Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 9, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Whether on the facts and circumstances of the case and in law, the assessee, who is a share broker, is entitled to deduction by way of bad debts under Section 36(1)(vii) read with Section 36(2) - held yes - HC
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100% EOU - Deduction u/s 10B - There is no provision in Section 10B by which a prohibition has been introduced by the Legislature in setting off of a loss which is sustained from one source falling under the head of profits and gains of business against income from any other source under the same head- HC
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Deduction u/s 54F in respect of building under construction despite the same having not being fully constructed within the stipulated period of three years - benefit of exemption allowed - HC
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Whether pending allotment of NCSD would qualify as “commodities“ u/s 43(5) – whether its sale is Speculative transaction or Capital loss - PCD issued to existing shareholders - decided in favor of assessee - HC
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Source of capital introduced by the partners - When the assessee has explained the amounts as capital contributions by the partners, the AO is not justified in holding that the assessee has not explained the source. In case the Assessing Officer doubted the genuineness of the source, he should have considered the same in the hands of the partners only and not in the case of the firm. - AT
Customs
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By virtue of the present notification, i. 15/2012-Customs (ADD) dated 05-03-2012, the validity date of the earlier notification no.15/2007-Customs dated 20 February, 2007, levying anti-dumping duty on imports of all Fully Drawn or Fully Oriented Yarn/Spin Draw Yarn / Flat Yarn of Polyester, originat - Ntf. No. 15/2012 - Customs (ADD) Dated: March 5, 2012
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Ban on export of Cotton (Tariff Code 5201 and 5203) - reg. - Cir. No. 6/2012 Dated: March 6, 2012
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Publication of Daily Lists of Imports and Exports (Amendment) Rules, 2012 - Ntf. No. 18/2012 - Customs (N.T.) Dated: March 5, 2012
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SAD - Appellant are not eligible for duty exemption from Special Additional Duty of Customs in respect of Kerosene sold in the State of Orissa without payment of sales tax - AT
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Benefit under tainted DEPB scrips was claimed – confiscation - redemption fine - Importer who steps into the shoes of seller of forged document does not stand on better footing and cannot be allowed to retain benefit illegally obtained - AT
FEMA
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Clarification - Liberalised Remittance Scheme for Resident Individuals. - Cir. No. 90 Dated: March 6, 2012
Corporate Law
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Restoration of name of companies in the register maintained by the Registrar of Companies. - Once this Court is convinced that it is just to restore the company, then to refuse the relief because some thirty party may be inconvenienced by it, would be harsh. - HC
Indian Laws
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Application of provisions of Standards of Weights and Measures Act, 1976 - industrial consumer, institutional consumer versus retail sale - the issue clarified - HC
Service Tax
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Demand of serviced tax under business auxiliary service - Promotion or marketing of service provided by the client versus broadcasting service - pre-deposit of the demands waived - AT
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Input service - Refund - service tax paid on construction services within factory premises - construction of the residential premises - credit denied - AT
Central Excise
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Once a decision is reversed and set aside, it is immaterial on which point the decision was reversed because on reversion of the decision, it ceases to be a good decision in the eye of law. - HC
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Cenvat Credit - Job work - even assuming that the challans were not received within 180 days he has to pay the interest or even after the receipt of the challans after 180 days he is entitled to take Cenvat Credit - denial of credit is not justified - HC
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Reversal of cenvat credit - Once the credit has been validly taken and utilized, the question of its recovery does not arise when at a later point in time the goods became exempted - AT
VAT
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Stock Transfer - F form - Revisional orders - first respondent held that F forms filed by the petitioner did not meet the requirements of the CST (R and T) Rules ; they were incomplete - how-cause notice falls foul of the audi alterant partem rule necessitating the revisional order passed by the first respondent being set aside for violation of principles of natural justice - HC
Case Laws:
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Income Tax
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2012 (3) TMI 121
Estimation of profit - net profit at 2% - Held That:- Assessing officer has to give one more opportunity to the assessee before framing the assessment. No audit under 44AB - Penalty under 271B - Held That:- whether there was delay in getting the audit report or whether the assessee could not get the audit report at all. If the assessee could not get the audit report in time, then it is for the assessee to explain the reasonable cause for the delay in not getting the audit report. Therefore, in our opinion, the matter needs to be factually verified by the assessing officer. Case remanded back.
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2012 (3) TMI 120
Assessee claimed deduction under 80HHC - Interest Income assessable as "Business Income OR Other Source" - CIT revoked 263 - Held That:- Deposit in bank account are as business compulsion and as a requirement of bank in granting credit facilities and not to earn interest Income. In earlier year the above ground were decided in assessee favour. Where two views are possible and AO resorted to one, it cannot be considered an order erroneous to revenue. Revocation not justified. Export Gain on forward contracts as a part of export turnover under 80HHC - Held That:- Exchange gain on forward contract translation does not have any element of export turnover or profit from export. 90% of the said income has to be excluded from the business profits
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2012 (3) TMI 119
Applicability of 40A(3)(cash payment exceeding of 20,000) - Assessee Co-operative Society - Order obtained from industry for carriage of cement, food grain and work allotted to truck owners - Bill from truck owners send to consignee, commission charged at 3% - Held That:- In view of "G.A. Road Carriers" (2010 - TMI - 203699 - ITAT, HYDERABAD) transportation is not the business of the assessee company. It acts as a commission agent facilitating payment to the truck owners, who are its members. Therefore, the payments were not business expenses of the assessee, therefore no disallowances.
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2012 (3) TMI 118
Expenditure in relation to exempt Income - Old Investments - interest Income NIL - Held That:- Earning of the income in a particular year is not sine qua non of allowing expenditure. Thus, the income may be nil, yet the expenditure incurred in pursuit of earning such income is deductible. Exempt Income - Assessee: No expenditure incurred - Held That:- In view of Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT,(Bombay High Court) & Maxopp Investment Ltd. Vs. CIT (Delhi High Court), dis-allowances couldn’t be upheld.
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2012 (3) TMI 117
Validity of Search - Block Assessment - reason recorded for issuance of 132 not furnished - Search warrant in joint name, assessment framed in the individual name was bad in law - Held That:- In view of Smt. Vandana Verma (2009 - TMI - 34911 - ALLAHABAD HIGH COURT), since the warrant of authorisation was in the joint names and not in the individual names of the assessee, therefore the assessment framed u/s. 153A in individual capacity not maintainable. Accordingly the assessment framed by the AO u/s. 153A is annulled.
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2012 (3) TMI 116
Tea Development Account - Deposits under NABARD - Amount withdrawn and Fixed Assets purchased - AO denied depreciation - CIT(A) allowed claim on Goodrick Group Limited - Held That:- There is no restriction on account of allowability of depreciation on the assets purchased out of withdrawal from NABARD. Disallowance of Cess on green leaves the cess was paid only for agricultural operation and agricultural income - Held That:- in view of AFT Industries (2004 - TMI - 10894 - CALCUTTA High Court), deduction allowed. Disallowance in respect of exempt income - Dividend income credited - CIT(A) reduced the additions from Rs 22,404 to Rs 5,000 - Held That:- Rule 8D is applicable for and from assessment year 2008-09 and prior to that the Assessing Officer can make estimate in the given facts and circumstances. Hence, we restrict the disallowance to 1% of dividend income and direct the Assessing Officer to calculate the expenditure on that basis. Reliance placed on Godrej Boycee Boycee Mfg. Co. Ltd (2010 -TMI - 78448 - BOMBAY HIGH COURT)
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2012 (3) TMI 115
Penalty Proceedings - Deductions claimed under 80IA - Windmill leased and used in generating Electricity - AO treated as transfer from associated enterprise - Tribunal set aside order of CIT, penalty proceedings initiated - Held That:- When case is accepted by Hon'ble High Court show that there was substance in the claim of the assessee. In view of Reliance Petroproducts Pvt. Ltd.(2010 - TMI - 75701 - SUPREME COURT), Penalty unjustified.
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2012 (3) TMI 104
DTAA between India and UK - appellant had made a request u/s. 195 for non deduction of tax from the payment made to ARL - The request was rejected by the DCIT, TDS Circle-1(1), vide his order u/s. 195 dt. 1.12.1998 - Ld. Counsel for the appellant on the other hand, submitted that as far as the case of ARL is concerned, this Tribunal has already taken a view that the receipts in question are not chargeable to tax - It was his submission that since proceedings for assessment of income of the non-resident have been initiated, it was not open to the revenue to initiate proceedings under section 163 of the Act against the appellant - Held that: an agent or any person who apprehends that he may be assessed as such an agent can retain out of the money payable to the non-resident a sum equal to the estimated liability. A mere relation between the business of the non-resident and the activity in India which facilitates or assists the carrying on of the business of the non-resident would result in a business connection - the provisions of Sec. 166 of the Act provides that the provisions for treating person in India as agent of the non-resident does not prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income - Held that: CIT(A)fell into an error in accepting the plea of the appellant and canceling the order under section 163 of the Act - Appeals are allowed
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2012 (3) TMI 103
Whether on the facts and circumstances of the case and in law, the assessee, who is a share broker, is entitled to deduction by way of bad debts under Section 36(1)(vii) read with Section 36(2) of the Income Tax Act, 1961 - The requirement which has been imposed by Parliament in Section 36(2)(i) is that a deduction on account of a bad debt can be allowed only where such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of the debt is written off - The brokerage having been credited to the profit and loss account of the assessee, it is evident that a part of the debt is taken into account in computing the income of the assessee - Since both form a component part of the debt, the requirements of Section 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee - Decided in favor of the assessee
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2012 (3) TMI 102
Order of settlement commission - assessee filed an application before the ITSC under Section 245C of the Act seeking a settlement of its income for the assessment year 2005-06 - assessee also submitted that its case involved complexity of investigation arising because of the fact that various loose papers were seized during the survey and heavy additions would in all probability be made leading to protracted litigation - After accepting all the submissions of the assessee as noted above, the ITSC settled the additional income of the assessee at Rs. 15 lacs as per the statement of facts filed by the assessee - ITSC has merely observed and accepted the assessee's explanation that the word "cash" has been erroneously mentioned instead of the word "cheque" - The manner in which the ITSC has set out to dispose of the assessee's application before them and the report of the CIT shows that the procedure adopted by them is vitiated and is certainly not in accordance with law - ITSC could not have been satisfied as to the acceptability of the assessee's explanation with regard to the various issues raised before it in the report of the CIT merely on the basis of the reports of the JDIT - Decided in favor of the assessee by way remand to ITSC
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2012 (3) TMI 101
Addition - Deduction u/s 10B - hundred percent Export Oriented Unit (EOU) - Assessing Officer held that a loss sustained by the eligible unit could not be set off against the income of the other units - The earlier provision specifically stipulated that profits and gains derived by an assessee from a hundred percent export oriented undertaking to which the section applies shall not be included in the total income of the assessee - There is no provision in Section 10B by which a prohibition has been introduced by the Legislature in setting off of a loss which is sustained from one source falling under the head of profits and gains of business against income from any other source under the same head - A provision akin to subsection (5) of Section 80IA or for that matter akin to subsection (6) of Section 80I has not been introduced by the Legislature when it enacted Section 10B - Appeal is dismissed
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2012 (3) TMI 100
Disallowance u/s 14A - The instruments resulting in tax free income were purchased the earlier years, whereas the bank loan was availed of in the present year - Further the bank loan was for a specific purpose, i.e. export of sugar and could not be used for any other purpose - Held that: as far as administrative expenses is concerned, the matter has been remitted back to the Assessing Officer - Appeal is disposed of
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2012 (3) TMI 99
Validity of search and seizure - The petitioner has also adduced evidence in the form of affidavits of panchas and has sought an opportunity to cross examine the authorised officer of the Department to substantiate his contention regarding the illegality of the search - Held that: the appellate authority is bound to consider all the contentions of the petitioner including the question as to whether the search is valid and whether the assessing authority had jurisdiction to initiate proceedings under Section 153A on the basis of that search, if the same is invalid - Decided in favor of the assessee by way of remand to appellate authority
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2012 (3) TMI 98
Capital Gain-Whether lump-sum consideration is a capital receipt in the hands of the assessee company- held that:-the amounts were paid to the assessee on account of right to use the know how for a specified period and no outright transfer of know how amounts received thereunder would be nothing but royalty received Royalty -Whether the lump sum consideration was royalty within the meaning of Article-VII of the DTAA -held that:-"royalty" means any royalty or other like amount received as consideration for the right to use copyrights, artistic or scientific works, patents, models, designs, plans, secret processes or formulae, trademarks and other like property or rights -the amount received by the assessee was royalty covered under Article VII of the DTAA and therefore, taxable in India -Royalties derived by a resident of one of the territories from sources in the other territory may be taxed only in that other territory the questions raised were in favour of the revenue and against the assessee.
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Customs
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2012 (3) TMI 112
Undervaluation of goods - Provisional Release of the goods - learned counsel had further prayed that on the petitioner furnishing the bond and on making the payment, as stated above, the third respondent may be directed to release the goods in question, forthwith - Decided in favor of the assessee by way of direction to deposit Rs. 3,00,000, as part of differential duty
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2012 (3) TMI 94
Revenue effect is too meager - it would be sufficient to keep the questions of law open, if the Revenue wants to agitate the same in an appropriate appeal - Appeal is disposed of
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2012 (3) TMI 93
Writ petition - misdeclaration of goods - Held that: the respondents are directed to complete the process of investigation, enquiry and adjudication, with regard to misdeclaration of goods, within a period of six months from the date of receipt of a copy of this order
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Corporate Laws
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2012 (3) TMI 111
Winding up petition - appellant-company had suggested the proposal for settlement by way of one time resettlement of loan - On the basis of the above recovery certificate and calculating the interest on the principal amount, the petitioning creditor issued notice to the appellant-company calling upon the company to pay the bank an amount of Rs. 14.26 crores together with further interest from 1 March 2010 and other charges - It is also submitted that the appellant is a going concern with 470 employees who are being paid monthly wages of Rs. 21 lakhs - Held that: having regard to the fact that the first winding up petition being Company Petition No.5 of 2006 by this very petitioning creditor against the same company was dismissed by this Court in terms of order dated 8 June 2006 - Appeal is alloowed
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2012 (3) TMI 92
Restoration of name of companies in the register maintained by the Registrar of Companies. - Sectio 560(6) - the expression 'just' would mean that it is fair and prudent from a commercial point of view to restore the company. The Court has to examine the concept of 'justness' not exclusively from the prospective of a creditor or a shareholder or a debtor, but from the prospective of the society as a whole. Once this Court is convinced that it is just to restore the company, then to refuse the relief because some thirty party may be inconvenienced by it, would be harsh. Since today the respondent No. 2 company has a Foreign Award of more than a million dollars in its favour, it would be just, fair and prudent to restore the company to its original status. The ex-management of the respondent No. 2 company are directed to file all statutory returns along with prescribed fees in compliance with all statutory requirements. In the event of their failure to do so, the petitioners are directed to fulfil the aforesaid obligation.
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Service Tax
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2012 (3) TMI 124
CENVAT credit on courier services- service tax paid on Courier services used for transportation of samples of finished goods from the place of removal to buyer premise - credit on outward freight is admissible if the same is part of price of goods - the place of removal as defined under Sec.4 of the Central Excise Act, 1944 is a factory or any other place of production of goods -the credit of service tax on outward freight is admissible if the same is part of price of goods - held that:-the credit was denied as the courier service is received after the clearance of goods from the factory gate therefore, the service relates to post clearance of the samples and nothing to do with the manufacture of samples - the applicants had not produced any evidence to show that the courier expenses are part of the price of the samples - directed to deposit an amount of Rs.10 lakhs within a period of eight weeks and a compliance report.
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Central Excise
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2012 (3) TMI 91
Waiver of pre-deposit - whether Rule 10A of the Valuation Rules is applicable to the facts of the present case - assessee is inter alia engaged in the activity of body building at their factory on the motor vehicle chassis supplied by Tata Motors Limited - Perusal of the order of CESTAT dated 5th August 2008 clearly shows that the assessee voluntarily offered to make predeposit in that case, because, the issue being recurring in nature, the Tribunal would hear and disposed of the matter expeditiously - instead of deciding the earlier appeal filed by the assessee expeditiously, the Tribunal was not justified in directing the assessee to make predeposit in the present case by relying upon its earlier order - Decided in favor of the assessee
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2012 (3) TMI 90
Demand - Time barred - Held that: learned counsel for the Revenue has not been able to high-light any provision of law which may show that the scrap of iron and steel; or copper and brass or even plastic waste which is a packing material would be exigible items - Decided in favor of the assessee
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2012 (3) TMI 89
HC refused to interfere in a case where the appellant did not avail the remedy of statutory appeal within the permitted period. - however granted time tot eh appellant to clear the entire arrears within six months.
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