction of the Settlement Commission can be invoked only after the applicant has filed a bill of entry or a shipping bill in support of the import or the export goods, as the case may be, and where in relation to such bill of entry a show cause notice is issued by the appropriate officer. Admittedly, the application filed by the Petitioner to the Settlement Commission was after the amended provisions of Section 127H were brought into force with effect from 1 July 2007. The Settlement Commission has no jurisdiction to grant an immunity or a waiver from the statutory liability to pay interest. The liability to pay interest on delayed payment of duty under section 28AB is mandatory where any duty has not been levied or paid or has been short levied or short paid or erroneously refunded - no merit in the petition and the order of the Settlement Commission does not suffer from any error - against assessee.
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Corporate Laws
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2013 (2) TMI 197
Permanent injunction restraining infringement of copyrights, delivery of profits, rendition of accounts, damages and delivery of all plaintiffs’ unlicenced pirated software - all the impugned products being unlicensed/pirated software contained in hard disks, compact disks, floppy disks including any CD Writers/Burners, or any other material infringing or aiding in the infringement of the Copyright of the Plaintiffs, such as infringing copies of user Instruction Manuals of software titles, lying in the possession of the Defendants and their principal officers, directors, agents, franchisees, servants - Held that:- Software programmes as developed and marketed by the plaintiffs are a ‘computer programme’ within the meaning of Section 2 (ffc) of the Copyright Act, 1957 and also included in the definition of a literary work as per Section 2(o) of the Copyright Act, 1957. The plaintiffs’ work are also protected in India under Section 40 of the Copyright Act, 1957 read with the International Copyright Order, 1999 as the rights of authors of member countries of the Berne and Universal Copyright Conventions are protected under Indian copyright law. India and the USA are signatories to both the Universal Copyright Convention as well as the Berne Convention. Consequently, this Court is of the view that plaintiffs are entitled to a decree of permanent injunction. Plaintiffs are entitled to relief of damages and rendition of accounts to the tune of Rs. 5,00,000/-
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2013 (2) TMI 196
Creditor’s petition for winding up on just and equitable ground - Held that:- While it may be inappropriate to rule out the application of the just and equitable clause even to a creditor’s winding up petition, there is not enough material that has been placed before court in such regard. The petitioner’s claim is on account of a bill discounting facility accorded to the company under which the company obtained material from a third party seller and the petitioner made immediate payment to the seller against the company’s promise to repay the petitioner with interest at a future date. The company’s case is that the money covered by the dishonoured cheques has been paid to the seller and the petitioner should look to the seller to realise the dues. Though there is substantial basis to the petitioner’s assertion that the company’s alleged payment to the seller may not discharge the company of its obligation to pay the petitioner, the facts are not such as would prompt the company court to admit the petition on the ground that it is just and equitable to wind up the company despite the presumption as to the company’s inability to pay its debts not having been established by the petitioner. Petition fails and it is permanently stayed on the ground that the company’s inability to pay its debts has not been made out and the facts as pleaded do not warrant consideration of the petition for winding up on the just and equitable ground - Writ dismissed.
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2013 (2) TMI 195
Winding up petition - claim was based on the debt recovery of which is barred under the law of limitation - Held that:- The appellant herein had last raised 39 invoices for Rs.67,86,255/- between April, 2007 to March, 2008. Payment of Rs.38,02,495.11 was made by the respondent on or before 12th January, 2009. Tax at source was also deducted on the payments and the tax deduction at source certificate was made available on 12th January, 2009. The winding up petition in the Delhi High Court was filed on 30th November, 2012. It was returned under office objection and was re-filed on 4th December, 2012. In the winding up petition, there is no allegation that the outstanding amount of Rs.23,54,853/- was admitted by the respondent as due and payable to the appellant in their books of accounts or in the annual returns, which was filed with the Registrar of Companies. The company petition was, therefore, filed for recovery of a time barred debt. The company petition does not elaborate and state why and for what reason the debt for which the winding up petition was filed was still due and payable and not barred by limitation as the last payment was received by the appellant and made by the respondent on 12th January, 2009. The period of 3 years, therefore, expired on 12th January, 2012. The appellant at best is entitled to exclusion of 301 days for the period between 15th January, 2011 and 11th November, 2011. The company petition before the Delhi High Court was filed on 30th November, 2012 or after 3 years and 323 days (2012 being a leap year). The claim which is made subject matter of the winding up proceedings would still be barred by limitation as the winding up petition in the Delhi High Court was filed belatedly by 22 days. Treating the notice under Section 434(1)(a) as equivalent to Section 80 CPC and to give benefit of Section 15(2) of the Limitation Act would, therefore, lead to analogous and somewhat incongruous situation where the creditor cannot sue a company in civil proceedings as time barred debt but can by invoking the exclusion under Section 15(2) of the Limitation Act, sue a company for winding up of company on account of deeming fiction that the company is unable to pay the same debt. However, need not further dwell and give an affirmation opinion on the said aspect because even if this period of 21 days excluded under Section 15(2) of the Limitation Act, the winding up petition would still be barred on the date of filing by 1 day. Being in the nature of original proceedings, Section 5 of the Limitation Act would not apply - no merit in the present appeal hence dismissed. The costs of Rs.10,000/- imposed by the learned Single Judge on appellant are waived.
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FEMA
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2013 (2) TMI 201
Order of preventive detention - writ to release of the detenue by quashing detention orders - intelligence unit contraband fake noteswere recovered from the baggage carried by the detenue - Held that:- When a passport of the detenu was retained with the Customs department, the likelihood of the detenu indulging in the smuggling activities was foreclosed. Impounding the passport of the detenu was enough to curb the potentiality of the smuggling, and therefore there was no justification to pass order of preventive detention when there was no chance of the detenu travelling to foreign country without passport. As decided in Rekha vs. State of Tamil Nadu [ 2011 (4) TMI 1217 - SUPREME COURT OF INDIA] if the ordinary law of the land (the Penal Code and other penal statutes) can deal with a situation, recourse to a preventive detention law will be illegal. Principle emanating from the frame work of the Constitution of India assuring personal liberty and giving fundamental rights to each citizen of India is that the order of the preventive detention being exceptional measure by way of social defence ought to be used with great deal of care and circumspection. Applying the principle to the case on hand it is concluded that the impugned order of preventive detention passed in the present case is faulty, caution less and unsustainable Preventive detention orders quashed.
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Service Tax
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2013 (2) TMI 217
Waiver of pre-deposit - petitioner will not fall under the category of "service" and therefore, the question of making any pre-deposit does not arise - Held that:- Main plea of the petitioner is the question of applicability of service tax itself to the petitioner & it is for the appellate authority to take a decision on the said question and therefore, when the appeals are pending before the appellate authority, such a question raised by the petitioner in these Writ Petitions, is a matter for examination by the appellate authority. The undue hardship and other difficulties expressed by the petitioner, much less what is now claimed, are not available in the present circumstances and the first respondent himself has come to a conclusion to reduce the pre-deposit amount with a lenient approach. Therefore there is no merit in these Writ Petitions. The petitioner shall pay the pre-deposit amount as ordered by the first respondent in the impugned order, within a period of two weeks from today, and on such payment, the first respondent-appellate authority shall dispose of the appeals themselves, on merits and in accordance with law, within a period of four weeks thereafter - writ dismissed.
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2013 (2) TMI 216
Notice for recovery - Challenge the Circular No. 967/01/2013-CX dated 1.1.2013 - Held that:- An appeal has been filed before the CESTAT along with the stay application, but no hearing has been granted so far & in the meanwhile, recovery notice has been issued on 9.1.2013. An assessee who moves an application for waiver and is diligent in pursuing the application cannot be blamed for the inability of the appellate forum to dispose of the stay application In view of the above, post the matter on 31.01.2013. There will be an order of interim stay and interim injunction till then. The petitioner is permitted to take steps to implead the CESTAT before which the appeal is pending, as a party respondent, in the meantime.
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2013 (2) TMI 215
Classification of service - Extended period of limitation - Business auxiliary service - Section 65 (101) - Sub-broker to the main stock broker - Circular No. 334/13/2009-TRU, dated 6.7.09 - Appellant is not a sub-broker recognized under the SEBI Act, 1992 Held that:- Once the appellant is out of purview of section 65 (101), its activity was rightly covered by the service found by Revenue because there was a taxable service provided which unambiguously appears to be in the nature of business auxiliary service since the appellant was not sub-broker recognized by law. Therefore, both the authorities have rightly held that the appellant provided the impugned service. In favour of revenue Penalty - Held that:- There was confusion in understanding the law by the assessee as to the role of sub-broker and taxability of the service provided by the appellant. Accordingly, in all fairness the appellant shall only be liable to service tax for the normal period without being taxed for extended period. The reasons aforesaid also convince to hold that the appellant shall not be liable to penalty. In favour of assessee
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2013 (2) TMI 214
Stay Petition - Utilization of CENVAT credit without having balance – Penalty - Section 80 of the Finance Act, 1994 – Held that:- Conduct of the appellant does not reflect to be fair when public money was enjoyed without credit being available on record therefore penalty shall be levied. Penalty is reduced to 25% of tax element which shall be payable within 30 days. Stay denied
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Central Excise
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2013 (2) TMI 198
Penalty under section 11AC - CENVAT credit on the input Services viz. G.T.A. Service being reversed on being pointed out by Audit - Held that:- Penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. Therefore, mis-declaration, suppression of facts etc. with intent to evade payment duty is a sina qua non for invoking penal provision under section 11AC as decided in Rajasthan Spinning & Weaving Mills case [2009 (5) TMI 15 - SUPREME COURT OF INDIA] As in the present case, no suppression or misstatement or mis-declaration on the part of the appellant,there is no suppression of fact as the entire amount of CENVAT Credit received and utilized both for traded as well as manufactured goods were duly accounted for in the CENVAT Credit register and the CENVAT Credit availed on the input services, were duly reflected in their monthly returns filed with the department. T brought out in the impugned Orders of the lower authorities, therefore penalty under section 11AC cannot be justified - in favour of assessee.
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2013 (2) TMI 194
Personal Penalty under Rule 26 - case of shortage of duty booked - Held that:- There has to be knowledge for imposing penalty under Rule 26. Shri Ashok Jain in his statement stated that the appellant is looking after the finance and legal affairs of the company and the department could not bring out that he was looking after the day to day working of the factory and they could not bring out any knowledge on the part of the appellant in the shortage found in the factory. In these circumstances Commissioner(Appeals)'s order is not sustainable in law as far as the penalty imposed against the appellant under Rule 26 is concerned. Thereforethe same is set aside and the appeal is allowed.
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2013 (2) TMI 193
Notification No. 16/97/CE dated 01.04.1997 - Whether the appellant had validly exercised the option given in the notification - appellant was availing Cenvat credit in respect of clearances of its final products (electrical equipments) - Held that:- As in the order dated 11.01.2013 itself it was indicated that the appellant had not exercised the option validly as he has availed Cenvat credit which would not have been availed of in respect of those clearances after having exercised the option. The option was still-born and, therefore, the appellant could not have taken advantage of the notification dated 01.04.1997. Tribunal was in error in assuming that this was a case of withdrawal of an option. It was not a case of withdrawal, but it was a case of an option which had not been validly exercised, in the first instance. It is no doubt true that an option once exercised under the said notification, could not be withdrawn for the entire period of the financial year during which that option is exercised but, as mentioned above, this is not a case of withdrawal of an option. On the contrary, it is a case of the option itself being ineffective from its inception. This being the position, if the appellant has taken any advantage of the notification, that advantage would have to be reversed & appellant’s case would, therefore, have to be governed outside the said notification for the entire financial year 1997-98. The department shall make the computation, as the appellant is willing to pay the amount as per the record of clearances & appellant shall file the requisite documents for the purposes of computation within four weeks from today.
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2013 (2) TMI 192
Recovery proceedings - Circular dated 1-1-2013 - Held that:- Directing the respondents not to initiate any coercive measures for recovery of the Central Excise or Service Tax liability or interest and penalties as assessed in the Orders-in-Original or as confirmed in the appeals pending disposal of the applications filed by the petitioners for waiver of pre-deposit and wherever filed, the applications for stay of the Central Excise or Service Tax, interest and penalties, as the case may be.
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2013 (2) TMI 191
Recovery proceedings of remaining amounts - appeal pending before the Tribunal - appellant made a pre-deposit of Rs.2,00,000/- at the time of adjudication - as mentioned under the column Probable date of Posting where the Registry has given comments: that Appeal papers weeded out on 01.08.2000 & appeal file to be reconstructed - Held that:- As the Registry is directed to place the matter before the Hon'ble Vice President/HOD for approval for the reconstruction of the appeal file Revenue is also directed that till such time not to take coercive steps to recover the proceedings against the impugned order.
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2013 (2) TMI 190
CENVAT Credit on rent a cab service - Held that:- There is no dispute on the fact that the assessee had used the said services for transportation of their own official as well as outside personnel visiting to their plant. The issue of eligibility of CENVAT Credit on rent a cab service as input service is no more res integra as decided in the Stanzen Toyotetsu India (P) Ltd.'s case (2011 (4) TMI 201 - KARNATAKA HIGH COURT) wherin CENVAT Credit on rent a cab has been allowed considering the same as an input service within the definition of Rule 2(l) of CENVAT Credit Rules, 2004 - in favour of assessee.
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CST, VAT & Sales Tax
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2013 (2) TMI 218
Validity of notice issued u/s 23 of the Maharashtra VAT 2005 - date of issue is 17 January 2012 for the two AY 2005-6 and 2006-7 - Held that:- Assessee's submission proceeds on the basis that the second proviso to Section 21(2) would apply and no order of assessment could be made after the expiry of three years. The fallacy in the submission is that in respect of assessments for the period ending on or before 31 March 2008, Section 21(3) initially provided an extended period of six years for the issuance of a notice for assessment and where such a notice was issued, Section 23(3A) allowed a period of seven years to complete the assessment. Consequently, for AY 2005-6 a notice under Section 21(3) could be issued until 31 March 2012 and the assessment under Section 23(3A) could then be made until 31 March 2013. For AY 2006-7 a notice under Section 21(3) could have been issued until 31 March 2013 and an assessment under Section 23 (3A) could be made by 31 March 2014. The fact that a notice had not been issued would make no difference to the situation because the time for the issuance of the notice under Section 21(3) and consequently for making an assessment under Section 23(3A) had not expired. Before the assessment became time barred, the legislature stepped in by deleting Section 21 by Ordinance 6 of 2011 and by making a corresponding amendment by Section 23(3A). But, the point to note is that when the amendment was brought about by Ordinance 6 of 2011, the time prescribed for the issuance of a notice under Section 21 (3) and for completing an assessment under Section 23(3A) had not come to an end and the assessment had not become time barred. The amended provision does not make any difference to the position. Both under the unamended and under the amended provision, the assessment is not time barred for A.Ys 2005-06 and 2006-07. Thus as the period of limitation for making an assessment in respect of the period ending on 31 March 2008 had yet not expired, the present is not a case where by a subsequent amendment, limitation has been enlarged even though the limitation prescribed under the earlier legislative provision has expired - no merit in the Petition.
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Indian Laws
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2013 (2) TMI 213
Wards of the petitioners were in the age group of 3 years and plus and are eligible to seek admission in schools in a class which is described as Pre-Nursery - According to the existing criteria adopted by the schools, a child of 3+ years, is eligible for Pre-Nursery and a child of 5+ is eligible for seeking admission in Class-I – District education Officer clarified that the existing age criteria of 3 years for Pre-Nursery and 5 years for Class I respectively on the Ist April of the academic year will enure – on some further querries made by the four private schools of the U.T. namely –It was stated that in view of the various representations made by various parents expressing difficulty in admission of their wards, you may continue with the criteria followed by you in the past. The contention of the petitioners is that all the schools ought to have followed a uniform policy and to substantiate this contention, reference has been made to a judgment of the Delhi High Court which while considering an almost similar controversy, constituted a Committee by the name of Ganguly Committee whose recommendations were accepted by the Director of Education and NCERT, Delhi. Held that:- Provisions of R.T.E. Act do not contemplate the pegging of the age of a child at the admission to elementary school as 6 years and in the absence of any prejudice, the decision seems irrational and sans any foundation - Private schools certainly have a right to fix the norms and adopt a criteria for admission to their schools and if they do so, there is no illegality, provided such a decision satisfies the tests of fairness, reasonableness, transparency and being non exploitative but the reason given by them for doing so, does not seem to be rational – Providing any cut of date is likely to have the impact of inclusion and exclusion both, so therefore any such date which is provided should have a sustainable logic based on serious inputs in this regard – It is not the case that any serious inputs have gone into such a decision making, which inputs have been derived on a sound study of the issue. In the given circumstances of the case, Court directed the followings:- (1) It is desirable and in the interest of the children and their parents that a somewhat uniform policy is adopted so as to create a harmonious process of regulated admissions. (2) Such a process would obviate the chance of children of different age groups competing with each other. (3) All the four schools namely Sacred Heart School, Sector 26, Carmel Convent School, Sector 9, St.John School, Sector 26, and St.Anne School, Sector 32, Chandigarh would, as a one time measure, consider the cases of all the children who are born upto 30.9.2006. (4) Schools may issue a communique about the directions given in this judgment which shall be sufficient notice to the desirous parents with no further publication of a notice. (5) The schools need not give any separate notice for this purpose. However, they shall display it on their notice-boards. (6) As per the norms set up by the Chandigarh Administration, the schools shall also be entitled to charge fee of Rs.100/- on the admission form given out by them. If the forms are available on the website of the schools, the same be downloaded by the parents and submitted to the school along with fee of Rs.100/-. (7) The forms shall be accepted by the 20th of February, 2011. Each school is thereafter free to fix the date for admission. The forms shall be scrutinised by the schools in another three days after receipt and thereafter a date shall be fixed for holding draw of lots as per their convenience, which date shall be given out to the applicants/parents. these directions should not result in euphoria for those who might perceive it as a vindication of their stand, nor should it be perceived as a derision of those whose decision has not been appreciated, but this should be treated as an opportunity to all, where we put our heads together to evolve a mechanism, where our young ones do not have to see a brooding gloominess in the process which otherwise is the beginning of their journey on the path of enlightenment. The entire material be thus placed before the Court. The Administration shall form a panel of educationalists, sociologists, psychologists to suggest a proper age for admission in the initial classes and to ascertain a uniform policy. Adjourned to 27.4.2011.
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