Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 8, 2012
Case Laws in this Newsletter:
Income Tax
Customs
CST, VAT & Sales Tax
Indian Laws
Articles
News
Highlights / Catch Notes
Income Tax
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Unexplained credits difference in bank balance as per books of accounts vs bank balance as per bank statement treated as unexplained credit there is no basis whatsoever for making any addition under these circumstances u/s.68 of the Act.... - AT
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Taxability of Cash compensation received capital receipt vs Revenue receipt - Capital receipt in principle is outside the scope of income chargeable to tax. .... - AT
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Dis-allowance of depreciation on windmills windmills installed & put to use on 31.03.05 generation of electricity started in April 2005 the claim for depreciation has to be allowed if the conditions prescribed in law are satisfied and admission by the Assessee cannot be the basis to sustain the dis-allowance of depreciation..... - AT
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Depreciation @ 40% or 100% - transport vehicle as consisting of two parts, viz., cylinder and vehicle - entitled to claim depreciation at 100 per cent .... - HC
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Set off of indexed long term capital loss against non-indexed long term capital gains - the expression "similar computation" used in section 70(3) of the Act does not refer to the computation under sections 48 to 55 of the Act and not the computation second proviso to section 48 of the Act vis-ΰ-vis proviso to section 112(1) of the Act but the computation under sections 48 to 55 of the Act.... - AT
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Penalty - Provision of section 269SS - Cash loans - The amount taken for a short period. - It has to be considered as temporary advance - If it is a temporary advance, such temporary advances are outside the purview of section 269SS of the Act..... - AT
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Revisionary powers of Commissioner u/s 263 - Order of the A.O. cannot be regarded as erroneous even if he had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition has been made on account of the reasons for reopening i.e. investment in FDR, which were recorded before issue of notice u/s 148..... - HC
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Deemed dividend- an assessee who is not a shareholder of the company, from which it received a loan or an advance cannot be treated as being covered by the definition of the word dividend as provided in Sec.2(22)(e) of the Act..... - HC
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Long term capital Gains benefit of exemption u/s 10(38) - sale of unlisted securities - sale made on 29/30.12.05 by transferring it to escrow a/c - the transaction undertaken by the assessee was not chargeable to STT. - Consequently, the assessee is not entitled to exclude the gains from his total income. .... - AT
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Registration under 10(23C) -Revenue failed to show that accumulation exceeding more than 15% has exceeded the period of five years - If no profit arises from the activity, it is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit. Orders declining registration are quashed.... - HC
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Book profit u/s 115JB - MAT - the profit on sale of assets credited to the profit & loss account cannot be excluded while computing the Book Profit under section 115JB even though the capital gains arising from the sale of that asset is not subject to tax under the normal provisions of the Income-tax Act by virtue of the provisions of section 54EC... - AT
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Set off of loss from assets on which depreciation was claimed - under section 74(1)(b) the assessee is entitled to the claim of set off of long term capital loss against the income arising from the sale of office premises, the gain of which is short term due to the deeming provision but the asset is long term. - set off allowed..... - AT
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Capital Gains Adoption of valuation made by the Stamp duty authorities as consideration - - Once the assessee claimed before the A.O. that the fair market value determined by the stamp-duty authorities are higher then the actual sale consideration and A.O. is not satisfied with the explanation of the assessee then he should rather bound to refer the matter to the DVO for valuation.... - AT
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Royalty for exclusive rights of distribution of Cinematographic films assessee has a business connection in India but does not have any P.E. in India. Since the Indian company who obtained the rights is acting independently, Agency PE provisions are not applicable to the assessee company. Thus, the incomes arising outside Indian Territories cannot be brought to tax .... - AT
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Block assessment versus Income escaping assessment -If the time period for assessment under 158BD has expired the proceedings under section 148/147 of the Act, appears reasonable in the peculiar facts and circumstances of the case. .... - HC
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Renovation expenses lease building The building that was taken on lease remained intact. What has been done was only to create a better working environment. - Allowed as revenue expenditure.... - AT
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Validity of reassessment proceedings reassessment proceedings should not continue as no notice u/s 143(2) was served on the assessee within the stipulated time. - The principle of estoppel under Section 292BB will not apply.... - HC
Customs
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Whether continued detention of goods can be justified - This period of 6 months can be enlarged by the Commissioner of Customs by a further period of 6 months, by virtue of the proviso to Section 110 (2). Therefore, the respondents had time till 25/26.5.2011, which could have been extended upto 25/26.11.2011. But we are in December 2011. Till date no notice u/s 124 (a) has been issued. - Goods ordered to be released.... - HC
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Refund - recovery of duty twice from the appellant and from the customers of the appellant -In the absence of any such show cause notice to the appellant holding him as an importer, holding back of the amount collected from him either under force or paid voluntarily, cannot be considered as an amount which need to be appropriated against the proposed penalties..... - AT
Indian Laws
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Neither the Nagar Parishad nor the Nagar Panchayat have any authority of law to levy a tax or a fee on Advertisements placed by the petitioners over the private shops or buildings where they are carrying on their business..... - HC
Service Tax
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Clearing & Forwarding Agent or Distributor's Agreement - All the condition state that the appellant were appointed as Distributors and not C&F Agent.-... - AT
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Accommodation service Section 65(105)(zzzzw) of Finance Act, 1994 - Tirumala Tirupati Devasthanams (TTD) - There is no dispute that it has been running these guest houses for a considerable time. - Liable to pay service tax.... - HC
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Notification No. 01/2006-ST dated 01.03.2006 - Reversal of credit - appellants have admittedly reversed the credit along with interest - notification in question would be available to them.... - AT
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Cargo handling services - Suppression with intention to evade payment of tax cannot be alleged in this case in view of the confusion in law in this matter prevalent during the time and therefore demand for the normal period of one year only can be sustained in this case and penalties u/s 80 of Finance Act, 1994 are waived. ... - AT
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Constitutional validity of levy of service tax on import of services - Does the Parliament have the powers to legislate for any territory - provision does not suffer from vice of unconstitutionality... - HC
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Applicability of CAG (Duties, Powers and Conditions of Service) Act, 1971 for conduct of audit of private company - let there be an interim order directing that no audit be conducted by the authorities till 16th March, 2012 or until further orders, whichever is earlier..... - HC
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Cargo Handling Service - Transporting coal from wagons to Thermal Power Station by conveyor belt and not by any means of transportation - service rendered by Appellants cannot be considered as Cargo Handling Services .... - AT
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Service tax liability - recipient of services - Since parent company does not have any office or establishment in India, by virtue of the provisions of Section 66A of Finance Act, 1944 read with Rule 2(1) (d) of the Service tax Rules, 1994, the appellant would be liable to pay service tax in respect of taxable service received by them .... - AT
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Rebate under Rule 5 - Export of services - Just because FICRs do not bear the export invoice numbers, it cannot be concluded that the same do not pertain to the service provided by the appellant to their client abroad..... - AT
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Inasmuch as the medical and personal accident policy insurance etc. form part of the cost of the final product, in terms of CAS 4, the same has to be held as modvatable input services. .... - AT
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Coaching Centres Services - Books along with Services - Books of another company - Standard Text book - Exemption under notification no. 12/2003.... - AT
Central Excise
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Central Excise Valuation - when the goods have been cleared to the customers/ultimate buyers through a consolidated invoice which includes the price of the product plus OSC/RPP. - the goods have been sold over and above the MRP, therefore the OSC/RPP are includable in the assessable value.... - AT
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Bank guarantee - Supreme Court in CCE v. Dunlop India Ltd. (1984 -TMI - 40039 - SUPREME Court) has held that the State is not run on the Bank Guarantees. Therefore, no permission is granted to appellant to furnish Bank Guarantee to the extent of Rs.60 lacs.... - HC
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Refund of excess interest - when the interest was for late payment of duty, there would not be any question of unjust enactment .... - AT
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Eligibility to avail the credit of balance 50% of the amount of duty paid on the capital goods in the subsequent financial year, without installing the same and putting it into use - credit allowed..... - AT
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Cenvat Credit - Goods destroyed in heavy floods, were cleared as waste and scrap - there was no provision in the law at the relevant time for reversal of CENVAT credit availed on capital goods if the same were destroyed due to natural calamities. .... - AT
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Stay - waiver of pre deposit - As held by the Apex Court in Benara Valves Ltd case (2006 -TMI - 866 - SUPREME COURT OF INDIA), the undue hardship to the person is a relevant factor to be taken into consideration under Section 35 F of the Act. .... - HC
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Central Excise valuation - The appellant's finished product i.e. EOT cranes were completely manufactured, even without being fitted with magnets. Therefore Value of Magnet cannot be part of Assessable Value.... - AT
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Central Excise MRP based valuation - after sales service charges for four years being optional, not includible for valuation while determining MRP under Section 4A of Central Excise Act, 1944 .... - AT
VAT
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Central Sales Tax - movement of goods from the State of Maharashtra to Mumbai High does not constitute a movement from one State to another State. Mumbai High does not form part of any State in the Union of India. Therefore it cannot be regarded as inter-state sale..... - HC
Case Laws:
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Income Tax
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2012 (2) TMI 77
Non-deduction of tax at source from bank guarantee commission - stock broking business bank guarantees furnished in lieu of margin deposits, to various agencies, such as BSE and NSE Revenue contended that tax to be withhold u/s 194 interest imposed u/s 201(1A) Held that:- Principal agent relationship is a sine qua non for invoking the provisions of Section 194 H. While it is termed as 'guarantee commission', it is not in the nature of 'commission' as it is understood in common business parlance and in the context of the section 194H. This transaction, in our considered view, is not a transaction between principal and agent so as to attract the tax deduction requirements u/s 194H. As we have held that the assessee was not required to deduct tax at source u/s 194 H, the question of levy of interest u/s 201(1A) cannot arise Decided in favor of assessee.
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2012 (2) TMI 75
Off-shore supplies & services - applicant being Hong Kong company project awarded by Petronet - consortium formed with an Indian company(CINDA), to execute the project - CTCI responsible for off-shore supplies & services & CINDA for onshore supplies - Revenue contending that the consortium formed by CTCI and CINDA is an AOP and payments made by Petronet should be taxed in India Held that:- All that is income in the transaction for supplies has not arisen in India as the right, title, payments, etc, in the supplies have passed on to Petronet which is importing these supplies outside India. The ownership vests with Petronet who imported these supplies. Further, all such issues, including whether the contract is composite and indivisible, have been addressed in the case of Ishikawajima Harima Heavy Industry (2007 - TMI - 3467 - Supreme Court ). Therefore, amount received/receivable by applicant for offshore supplies is not liable to tax in India under the provisions of the Act, in view of the decision of Supreme Court in IHHI - Decided in favor of assessee.
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2012 (2) TMI 74
Off- shore supply contract India-China Double Taxation Avoidance Convention - applicant being company of China contract for supply of equipment to Indian company - Indian company, defined as the 'owner' in the contract - passing of the title to the equipment outside the country - title passed at the port of loading : Shanghai - Bill of Lading, Bill of Entry shows owner to be Indian company Transit insurance in name of owner - taxability of the payment received under the contract Revenue contending that pre-commissioning and commissioning activities must be taken as one and indivisible and the liability to tax should be determined on that basis - Held that:- On perusal of aforesaid, it is found that this would be an offshore sale in the light of the decision in case of Ishikawajima-Harima Heavy Industries Ltd (2007 - TMI - 3467 - Supreme Court ) and hence not liable to tax in India. We clarify that the ruling relates only to off-shore supplies Decided in favor of assessee.
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2012 (2) TMI 73
Condonation of Delay - Period of limitation Tribunal dismissed the appeal against order of CIT(A) dated 16.03.07 passed u/s 263 delay of 1049 days CIT(A) restored the matter to A.O. vide its order dated 16.03.07 A.O. passed order on 31.08.07 - Held that:- There is no perversity in the Tribunal's order dismissing the appeal on the ground that several proceedings have taken place pursuant to the said order of CIT (A) which had become final Decided against the assessee.
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2012 (2) TMI 72
Nature of income capital gain vs business income - purchase & sale of shares A.Y. 07-08 - Held that:- Issue was covered in favour of the assessee by the decision of the Tribunal in A.Y. 2005-06 and 2006-07 in which the Tribunal on identical facts accepted the claim of the assessee that it was an investor. Merely on the ground that volume of transaction was heavy and capital gain earned was large, it could not be held that the assessee was trading in shares. Hence, order of CIT(A) accepting the claim of the assessee as capital gain is upheld Decided against the Revenue.
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2012 (2) TMI 71
Penalty u/s 271(1)(c) revised return filed - deduction u/s 80G claimed on property gifted to Trust deduction disallowed - Held that:- The ratio of the decision of Supreme Court in case of CIT Vs. Reliance Petro Products Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT) is squarely applicable to the facts and circumstances of the present case as assessee has not furnished any inaccurate particulars. She filed certificate for donation of the property to the Trust which is registered u/s 80G. However, the claim was denied because of the reason that deduction u/s 80G is not allowable on fixed assets. This was a bonafide mistake and nothing else. If wrong claim was to be made then assessee could have claimed in the original return. Therefore, penalty levied was not justified Decided in favor of assessee.
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2012 (2) TMI 70
Taxability of interest received on FDR accrual basis vs receipt basis - FDR conveyed in the name of the assessee through Will executed on 19.07.03 - Will probate on 21.3.2007 FDR matured on 20.04.07 agricultural income treated as income from other sources by Revenue A.Y. 08-09 - Held that:-Probate was issued in the A.Y.2007-08 then total interest should have been assessed in the A.Y.2007-08, which the assessee has failed to do. Since only interest of Rs.1,13,306/- has been offered for taxation for A.Y.2007-08, therefore, to this extent no addition should have been made. Accordingly, addition of Rs.1,13,306/- is reduced out of total addition of Rs.3,19,588/-. The remaining amount out of total interest is sustained in the year under consideration. In respect of agricultural income, assessee did not file any evidence in respect of agricultural land holding. Thus, it cannot be said that the same is out of agricultural income. Order of CIT(A) is confirmed Decided partly in favor of assessee.
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2012 (2) TMI 69
Dis-allowance of expenditure on ground of made towards purchase or firewood from sundry parties on ground that majority of the invoices were self-made vouchers purchases treated as bogus dis-allowance of unloading wages - manufacturer of inorganic chemicals Held that:- Assessing authority has listed a series of deficiencies in the documentation, but if the entire purchase made from the sundry parties has to be disallowed, the quantum of purchase of firewood available with the assessee would be quite insufficient to meet its operational requirements. Secondly, in the matter of purchase of firewood etc., there is every chance for making local purchase off and on, for which foolproof and formal documentary evidences in the form of bills may not be available. Therefore, disallowance of Rs. 24,69,070/- as a whole is not at all justified. Further, we find no ground to interfere with the order of the lower authorities in respect of addition towards unloading wages Decided partly in favor of assessee.
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2012 (2) TMI 68
Dis-allowance @ 8% of the commission paid to Taxi and Auto Drivers CIT(A) enhanced dis-allowance to 10% - disallowance was made in A.Y. 2002-03 also - assessee challenging sustaining and enhancement of addition on the ground that procedure laid down in section 251(2) is not followed Held that:- No notice u/s 251(2) has been given, therefore, enhancement by CIT (A) is not justified and the same is deleted. Regarding disallowance @ 8% by the AO, it is seen that the assessee was not required to produce the persons to whom commission has been paid. CIT(A) followed the order of the Tribunal for the A.Y.2002-03 in assessees own case whereas the assessment year under consideration is A.Y.2007-08. In between years no disallowance was made as stated by assessee. It is further seen that in the case of assessees father on similar facts where the disallowance was made @ 10%, ad-hoc disallowance was sustained at Rs.50,000/-. by Tribunal. Keeping in view the aforesaid, an addition of Rs.50,000/- is sustained against the addition of Rs.2,20,217/- - Decided partly in favor of assessee.
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2012 (2) TMI 67
Best Judgement assessment unexplained credit deposit of Rs 16 lacs in bank a/c of assessee failure to furnish evidences to prove source of deposit - assessee submitted that no land has been sold - agreement with the colonizer was cancelled and the amount has been returned, therefore, no amount has been accrued to the assessee Held that:- We find that the matter needs re-verification. Assessee has taken a plea that amount has been refunded due to cancellation of agreement. It was further submitted that the land in question is in possession of the assessee till date and it can be verified. Assessee has issued receipt with his signatures without mentioning the amount. Agreement for sale of land needs to be examined. Since assessment was completed u/s 144 and full details of additional evidences could not be filed, we are of the considered view that the matter should go back to the file of the A.O. to examine the case once again Decided in favor of assessee for statistical purposes.
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2012 (2) TMI 66
Dis-allowance of expenditure towards diesel and oil including repairs and maintenance in respect of poclain Lorry transporter - Held that:- In present case, poclain was not operated during the previous year therefore, there cannot be any huge expenditure towards diesel and oil. However some amount of expenditure has necessarily to be incurred to keep the machine in a working condition. Thus, disallowance is definitely called for, however it is reduced to some extent. Expenses relating to crane and poclain Held that:- For the reasons already stated in respect of poclain, we find that this nominal disallowance made by the lower authorities is justified. Dis-allowance of machinery maintenance Held that:- Assessing authority has disallowed 15% of the claim, which appears to be just & proper, as the assessee was not in a position to explain the expenditure in a convincing manner. Dis allowance of running expenditure of 8.67 lacs out of total 11.67 lacs was made for the reason that differences existed between the expenditure claimed by the assessee vis-ΰ-vis the bills produced by the assessee Held that:- The assessee is earning his income from operation of lorry transport. Therefore, a reasonable amount of expenditure has definitely to be allowed in respect of running of the trucks. Therefore amount allowed of Rs. 3 lakhs is not sufficient. We modify the allowance to Rs. 6 lakhs and disallow the balance amount Decided partly in favor of assessee.
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2012 (2) TMI 65
Penalty u/s 271(1)(c) - sale of land assessee presumed it to be agricultural land on the basis of certificate issued by Tehsildar - notice issued u/s 148 return filed u/s 148 declaring the same as capital gains - Held that:- There was no malafide intention of the assessee in not paying any capital gain as he was under bonafide belief because of the certificate issued by the Tehsildar that the land in question is situated beyond 8 kms from the municipal limits and hence, not liable for capital gain tax. All other particulars were furnished by the assessee while filing return of income in response to notice u/s 148. The return was filed before making any enquiry and entire receipt on account of sale consideration of agricultural was shown in the computation. Therefore, in our considered view, the CIT(A) was justified in canceling the levy of penalty. Accordingly, we confirm the order of the CIT(A) Decided in favor of assessee.
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2012 (2) TMI 64
Trading addition CIT determined Net Profit @ 10.5 % against 12.5% determined by A.O - dis-allowance u/s 40A(3) & Section 37 by A.O. deleted by CIT assessee contesting for determination of net profit @ 10% - Held that:- Once net profit rate has been applied, no other addition is warranted in the profit & loss account as held in the case of CIT Vs. Banwari Lal Bansidhar(1997 - TMI - 17366 - Allahabad High Court). Order of the CIT(A) in deleting the addition made u/s 40A(3) & 37 is confirmed in this regard Decided against the Revenue. Regarding trading addition sustained by the CIT (A) by applying net profit rate at 10.5%, we find that the provisions of section 145(3) are applicable as certain defects were there. The assessee itself has shown net profit rate at 10%. The A.O. applied net profit rate at 12.5% which has been reduced to 10.5% by the CIT (A). We see no unreasonableness in the order of the CIT (A) Decided against the assessee.
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2012 (2) TMI 63
Charitable Trust trust created for the purpose of development of the STEMI programme, to give medical relief to poor/backward people and other objects - denial of registration u/s 12AA on the ground that meaning of STEMI was not provided and doctors (trustees) being busy cardiologists would not have time to attend to the objects of the trust Held that:- Reasons provided by CIT are subsequent event to the granting of registration. At the time of registration of the trust all that is required to be verified is regarding the genuineness of the activities of the trust as also the objects of the trust. Both the objects and genuineness of the activities admitted by the CIT are charitable in nature. In the circumstances, we are of the view that the CIT erred in not granting the registration u/s 12AA Decided in favor of assessee.
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2012 (2) TMI 53
Period of limitation - special audit u/s 142(2A) assessment completed u/s 153A based on search and then special audit - extension of time availed - assessee contending that AO had no justification for ordering special audit u/s 142(2A) and therefore, AO was not entitled to extended period Held that:- In the present case, no complexity of accounts was involved. It was a simple case of estimation of income based on documents and statements furnished by assessee. AO had also made adhoc disallowance of various items of expenses and had not even considered the accounts before special audit had been ordered with the intention of getting extended period. Further, facts in this order are identical with decision of the Tribunal in A.Y. 1998-99 to 2003-04 and 2004-05, in assessees own case, therefore, we hold that AO was not entitled for extra period for completing assessment and assessment order passed on 29/9/2006 was barred by limitation. Decided in favor of assessee.
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2012 (2) TMI 52
Work Contract vs Contract for sale purchase of product - product manufactured out of raw materials supplied by a foreign company who had direct interest in the assessee company - product manufactured to the specification of the assessee utilizing the technical know-how supplied by it - labeling the product with the brand name of the assessee - supplying the entire product only to the assessee and not to anyone else Held that:-This is not simply a situation of a product manufactured to the specifications of the assessee, being sold to the assessee at the price fixed by the seller but this is to be held as a specific contract for manufacturing of a particular product notwithstanding the fact that the seller had paid the price for the raw-material directly to the foreign company supplying raw material, but had interest in the assessee company in India and having a definite communication. Further, situation contemplated u/s.194C i.e. the payment being carrying out any work which is to improve the situation of such nature and of course preceded between the contract between the assessee and the manufacturer company. Therefore, it is held provisions of Section 194C are applicable to the assessee and is clearly attracted to the present situation Decided in favor of Revenue.
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Customs
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2012 (2) TMI 39
Plea for release of confiscated goods import of Oats goods confiscated due to the objections raised by the Port Health Officer and that goods have been misbranded - CESTAT vide order dated 27.10.11 directed for release of goods on fulfillment of certain conditions by assessee release pending - Held that:- Since Revenue has not challenged the order of CESTAT hence with the conditions attached in the order, it is directed to implement the order of CESTAT within a period of two weeks from the date of receipt of a copy of this order. Petitioner would have to comply with a number of conditions like providing details to comply with the local laws, at the time of the re-packing and the re-labeling of the said goods, in the customs bonded area, and goods to be subjected to necessary tests to make sure that the goods in question are fit for human consumption, before release of goods Decided in favor of petitioner.
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CST, VAT & Sales Tax
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2012 (2) TMI 62
Appellant sells liquor at duty free shops at Bengalaru airport, no tax payable as goods are sold in the course of import or before the goods have crossed the customs frontier of India and are directly sold to customers - Revenue argued after purchase of goods passenger crossed the custom frontiers and and sales were not effected by transfer of documents of title to the goods - Held That:- The above argument is irrelevant. Transfer of document is one method and delivery may be physical also. Simply because the sales had not been effected by transfer of documents of title to the goods and the sales were effected by giving physical possession of the goods to the customers, it would not mean that the sales were taxable under the Act. - Decided in favour of assessee.
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Indian Laws
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2012 (2) TMI 76
2G Spectrum Scam PIL for appointment of a group of independent persons to assist the Court in monitoring the investigation being carried out by the CBI, the Enforcement Directorate and the Income Tax Department in '2G case' Held that:- Though power of superintendence cannot be used by the Central Vigilance Commission for interfering with the manner and method of investigation or consideration of any case by the CBI in a particular manner. However, keeping in view the nature of the case and involvement of large number of influential persons, we feel that it will be appropriate to require the Central Vigilance Commissioner and the Senior Vigilance Commissioner appointed u/s 3(2) of the Central Vigilance Commission Act, 2003 to render assistance to the Court in effectively monitoring the further investigation of the case. This course will be perfectly in tune with the mandate of Section 8(1) of the 2003 Act. Directions for compliance of aforesaid are issued Decided in favor of petitioner.
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