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TMI Tax Updates - e-Newsletter
February 27, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Slump sale – it was not possible to attribute the consideration which was paid, towards the individual assets which form a component part of the transfer of the business hence not possible to compute any chargeable capital gain on the sale of the undertaking as a going concern. - HC
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Trust - When condition under Section 13(1)(b) are violated exemption u/s 11 are not given, it shall not effect the registration. CIT(A) to allow registration. - AT
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TDS - When Conversion Charges and Administrative expenses were paid without any formal agreement and the actual expenses were reimbursed or shared on the basis of turnover and cost without including any profit element. Such payments are not subject to TDS under 194C. - AT
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In view of Instruction No. 3/2011 which prohibits filing of an appeal to the High Court, where the tax effect is less than Rs. 10,00,000 - Instruction No. 3/2011 issued on 9.2.2011 is applicable to pending proceedings also, this appeal preferred by the Revenue is not maintainable. - HC
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MAT - Profit and gains of any business of insurance - there is no provision for excluding from the book profits any profit accruing on account of sale of investments. - AT
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Deemed dividend - assessee (employee) entitled to both salary and commission of profits - the advance of commission on profits over and above that amount drawn during the course of the year before the profits was determined and accrued to the petitioner, would be treated as deemed dividend subject to tax. - HC
Customs
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DEPB - The expression "including pipes and tubes" following the words "extruded aluminium products" in Item 7 is restrictive in nature and will give 'extruded aluminium products' a restrictive meaning in order to include the standardized products such as pipes and tubes within the meaning of the term extruded aluminium products.e - SC
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Confiscation - importer - the definition of 'importer' under Section 2 (26) of the Customs Act, 1962 - AT
DGFT
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Corrigendum in description of export item at Sl. No 915, Product Code-62 of the DEPB Rate Schedule. - Cir. No. 100 / (RE-2010)/2009-2014 Dated: February 23, 2012
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Permission for export of wheat through Land Custom Stations (LCS) on Indo-Bangladesh and Indo-Nepal border. - Ntf. No. 99 (RE-2010)/2009-2014 Dated: February 23, 2012
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Permission for export of non-basmati rice through Land Custom Stations (LCS) on Indo-Bangladesh and Indo-Nepal border. - Ntf. No. 98 (RE-2010)/2009-2014 Dated: February 23, 2012
Corporate Law
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Whether stamp duty is payable on the transfer of properties pursuant to the sanction of any scheme of amalgamation or demerger under the Companies Act, 1956 - Held yes - HC
Central Excise
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Credit on packing materials of capital goods – Revenue demanding reversal for same considering it to be clearance of waste & scrap of capital goods, relying on sub-rule (5A) of Rule 3 of Cenvat Credit Rules, 2004 - Held no - AT
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Notification 67/95 - Manufacturing Sugar & Molasses - Molasses used to produce Etyl Alcohol - Paid 8% of the value of clearance of such undenatured ... - AT
Case Laws:
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Income Tax
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2012 (2) TMI 355
Penalty u/s 271D - unsecured loan received in cash / bearer cheques – assessee contending them to be share application money – Held that:- Tribunal while deleting penalty took view that assessee company had entertained a bona fide belief of non-applicability of Section 269SS on loans accepted from its directors/ shareholders. Whereas records reveal that company specificaly pleaded the same to be share application money and not loans or deposits at all. How can it said that the company was under such bona fide belief of non-applicability of S 269SS on loans. Rule 2(b)(ix) of the Companies (Acceptance of Deposits) Rules, 1975 would also have no application in the present case wherein it is held that deposit does not include any amount received from a director or a shareholder of a private limited company. Further, shelter u/s 273B is granted if it is established that for some bona fide reasons the assessee could not get a loan or deposit by an account payee cheque or account payee bank draft which is absent in present case. Therefore, order of tribunal cancelling the penalty is set aside – Decided in favor of revenue.
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2012 (2) TMI 354
Business expenditure – Royalty payment – Trademark - Capital vs Revenue expenditure – dis-allowance of doubtful debts/allowances – Held that:- CIT(A) observed that payment was for use of technology and technical information. Assessee had not secured any exclusive privilege to either manufacture or sell the products. No benefit or right accrued in perpetuity and was for prescribed period thus payment was not for acquisition of any capital asset (trade mark) but was revenue expenditure. Aforesaid view of CIT(A) & Tribunal is upheld. See CIT vs G4S. Securities System (India) (P) Limited (2011 - TMI - 204608 - Delhi High Court) Doubtful debts/allowances - The said claim was admissible u/s 37 r.w.s. 28 of the Act – Decided against the Revenue.
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2012 (2) TMI 353
Allowability of interest paid on loan from the gross interest received on Fixed Deposit Receipts - money obtained on loan and converted into FDRs – Held that:- Division bench of this court held in case of same assessee in earlier A.Y. (2010 - TMI - 204444 - Delhi High Court ) that interest paid was expenditure laid out and expended wholly and exclusively for the purpose of making or earning the interest income. Following the aforesaid decision and the reasoning therein – Decided against the Revenue.
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2012 (2) TMI 352
Interest Tax Act, 1974 – whether assessee is financial company or a credit institution in terms of Section 2(5B), 2(5A) of the Interest Tax Act, 1974 – principal business of the assessee - whether the interest earned under the three heads namely, lease charges, hire purchase charges and bill discounting charges were chargeable to tax under Interest Tax Act, 1974 – Held that:- An order of remit to the Tribunal is passed. It is clarified that no opinion is expressed on the legal position in the absence of factual details.
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2012 (2) TMI 351
Cessation of liability - Tribunal rejected the appeal against the order of the CIT(Appeals) deleting the addition made by A.O. u/s 41(1) – Held that:- CIT(Appeals) found several findings recorded by the A.O. to be factually incorrect. In view of the reasons given by the A.O. and the factual matrix recorded by the CIT(Appeals) and the Tribunal, we do not find any reason to interfere – Decided against the Revenue.
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2012 (2) TMI 350
Plea for stay of the collection of tax and the interest – assessee contesting disallowance of Rs 232.64 crores out of the additional vend fee special privilege fee payable under the Tamilnadu Indian made Foreign Spirit (Supply by Wholesale) Rules, 1983 – deduction on account of enhancement of Special Privilege Fee rates in P&L a/c – Held that:- Petitioner is directed to deposit sum of Rs.21.62 crores in respect of the tax demand of Rs 86.47 crores as per the impugned order dated 7.2.2012, made u/s 220(6) within eight weeks from the date of receipt of a copy of this order for admissibility of appeal.
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2012 (2) TMI 349
Finding of fact - dis-allowance of payment to Commission agents in respect of sales made to the State Road/Municipal Transport Corporation/Undertakings – Tribunal deleted the dis-allowance – Revenue contended that commission payment in fact represented illegal gratification paid to some of the officers of the SRTC/Municipal/ Undertakings - Held that:- The conclusion reached by the tribunal is a finding of fact. Tribunal has accepted and agreed that evidence exists to show and establish nature of services actually rendered by various agents at different places throughout India. Further w.r.t. to contention of gratification it is held that it is based on surmises, conjectures or suspicions and is not rationally possible – Decided against the Revenue.
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2012 (2) TMI 348
Deemed export - whether sale of goods in India to UNICEF, which is a UNO, can be construed as export out of India - deduction u/s 80HHC – assessee contended it to be “deemed export” in view of its expression in Import and Export policy of the Government of India - export was made to UNICEF, therefore, no need for the goods to cross the boundary of India to constitute export out of India - Held that:- Term “export out of India” has not been defined in the Act. However, simple meaning of it would entail the transfer of goods out of the territory of India. Further, concept of “deemed export” prevalent in another legislation or policy cannot be imported into the Income-tax Act, 1961 unless the said Act specifically says so. Section 80HHC stipulates twin conditions of goods to be exported out of India, and sale proceeds to be received in convertible foreign exchange. Satisfaction of one condition in the absence of other condition being satisfied would not entitle the assessee to claim the deduction u/s 80-HHC. Section 80-HHC speaks only of export out of India, irrespective of who the purchaser or consignee is, be it a private party or an organization such as UNICEF. Therefore, deduction u/s 80HHC not allowed – Decided in favor of revenue.
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2012 (2) TMI 327
Slump sale – A.Y. 1994-95 – Tribunal held non-applicability of capital gains in view of the fact that the IMFL business has been transferred as going concern and therefore a slump sale – Revenue contesting the same – Held that:- In the present case, the position as it existed prior to the insertion of the provisions of Section 50B by the Finance Act of 1999 is dealt with. Neither authorities nor Tribunal were in dispute that transfer of the entire business as a going concern was involved. The Tribunal has corrected the view taken by the authorities by holding that it was not possible to attribute the consideration which was paid, towards the individual assets which form a component part of the transfer of the business hence not possible to compute any chargeable capital gain on the sale of the undertaking as a going concern. View of Tribunal is thereby affirmed. See PNB Finance Ltd vs CIT (2008 - TMI - 31364 – Supreme Court) – Decided against the Revenue.
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2012 (2) TMI 326
Sales Promotion, Staff food expense, Advertisement expenses - Business OR Personal Expense - AO: Self made vouchers and bogus claim - Held That:- AO has not given any basis for making disallowance of these expenses and even CIT(A) has not given any basis for restricting the disallowance at 10,000/- in each of the expenses. Decided in favour of assessee. Assessee engaged in job contract - payment to transporter - AO made additions on account of non-deduction of tax under 194C - Work Sub-contracted thus liable to tax deduction - Held That:- In view of ACIT Vs Smt. Keya Seth (2011 - TMI - 209123 - ITAT KOLKATA), decided in favour of assessee. AO disallowed claim of Sundry Creditor related to labour charge - Station wise break up provided - Held That:- Total labour charges outstanding are on account of sundry creditors, which remains payable as on 31.03.2006 and these are particularly on account of payments for the month of February and March, 2006. Similar liability for AY 2004-05 and 2005-06 was accepted by revenue while framing assessment u/s. 143(3) of the Act for the reason that this is normal practice in this line of business that this type of payment remains outstanding as on the year ending i.e. in the month of March. Decided in favour of assessee.
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2012 (2) TMI 325
Stay Application - Demand raised 24,66,51,870 amount paid 16,31,14,700 - Hardship: Term loan 200 Crores instalment of Rs 11.50 Lacs - Held That:- Assessee already has paid more than 50% of demand, in the interest of revenue the assessee is required to pay Rs.50 lacs before 31.01.2012 and the balance demand is stayed till disposal of the appeal or six months, whichever is earlier .
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2012 (2) TMI 324
Trust - Registration declined as Scholarship provided to needy poor jain treating as helping a particular religious community - Held That:- When condition under Section 13(1)(b) are violated exemption u/s 11 are not given, it shall not effect the registration. CIT(A) to allow registration. Deduction under 80G - Held That:- As the trust is eligible for registration CIT to reconsider the application under 80G. Reliance placed on Umaid Charitable Trust V/s Union of India (2008 - TMI - 31890 - RAJASTHAN HIGH COURT)
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2012 (2) TMI 323
Rectification of Tribunal order - Contradiction in para 11 and 13 - Held That:- Assessee have agreed to change in investments from 282.41 Lacs to 337.32 lacs thus tax free incomes have been earned further there was also increase in current capital. Tribunal took view after considering all facts and figure. Therefore, apparently there was no error or apparent mistake committed by the Tribunal. Reliance also placed on Reliance Utilities & Power Ltd. (2009 - TMI - 32150 - HIGH COURT BOMBAY) & Hero Cycles(2009 -TMI - 35238 - PUNJAB AND HARYANA HIGH COURT). Application rejected.
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2012 (2) TMI 322
TDS - Held That:- When Conversion Charges and Administrative expenses were paid without any formal agreement and the actual expenses were reimbursed or shared on the basis of turnover and cost without including any profit element. Such payments are not subject to TDS under 194C. Dis allowance of Conversion charges and Administrative charges under 40A(2) - No additions by AO as entire amount is dis-allowed under 40a(ii) - Held That:- Case remanded back to CIT(A) to decide afresh. Claim for Bad debt - Held That:- Assessee has filed no evidence to show that debt have been accounted in earlier year. Even at this stage, the assessee has filed no material on record to show that the assessee has issued bills/debit notes to the party and has duly accounted for the corresponding income in the relevant A.Y. Case referred back to CIT(A).
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Customs
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2012 (2) TMI 313
Whether "aluminium grills" can be termed as "Extruded aluminium products" and assessee can take the benefit of the Item 7 of Code 61 - Held that:- The expression "including pipes and tubes" following the words "extruded aluminium products" in Item 7 is restrictive in nature and will give 'extruded aluminium products' a restrictive meaning in order to include the standardized products such as pipes and tubes within the meaning of the term extruded aluminium products. Further, in various earlier decisions it is held that word "includes" may in certain contexts be a word of limitation and used in the sense of 'means'. In view of the aforesaid reasons, aluminium grills cannot fit into Item 7 of the Product Code 61 of the DEPB Schedule in order to claim benefit of the DEPB Scheme and therefore, we cannot sustain the order passed by the Tribunal – Decided in favor of Revenue.
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Corporate Laws
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2012 (2) TMI 315
Failure to pay Consideration - recovery - Purchase Order for Conveyor System - Rs 1,67,19,053 were paid out of Rs 1,90,83,443 - Agreement entered: Respondent Co. to pay balance amount petitioner to help in working of conveyor belts - Cheques dishonored - Draft Can-celled - Co.is in winding up - Held That:- Defense of respondent co. is sham. Liquidator to take over the entire assets. Respondent company, its directors, officers, employers, authorised representatives are restrained from selling, transferring, alienating, encumbering and parting with the possession of any movable and immovable assets and funds of the respondent company. They are also restrained from withdrawing any money from the accounts of the respondent company.
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2012 (2) TMI 312
Whether stamp duty is payable on the transfer of properties pursuant to the sanction of any scheme of amalgamation or demerger under the Companies Act, 1956 - Held that:- Order sanctioning a scheme of amalgamation or demerger u/s 394 of the Companies Act, 1956 would amount to an instrument and conveyance within the meaning of the Stamp Act applicable in this State and is, accordingly, exigible to stamp duty. No property transferred pursuant to any scheme of amalgamation of merger or demerger in this State would be effective unless appropriate stamp duty thereon has been paid.
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Service Tax
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2012 (2) TMI 319
Waiver of pre-deposit - Sale of Naphtha and furnace oil on high sea basis - Additional handling charges and facilitation charges liable to tax under "Business Auxiliary Services" - Held That:- These charges are to be included in assessable value therefore, they are not liable for service tax. Waiver granted.
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2012 (2) TMI 310
Cenvat credit in respect of service tax paid on courier services and telephone services – Held that:- In view of decision in case of CCE vs Apar Industries Ltd (2010 - TMI - 203341 - CESTAT, Ahmedabad), Keltech Energies Ltd Vs CCE (2008 - TMI - 4051 - CESTAT Bangalore), balance of convenience lies in favour of appellants justifying full waiver of dues arising from the impugned order for admission of the appeal. There shall be stay on collection of dues arising from the impugned order during pendency of the appeal – Decided in favor of assessee.
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Central Excise
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2012 (2) TMI 328
Availment of non - existent Cenvat Credit by first stage dealer on goods – purchases of iron and steel products - credit claimed on basis of invoices showing payment of duty - investigations conducted at manufacturer showed non-manufacturing & non-payment of duty by manufacturer of goods – fraudulent invoices issued - Held that:- Prima facie there are evidences appearing to show that the credit that was passed on was not against proper duty payment. The real merit in the matter can be decided only during final hearing. Thereby, appellants are directed to make pre-deposit for admission of appeal. Subject to deposit, collection of penalty is stayed.
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2012 (2) TMI 311
Credit on packing materials of capital goods – Revenue demanding reversal for same considering it to be clearance of waste & scrap of capital goods, relying on sub-rule (5A) of Rule 3 of Cenvat Credit Rules, 2004 - Held that:- Sub-rule (5A) of Rule 3 will apply to capital goods only. Packing material cannot be considered as capital goods even if it was used for packing capital goods. The matter is remitted to the adjudicating authority to verify whether only packing materials were cleared. If that is the case, the provisions of the said sub-rule will not apply and the appellants will not be liable for payment of any duty.
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Indian Laws
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2012 (2) TMI 333
Restriction on Foreign Law Firm or Foreign Lawyers - Writ Petition filed claiming that Foreign Law Firms and foreign lawyers were practicing the profession of law in India in contravention of the Advocates Act and that they should be restricted from having any legal practice either on the litigation side or in the field of non-litigation and commercial transactions within the territory of India - Held that:- Foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfill the requirement of the Advocates Act, 1961 and the Bar Council of India Rules. However, there is no bar either in the Act or the Rules for them to visit India for a temporary period on a "fly in and fly out" basis, for the purpose of giving legal advise to their clients in India regarding foreign law or their own system of law and on diverse international legal issues. Moreover, having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration. The B.P.O. Companies providing wide range of customized and integrated services and functions to its customers like word-processing, secretarial support, transcription services, proofreading services, travel desk support services, etc. do not come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules. However, in the event of any complaint made against these B.P.O. Companies violating the provisions of the Act, the Bar Council of India may take appropriate action against such erring companies.
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