Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 5, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reopening of assessment - The change of the nomenclature from “capital gains” to “undisclosed income” does not result in any escapement of income since the rate of tax is the same under both heads - HC
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Deemed income u/s 56(2)(vi) - before a plea based on section 56(2)(vi) can be taken, a foundation has to be laid that the transaction was without any consideration. - HC
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Salary terminology - computation of gratuity and leave encashment - definition of 'salary' is squarely and specifically applicable to section 10(10) and 10(AA)and, hence, any other definition of 'salary' cannot be imported and applied to such sections. - AT
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Registration u/s 12A(a) - receipts exceeding Rs. 10 lakhs - denial of registration may be justified but not the cancellation. - AT
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Disallowance of expenditure u/s 40(a)(ia) – Whether disallowance of expenditure u/s 40(a)(ia) is ‘eligible profit’ from housing project u/s.80IB(10) - Held Yes - AT
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Accrual of expenses - The provision of LTC encashment provided by the assessee in its books of accounts on the basis of AS-15, was a deductible amount from the profits of the company - AT
Customs
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Refund of 4% of Special additional duty denied (SAD) - revenue shall accept a certificate from CA - no need for insisting on production of audited Balance Sheet and P&L A/c - AT
Corporate Law
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Amalgamation of a company - corporate death - the conclusions that the suit had abated by virtue of Order 22 Rule 3, on the “death” of the original plaintiff, cannot be sustained. - HC
Central Excise
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Cenvat credit on services rendered to head office - Input Service Distributor - HO has not issued any invoice - appellants are eligible for the credit - AT
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Reversal of Cenvat credit - if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared as such - AT
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Whether supply from DTA to SEZ are eligible for claim of rebate under Rule 18 of Central Excise Rules, 2002 without Bill of Export - assessee were not required to file a Shipping Bill – Rebate claim allowed - CGOVT
VAT
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Input credit claimed - VAT - in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax and in the absence of notification that a dealer’s registration is cancelled the benefit of input credit cannot be denied. - HC
Case Laws:
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Income Tax
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2013 (2) TMI 75
Reopening of assessment - assessee has received accommodation entries - Held that:- Perusal of the assessment order that the assessee had declared the amount of Rs.5,10,130/- in its return of income as short term capital gains on sale of shares. The fact however remains that the amount had been declared in the return of income as capital gains and what the AO did was only to change the nomenclature from “capital gains” to “undisclosed income”. The assessment has been reopened after a lapse of about 8 years from the end of the relevant assessment year. As already noted, according to the revenue the assessee had declared the amount as capital gains in the return of income. There was thus no failure to disclose the income. Consequently, there is no escapement of income. The change of the nomenclature from “capital gains” to “undisclosed income” does not result in any escapement of income since the rate of tax is the same under both heads - reassessment was without jurisdiction - in favour of assessee.
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2013 (2) TMI 74
Agreement to sell - six cheques received in lieu of earnest money - failure to pay the balance consideration and the respondent/ assessee sent a notice of forfeiture - forfeited amount of Rs.18 crores was shown as advance received from the property in the balance sheet of the respondent/ assessee and not been offered for taxation in the relevant assessment year - AO not satisfied made a reference to ACIT u/s 144 - Held that:- Appellant/ revenue sought to invoke the provisions of section 56(2)(vi) however, find that this plea had not been raised before the Tribunal. Consequently, such plea of revenue cannot be entertained. Even otherwise, before a plea based on section 56(2)(vi) can be taken, a foundation has to be laid that the transaction was without any consideration. No such foundational plea had been taken before the Tribunal. Apart from this the Tribunal has rightly noted that the provisions of section 51would come into play as it specifically covers this type of a transaction. Once the transaction has been held to be genuine, there is no question of the transaction being without any consideration. Consequently, no merit in the revenue’s appeal, much less any substantial question of law for consideration - in favour of assessee.
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2013 (2) TMI 73
Interpretation of Section 44 r.w.r. 5 of the First Schedule - Tribunal added TDS & provision for taxation to the balance of profits disclosed by the annual accounts of the appellant insurance company - Held that:- Issue covered against the revenue by virtue of the Supreme Court decision in the assessee’s own case in CIT v. Oriental Fire and General Insurance Co. Ltd (2007 (5) TMI 193 - SUPREME COURT) - in favour of the assessee. Disallowance of insurance company claim for allowing weighted deduction u/s 35B - Held that:- covered against the assessee and in favour of the revenue by virtue of the Supreme Court decision in the case of CIT v. Hero Cycles Pvt. Ltd. & Ors [ 1997 (8) TMI 6 - SUPREME COURT]. Disallowance under Section 37 (4) - expenditure on lease rent, taxes and repairs and maintenance of a guest house as these expenditure was allowable under certain other provisions of the Income Tax Act - Held that:- Against the assessee by virtue of the Supreme Court decision in the case of Britannia Industries Ltd. v. CIT & Anr. [2005 (10) TMI 30 - SUPREME COURT]. Claim for deduction being reserves for export market development allowance allowed - Held that:- When an amendment was introduced in Rule 5(a) of the First Schedule to the said Act amending the phrase “including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provisions as may be prescribed.” In the present case, since the relevant assessment years are all prior to 01.04.1989, this additional phrase would not apply. Even the Supreme Court decision in General Insurance Corporation of India (2007 (5) TMI 193 - SUPREME COURT) was in respect of the assessment years 1977-78 when this phrase was not there in the statute book.Consequently, this aspect of the matter pertaining to reserves for export market development allowance would also have to be decided in favour of the assessee Claim for bad/ doubtful debt allowed - Held that:- There is no debate that it stands covered against the revenue in the assessee’s own case in CIT v. Oriental Fire and General Insurance Co. Ltd (2007 (5) TMI 193 - SUPREME COURT) which confirms this court’s decision in Oriental Fire and General Insurance Co. Ltd v. CIT [2004 (5) TMI 29 - DELHI HIGH COURT].
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2013 (2) TMI 72
Salary terminology - definition of salary - whether Salary includes DA - computation of gratuity and leave encashment - Held that:- AO has rightly computed the amount of gratuity exempted under the Act by following definition of salary as per Fourth Schedule, Part A Rule 2(h) which defines salary including dearness allowance, if the terms of the employment so provides but exclude all other allowances and perquisites for the purpose of this Act. Disallowance of ₹ 29,060/- out of leave encashment under the provisions of section 10(10AA) - Held that:- In view of the Explanation to section 10(10), the computation of benefit of gratuity and leave encashment, as contemplated u/s 10(10) and 10(AA) are to be governed by the definition of 'salary' contained in the above Explanation and not by any agreement, as contended by the assessee viz 8th Bipartite Settlement on wage revision and other similar conditions between Indian Banks' Association and their Workmen. The definition of 'salary' is squarely and specifically applicable to section 10(10) and 10(AA) of the Act and, hence, any other definition of 'salary' cannot be imported and applied to such sections. This view is supported by the direct decision of the Hon'ble Madras High Court in the case of K. Gopal Krishan v. Central Board of Direct Taxes [1994] [1993 (4) TMI 33 - MADRAS HIGH COURT] - against assessee.
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2013 (2) TMI 71
Unexplained cash credit u/s.68 - CIT(A) deleted the addition admitting fresh evidence u/r 46A - Held that:- As now the assessee has informed that the labour charges have actually been paid in the subsequent years & drew the attention on certain evidences to corroborate that the balance outstanding amount had already been paid as on date, therefore should have been allowed. At this stage of second appeal, it is not possible to examine the veracity of such documents which were not placed before the AO. Therefore considering it proper as also justifiable to again restore this issue back to the file of the AO, so that the Revenue Department can examine the correctness of the claim that the amount in question in fact was not an amount as qualified u/s.68, but the impugned amounts were in the nature of the amounts which are qualified u/s.41(1). By adopting the recourse of setting aside to assessment stage , the grievance of infringement of Rule 46A is also addressed. After ascertaining that the amounts in question in fact were the liabilities to be paid by the assessee and not cash deposits or loans, the AO is then directed to verify the correctness of the claim now as that those liabilities were squared up by making the payment in the years to come - in favour of revenue for statistical purposes. Rejection of Deduction u/s.80-IA - project of infrastructure - whether the assessee’s nature of work had fallen under the definition of a “contractor” or a “developer” - Held that:- The total turnover of the assessee was received mainly in respect of development of arch-bridges, made over railway-track or under bridges on Delhi Ghaziabad Section & execution of “RCC Box Bridge” by applying pushing method for passing under main track and executed contract & also provided under-bridge below railway-track. On the basis of this examination it was wrong on the part of the AO to hold that the assessee has merely acted as a contractor as by analyzing the nature of work executed by the assessee, it can be gathered that the assessee had acted as a developer. The assessee has undertaken the responsibility of execution of the work. The assessee has developed its own design and on getting approval applied the technology for completion of infrastructure facility. Terms and conditions of the agreement executed with certain Government Departments have also established that the risk in execution of work has also been undertaken by the assessee. The Revenue Department has wrongly interpreted the word “owned” in section 80IA(4)(i)(a). Thus to conclude the act do not prescribe that the infrastructure facility is to be owned by such an enterprise. The infrastructure facility is always the property of the Government and an enterprise is bound by the agreement to transfer the same after the settled period. The assessee’s execution of work fall within first category, i.e. developing of infrastructure facility. The decisions of ABG Heavy Industries(2010 (2) TMI 108 - BOMBAY HIGH COURT), Koya & Company (2012 (5) TMI 158 - ITAT HYDERABAD), Radhe Developers (2007 (6) TMI 316 - ITAT AHMEDABAD) and Bharat Udyog Ltd. (2008 (6) TMI 225 - ITAT BOMBAY-F) thus support the stand taken by the assessee - thus the assessee is eligible for the deduction u/s.80IA - in favour of assessee. Disallowance on account of freight and warehouse charges u/s.40(a)(ia) - CIT(A) deleted the addition - Held that:- As decided in CIT vs. J.K. Construction Co. [2013 (2) TMI 54 - GUJARAT HIGH COURT] under a situation when the TDS amount is duly deposited in the Government Exchequer before the due date of filing of return, then the provisions of section 40(a)(ia) are not to be invoked for the purpose of disallowance of expense. In the present case, on the basis of the undisputed fact that the TDS was deposited within the said prescribed date, therefore we hereby dismiss this ground of the Revenue - in favour of assessee. Deduction u/s 80IA - civil work executed at Mazgaon Dock Ltd. (MDL) - Held that:- As in respect of the civil work executed at MDL the nature of work was found to be a repair work. The assessee has not demonstrated that there was development of any infrastructure facility. Facts as culled out from the records reflect that the assessee had carried out the civil work like excavation, concrete flooring and also provided steel enforcement bar for RCC flooring, etc.. Since the basic condition is that for the purpose of claim of deduction u/s.80IA(4) an Enterprise should develop an infrastructure facility as defined in Explanation and the work executed with Mazgaon Dock Ltd. was not within the said definition, therefore the nature of civil work executed did not qualify for deduction u/s.80IA(4) - against assessee. Disallowance of expenditure under mutual agreement - allowed only Rs 1 Lac only - Held that:- Revenue Authorities have appreciated the evidence and thereafter arrived at the conclusion that there was no justification for claim of an amount Rs.1 lac due to lack of factual as also legal corroboration. The assessee has not substantiated its claim in respect of an outstanding liability per-say of Rs.1 lac, therefore in the absence of any cogent evidence, the factual finding of the authorities below affirmed and dismiss this ground - against assessee. Disallowance of deduction on account of liquidated damages retained by the appellant’s customer - Held that:- The assessee has furnished the copy of account of MDL in its book & a letter of the Chief Manager (CW) dated 08/06/2005, wherein as per the subject the assessee has executed “Concrete flooring with anchor plate in Alcok Yard in between existing Gantry rail track” and retained liquidated damages provisionally at 6% amounting to Rs.1,73,106/-. Later on, an amount of Rs.41,497/- was refunded. The MDL has deducted Rs.1,31,610/- as per letter dated 10.10.2008 as liquidated damages. Thus in terms of the provisions of section 41(1), the assessee is under obligation to account for the impugned claim in Asst.Year 2008-09. See Rotork Controls India Pvt.Ltd.(2009 (5) TMI 16 - SUPREME COURT OF INDIA) - in favour of assessee. Disallowance of deduction on account of depreciation on motor cars - the cars in question were in the name of the directors - Held that:- As decided in CIT vs. Aravali Finlease Ltd. [2011 (8) TMI 814 - GUJARAT HIGH COURT] that although the vehicle was registered in the names of the Directors but it was asset of the assessee, hence depreciation on the said vehicle is to be allowed. Also see ITO vs. Electro Ferro Alloys Ltd. [2011 (10) TMI 495 - ITAT, AHMEDABAD ] - in favour of assessee.
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2013 (2) TMI 70
Cancelled of registration granted u/s 12A(a) - assessee was hit by substituted Section 2(15) - receipts exceeding Rs. 10 lakhs - Held that:- DIT(E) has clearly mentioned that assessee’s objects were in the nature of advancement of object of general public utility coming within the ambit of Section 2(15) but he had cancelled the registration only for the reason that the receipts exceeded Rs. 10 lakhs. If the receipts exceeded Rs. 10 lakhs and if such receipts were of nature mentioned in first proviso to Section 2(15) AO would, no doubt, be justified in denying exemption under Sections 11 and 12. However, this will not be a sufficient reason for cancelling the registration granted to the assessee under Section 12A(a). If in the very next year, assessee’s receipts are less than Rs. 10 lakhs, then it will have to be granted the exemption available under Sections 11 and 12 if other conditions are satisfied. Thus nature of objects of the assessee cannot fluctuate in tandem with the quantum of receipts mentioned in the first proviso. See Rajasthan Housing Board (2012 (5) TMI 100 - ITAT JAIPUR) and Gujarat Cricket Association (2013 (2) TMI 29 - ITAT AHMEDABAD) - DIT(E) fell in error in cancelling the registration granted to the assessee under Section 12A(a) - in favour of assessee.
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2013 (2) TMI 69
Rejection of rectification application u/s 154 - Return u/s 172(4) showing freight and THC shown as 4,19,82,717.88 instead of Rs. 2,06,66,514/- due to typographical error - CIT(A) granted tax relief to assessee - Held that:- The assessee even at this stage has not filed the break up of the amount of Mundra branch shown at Rs. 287,203,305/- in which, according to the assessee, the amount of Rs. 2,06,66,514/- is included and there is no amount of Rs. 4,19,82,717.88 included in the total freight, THC & misc. charges of Mundra Branch, thus respectfully following the ratio of decision A.S. Glittre D/5 I/S Garonne and Others [1997 (4) TMI 3 - SUPREME COURT] to show that after the regular assessment is made the adhoc assessment made u/s 172(4) is suspended. Thus CIT(A) was fully justified in directing the A.O. to verify the mistake pointed out by the assessee and if such is the case, then, such amount which should not have formed part of the amount payable for the particular voyage should be reduced - against revenue.
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2013 (2) TMI 68
Disallowance of expenditure u/s 40(a)(ia) – Whether disallowance of expenditure u/s 40(a)(ia) is ‘eligible profit’ from housing project u/s.80IB(10) - Held that:- Yes, The income representing the amounts of addition made on account of disallowance u/s. 40(a)(ia) is not derived from eligible business then what other activity was the said income derived from. In order to have an income there must be a source. As such any addition made to the business income went to increase the business profit but such business profit being fully exempt under the provisions of section 80IB(10), the additional amount too was eligible to claim deduction and could not be taxed separately – In favour of assessee
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2013 (2) TMI 67
Prior period expense - Whether payment of royalty and cess under the Mining & Minerals Development & Regulation Act is a statutory liability and covered under provisions of Sec. 43B - Additional demand of Royalty paid during the year to the Government claim in the P & L a/c as "Adjustments relating to earlier years" as Prior Period expenses – Held that:- Assessee has been claiming deduction u/s 43B on account of royalty and cess continuously since for the last so many years and moreover section 43B though specifically does not cover the term royalty or cess but by implication covers all statutory payments. The Mines & Minerals Development Regulation Act, 1957 is a statutory Act and all payments paid to Govt. under the provision of this Act are necessarily statutory payments. Therefore, the payment made by the assessee was covered by the provisions of section 43B - In favour of the assessee Higher rate of Depreciation u/s 32 - Whether UPS and Fibre Optic Computer Networking is a part of computer system for claiming depreciation @ 60% - Held that:- Following the decision in case of BSES YAMUNA POWERS Ltd (2010 (8) TMI 58 - DELHI HIGH COURT) that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. The computer accessories and peripherals cannot be used without the computer. Therefore, the computer peripherals such as UPS system/inverter are essentially part of computer system and computer in the modern age cannot work independently without these basic peripherals – In favour of assessee In respect of Fibre Optic Computer Networking - Held that:- A civil foundation for plant partakes the nature of plant for depreciation, similarly an AC or T.V. installed in a bus partakes the nature of commercial vehicle and an electric cable when used in a building partakes the nature of building while it becomes part & plant which used in a machine. Following the same principle, we hold that computer fibre networking when used in conjunction with computers will be eligible for depreciation as is available to computers – In favour of assessee Disallowance u/s 14A – Rule 8D applicable prospectively or retrospectively - Expenditure in relation to exempt income – Held that:- As decided in case of Maxopp Investment Ltd. (2011 (11) TMI 267 - DELHI HIGH COURT) that Rule 8D was applicable from assessment year 2008-09. Section 14A and Rule 8D would operate prospectively but that does not mean that the A.O. is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If the A.O. is satisfied that the assessee has correctly reflected the amount of such expenditure he has to do nothing for this. On the other hand, if he is satisfied on the objection and analysis and for cogent reason that the amount of such expenditure as claimed by the assessee is not correct, he is required to determine the amount of such expenditure on the basis of reasonable and acceptable method of apportionment – Remand back to A.O. Depreciation u/s 32 – Block of asset – Whether depreciation has been allowed u/s 32 of assets of which WDV had reached 5% & these were though not in active use and no depreciation has been charged under Companies Act – Held that:- From 1988-89 after introduction of block of asset the individual asset has lost its identity and it does not matter whether some part of block of asset did not function during a particular year. It is sufficient if some of the block of assets is operational during the year. The benefit of depreciation is available to block of asset. the depreciation as per Companies Act was not charged as their WDV had reached 5% and these were though not in active use but these were used less as compared to other assets and therefore were eligible for depreciation – In favour of assessee Disallowance of liability for long service award - Assessee had claimed on the basis of accrual valuation as per accounting standard AS-15 – Held that:- As per service agreement with the employee the determination of liability for long service award was calculated as per accounting standard AS-15 norms and were rightly provided for in the books of the company as the liability had arisen as on the date of balance sheet and the assessee had rightly debited the corresponding amount to the P&L Account – In favour of assessee Disallowance of liability for LTC encashment - unascertained and contingent liability – Held that:- LTC entitlement was eligible for encashment and the company had provided for its liability on the basis of accrual method. The LTC encashment was liable to tax in the hands of employees under the I.T. Act. The provisions on account of LTC encashment were made in accordance with accounting standard AS-15 which are mandatory. The provision of LTC encashment provided by the assessee in its books of accounts on the basis of AS-15, was a deductible amount from the profits of the company – In favour of assessee
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2013 (2) TMI 66
Disallowance of interest expense - Interest free advances to associate concerns – Held that:- As concluding from the fact of the case what was given by the assessee to its associate concern was a total sum of Rs.4.42 crores for A.Y. 2005-06. Out of the said amount a sum of Rs.1.55 crore pertained to the deposits given to various directors and related parties as advance against office premises which was utilized by the assessee for the purpose of business. Therefore disallowance sustained only to the extent of interest pertaining to interest free loans and advances – In favour of assessee Disallowance of interest expense – Interest on borrowed fund - Interest free advances to associate concerns – Assessee contended that they have enough interest free funds – Held that:- Following the decision in case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. Share capital and share application money can well be said to be available as own funds with the assessee and it cannot be said that since it was utilized in the assets, it lost its character of own funds – Delete the addition – In favour of assessee Addition on account of excess amortization - assessee has purchased video rights / other copy rights - 100% cost of such rights, if any part of such right is sold during the year, are claimed as revenue expenditure as per accounting method consistently adopted – A.O. argued that assessee has not valued the pendancy of rights as its closing stock, therefore, the cost to the extent it could be allowed should be restricted to the sale receipts on partial sale of total bundle of rights – A.O. after reducing the revenue received by the assessee against those rights has added the balance amount to the income of the assessee – Held that:- Without properly valuing the opening as well as closing stock of the assessee, the AO could not adopt such course of action. As decided in case of Rajendra Prasad Moody (1978 (10) TMI 133 - SUPREME COURT) that if the expenditure has been laid out or expended wholly and exclusively for the purpose of making or earning income, the allowability thereof is not dependent upon the making or earning income. The portion of bundle of rights which were standing on 1st Day of the relevant accounting year has not been taken into consideration, similarly closing stock has not been valued probably on account of difficulty to be faced in this respect - In favour of assessee
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2013 (2) TMI 65
Transfer Price – Arm Length Price - Appropriate method for computing the ALP - Assessee has adopted the CUP method – Assessee is engaged in providing medical transcription services - Assessee has considered two external comparables and three internal comparables – The price charged to its AE, in comparison with the price charged to its other overseas customers, so also by the price charged by the other two Indian companies Held that:- The comparables adopted by the assessee are uncontrolled parties and can be considered for the purpose of determining the Arms' Length Price as per CUP method. The observation of the TPO that the comparables cannot be considered to be uncontrolled is without any basis, and it is based on mere presumptions and surmises. When the comparables considered by the assessee are in no way connected either with the assessee or with its holding company, and all the information/data relating to their transactions are available, the TPO was not justified in rejecting the computation of ALP made by the assessee by applying the CUP method – In favour of assessee Exemption u/s 10A – Computation of Turnover – Adjustment of communication charges from export turnover & total turnover - Held that:- Following the decision in case of Tata Elexi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) that the expenditure incurred towards communication charges, if excluded from the export turnover, has also to be excluded from the total turnover. The communication charges have to be excluded both from the export turnover as well as the total turnover, while computing exemption u/s 10A – In favour of assessee
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Customs
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2013 (2) TMI 64
Refund of 4% of Special additional duty denied - unjust enrichment - Held that:- The Chartered Accountant's certificate is specific to the Bill of Entry and also indicate that the Chartered Accountant is a statutory auditor of appellant. As against such a specific certificate, it is seen that Commissioner (Appeals) has analysed the balance sheet and come to a conclusion that an amount of ₹ 1,11,357/- has been debited in expenses accounts in the financial year 2007-2008. It is not very clear as to how first appellate authority has come to such a conclusion. Also as found that in CBEC circular No.18/2010-Cus, dt.08.07.2010 at Para 6 specifically directing field formation in respect of refund claim arising on S.A.D paid by the assessee as some field formations have also raised certain doubts whether the audited Balance Sheet and P/L A/C have to be examined in respect of the current financial year for scrutiny of unjust enrichment aspect. In this regard, the issue has been examined by the Board and it has been decided that the field formations shall accept a certificate from Chartered Accountant for the purpose of satisfying the condition that the burden of 4% CVD has not been passed on by the importer to any other person. Also the importer shall also make a self-declaration along with the refund claim to the effect that he has not passed on the incidence of 4% CVD to any other person. Hence, there is no need for insisting on production of audited Balance Sheet and Profit and Loss Account in these cases. Thus the appellant herein has satisfied all the conditions required for claiming refund of Special Additional Duty paid by him. See Gujarat Boron Derivatives Pvt. Ltd. (2012 (9) TMI 207 - CESTAT, AHMEDABAD) and STP Ltd (2010 (12) TMI 80 - CESTAT, MUMBAI)- in favour of the assessee.
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2013 (2) TMI 63
Grant of Customs House Licence - Regulation 9 of the Customs House Agents Licensing Regulations, 1984 – Petitioners had qualified in the written examination, prior to the coming into force of the regulations issued in the year, 2004 - Petitioners had qualified in the oral examination after the new regulations had come into force – Held that:- It’s appropriate to direct the respondents to issue the necessary certificate granting the Customs House Agents Licence to the petitioner, as per Regulation 9 of the Customs House Agents Licencing Regulations, 2004, on the petitioner complying with the requirements prescribed under Regulation 10 of the said regulations.
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Corporate Laws
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2013 (2) TMI 62
Directions against the Registrar of Companies (ROC) for not making available copies of documents as directed by the appellate authority - Held that:- Considering the list of dates and events which is all that the petitioner appearing in person relied upon, no merit in the appeal. Learned single Judge made every endeavour to ensure that the documents are made available to the petitioner and towards that objective, even fixed a date, time and place vide order dated 16.08.2012. The petitioner, however, never visited the office of the standing counsel for Government of Delhi (counsel for ROC) on the said date or time, but went five days later. Obviously the records were not available when the petitioner so visited. The petitioner has been only insisting that the records should have been made available when he chose not to go to the counsel, an aspect dealt with by the single Judge in the order dated 03.10.2012. The petitioner has been unnecessarily obstinate inasmuch as even in the order dated 03.10.2012, it is noticed that the single Judge offered it to the petitioner that another date can be fixed, but the petitioner was not willing to indicate any other date. Despite this, the single Judge has granted liberty to the petitioner to approach the office of ROC so that direction dated 16.08.2012 could be complied with as and when the appellant chooses to go to the office of the ROC. The litigation is being carried out unnecessarily without any purpose.
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2013 (2) TMI 61
Whether the amalgamation of a company (which institutes a suit, that is pending) with another, results in its corporate death, and consequent abatement of the suit, or does the transferee company become entitled to claim itself to be the successor, and continue with the suit, in terms of provisions of Order 22 Rule 10, Civil Procedure Code ? - Held that:- Although the identity of the party changes, the nature of the claim does not. It is, in legal terms, the same cause of action as it was before. There is no question of a new claim or cause of action being asserted, even though in the particular circumstances the claim is being made by a different person. Because it is the same cause of action, there is no scope for a limitation defence. The defendant cannot say that the time for bringing proceedings has expired when the new claimant replaces the old, because the essential point is that no new claim is being put forward. The limitation defences have nothing to do with a change in the identity of a party. A cause of action is not extinguished, the court has to trace, or at least make an effort to trace the rightful successor to prosecute the claim, or defend the proceeding. The argument based on Section 3(42) of the General Clauses Act, 1897 is also of no assistance, because even if a company is a person, and winding up results in its death, there is a radical difference between an amalgamation and a final winding up order, after all affairs of the company have been taken care of by the Court. It is therefore held that the conclusions of the learned single judge that the suit had abated by virtue of Order 22 Rule 3, on the “death” of the original plaintiff, cannot be sustained. Procedural laws are meant to regulate the object of doing substantial and real justice and not to foreclose adjudication on merits. The court is mindful of the fact that barring the application of the principle action personalis moritur cum persona, (i.e a personal right of action dies with the death of the person) other claims do not extinguish, and can be continued. A creditor’s claim to his dues therefore does not die. Even where abatement occurs, in the sense that the time prescribed for the setting aside of abatement expires - under Article 120 of the Schedule to the Limitation Act expires, the creditor/claimant, through the successor, or the successor, as the case may be, can request the court to condone the delay in moving an application, under Section 5 of the Limitation Act. The Merger deed specifies that the entity as such has not ceased to exist but is continuing for limited purposes to the collection of receivables and settlement of liabilities. This Court, however desists from pronouncing on the issue, as that would be the subject matter of inquiry under Order 22 Rule 10, CPC, by the concerned court. Having regard to the conclusions reached by this Court, in the earlier portions of this judgment, it is just and appropriate that the claims of Yapi Kredi Bank, and its claimed successor, C.H. Financial Investments, should be inquired into under Order 22, Rule 10 CPC by the learned single judge. The said applications are accordingly restored to their original position on the file of the Court.
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Service Tax
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2013 (2) TMI 79
Refund claim rejected - non justification by the documentary evidences and lack of matching figures - Held that:- Appellant has been able to justify the refund claim filed by them which was incorrectly paid or paid twice over as the certificates of chartered accountant, which has not been appreciated by the lower authorities. At the same time, as in the appeal memoranda before the first appellate authority, the appellants have taken other grounds which are not considered and there are no findings in the impugned order, it is not addressing the points raised by the appellants in appeal memoranda and also the factual matrix as regards the evidences that has been produced but has not been appreciated. Thus without expressing any opinion on the merits of the case set aside the impugned order and allow the appeal of assessee by way of remand to the first appellate authority.
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2013 (2) TMI 78
Rejection of Refund claim - Held that:- FAA has correctly recorded that the appellant or the assessee should be informed about the reason for rejection of the claims which he could meet with or defend at the time of personal hearing. But in the present case the adjudicating authority has not issued any show cause notice indicating the reasons on which the refund claims are sought to be rejected & directly had called the appellant for personal hearing. FAA was correct in setting aside the impugned orders of rejection and remanding the matter back to the adjudicating authority for deciding the issue on merits after following the principles of natural justice - in favour of assessee.
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2013 (2) TMI 77
Goods Transport Agency - Eligibility to claim abatement under notification No. 32/2004-ST – Whether recipient of GTA service is required to furnish evidence of GTA not availing benefit of CENVAT scheme to qualify for the benefit of Notification 32/2004 - ST Service provider has given a general declaration as regards non availment of cenvat credit – Held that:- Following the decision in case of ARANI AGRO OIL INDUSTRIES LTD. (2011 (1) TMI 715 - CESTAT, BANGALORE) that recipient of GTA service was not required to furnish evidence of not availing cenvat scheme to qualify for the disputed benefit. Moreover, the benefit is denied for the reason that declaration of GTA as regards not availing the Cenvat credit was not available on each consignment note. We find that there is no such condition in the notification. In favour of assessee
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2013 (2) TMI 76
Waiver of pre-deposit - Denial of input service credit - Assessee engaged in the activity of sale of electronic goods - attending complaints for repair and maintenance and warranty period complaints and are also involved in erection and commissioning activities of DTH - Held that:- In respect of activity of sale at the showroom is not a service. Therefore the applicants are not entitled for input service credit. The activity of erection and commissioning of the electrical equipments as well as attending to the complaints of customers during the warranty period and in some of the cases, they are receiving the faulty equipments at their showrooms and the same are being sent to the service centres for repair and on that count, they are rendering certain service, for which they are entitled to input service credit. Pre-deposit partly waived.
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Central Excise
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2013 (2) TMI 60
Cenvat credit on services rendered to head office - HO though registered as an Input Service Distributor has not issued any invoice for distributing the service tax paid by the service provider - the respondent has two POY and DTY Division - Held that:- As decided in assessee's own case [2010 (7) TMI 319 - CESTAT, AHMEDABAD] no allegation of non receipt of input service or the allegation of service not relatable to the factory and also in view of the fact that invoice was in the name of head office of the same factory and not in the name of some one else appellants are eligible for the credit - in favour of assessee.
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2013 (2) TMI 59
Cenvat credit of service tax paid on CHA Services and C & F Agent service - Held that:- There is no dispute that the goods on which the services were rendered by the CHA and C & F Agents were in respect of the goods which were sought to be exported & also the services were received by the appellant for the export of the goods. Thus FAA was correct in coming to the conclusion that the appellant is eligible to avail cenvat credit on the service tax paid on CHA and C & F Agent services relying on Ultratech Cement Limited [2010 (10) TMI 13 - BOMBAY HIGH COURT] would also cover the issue in favour of the respondent.
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2013 (2) TMI 58
Reversal of less Cenvat credit - Held that:- This issue is squarely covered by the judgment of Raghav Alloys (P) Ltd.(2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT) wherein held that capital goods loose their identity only when after use over a period of time, the same has become in-serviceable and fit to be scrapped. The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, it has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared as such - decided in favor of assessee.
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2013 (2) TMI 57
Circular No. 29/2006-Cus – Whether supply from DTA to SEZ are eligible for claim of rebate under Rule 18 of Central Excise Rules, 2002 without Bill of Export – Assessee had supplied goods to SEZ unit - filed claims of rebate under Rule 18 of the Central Excise Rules, 2002 - Not filed Bill of Export with the claims – Held that :- As per Para (5) of Board’s Circular No. 29/2006-Cus., dated 27-12-2006, the supply from DTA to SEZ shall be eligible for claim of rebate under Rule 18 of Central Excise Rules, 2002 subject to fulfilment of conditions laid thereon - As per sub-rule (1) of the said Rule 30 of SEZ Rules, 2006, DTA may supply the goods to SEZ, as in the case of exports, either under Bond or as duty paid goods under claim of rebate on the cover of ARE-1 - Meaning of export entitlement as given in sub-rule (3) of SEZ Rules, 2006 should be read with sub-rule (5) of the said Rule. In terms of sub-rule (5) of the said Rule, Bill of Export should be filed under the claim of drawback or DEPB. Though Bill of Export is required to be filed for making clearances to SEZ, yet the substantial benefit of rebate claim cannot be denied only for this lapse - Rebate on export of duty paid goods under Rule 18 of Central Excise Rules, 2008 is admissible. Further movement of goods manufactured in DTA units to SEZ shall be under bills of export and ARE-1 only in cases where exporter avails export entitlements. In this case there is no dispute about the fact that the respondents have not availed any export entitlement with respect of the goods exported by them to a unit in SEZ as involved in the present case - Since the assessee were not required to file a Shipping Bill, non- production of a copy of the Shipping Bill along with the rebate claim under Rule 18 of Central Excise Rules, 2002, certainly cannot be made a pretext to reject the legitimate claim – Rebate claim allowed – Against the revenue.
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2013 (2) TMI 56
Rebate of Excise duty - Rebate of excise duty suffered at raw material stage – Appellant had filed one rebate claim for the raw materials used in the manufacture of final product exported which is exempted from payment of duty vide Notification No. 30/2004 C.E., dated 9-7-2004 - Held that:- Rebate/drawback etc. are export-oriented schemes and unduly restricted and technical interpretation of procedure etc. is to be avoided in order not to defeat the very purpose of such schemes which serve as export incentive to boost export and earn foreign exchange and in case the substantive fact of export having been made is not in doubt, a liberal interpretation is to be given in case of any technical breaches.- In Suksha International v. UOI [ 1899 (1) TMI 3 S.C.] it has beenobserved that an interpretation unduly restricting the scope of beneficial provision is to be avoided. Further appellant had submitted a letter to the jurisdictional Deputy Commissioner of C.Ex. seeking permission for availing the rebate of duty paid on excisable goods used in the export product in incorporating therein the input-output ratio as 1:02:01 as per the Standard Input Output Norms (SION) prescribed in Foreign Trade Policy - All relevant documents like ARE-2, export invoice, Shipping Bill, Bill of lading & Invoices evidencing payment of Central Excise Duty on Nylon yarn used in the manufacture of Filament Twines that were exported were submitted - Appellant is entitled for rebate of duty claimed vide ARE-2 No. 02/2008-2009, dated 28-5-2008 - allow the appeal – In favour of assessee.
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CST, VAT & Sales Tax
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2013 (2) TMI 80
Input credit claimed - Whether the VAT authorities were justified in disallowing the claim of assessee a purchasing dealer - appellant trades in electrical goods and is a registered dealer under the VAT Act - Held that:- Section 9(1) grants input credit to purchasing dealers & Section 9(2) lists out specific situations where the benefit is denied. The negative list, as it were, is restrictive and is in the nature of a proviso. As a result, this Court is of the opinion that the interpretation placed by the Tribunal that there is statutory authority for granting input credit, only to the extent tax is deposited by the selling dealer, is unsound and contrary to the statute. It is also iniquitous because an onerous burden is placed on the purchasing dealer to keep a vigil over the amounts deposited by the selling dealer. The Court does not see any provision or methodology by which the purchasing dealer can monitor the selling dealer’s behavior, vis-à-vis the latter’s VAT returns. Indeed, Section 28 stipulates confidentiality in such matters. Nor is this Court in agreement with the Tribunal’s opinion that insertion of clause (g) to Section 9(2) is clarificatory. As Section 9(2) is an exception to the general rule granting input tax credit to dealers who qualify for the benefit. The conditions for operation of the exception are well defined. The absence of any condition such as the one spelt out in clause (g) and its addition in 2010 rules out legislative intention of its being a mere clarification of the law which always existed. This Court is further of the opinion that the Bombay High Court judgment in M/S.Mahalaxmi Cotton Ginning [2012 (5) TMI 152 - BOMBAY HIGH COURT] is of no assistance to the revenue, because there, the Court had to deal with the Constitutionality of Section 48(5) of the local VAT law as in the present case, as noticed previously, the VAT Act is silent, Section 9(2) (g) was introduced only with effect from 1-4-2010. This Court is of the opinion that in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax and in the absence of notification that can be ascertained by men in business that a dealer’s registration is cancelled (as has happened in this case) the benefit of input credit, under Section 9(1) cannot be denied. As the cancellation of both selling dealers’ registration occurred after the transactions with the appellant. The VAT authorities observed that the scanty amounts deposited by the selling dealers was incommensurate with the transactions recorded, and straightaway proceeded to hold that they colluded with the appellant. Such a priori conclusions are based on no material, or without inquiry, and accordingly unworthy of acceptance - thus appellant is entitled to the credit claimed after due verification, in accordance with law, within two months from today - in favour of the assessee.
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