Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 7, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Deduction u/s 54/54F - nothing in Sections 54/54F which require the residential house to be constructed in a particular manner - residential house consists of several independent units can be permitted - HC
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Sale of Personal effects - articles did not include any jewellery and they had been held for personal use by the assessee and they were subsequently sold by him to various buyers - No addition - HC
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Nature of subsidy received - Capital or revenue receipt - amount given as subsidy to meet any revenue expenditure can safely be termed as revenue receipt - HC
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Charitable trust - Exemption u/s 11 - benefit to the persons referred to in S. 13(3) - After the expiry of the leased period, it is always open to the assessee to remove the constructions and, therefore, no benefit would directly enure to the benefit of the trustees. - HC
Service Tax
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Advertisement agency services - valuation - media cos - applicant is liable to pay service tax on the amount which they have retained with themselves - AT
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Service tax on sponsorship - reverse charge - appellant is co-sponsor of DLF IPL - stay granted - AT
Central Excise
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Reversal of CENVAT credit - when the transfer of the capital goods is from one factory of the same assessee to another factory of the same assessee there is no need for reversal of any credit - AT
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Interest on Cenvat Credit reversed - assessee has to pay interest under Rule 14 for the period from the date of taking of credit to the date of its reversal, whether or not the credit was utilized - AT
Case Laws:
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Income Tax
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2013 (3) TMI 102
Rectification u/s 154 - whether ITAT is right in dismissing the appeal of the revenue on the issue of disallowance of deduction under Section 80P on interest earned on investment of surplus reserves - Held that:- CIT(Appeals) relying upon the fact that the identical issues in the assessment years 1991-92, 1993-94, 1996-97 and 1997-98 have been decided by the Tribunal wherein held that investment in PSEB bonds and IDBI bonds by the assessee were eligible for deduction under Section 80P(2)(a)(i) of the Act - rectification allowed. No substantial question of law arises for consideration of this Court.
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2013 (3) TMI 101
Deduction u/s 54/54F disallowed - as per AO house/units in the first and second floors holding that they were separate and independent residential units having separate entrances and cannot be considered as one unit to enable the assessee to claim the deduction - ITAT allowed assessee's claim of deduction u/s 54 - Held that:- Section 54/54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the AO into the section. There is nothing in Sections 54/54F which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house.There may be several such considerations for a person while constructing a residential house.Therefore, unable to see how or why the physical structuring of the new residential house,whether it is lateral or vertical, should come in the way of considering the building as a residential house. The residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F - Tribunal took the correct view. No substantial question of law arises for consideration - in favour of assessee.
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2013 (3) TMI 100
Income From Undisclosed Sources - ITAT deleted the addition - Whether item sold by the assessee were "personal effects" so as to fall within the ambit of exclusionary clause of Section 2(14) which defines "capital asset" - onus to prove that the items sold were not personal effects of the assessee will be on whom ? - Held that:- The Supreme Court in CIT Vs. H H Maharani Usha Devi (1998 (5) TMI 5 - SUPREME COURT) had observed that the High Court in Himatlal C. Valia Vs. CIT [2000 (9) TMI 41 - GUJARAT HIGH COURT] had rightly held that the frequency of use of the property must necessarily depend on the nature of the property and that merely because from the nature of the property, it could be used on ceremonial occasions only, it did not follow that the property was not held by the assessee for personal use. Thus as in the present case the only evidence that is forthcoming is the affidavit of the assessee where he has indicated that the said articles were for his personal use. He has also indicated that these articles were received by him from two streams, one, by way of inheritance from his father and uncle and the other, by way of a gift deed from his aunt. Whatever be the mode of acquisition of articles, the fact, as stated in his affidavit, is that these were in his personal use. Those articles were moveable properties. They did not include any jewellery and they had been held for personal use by the assessee and they were subsequently sold by him to various buyers. The fact that these articles were held by him for personal use has been indicated in the affidavit filed by the assessee before the assessing officer. No material has been brought out by the assessing officer or the revenue to indicate that the affidavit is false. Therefore, on the basis of evidence on record, the articles in question ought to have been held to be "personal effects" of the assessee. The amendment to section 2(14) has prospective operation with effect from 01.04.2008, whereas in the present case the assessment year is 2002-03 - appeal decided in favour of the assessee and against the revenue.
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2013 (3) TMI 99
Nature of subsidy received - Capital or revenue receipt - compensation for loss of profit - held that:- The Janta Cloth Scheme for the handloom sector was introduced with the twin objective of providing sustained employment to the unemployed and underemployed handloom weavers and at the same time to provide cheaper cloth to the weaker section of the population of our country. The subsidy was payable on the basis of actual deliveries of Janta Cloth. 20% of the subsidy was meant for meeting overhead expenses whereas 80% was to be utilised for meeting the cost of production. Applying the principles laid down by the Apex Court [in the case of Sahney Steel & Press Works Ltd. Versus Commissioner of Income Tax,A.P.-I, Hyderabad, (1997 (9) TMI 3 - SUPREME COURT)] to the facts of the present case, we find that one of the objectives of the Janta Cloth Scheme was to provide cheaper cloth to the weaker section of the population of our country. The subsidy was payable on actual deliveries made and not on the portion relating to goods returned. 20% of the subsidy was meant for meeting the overhead expenses while 80% was to be utilised for meeting the cost of production. Anything incurred towards overhead expenses and cost of production is necessarily a revenue expenditure. Therefore, amount given as subsidy to meet any revenue expenditure can safely be termed as revenue receipt. - Decided in favor of revenue.
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2013 (3) TMI 98
Revision u/s 263 - erroneous and prejudice to revenue order - held that:- Assessing Officer on the basis of a detailed inquiry found that on procurement of orders from various Government Department for the respondent-assessee, Dr. Shashi Kant Gupta had rendered services in his individual capacity, the amount of commission which is alleged tohave been paid to M/s Ratandeep Polymers (P) Ltd., has to be assessed on substantive basis in the hands of Dr. Shashi Kant Garg. There is no question of holding that the Assessing Officer had not made a detailed inquiries in this behalf. The order of Commissioner of Income Tax (Appeals) under Section 263 of the Act has been righly set aside by the Tribunal. - Decided against the revenue.
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2013 (3) TMI 97
Charitable trust - Exemption u/s 11 - benefit to the persons referred to in section 13(3) - revenue submitted that the registered lease deed was only for a period of 29 years. After the term would have expired in the year 2034, the lessee i.e. the present assessee would not be in a position to remove the construction which would enure to the benefit of the trustees who are lessors. Therefore, the provision of section 13 has rightly been invoked. - held that:- The submission is wholly misconceived. - In the registered lease deed, there is no stipulation that the construction made on the lease land would become the property of the lessor after the expiry of the term of the period of lease. After the expiry of the leased period, it is always open to the assessee to remove the constructions and, therefore, no benefit would directly enure to the benefit of the trustees. - Decided in favor of assessee.
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2013 (3) TMI 96
KAR VIVAD SAMADHAN SCHEME - assessee is a partnership firm deriving income from Sarafa business - assessment completed u/s 144 - Whether the appellant having opted for the scheme and its appeal having been allowed to be withdrawn the Tribunal was justified in proceeding and deciding the appeal of the Revenue on merits? - Held that:- In view of the provisions of Section 90(4) of KAR VIVAD SAMADHAN SCHEME, 1998 as the declaration filed by the appellant for the assessment year 1980-81 has been accepted by the CIT being the designated authority, the Tribunal has erred in law in deciding on merit when the appeal ought to have been dismissed as withdrawn. As decided in Nishit Construction Company P. Ltd. v. Income Tax Officer (2006 (4) TMI 114 - MADHYA PRADESH HIGH COURT) & All India Federation of Tax Practitioners Vs. Union of India [1998 (11) TMI 113 - DELHI HIGH COURT] wherein held that if a declaration has been made under KAR VIVAD SAMADHAN SCHEME, 1998 then the appeals preferred by the assessee as also the department in respect of the same assessment year cannot be proceeded with. Thus the Tribunal has erred in law in remanding the matter to the CIT(A) for decision afresh as the declaration under KAR VIVAD SAMADHAN SCHEME, 1998 has been accepted by the designated authority.
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2013 (3) TMI 95
Addition u/s 68 - as per AO assessee had not produced the broker through whom the transaction of shares had taken place thus has not substantiated claim with evidence - Held that:- The submission of AO is wholly misconceived as the share transaction was done in Demat form. The sale has been certified and therefore there is no question of adding the income under Section 68 of the Act - in favour of assessee.
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2013 (3) TMI 94
Powers of ITAT to recall the own orders - Held that:- As the appellant could not place any material to show as to why the order dated 4th November, 2008 was recalled by the Tribunal and as directed to file copy of the Tribunal's order but he failed to do so appeal dismissed. Interest received on the FDR - income relating to business of civil construction or interest income - Held that:- The interest received on the FDR is treated as part of income relating to business of civil construction or interest income will not make any difference to the tax liability of the assessee, therefore, the ground raised by the revenue be comes only of academic importance. As the department could not dispute the above findings of the Tribunal appeal dismissed.
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Customs
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2013 (3) TMI 92
Violation of condition of notification 53/97 customs 03.06.1997 - order passed u/s 28(1) of the Customs Act demanding customs duty along with interest and also penalty - petitioner company is 100% EOU engaged in manufacture of recycled non-ferrous & ferrous metals started commercial production w.e.f.09.03.2001 for which imported mixed metal scrap - Held that:- Tribunal after taking note of the financial status of the petitioner company which was given at the stage when rectification application was filed and also taking note of the submissions made was of the view that the appellant requires no indulgence for exemption regarding condition of pre-deposit and accordingly considered it appropriate to review the customs duty to be deposited at the stage for maintaining the appeal and observed that rest of the duty and penalty & other charges levied by the assessing authority shall remain stayed and be looked into at the time of hearing. After going through the order impugned of the learned Tribunal, no manifest error being committed while passing order impugned exercising discretion which may require interference by this Court under its limited scope of judicial review U/Art.226 & 227 of the Constitution.
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2013 (3) TMI 91
Release of goods - petitioner pressed for a direction to release the goods in the light of the test report, since it is pointed out that the detention of the goods is creating hardship, as the petitioner is now saddled with the liability to remit demurrage charges. Import Policy - The Indian Importers would have to apply to BIS for seeking a licence for each of the notified product he intends to import. Revenue directed to pass appropriate orders after hearing the petitioner within a period of two weeks from the date of production of a copy of this judgment.
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Corporate Laws
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2013 (3) TMI 90
Cancellation of shares - Petitioner was a registered shareholder of respondent-company having its registered office at Shillong - respondent-company has not held any meeting nor has it taken any resolution for cancellation of the shares allotted in the year 2001-2002 which would include petitioner's shares - neither has the respondent-company taken his consent in writing or otherwise for cancellation of his shares - writ filled by the petitioner desiring to question the tenability of the prayer of the respondent-company made before the Company Law Board, Delhi for cancellation of those shares - Whether the facts projected by the respondent-company in their petition can constitute a material, essential or integral part of the cause of action? Held that:- Mere fact that the respondent-company was registered, or has its registered office, at Shillong, is not decisive, and has absolutely no bearing with the lis or the dispute involved in the case so as to confer territorial jurisdiction upon Gauhati High Court. Thus having a registered office of the respondent-company at Shillong has not, even remotely, touched upon the controversy involved in the company petition pending before the Principal Bench of Company Law Board at Delhi, the bundle of facts to be proved by the respondent-company before the Company Law Board at Delhi for the right to judgment is not about the situs of their registered office. On the contrary, this writ petition is squarely covered by the decision of the Apex Court in Adani Exports Ltd. case (2001 (10) TMI 321 - SUPREME COURT OF INDIA). Therefore, the mere fact that the respondent No. 2 has its registered office at Shillong or carries on its business at Shillong has absolutely no bearing on whether the shares allotted by it in the year 2001-02, is legal or not is rather the cause of action for the company petition such an issue cannot, by any stretch of imagination, be held to constitute a material, essential or integral part of the cause of action, they are as different as chalk and cheese. Thus no part of the cause of action of the company petition pending before the Company Law Board at Delhi lies within the territorial jurisdiction of this Court. Writ petition dismissed on the ground of its non- maintainability for want of territorial jurisdiction.
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FEMA
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2013 (3) TMI 93
Violation of sections 3(a), 3(d) & 4 of FEMA - assessee contested against on no proper opportunity given, thus violation of principles of natural justice - Held that:- As clear from para 15 of the impugned order that notice was served vide letter dated 4.4.2008, under mahazar dated 3.4.2008 in terms of Rule 9(c) of FEMA (Adjudication Proceedings and Appeal) Rules 2009. But none appeared on the date of hearing. However, by letter dated 7.4.2008 the petitioner herein filed a reply memorandum dated 11.7.2007 giving the details of the stand taken in opposition to the adjudication. Thereafter also several opportunities were given to which the petitioner as well as his counsel did not respond and participate in the proceedings. Therefore, the authority had no other option except to pass final order. Hence, the plea of no opportunity given and there is a violation of principles of natural justice has to be rejected and is accordingly rejected.
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Service Tax
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2013 (3) TMI 107
Notice of recovery of the demand - Held that:- As assessment order was passed against the petitioner way back on 18.11.2011 & petitioner filed an appeal along with stay application as well as exemption from depositing the pre-deposit amount way back on 17.02.2012 & the stay application is pending before the Tribunal since then the respondent-Department is pressing hard for depositing the amount in question as the stay application is pending before the Tribunal for last more than 11 months - issue direction to the respondent-Tribunal to hear and decide the stay application of petitioner, as early as possible.
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2013 (3) TMI 106
Tour operator services - buses given on rent - held that:- definition of tour operator requires planning, scheduling organising or arranging tours. - there is no allegation that is it the appellant who had undertaken the planning, arranging of the tour etc. - They have simply provided the buses owned by them to M/s. Hans Travels who have further undertaken the tours - prima facie case in favor of assessee - stay granted. In respect of Rent a cab services stay granted partly.
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2013 (3) TMI 105
Advertisement agency services - The dispute is regarding the payments received by applicant for media cost. For example out of Rs. 100/- billed to the client, Rs. 85/- is as media cost and Rs. 15/- as commission (which is taxable). Out of Rs. 85/- only Rs. 80/- is actually paid to the media. - held that:- applicant is liable to pay service tax on the amount which they have retained with themselves i.e. the amount received from the client less amount paid to the media. Same view has been expressed by the Board’s Circular which relied upon by the learned A.R. - stay granted subject to deposit of 25%.
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2013 (3) TMI 104
Service tax on sponsorship - reverse charge - appellant is co-sponsor of DLF IPL - held that:- definition as enshrined in 65(105)(zzzn) during the relevant period specifically excludes the service tax liability on the sponsorship of sports events. - Subsequent to amendment to the said definition from 1-7-2010, even the sponsorship of sports event has been brought under the service tax net. - TRU Circular, dated 26-2-2010 also indicates Cricket as one of the sports. - co-sponsorship of the matches with the DLF has been granted unconditional waiver by the coordinate Bench in [2012 (5) TMI 404 - CESTAT, NEW DELHI] - stay granted.
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Central Excise
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2013 (3) TMI 89
Clandestine removal of cigarettes without payment of the central excise duty - assessee argued that a direction ought to be issued by this Court to the Commissioner of Central Excise (ADJN), New Delhi to permit the petitioner to cross-examine the remaining witnesses available before acting under section 9D - Held that:- No intervention in the exercise of this Court's power under Article 226 of the Constitution of India is warranted for the present, thus without recording any observation on the rival orientations on merits, it appropriate to dispose of this petition by requiring the Commissioner of Central Excise (ADJN), New Delhi to consider and decide on the petitioner's request dated 4.1.2013 caliming right of cross-examination of the witnesses before furthering the proceedings based on the show cause notice involved and acting under Section 9D of the Act as proposed. Direction to the petitioner to be present through its authorized representative before the Commissioner of Central Excise (ADJN), New Delhi on 22.2.2013, who, after affording an opportunity of hearing to the parties, would record his decision on the issue.
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2013 (3) TMI 88
Recovery proceedings - Held that:- As from the documents annexed with the writ petition, it is clear that petitioner has preferred an appeal along with an application for stay-cum-for waiver of pre-deposit amount and the same is pending before the appellate authority Commissioner, Central Excise since 25th October, 2012. Thus the respondent department issuing a notice of recovery dated 15th January, 2013 to petitioner is wrong. The right of appeal is a valuable right. Therefore, it was the duty of the appellate authority to fix the stay application for hearing at an early date and till then no recovery should have been made by the respondent department as there is no fault on part of the petitioner - Parties are directed to appear before the appellate authority for hearing of stay application on 12th February, 2013.
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2013 (3) TMI 87
Reversal of CENVAT credit based on depreciated value - capital goods used for some time and thereafter removed - Revenue was of the view that the appellant should have reversed the entire credit as during the period when the goods were removed from the factory there was no provision in Rule 3 of the CENVAT Credit Rules for reversal of credit based on depreciated value - Held that:- As deccided in CCE, Salem Vs. Rogini Mills Ltd. [2010 (10) TMI 424 - MADRAS HIGH COURT] the said provision requiring reversal of the entire credit taken at the time of receipt of the capital goods in the factory cannot be applied to a situation where capital goods are cleared after use for a few years. when the transfer of the capital goods is from one factory of the same assessee to another factory of the same assessee there is no need for reversal of any credit - in favour of assessee.
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2013 (3) TMI 86
Demand of interest u/r 14 of CCR 2004 r.w.s. 11AB of the Central Excise Act - assessee contested that CENVAT credit was merely taken by making an entry in the CENVAT account and reversed at a later point of time by making a debit entry before issuing SCN thus there would be no question of interest liability - Held that:- There is only one ruling that is applicable to the instant case and the same is the one handed down by the apex court after interpreting the provisions of Rule 14 in Ind-Swift Laboratories case [2011 (2) TMI 6 - SUPREME COURT]. The ruling is to the effect that the word or appearing between the words taken and utilized cannot be read as "and" by way of reading it down as has been done by the High Court. The effect of this ruling is unambiguously clear. Where an amount of inadmissible CENVAT credit was taken by a manufacturer of excisable products or a provider of output service but later on reversed, he has to pay interest under Rule 14 for the period from the date of taking of credit to the date of its reversal, whether or not the credit was utilized. This is the clear result of the interpretation given by the apex court to the provisions of Rule 14. It is binding on this Tribunal under Article 141 of the Constitution of India. Thus the short question (whether the appellant is liable to pay interest under Rule 14 of the CCR 2004 on the amounts of CENVAT credit in question) has to be settled in favour of the Revenue.
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CST, VAT & Sales Tax
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2013 (3) TMI 109
Classification of the goods - Determination of rate of tax - under Entry 163 of Schedule IV of the RVAT Act (4% ad valorem) OR Entry (residual) under Schedule V of the RVAT Act (12.5% as valorem) - Held that:- A bare look at the order dismissing an application filed by the petitioner for grant of stay indicates that it is non-speaking order. No reason whatsoever has been advanced by the Tax Board while refusing to exercise its discretion to protect the petitioner company from its liability (under challenge) to pay the interest in respect of demand raised by the department in spite of the fact that the petitioner company had already paid differential but disputed tax during the pendency of appeal under protest. The dispute arises on the issue of classification of goods manufactured by the petitioner company. The petitioner company is a well known and reputed company, thus exercise of Jurisdiction for interim protection vested in courts and Tribunals has to be balanced taking into consideration the facts and circumstances of a given case. This has not been done by the Tribunal. Thus direct the Tax Board to decide the appeal of the petitioner within a period of twenty days from today & petitioner is directed to move an application before the Tax Board, for preponement of the date of hearing of the appeal pending before the Tax Board, on or before February 26, 2013. During pendency of appeal before the Tax Board, there would be a stay on the deposit of interest on the amount different tax demanded by the department and already deposited by the petitioner company.
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2013 (3) TMI 108
Eligible for sales tax exemption - KGST Act - claim of the petitioner for refund rejected - Held that:- Order exempting the petitioner from liability for payment of tax for seven years w.e.f. 12/10/91 or till the sanctioned amount of Rs.1,60,909/- is exhausted, whichever is earlier was issued on 20/9/2007. Once such an order has been issued, the said order has to be given effect to. Therefore, if within the period during which the petitioner is eligible for exemption, any payment has been made by the petitioner, such realisation of tax from the petitioner is a collection of tax without authority of law. Therefore, such unauthorisedly collected amount is liable to be refunded to the petitioner. Therefore, the view taken in Ext.P3 that there is no specific order by the appellate authorities requiring refund of the amounts collected from the petitioner is absolutely illegal and cannot be upheld. See Corporation Bank v. Saraswati Abharansala and another {2008 (11) TMI 387 - SUPREME COURT.
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Indian Laws
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2013 (3) TMI 110
Constitutional validity of Entertainment Tax - Multi System Operators (MSO) - The contentions raised on behalf of the appellants before this Court were to the effect that the appellants were not `Proprietors' and they were not providing entertainment and, therefore, no tax was to be paid by them. - held that:- The first issue is no longer res integra as this Court, in the case of STATE OF WEST BENGAL v. PURVI COMMUNICATIONS (P) LTD., (2005 (3) TMI 438 - SUPREME COURT OF INDIA) has held that even Multi-System Operators (MSO) would be liable to pay Entertainment Tax. It is not in dispute that the appellants are Multi-System Operators, who transmit the signals to the cable operators and in turn, the cable operators transmit signals to the subscribers. In such a way, as the appellants are connected to an organisation of the entertainment, they would be `Proprietors' as per the provisions of the Act. - Decided against the assessee.
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2013 (3) TMI 103
Delay of 42 days in providing of requisite records made under RTI-request - Held that:- There is no doubt that the RTI-application dated 2-5-2011 filed by Shri R.K. Jain was replied to by CPIO Shri Mohinder Singh, Assistant Registrar vide ID No. 06-56/11, dated 6-6-2011. Shri Jain inspected the relevant documents on 9-6-2011 and submitted his Inspection Notes dated 9-6-2011 indicating clearly the copies of the documents required by him. With regard to other Inspection Notes, the copies of 813 pages were provided to Shri Jain on 27-6-2011. However, no information was provided to him in respect of his Inspection Memo No. 87 dated 9-6-2011 for more than a fortnight. He therefore, sent a reminder dated 24-6-2011 to the CPIO and the same was received in the office of the Public Authority on the same day. Subsequently, two more reminders were sent vide letters dated 1-7-2011 and 9-7-2011. Finally, copies of 383 pages of a Register maintained by Shri Pramod Kumar were furnished only on 22-7-2012. Thus the 30 days time available with the CPIO as mentioned in Section 7 of the RTI Acthad already been lapsed as the CPIO given a reply on 6-6-2011 to the RTI-request dated 2-5-2011. The CPIO never contested that he had sent all the three letters to the deemed CPIO. Thus, the Commission is of the considered view that both Shri Mohinder Singh, Assistant Registrar & the then CPIO and Shri Pramod Kumar, SPS to Member (Tech.) & holder-of-the-information are equally responsible for the delay in furnishing the information. A penalty of Rs. 10,500/- for the delay of 42 days @ Rs. 250/- per day is imposed u/s 20(1) of the RTI Act, 2005. As both the officers are equally responsible, the penalty of Rs. 5,250/- is imposed on each of them viz., Shri Mohinder Singh, Asstt. Registrar & the then CPIO and Shri Pramod Kumar, Deemed CPIO to be recovered in 2 monthly instalments of Rs. 2,625/- each from each one of them.
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