TMI Tax Updates - e-Newsletter
April 11, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. SUPPORT SERVICES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Shri Sachin Pilot Directs Expeditious Distribution of Rs 3,270 Crore, Realized from the Assets of Defunct Companies, to Claimants

2. Rajiv Gandhi Centre for Aquaculture Produces Specific Pathogen free L.Vannamei Broodstock for the First Time in India

Notifications

Customs

1. 36/2013 - dated 10-4-2013 - Cus (NT)

Amends exchange rate notification no. 35/2013-Customs (N.T.), dt. 04-04-2013

Circulars / Instructions / Orders

FEMA

1. 98 - dated 9-4-2013

Trade Credits for Imports into India – Review of all-in-cost ceiling

Highlights / Catch Notes

Income Tax

• High Court Rules No Penalty u/s 271(1)(c) if Income Addition is Overturned, Protecting Taxpayer Rights.

  Case-Laws - HC : Penalty u/s 271(1)(c) - When the addition was set aside, there was no question of imposition of penalty - HC
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• 40% Depreciation Rate Approved for Security Vans Used in Transporting Cash and Valuables by Assessee.

  Case-Laws - AT : Higher rate of depreciation - assessee has proved that it has used the security vans for transportation of cash valuables etc. - claim depreciation @40% on security vans allowed - AT
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• Tax Exemption for Capital Gains Approved for Converting Adjacent Flats into a Single Home u/s 54F.

  Case-Laws - AT : Exemption of Long Term Capital Gains u/s. 54F - two adjacent flats were purchased and later on same were converted into one single residential unit. - Exemption allowed - AT
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Corporate Law

• Court Rules Mere Name Resemblance Insufficient for Central Government to Enforce Company Name Change Directive.

  Case-Laws - HC : Rectification of name of company - mere resemblance of name does not follow as a matter of course that it should be directed by the Central Government to change it's name. - HC
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Service Tax

• Court Allows Service Tax Adjustment Between Tenant and Landlord, Subject to Verification.

  Case-Laws - HC : Liability of pay service tax rending - adjustment of service tax deposited by the tenant with the service tax demanded from the landlord - adjustment allowed subject to verification - HC
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• Court Grants Stay on Service Tax for Software Repair and Maintenance; Key Case for Software Services Agreements.

  Case-Laws - AT : Management, Maintenance or Repair Service - Software Services Agreement - repair and maintenance of software - stay granted - AT
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Central Excise

• Appellant Must Apply to Extend Stay After Six Months in Central Excise Case: Procedural Requirements Explained.

  Case-Laws - AT : Unconditional stay - Whether on expiry of six months from the date of stay order, the Appellant is required to file an application for extension of stay? AT
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VAT

• High Court: Buyer's Input Tax Credit Unaffected by Seller's Tax Payment Failure. Separation of Responsibilities Highlighted.

  Case-Laws - HC : Input tax credit denied - credit can not be denied on a plea that the selling dealer has not paid the tax. - HC
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Case Laws:

• Income Tax

• 2013 (4) TMI 212
  Penalty u/s 271(1)(c) - Tribunal cancelled the penalty levy - addition of rental income - Held that:- So far as rental income which was initially held to be sham and was added in the income of the respondent, is concerned, this question has already been decided in Commissioner of Income Tax Vs. Kohinoor Tobacco Products (P) Ltd (2005 (2) TMI 31 - MADHYA PRADESH HIGH COURT). The facts show that the addition of the rental income itself was set aside in the appeal by the Tribunal. When the addition was set aside, there was no question of imposition of penalty and the ITAT have rightly set aside the order, in which no error is found. Thus the Tribunal was justified in law in setting aside the penalty under Section 271(1)(c) - against the revenue.

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• 2013 (4) TMI 211
  Disallowance u/s 14A - Tribunal deleted the disallowance - Held that:- By the impugned order the Tribunal has restored the issue of disallowance under Section 14A to the file of the assessing officer to decide afresh in the light of the decision of this Court in the matter of Godrej and Boyce Manufacturing Company Limited V/s. DCIT reported in (2010 (8) TMI 77 - BOMBAY HIGH COURT) - No reason to entertain questions as framed by the Revenue. Addition being provision for bad debts on account loaned to its group concern - ITAT deleted the addition - Held that:- Tribunal by the impugned order has followed the decision of Vijaya Bank V/s. CIT [2010 (4) TMI 46 - SUPREME COURT] wherein it has been held that once the provision of doubtful debt has been debited to the profit and loss account and corresponding provision has been credited or reduced from the debtors account in the balancesheet, then, this would amount to writing off. In the present case, the Tribunal recorded a finding of fact that the respondent - assessee has debited the provision of doubtful debt to the profit and loss account and correspondingly reduced the assets by reducing the amount of unsecured loans. On the aforesaid facts, the Tribunal held that this would amount to writing off of the debt. Thus, on examination of facts it concluded that the respondent - assessee has written off the loan and would be entitled to the claim of bad debts - no reason to entertain question. Disallowance of long term capital loss - it is the case of the Revenue that the shares were sold due to family arrangement at very low prices and, hence, the loss is alleged to have been contrived - ITAT deleted the addition - Held that:- The Tribunal referred to the decision of of K.P. Varghese V/s. I.T.O. [1981 (9) TMI 1 - SUPREME COURT] wherein it is held that it is not sufficient for the Revenue to merely allege that the assessee has received more consideration than what is declared, but the Revenue must prove that the assessee had in fact received more consideration. As in the present case the Revenue has not discharged the burden which is casts upon it in terms of the decision of the Apex Court in the matter of K.P. Vargese (supra). Further the Tribunal also recorded that in case the Revenue doubted the calculation of the intrinsic value of shares, it was open to the Revenue to rework the appropriate value so as to justify its allegation that the price at which they were transferred was low. In these circumstances no reason to entertain question. Computation of profits under Section 115JB - whether the provision of doubtful debts has to be added - Held that:- In view of decision to Addition being provision for bad debts on account loaned to its group concern above, issue of adding back the provisions for the purpose of computing book profits does not survive. This is particularly so in view of the fact that the Tribunal has recorded a finding of fact that the provision has been written off. Accordingly, we see no reason to entertain question.

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• 2013 (4) TMI 210
  Higher rate of depreciation on security vans - 30% v/s 40% - Held that:- Issue involved in the present case is no more res integra and is covered by decision of of assessee's own case for assessment years 2001-02 to 2003-04 wherein held that under item [2][ii] of heading III PLANT AND MACHINERY of Appendix I of table of rate of depreciation, the higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire In the present case the assessee has proved that it has used the security vans for transportation of cash valuables etc. It is not the case of the revenue that the assessee has not used the said security vans for its business of transportation of cash, valuables etc., or the same has not been used mainly for business of the assessee of transportation of cash, valuables etc. In case in CIT vs. Gupta Global Exim P. Ltd. [2008 (5) TMI 7 - SUPREME COURT] the assessee's main business was importing timber longs and selling them. Whereas in the case before us, the assessee has proved that the transportation of cash and valuables was its main business. Thus the decision relied on by the DR in CIT vs. Gupta Global Exim P. Ltd [supra] is distinguishable and not applicable to the facts of the present case. That being so the revenue has failed to controvert the finding of the CIT[A] that the assessee is entitled to claim depreciation @ 40% on security vans - Revenue's appeal stands dismissed.

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• 2013 (4) TMI 209
  Exemption of Long Term Capital Gains u/s. 54F - disallowance of one residential flat out of 2 adjacent flats used as one residential unit - Whether the phrase 'a residential house' used in sub-section (1) of Section 54 and 54F means one residential house or more than one residential house independently located in the same building/compound/city ? - Held that:- Considering the case of Ms. Sushila M. Jhaveri [2007 (4) TMI 289 - ITAT BOMBAY-I] exemption u/s 54 and 54F would be allowable in respect of one residential house only. If the assessee has purchased more than one residential house, then the choice would be with assessee to avail the exemption in respect of either of the houses. However, where more than one unit are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen, etc., then, it would be a case of investment in one residential house and consequently, the assessee would be entitled to exemption. As in the present case two adjacent flats were purchased and later on same were converted into one single residential unit. Both the flats were on one floor only and no other dwelling unit there was there on that floor. Builder had constructed two units, but the assessee converted them in one unit only. Spot inspection report clearly prove that there was common passage and only one kitchen was functional with all appliances. There is no doubt that assessee had purchased two flats and later on converted them into one unit for the purpose of residence. Therefore, assessee is entitle to claim exemption u/s. 54 - in favour of assessee.

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• Customs

• 2013 (4) TMI 208
  Application for waiver of pre-deposit of the amount of penalty allowed partly - Held that:- The findings recorded by the adjudicating authority have been taken into consideration by the Tribunal that the allegations against the appellant are of availing the benefit under Advanced Licensing Scheme without actually exporting one lakh pieces of garments.In view of the said fact, the appellant is not entitled to any other benefit than what was granted by the Tribunal. Appellant's contention that a sum of Rs. 7.00 lacs were deposited during the course of the investigation, therefore the said amount should be excluded from the amount of pre-deposit as ordered by the Tribunal is not acceptable as no such concession can be granted to the appellant for the reason that such amount was mentioned in the application to seek waiver of pre-deposit filed before the Tribunal. Since, such fact was pointed out, no reason to find infer that the order of the Tribunal is not after considering the effect of such deposit.

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• Corporate Laws

• 2013 (4) TMI 207
  Rectification of name of company - Sections 20 and 21 & 22 of the Companies Act, 1956 - Company is registered by an identical name or a name that closely resembles the name of a previously registered company - Held that:- Thus, even assuming that the subsequent company is, through inadvertence or otherwise, registered by a name which is identical with or to nearly resembles a name by which a company in existence has been previously registered, it does not follow as a matter of course that it should be directed by the Central Government to change it's name. This is clear from the use of the words “if the Central Government so directs” in section 22(1)(b). The word “if” indicates that it does not follow as a rule that merely because a company is, through inadvertence or otherwise, registered by a name which is identical with or to nearly resembles the name by which a company in existence has been previously registered, it is bound to be ordered to change it's name. The Central Government must satisfy itself that the name by which the subsequent company registered through inadvertence or otherwise is undesirable. Suffice it to state that merely because the name of a company subsequently registered is identical with or too nearly resembles the name of a company which has already been registered, albeit, through inadvertence or otherwise, it does not follow that an order for rectification is bound to be passed. Matter remanded back to ROC for fresh order after considering the relevant facts in an application under section 22.

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• Service Tax

• 2013 (4) TMI 214
  Liability of pay service tax rending - Tenant (leasee) paid the service tax in pursuance of the direction of the court in the matter of writ petition challenging the constitutional validity - adjustment of service tax with the service tax demanded from the landlord - held that:- Admittedly the amount was remitted by the petitioner with the 8th respondent for payment of service tax due from the 4th respondent. Now that the liability has been upheld by the Courts, petitioner wants to discharge the said liability and it is therefore, that the prayer is now made. Thus dispose of this writ petition directing the 8th respondent to ascertain the exact amount deposited by the petitioner and there upon the amount, along with accruals thereon should be paid over to the 6th respondent within four weeks from today.

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• 2013 (4) TMI 213
  Management, Maintenance or Repair Service - Software Services Agreement - period in question from February 2007 to March 2009 - appellant seeks waiver and stay in respect of the adjudged dues - assessee's claim for the benefit of Notification No. 12/03-ST - Held that:- The terms and conditions of the Software Services Agreement (between the appellant and ICICI Bank Corporation Ltd.) produced by the appellant indicate that the service rendered by the appellant comprises adaptation, upgradation, enhancement, implementation etc of IT software. These processes are expressly covered by the definition of "IT Software Service" under Section 65(105)(zzzze) of the Finance Act 1994. This service became taxable with effect from 16/5/2008 only. Admittedly, the appellant has paid service tax under the Head “IT Software Service” from 16/5/2008. In the case of SAP India Ltd. (2010 (9) TMI 289 - CESTAT, BANGALORE) the question whether the same activity could be alternatively classified as maintenance or repair of software was examined by a coordinate Bench and the same was answered in the negative. Also in EBZ Online Pvt. Ltd. (2010 (12) TMI 101 - CESTAT, MUMBAI) was decided in favour of assessee, following the decision in SAP India case. Thus the appellant seems to have reasons to claim support from the said decisions of this Tribunal. Also the reasons stated by the adjudicating authority for rejecting the claim for abatement under Notification No.12/03-ST are questionable. In this scenario, predeposit and stay of recovery in respect of the adjudged dues waived.

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• 2013 (4) TMI 204
  Review Petition against order [2010 (10) TMI 907 - SUPREME COURT] whereby the special leave petition was dismissed - Held that:- As there is delay of 181 days in filing the Review Petition for which no satisfactory explanation has been given. Even otherwise, no merit in the Review Petition

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• Central Excise

• 2013 (4) TMI 206
  Unconditional stay - Recovery in view of 35C ( 2A ) - Whether on expiry of six months from the date of stay order, the Appellant is required to file an application for extension of stay - Held that:- For the period subsequent to the insertion of the Second Proviso the Tribunal should, as a matter of practice, specify the time period during which the stay shall operate after exercising its judicial discretion. The period may be limited or could be co- terminous with disposal of appeal - on consideration of all relevant factors in a given fact situation. In this case, since the stay order dtd . 11.05.2012 does not mention the period, its duration has to be treated as co-terminus with the disposal of appeal. Therefore while the application for early hearing is dismissed, the Department is, directed not to take coercive action for recovery - The miscellaneous application stands disposal of as above. Decision in the case of Poly Fill Sacks vs. Union of India [2005 (2) TMI 148 - HIGH COURT OF GUJARAT] followed.

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• 2013 (4) TMI 205
  Wrong availment of Cenvat Credit - Availing Modvat credit of duty paid on capital goods as required under Rule 57-T(1), declaring that the said goods shall not be used for manufacture of excisable goods which is either exempted from payable of duty by notification or chargeable to nil rate of duty. - Held that:- The Commissioner (Appeals) had clearly held that the appellant's unit had been taken over by the ACGL which are manufacturing dutiable final products and the MODVAT credit on the capital goods in question was legally available to them in terms of Rule 57S(5) of the Central Excise Rules, 1944. This finding of fact was confirmed by the CESTAT. The contention of the Revenue that the credit of capital goods was inadmissible and no benefit could be given to M/s. ACGL under Rule 57S(5) was in terms rejected by both the authorities - The finding of the Assistant Commissioner that the said two units were separate, which finding was arrived at after interpreting the agreement between the parties, was not accepted and the said finding was in terms set aside. The appellant, therefore, had no right to challenge the concurrent finding of facts in this appeal - No case is made out for interference with the judgments and orders passed by both the Authorities - The appeal is dismissed in favour of Assessee.

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• CST, VAT & Sales Tax

• 2013 (4) TMI 215
  Input tax credit denied - as per dept.selling dealer has not paid the tax - Held that:- Sub-section (16) of Section 19 states that the input tax credit availed is provisional. It, however, does not empower the authority to revoke the input tax credit availed on a plea that the selling dealer has not paid the tax. It only relates to incorrect, incomplete or improper claim of input tax credit by the dealer. In the present case, the petitioner-dealer, admittedly, had paid the tax to the selling dealer and claimed input tax credit and that was accepted at the time when the self-assessment was made. Even the pre-revision notices and the orders under challenge fairly state that the petitioner-dealer had paid tax to the dealer. It is, therefore, for the department to proceed against the selling dealer for recovery of tax in the manner known to law. The provision under which the present action has been initiated, namely invoking sub-section (16) of Section 19, does not appear to be correct on the admitted facts as above. All the revision orders revising the input tax credit on the admitted case of tax having been paid to the selling dealer, therefore, are found to be totally incorrect, erroneous and contrary to the provisions of the TNVAT Act and Rules. As a result, all the orders are liable to be set aside.

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