Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 6, 2013
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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Non deduction of TDS - disallowance u/s 40(a)(iii) - the amount paid as foreign allowances to the seconded personal is not liable for deduction of tax as they continue to be the employees on the roll of the member oil companies - HC
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Sale of shares - Capital Gains or business income - it will not be appropriate to assess the income declared by the assessee from sale and purchase of shares as business income - AT
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TP adjustment - ALP in respect of international transactions whereby the assessee imports equipments from its AE and re-sells them without any value addition to the Indian customers the RPM would be the most appropriate method - AT
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Penalty u/s 271(1)(c) – Concealment of income - Section 50C(2) is only a deeming provision which cannot be taken as to be an understatement for the purpose of imposing penalty. - AT
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Addition - personal drawings - Assessee is living with his father in tenanted premises and most of the expenditure was borne by the father – no need for making any addition on this account. - AT
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Method of accounting - Valuation of stock - The question of including the excise duty in the value of stock arises only if the purchases debited to P&L account are inclusive of excise duty. - AT
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Principle of res judicata – Constructive res judicata - if any issue or matter decided by the Court or Authority not having jurisdiction the principle of res judicata will not be applicable - HC
Corporate Law
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Sale of computers with pirated/ unlicensed version of Windows XP and Microsoft office software - infringement of copyright - plaintiffs are entitled to damages to the tune of Rs. 2,00,000/- HC
Service Tax
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Demand of service tax - Market Research Agency - Observation and surveillance of markets - could fall within the ambit of the statutory definition of 'Management Consultant' nor can any of them be brought within the scope of “Market Research Agency” - AT
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Refund of duty - Notification No.41/2007-S.T. dated 6.10.2007 - notification includes refund of education cess and secondary & high education cess collected on the service tax. - AT
Central Excise
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Non obtaining of Central Excise registration and non payment of duty - SSI exemption - he Deputy Commissioner's order is pre-mature as he should have either waited for the Commissioner to decide the matter - AT
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Cenvat credit on input packing material - There is no contrary evidence adduced by the Department that the input packing materials were not used in or in relation to the manufacture of finished goods except the Variance statement. - credit allowed - AT
Case Laws:
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Income Tax
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2013 (2) TMI 108
Licence fee for the use of software - Revenue expenditure Versus Capital expenditure – Assessee debited the licence fee to the Profit and Loss Account – Held that:- When the software are licensed for a particular period, for utilizing the same for the subsequent years fresh licence fee is to be paid, without renewing the licence or without paying the fee on such renewal, it is not possible to use those software – When the life of a computer or software is less than two years, fee paid for the acquisition of the right to use the same is allowable as revenue expenditure – Decided against the revenue. Whether provision for warranty is a contingent liability – Assessee claimed deduction – Held that:- As decided in Rotark Controls India P. Ltd. v. CIT reported in [2009 (5) TMI 16 - SUPREME COURT OF INDIA] makes it clear the historical trend is the question whether in the past there was any defect in the manufactured goods and not the actual expenditure incurred in rectifying the defect or in substituting the defective product with a defectless product – Assuming that the amount of warranty claiming deduction is actual and not incurred by the assessee, the difference in the amount is taxed in the subsequent year – warranty is not a contingent liability and the assessee is entitled to claim deduction – Decided against the revenue.
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2013 (2) TMI 99
Non deduction of TDS - disallowance u/s 40(a)(iii) - Held that:- In view of the finding of fact arrived at that the seconded personnel are not the employees of the respondent-assessee, the amount paid as foreign allowances to the seconded personal is not liable for deduction of tax as they continue to be the employees on the roll of the member oil companies even during the period of secondment & receive their salaries and emoluments from the member oil company of which they are employees & not being employees of the respondent-assessee. The occasion to apply Section 40(a)(iii) does not arise. Interpretation of Section 91(1) - whether assessee entitled to take double taxation benefit for the taxes paid in Kuwait only during the current year and not during previous years or on provisions for future period - Held that:- The object of Section 91(1) is to give relief from taxation in India to the extent taxes have been paid abroad for the relevant previous year. This deduction/relief is not dependent upon the payment also being made in the previous year. The fact that the payment of taxes on the income earned in Kuwait during the previous year has been examined and found to be correct by the CIT(A) before whom original documents evidencing payment of taxes had been produced the is not required to be entertained.
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2013 (2) TMI 98
Treating entire sale proceed as long term capital gains - as per AO transaction could not be regarded as genuine sale and purchase of shares - Held that:- CIT (A) after considering entire evidence of record found that purchase and sale transactions were proved. He further found that payment of the sale price was made to the assessee through bank channel and not in cash as such the transactions are actual transactions and not a fictitious accommodation entries. The sale transactions cannot be disbelieved only for the reason that the assessee could not give the identity of the purchasers. Arguments of the Senior Standing Counsel in this respect is not liable to be accepted.
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2013 (2) TMI 97
Disallowance u/s 40A(2)(b) in respect of payment made to G.K. Engg. - ITAT deleted the addition - Held that:- Tribunal confirmed this view observing that the AO had accepted the same payments in earlier years and no efforts were made in this regard in the present year to bring any comparable case of fair market value. Thus it is to viewed that the view of Tribunal is unassailable who placed reliance on decision Upper India Publishing House (P.) Ltd. v. CIT [1978 (12) TMI 2 - SUPREME COURT] in which it is observed that question whether expenditure is excessive or unreasonable is essentially a question of fact. Such question is therefore, not required to be considered. Disallowance on account of site wise material consumption - ITAT deleted the addition - Held that:- Issue is clearly factual besides involving relatively small amount. Disallowance made on account of vehicle/diesel oil-grease expenses - ITAT deleted the addition - Held that:- Entire issue is based on facts & when the Tribunal and CIT(Appeals) correctly on appreciation of evidence opined that disallowance was not justified, no question of law arises Disallowance of machinery hire/repairs/spares expenses expenses - ITAT deleted the addition - Held that:- Tribunal confirmed the same observing that the Assessing Officer had not pointed out any defects in the vouchers and had made ad-hoc addition - no reason to entertain the question. Disallowance of Site & Rasoda Expenses - ITAT deleted the addition - Held that:- The expenses were supported by the evidence on record and the assessee had produced all the bills and vouchers which were verified by the Assessing Officer and no discrepancy was found. Addition of suppression of receipts - ITAT deleted the addition - Held that:- ssessee and M/s. K.M. Patel & Co. agreed to make investment in such proportion for carrying out construction work jointly undertaken by them. If out of their relation and robust undertaking, the receipts were divided in a certain ratio which was not strictly in proportion of 60:40 percentage of investment made by them respectively, the same cannot be a ground for any addition in hands of the assessee that too without any additional material of the assessee actually having received additional payments not reflected in the books Addition of labour expenses - ITAT deleted the addition - Held that:- All the contractors whose statements were recorded had admitted having done work for the assessee for which payments were made. Addition of transport contractors expenses - ITAT deleted the addition - Held that:- The assessee had established genuineness of the payments. It was found that the parties receiving the payment had rendered services to the assessee which work was genuine Disallowance of claim of expenditure for rendering transportation services to Shri Manoj K. Agrawal - ITAT deleted the addition - Held that:- the same party carried out work for the assessee in the preceding assessment year and payment made to him was found to be genuine. He is assessed to tax and all details have been noted with regard to the same party. Therefore, such party cannot be treated as non-genuine - appeal of revenue dismissed.
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2013 (2) TMI 96
Sale of shares - treatment of Long Term Capital Gains & Short Term Capital Gains as business income - Held that:- Assessee had held the majority of shares for a very long time, varying from more than 1 year to 10 years. The income is mostly from long term holding of shares. In some cases, shares have also been sold at short intervals of less than 1 year, resulting into Short Term Capital Gain and even in such cases, mostly the shares were held for more than 90 days. It is possible for an investor to sell shares after holding for less than a year in order to reshuffle portfolio, etc. In a similar situation, the Tribunal in Assessment Year 2005-06 accepted the claim of the assessee as an investor. In that year, the assessee had shown Long Term Capital Gain of Rs.1,60,23,772/- and Short Term Capital Gain of Rs.26,36,004/-. The assessee had also shown small income from trading, for which separate accounts had been maintained. Further, in the AY 2002-03 and 2004-05, the AO himself accepted the similar income declared by the assessee as capital gain. The capital gain declared by the assessee was again accepted by the AO for the AY 2007-08 u/s.143(3). Considering the facts and circumstances of the case, it will not be appropriate to assess the income declared by the assessee from sale and purchase of shares as business income - in favour of assessee.
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2013 (2) TMI 95
Disallowance of deduction claimed for the provision made for impending union settlement in respect of Goa factory workers - Held that:- There is no dispute that the provision made by the assessee for impending union settlement in respect of Goa factory workers is a contractual liability and the same was in dispute as there was no settlement arrived at between the parties. The assessee has also accepted this position however, he has sought limited relief by way of a direction to be given to the AO to verify whether such settlement has taken place in the year under consideration and if so, allow the deduction claimed by the assessee. Thus AO is directed to give the assessee an opportunity to establish on evidence as to whether the settlement was arrived at in the year under consideration and to decide the issue accordingly after verifying the assessee’s claim - in favour of assessee for statistical purposes. Disallowance of deduction being 2% of dividend income on account of administrative and overhead expenses while calculating the deduction u/s 80M - Held that:- Following the decision of CIT vs. General Insurance Corporation of India [2000 (9) TMI 12 - BOMBAY HIGH COURT] that only the expenses those are directly relatable to earning of dividend income should be reduced for the purpose of computing deduction u/s 80M and any disallowance of such expenses made on adhoc or estimate basis cannot be sustained. Thus direct the AO to allow the deduction u/s 80M as claimed by the assessee in respect of dividend income - in favour of assessee. Including sales-tax amount to total turnover for the purpose of computing deduction u/s 80HHC - Held that:- This issue is squarely covered in favour of the assessee by the decision of CIT vs. Laxmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] & direct the AO to exclude the sales-tax amount from the figure of total turnover for computing deduction u/s 80HHC - in favour of assessee. Disallowance of payment made to M/s Asia Today for broadcasting Cibaca Gel Spots on Zee TV - Held that:- As the assessee has contended that the amount in question was paid by the assessee to a non-resident for services rendered outside India DR has fairly suggested that this matter may be sent back to the AO for examining the stand of the assessee that the amount in question not being chargeable to tax in India in the hands of the respondent, no tax at source was deductible from the payment thereof - in favour of assessee for statistical purposes. Inclusion or exclusion of excise duty from the figure of total turnover for the purpose of computing deduction u/s 80HHC - Held that:- Covered in favour of the assessee by the decision of Laxmi Machine Works (2007 (4) TMI 202 - SUPREME COURT) as well as Sudarshan Clemical Industries Ltd.(2000 (8) TMI 73 - BOMBAY HIGH COURT) to exclude the excise duty from the figure of total turnover for the purpose of computing deduction u/s 80HHC - in favour of assessee. Allowing the proportionate amount of the premium on redemption of non-convertible debenture - Held that:- While disallowing the deduction claimed by the assessee on account of entire premium on redemption of non-convertible debenture in assessment year 1992-93, the Tribunal has held in its order dated 12th Oct., 2011 that the assessee is entitled for deduction only to the extent of proportionate amount of premium payable on debentures as the premium so payable has to be spread over to the period of debenture as held by Madras Industrial Investment Corporation Ltd. [1997 (4) TMI 5 - SUPREME COURT]. Thus accordingly direct the AO to allow proportionate deduction on account of premium payable by the assessee on the debenture in the year under consideration after taking into consideration the period of debenture. Allow depreciation on the written down value of the foreign visitors expenditure disallowed as capital expenditure by the Tribunal - Held that:- Relief sought by the assessee therein is that certain expenses incurred on the traveling of foreign visitors having been held to be capital expenditure in assessment year 1992-93 being in relation to installation of machinery, depreciation thereon may be allowed in the year under consideration. As agreed by the learned representatives of both the sides, direction can appropriately be given to the AO to verify the final position on this issue in assessment year 1992-93 and to allow appropriate relief to the assessee accordingly. Therefore, direct the AO to verify the stand of the assessee as regards capitalization of the relevant expenses in assessment year 1992- 93 and decide this issue relating to consequential relief to the assessee accordingly. Disallowance of expenses incurred on VRS - CIT(A) deleted the addition - Held that:- A perusal of the relevant portion of the Tribunal’s order for assessment year 1993- 94 on similar issue shows that it was noted by the Tribunal that the liability in question was well supported by the actuarial valuation as well as the agreements between the assessee company and the employees. However, keeping in view that the said evidence was not examined by the AO, the matter was restored to the file of the AO in the interest of justice giving an opportunity to the AO to verify the same - in favour of revenue for statistical purposes. Disallowance of expenses incurred on promotional cinema films and on production of radio programme - Held that:- A similar disallowance made by the AO in assessment years 1992-93 and 1993-94 has been held to be unsustainable by the Tribunal following the decision in the case of CIT vs. Geoffrey Manners and Co. Ltd. 2009 (2) TMI 13 - BOMBAY HIGH COURT, thus the expenditure incurred on production of promotional films etc. has been allowed as revenue expenditure - against revenue. Addition on account of unutilized modvat credit - Held that:- This issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of CIT Vs Indo Nippon Chemicals Co. Ltd. (2003 (1) TMI 8 - SUPREME COURT) Addition made by the AO by invoking Rule 6D(2) - CIT(A) deleted the addition - Held that:- The limits of expenditure incurred on travels to the extent of stay in hotel as per Rule 6D is confined to daily allowance as referred to in the said Rule and does not extent to any other expenditure which is incurred wholly and exclusively for the purpose of business - in favour of assessee. Disallowance of expenditure incurred on computer software - CIT(A) deleted the said disallowance - Held that:- The exact nature of expenses incurred on computer software is required to be considered in the light of the guidelines laid down by in the case of Amway India Enterprises [2008 (2) TMI 454 - ITAT DELHI-C]. Thus restore the matter to the file of the AO for deciding the same afresh - in favour of Revenue’s for statistical purposes. Losses of eligible unit be ignored for determining the deduction u/s 80HHC if such loss relating to earlier years had been set off against other income - Held that:- Restored to the file of the AO with a direction to verify the claim of the assessee that there are no brought forward losses available to be set off and to allow appropriate relief to the assessee in terms of deduction u/s 80HHC if the same is found to be correct.
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2013 (2) TMI 94
Transfer pricing adjustment - whether to determine ALP in respect of business activity relating to distribution segment of the assessee with the AE is to be considered by RPM or TNMM - Held that:- ALP in respect of international transactions whereby the assessee imports equipments from its AE and re-sells them without any value addition to the Indian customers the RPM would be the most appropriate method for determining the ALP as decided in in the case of L'Oreal India Pvt. Ltd. (2012 (11) TMI 175 - ITAT MUMBAI) referring to the OECD guidelines wherein a view has been expressed that RPM would be the best method when a re-sale takes place without any value addition to a product. In the present case, the assessee buys products from the AE and sells it without any value addition to the Indian customers in that event, the GP as a percentage of sales arrived at by the TPO insofar as trading activity of comparables identified by the TPO at 12.90%. The GP as a percentage of sales of the assessee is at 35.6% which is much above the percentage of comparables identified by the TPO. In such circumstances no adjustment could be made by way of ALP. Therefore, accept the alternative plea of the assessee and delete the addition made by the AO - in favour of assessee. Disallowing the provision for warranty expenses - Held that:- The assessee has given a detailed basis on which provision for warranty has been arrived at. As seen from the methodology that the assessee takes into account the warranty liability for the accounting period after bifurcating the likely cost on account of labour, material etc. & the summary of the provision also shows that wherever excess provision was made in an earlier year, the same is reversed in the subsequent period. The claim made by the assessee prima facie shows that the estimate is made by the assessee on scientific basis and reasonable basis. Since neither the AO nor the DRP have given any contrary findings with regard to the methodology adopted by the assessee in making provision the claim made by the assessee should be accepted. Assessee satisfies the criteria for claiming deduction on account of provision for warranty as laid down by in the case of Rotork Controls (P.) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) and Ericssion Communications (P.) Ltd (2009 (9) TMI 710 - DELHI HIGH COURT) - in favour of assessee.
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2013 (2) TMI 93
Penalty u/s 271(1)(c) – Concealment of income - Inaccurate particulars while filing return - Assessee has sold immovable property and declared the sale consideration of ₹ 28,54,200/- for the purpose of computing capital gains in the revised return – A.O. was that the consideration as disclosed by the assessee qua the property sold was found to be less than the guideline value, which was ₹ 95.40 lakhs instead of ₹ 28.54 lakhs - AO made addition and impose penalty u/s 271(1)(c) Held that:- Section 50C(2) is only a deeming provision which cannot be taken as to be an understatement for the purpose of imposing penalty. To attract imposition of penalty, the assessee must be held to have concealed particulars of income or furnished inaccurate particulars. The assessee’s revised return stood duly accepted as a ‘valid’ return and the assessment was completed and merely because the A.O. invoked section 50C(2) and adopted guideline value to be the actual sale consideration and made addition in the assessee’s income automatically become a case attracting penalty u/s 271(1)(c) – In favour of assessee
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2013 (2) TMI 92
Disallowance of interest - Nexus of the borrowed funds with that of advance given for non-business purpose - Assessee is in the business of export of readymade garments and films - Advances given to the family members free of interest – Held that:- As concluded from the fact of the case most of the interest amounts are either for the foreign bills discounted or packing credit availed. Amount cannot be related to the advances made by assessee to his family members out of his personal finances. Interest statements which clearly indicate that the Bank interest paid and claimed is only towards business purpose in the business of export undertaken. In favour of assessee Disallowance of education expenses of assessee’s son – Revenue or personal expenditure - Nexus between the business of assessee and the expenditure incurred on education of assessee’s son – Held that:- This expenditure is person expenditure of assessee which he is claiming as business expenditure. We further notice that the stipend received abroad during his stay was not offered as income in assessee’s hands. The claim of the expenditure as business expenditure cannot be allowed on the facts of the case. In favour of revenue Addition on account of personal drawings - Assessee is living with his father in tenanted premises and most of the expenditure was borne by the father – Held that:- There is no need for making any addition on this account. The personal drawings debited to capital accounts are to the extent of Rs.6,46,763/- which comprises of cash withdrawals to an extent of Rs.4,76,177/- and credit expenses of Rs.1,70,586/-. Considering the fact that no estimation was made on account of drawings in previous years or in subsequent years and on considering that the amount claimed is a reasonable. In favour of assessee Addition for non-receipt of confirmation from various suppliers – Held that:- As seen from the orders, just because some confirmations have not been received from the parties, AO disallowed the entire amount under various heads. Assessee furnished lot of details to both AO as well as to the CIT (A) and CIT (A) did not admit any additional evidence on the reason that sufficient opportunity was given to assessee. This issue requires examination by AO afresh. Remand back to AO
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2013 (2) TMI 91
Method of accounting - Adjustment of MODVAT Credit - Clause 22(a) of the Form 3CD – Inclusion or exclusion of Excise receivable, Service tax receivable and VAT receivable in closing stock - Whether the assessee has adopted “exclusive method” or the “inclusive method – Held that:- Following the decision in case of Narmada Chematur Petrochemicals Ltd. (2010 (8) TMI 263 - GUJARAT HIGH COURT) that unless and until the amount of the Duty is not entered on one side as an item of cost, it cannot be taken as a component of the value of the closing stock on the either side. The true purpose of crediting the value of unsold stock is to balance to cost of those goods entered into other side of account. As decides in case of UNIQUE INDUSTRIES (2008 (5) TMI 238 - GUJARAT HIGH COURT) that the Excise duty, Sales Tax and other duties form part of the closing stock when the same are incurred. The question of including the excise duty in the value of stock arises only if the purchases debited to P&L account are inclusive of excise duty. The basic question which is yet to be ascertained is that whether the assessee has adopted “exclusive method” or the “inclusive method” and decides on the basis given decided cases – Remand back to A.O. Disallowance of commission - Genuineness of the payment of sales commission – Burden of proving the expense - Ground of commercial expediency for the ultimate benefit of the business – Held that:- Following the decision in case of Shahzada Nand And Sons (1977 (4) TMI 4 - SUPREME COURT) that the requirement of commercial expediency must be judged in the context of socio-economic thinking. In deciding whether a payment was made for the purpose of business, the correct approach would be to see whether it was made on the ground of commercial expediency for the ultimate benefit of the business. As concluding from the facts of the case Assessee contains several correspondence, copies of the debit-notes, information about the work done by those persons, their PANs, the basis of payment of commission on the supply of the machinery or the orders procured and the amount of TDS deducted on the payment of commission – In favour of assessee Disallowance u/s 40(a)(ia) – Fail to deduct TDS u/s 194 J – u/s 194 I - Payment for consultancy charges – Payment for Rent - Assessee is an individual – Held that:- the issue of deduction of tax at source has been mixed up between the applicability of section 194-I & Sec.194-J. It is worth to note that both these provisions have an exception, therefore, not to apply in the case of an “Individual” assessee. This aspect has to be re-considered by the Revenue Authorities. Next, is the determination of nature of “Professional” Services. As per assessee if a person does not have any professional qualification then how can he render professional services. This plea was not before the A.O., therefore the qualification of these persons alleged not to fall within this category has not been examined – Remand back to A.O. Disallowance of Foreign Travelling expense – Personal expenditure - Travel of wife and daughter – Held that:- The part relief was granted by CIT(A) in respect of disallowance pertained to the travel expenditure of wife. However, in respect of the expenditure incurred for travel of the daughter the disallowance was confirmed. A query was raised about the purpose of visit of the daughter which remained unanswered, hence we are also of the opinion that the disallowance was correctly made as per law – In favour of revenue
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2013 (2) TMI 90
Principle of res judicata – Principle of Constructive res judicata - Principle of estoppel - Preemptive purchase under Chapter XXC - Assessee entered into an agreement for sale of flat On 22nd October, 1984 at a consideration of Rs.18 lakhs - On 15th October, 1986 the statements in form 37-I was filed - On 12th December, 1986, the appropriate authority initially passed an order u/s 269UD(1) and the said property was directed to be purchased by the CG at a consideration of Rs.18 lakhs - Thereafter a sum of Rs.15 lakhs was paid to the appellant/transferee by the department, and the same was accepted - Balance sum of Rs.3 lakhs was released on 3rd February, 2002 and tendered but the appellant refused to accept the same – Assessee file WRIT petition against said Sale of flat by CG – WRIt decides against assessee – This WRIT was filed by assessee against the judgment of the Single Judge is per incuriam as the previous decisions on this point have been ignored Held that:- the Court or Authority not having any jurisdiction at all has decided the issue and in that context it was held by the Supreme Court consistently that if any issue or matter decided by the Court or Authority not having jurisdiction the principle of res judicata will not be applicable “The principle of res judicata is based on the need of giving a finality to judicial decisions. What it says is that once a respondent is judicata, it shall not be adjudged again. Primarily it applies as between past litigation and future litigation, when a matter – whether on a question of fact or a question of law – has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in S.11 of the Code of Civil Procedure; but even where Sec. 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct. The parties no doubt on paper reached the agreement on 22nd October, 1984 almost 2 years before the aforesaid chapter came into force but if a party sits on the agreement and does not want to enforce it date of execution of agreement is immaterial as far as this chapter is concerned. Date of filing of statement in Form 37-I with the sale agreement is deemed to be the date of agreement which is sought to be enforced irrespective of the anterior date of agreement put by the parties. In favour of revenue
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Customs
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2013 (2) TMI 89
Remittance of duty - Held that:- The goods were damaged and were lying in the factory and Commissioner (Appeals) has only ordered that the application for remission of duty has to be considered first. In these circumstances, no reason to interfere in the above findings of the Commissioner (Appeals)- Revenue's appeal which is devoid of merit is dismissed.
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2013 (2) TMI 88
Confiscation of red sanders wood truck - gave an option to redeem the same on payment of redemption fine of Rs.60,000/- on each truck and imposed penalty of Rs.10,000/- each - Held that:- As the two trucks were used for transportation of the red sanders wood which was in turn smuggled not in dispute & the drivers in their statements admitted that the trucks were used in smuggling of red sanders which has not been retracted or disowned. The red sanders wood being a prohibited item and its export is not allowed Commissioner has rightly confiscated the goods and trucks, which were being used in the smuggling prohibited items - Assessee's claim that they are not the owner of the trucks is contrary to the evidences on record. Further the ground taken by the appellants that no proceedings have been initiated against the financiers does not absolve them from the offence - confiscation of the trucks warranted - option to redemption given are also reasonable, thus no reason to interfere with the impugned order and accordingly, the same is upheld and both the appeals are dismissed - against assessee.
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Corporate Laws
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2013 (2) TMI 87
Injunction restraining infringement of copyright, delivery of profits, rendition of accounts, damages etc. - infringing activities regarding intellectual property rights by carrying on the business of unauthorized Hard Disk Loading of the plaintiffs’ software on to the branded computers sold by them to the customers, immediately initiated an investigation - 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. 2,00,000/-
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2013 (2) TMI 86
Winding up petition - Secured creditors - preference over other secured creditors - Right of Sporting Pastime India Ltd. (‘SPIL’) to receive amount after release of an amount by the IT department as refund with interest - Held that:- As already noticed, this Court had, on 22nd September 2006, already required the IT Department to refund the sum to SPIL and further ordered that the sum should be deposited with Canara Bank in terms of the judgment dated 18th November 2005. Since the Madras High Court has, by order dated 9th May 2007, directed that the release of the said amount should be only to SPIL and to no one else, this Court directs the IT Department to deposit in the account of SPIL with SBI Branch the sum of Rs. 17,40,29,511 together with interest calculated in terms of Section 244 of the IT Act within a period of three weeks from today. This is subject to the orders that may be passed in the appeal preferred by the IT Department and any further orders that may be passed by any other higher judicial forum. Immediately upon the amount being deposited in its account, SPIL will instruct SBI to transmit by RTGS the amount deposited to the account of Canara Bank, Green Park Extn., New Delhi. The above order is subject further to Canara Bank filing an affidavit in this Court, within two weeks, stating that depending on the orders passed by the ITAT or any higher judicial fora and any further order passed by this Court, Canara Bank will refund the said amount or any part thereof together with whatever interest as may be directed by this Court. This order is without prejudice to the rights and contentions of SPIL as regards its liability as may be determined by ITAT or by any other judicial forum. For reporting compliance and further hearing, list these matters on 12th February 2013 at 2.15 pm.
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Service Tax
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2013 (2) TMI 106
Demand of service tax u/s 73(a) - Management Consultant - Market Research Agency - Services rendered to their parent-company are - Observation of business activities of the Associate - Companies and licenses of BOSCH in India, as well as those of their competitors - Cultivation of contacts with the Associate Companies - Assistance with respect to the exchange of technical, economical and other information between BOSCH and its licensees - Attending to the personnel of BOSCH delegated to India and to other visitors - Entering into contract with new applicants for licenses - Observation and surveillance of markets - Revenue argued that adjudicating authority after examining the nature of activities undertaken by the respondent for the benefit of the German company under the relevant Service Agreement - Held that:- None of the above functions could fall within the ambit of the statutory definition of “Management Consultant' nor can any of them be brought within the scope of “Market Research Agency”. In favour of assessee
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2013 (2) TMI 105
Cleaning Services - Rendering to charitable hospitals and educational institutions - Circular No.80/10/2004-ST, dated 17.09.2004 - Held that:- As per the Board's Circular No.80/10/2004-ST, dated 17.09.2004, wherein construction of civil structure, which are being used for religious, charitable, health, sanitation and not for the purpose of profit are not taxable has been clarified. As the applicants have provided the Cleaning Service to Charitable Hospital, prima facie , relying on the above cited board's circular, we find that the applicants have made out a case for 100% waiver of pre-deposit. in favour of assessee
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2013 (2) TMI 104
Refund of duty - Notification No.41/2007-S.T. dated 6.10.2007 - Whether only the basic service tax was available as refund and not the component of education cess and secondary & higher secondary education cess in terms of the said notification - Held that:- Board vide Circular No.134/3/2011-ST dated 8.4.2011 has clarified that refund available in terms of the said notification includes refund of education cess and secondary & high education cess collected on the service tax. In favour of assessee
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2013 (2) TMI 103
Denial of refund of CENVAT credit - Whether CENVAT credit can be availed in respect of service tax paid on - construction services - security services and maintenance of garden in respect of residential colony of the employees - Held that:- Following the decision in case of MANIKGARH CEMENT (2010 (10) TMI 10 - BOMBAY HIGH COURT) and GUJARAT HEAVY CHEMICALS LTD (2011 (5) TMI 132 - GUJARAT HIGH COURT) that such provision of service is welfare activity and therefore service tax credit as claimed in respect of such services is not admissible. In favour of revenue Whether CENVAT Credit in respect of service tax paid on telephone services installed in the residence of officers is allowed - Held that:- Following the decision in case of ITC LTD.(2009 (1) TMI 192 - CESTAT, CHENNAI) that such credit is admissible. In the absence of any contrary decision, follow the same and hold that the appellants are eligible for credit of service tax paid on telephone services in respect of telephone installed in the residence of employees. In favour of assessee
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2013 (2) TMI 102
Penalty u/s 76 to 78 - Business Auxiliary Service - BAS clause (ii) of section 65(19) - Providing a service on behalf of the banks (clients) to the latter's customers and hence the activity was not taxable prior to 10.9.2004, the date on which "Provision of Service on behalf of the client" was enacted as a part of the definition of BAS under Section 65 (19) - Entire period of the dispute (1.7.2003 to 31.3.2012) Held that:- The terms and conditions of the relevant Agreements show that the appellant was, in fact, using their infrastructure, staff and expertise to market products of the Banks. In both the Agreements, the appellant was referred to as "Direct Sales Association/Agent". After a study of the functions assigned to the appellant under the Agreements, the name of the appellant to be befitting in the sense that the appellant was, in fact, selling products of the Bank. The products of the Banks were nothing but “Banking services”. Therefore, ex facie , the appellant was marketing the services provided by their clients, viz. banks. Therefore, their activities squarely fell within the ambit of "promotion or marketing of services provided by client" which function was a part of the definition of BAS since 1.7.2003. In favour of revenue Extended period of limitation - Penalty - Section 73 (1) - Section 80 - Extra-ordinary Taxpayer-Friendly Scheme” - The appellant was under believe that, on the basis of the terms and conditions of the Agreements, that their liability to pay service under BAS arose under clause (vi) of the definition - It is not in dispute that they got themselves registered with the department and paid service tax under BAS from 10.9.2004, the date on which clause (vi) became a part of the definition - Held that:- Circumstances there appears to be a valid ground for the appellant to claim the benefit of Section 80 ibid, where under, if reasonable cause for non-payment of tax was shown to exist, penal action could be averted. We are of the view that such reasonable cause existed in this case. Consequently the appellant can claim exoneration from penal liability. In favour of assessee
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Central Excise
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2013 (2) TMI 85
CENVAT Credit of Service Tax paid on outward courier services and CHA services - denial as these services were rendered after the goods were cleared from the place of removal - Held that:- If the goods are exported, there are catena of decisions which indicate that the place of removal is port. Reliance placed by the assessee on the judgments in the case of MTR Foods Ltd (2011 (1) TMI 143 - CESTAT, BANGALORE), Cadila Healthcare Ltd (2009 (8) TMI 172 - CESTAT, AHMEDABAD) & ROLEX RINGS P. LTD. (2008 (2) TMI 295 - CESTAT, AHMEDABAD) are directly on the issue - in favour of assessee.
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2013 (2) TMI 84
Seeking waiver of pre deposit of Cenvat credit and penalty - fair offer to make pre deposit of 25% of the cenvat credit within a period of Eight weeks and report compliance on 8th of March, 2013 has been accepted by assessee - Held that:- Commissioner (Appeal) has dismissed the appeal on the ground of non compliance with the provision of Section 35F of Central Excise Act, 1944 & has not decided the case on merits in these circumstances, the order passed by the Commissioner (Appeal) is set aside and the matter is remitted back to him for deciding the issues afresh providing reasonable opportunity of hearing to the appellant to present their case without insisting for any further pre deposit.
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2013 (2) TMI 83
Non obtaining of Central Excise registration and non payment of duty - Deputy Commissioner ordered that finished goods seized from their premises are liable for confiscation - Held that:- The question of confiscation of the finished goods and currency is linked with the question as to whether the appellants during period of dispute i.e. 2009-2010 had crossed the SSI exemption limit of Rs. 1.5 crore. If they had crossed the SSI exemption limit, they would be required to pay duty on these clearances in excess of the exemption limit and also obtain the central excise registration. But this question is yet to be decided by the Commissioner in another show cause notice with regard to the duty demand from both the appellants, which had been separately issued. In view of this, the Deputy Commissioner's order is pre-mature as he should have either waited for the Commissioner to decide the matter or should have referred the show cause notice, in question, to the Commissioner to be adjudicated alongwith the main show cause notice, therefore, no infirmity in the impugned order.
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2013 (2) TMI 82
Non payment of excise duty and wrong utilization of cenvat credit on input packing material - demand confirmed and equivalent penalty u/s 11AC r.w.r. 13 of CCR 2002 - broken, damaged and wastage biscuits generated during the course of manufacture of biscuits were liable to excise duty - Held that:- As decided in Commr. of Central Excise, Bhopal Vs. J.B. Mangharam Food Ltd. [1999 (8) TMI 267 - CEGAT, NEW DELHI] broken/waste biscuits generated during the course of manufacture of biscuits are non excisable goods and hence not liable to excise duty. That in the show cause notice as well as in the impugned order, there is no allegation that biscuits of goods quality were manufactured and cleared during the said period. Similarly, it is also not in dispute that the input packing materials received by the appellant were used in the course of manufacture of biscuits but got damaged and the demand was also issued for reversal of cenvat credit availed on the input packing material on the basis of Variance statement. The appellant had claimed that the input packing materials were used in or in relation to manufacture of finished goods and during the course of manufacture of finished goods, got damaged and in that context, they have submitted that the entire quantity of input packing materials could not be found with the finished goods. There is no contrary evidence adduced by the Department that the input packing materials were not used in or in relation to the manufacture of finished goods except the Variance statement. In absence of evidences to the effect that these inputs were not used in or in relation to the manufacture of the final product and the claim of the appellant that these were used and got damaged during the process of manufacture of finished goods being plausible and acceptable and accordingly, CENVAT Credit cannot be denied on the same - Commissioner (Appeals) order is devoid of merit and accordingly the same is set aside - in favour of assessee.
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2013 (2) TMI 81
Cenvat credit of duty paid on the inputs denied - MS ingots used in the manufacture of their final products - Held that:- Credit cannot be denied on the ground that manufacturer of the goods has not paid the duty where the inputs stand received on the basis of valid documents and after taking all the reasonable precautions. In case invoices contained all the particulars and credit has been availed on bonafide belief, the denial of credit on the ground that dealer has not received the goods in accordance with the law, is neither just nor fair. See Prachi Leather vs. CCE [2005 (3) TMI 249 - CESTAT, MUMBAI], Haryana Vidut Prasaran Nigam Ltd. Vs. CCE [2004 (1) TMI 129 - CESTAT, NEW DELHI], Varanasi Domestic Appliances (P) Ltd. Vs. CCE [2007 (2) TMI 484 - CESTAT, NEW DELHI],Bhuwalka Steel Industries Ltd. Vs. CCE [2006 (11) TMI 494 - CESTAT, MUMBAI], CCE vs. SPIC Pharmaceuticals Division [2006 (2) TMI 335 - CESTAT, CHENNAI ] and R.S. Industries vs. CCE [2002 (11) TMI 169 - CEGAT, NEW DELHI] - in favour of assessee.
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Indian Laws
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2013 (2) TMI 107
Award of reinstatement - respondents workmen worked as casual labourers on daily wages & due to non-availability of work their services were terminated - Held that:- Although an order of retrenchment passed in violation of Section 25-F of the Industrial Disputes Act may be set aside but an award of reinstatement should not be passed. This Court has distinguished between a daily wager who does not hold a post and a permanent employee. In view of the aforementioned legal position and the fact that the respondents - workmen were engaged as 'daily wagers' and they had merely worked for more than 240 days, relief of reinstatement cannot be said to be justified and instead, monetary compensation would meet the ends of justice - direct the appellant Bharat Sanchar Nigam Ltd. to pay Rs.2 lakhs to each of the respondents in full and final settlement of their claim, within six weeks from today else will carry interest at the rate of 12% per annum.
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2013 (2) TMI 101
Award of reinstatement - termination of services quashed - appellant was engaged as daily coolie in Construction Department of the Corporation some time in 1989 and his services were terminated after two years in 1991 - Appellant contended that the courts below have erred in holding that the Labour Court ought not to have passed an award of reinstatement in a case where the appellants approached for conciliation about 8-10 years of the termination - Held that:- It is submitted that while making the aforesaid observation the courts below failed to appreciate that the appellants were continuously making representation to the Respondent- Corporation and only on the basis of the assurance given by the Respondent Corporation the appellant had not taken any steps to enforce their right through the process of the court. In view of the concurrent finding recorded by both the learned Single Judge and Division Bench in appeal that the appellants were temporarily appointed on daily wages as and when work was available and they were not posted on regular basis against sanctioned post, thus no reason is find any reason and justification to interfere with the orders passed by the two courts. However, the direction for payment of Rs.10,000/- each to the appellants will not compensate the appellants. Hence, the appellants who approached for the conciliation after 8 to 10 years from the date of termination are entitled to a sum of Rs.50,000/- each whereas one of the appellants namely Rajkumar Rohitlal who has approached the Conciliation Officer within 2 to 3 years shall be entitled to get a sum of Rs. 1,00,000/-.
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2013 (2) TMI 100
Extension of time for delivery of Snow Mobiles - appellant-petitioner heavily banked upon Custom Duty Exemption Certificates issued by GOC to argue that the time stood extended - whether the issue raised in the instant proceedings was covered by the ambit and scope of arbitration clause & parties must be relegated to arbitration - Held that:- Nothing to accept the argument because the last request for extension of time was made on 05.05.2011 to extend the period up to 20.09.2011. The Snow Mobiles were not delivered by 20.09.2011 and were actually delivered on 07.10.2011, therefore, it cannot be presumed that there was any extension beyond 20.09.2011. More so when the stipulation contained in Clauses 3 and 9 of the Supply Order clothe the respondents with the unilateral right to cancel the Supply Order. Perusal of Clauses 3 and 9 of the Supply Order show that the Supply Order could be cancelled unilaterally by the buyer in case items were not received within the delivery period and that the extension of delivery period was left to the sole discretion of the respondents which was further subject to liquidated damages. Therefore, on facts there is no room to conclude that in the absence of any express communication extending the period of delivery, it can by implication or by necessary intendment be inferred that there was extension of delivery period in accordance with stipulations made in clause 3 read with clause 9. In any case the prayer was made for extension up to 20.09.2011 but the delivery could be made only on 07.10.2011 which again is beyond the period for which extension was sought. A perusal of clause 3 of Part III of the Standard Conditions of the Supply Order leaves no manner of doubt that there is intention of the parties to settle such difference by arbitration. The parties have agreed in writing to be bound by arbitration and the parties are ad idem. A perusal of clause further shows that the parties have agreed to settle all disputes or differences arising out of or in connection with the Supply Order by bilateral discussions. The very fact that the appellant-petitioner has filed the writ petition relatable to the instant appeal would itself show that there is a dispute with regard to the supply of Snow Mobiles by the appellant-petitioner to the respondents. It thus follows that the arbitration clause in the present case satisfies all essential elements. Once the aforesaid factual position is not in doubt then the writ petition would not be maintainable. See Empire Jute Co. Ltd and ors v. The Jute Corporation of India Ltd. And anr [2007 (10) TMI 545 - SUPREME COURT OF INDIA] In all commercial contracts of the nature in question in the present case, it is not possible to conclude that there is any violation of any rule of law of such a nature that equitable jurisdiction of the High Court under Article 226 is required to be exercised. The parties are relegated to the remedy of arbitration as provided by the arbitration clause.
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