TMI Tax Updates - e-Newsletter
April 17, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Central Excise

Articles

1. Transfer of Right to use goods-deemed sale or a service

   By: AMIT BAJAJ ADVOCATE

News

1. Union Finance Minister Dedicates SPMCIL Buildings for Satya Bharati School at Dhamua & Pomia in West Bengal.

2. Auction for Sale of Government Stocks.

3. Index Numbers of Wholesale Prices in India (Base: 2004-05=100) Review for the month of March, 2012 .

4. Joint Press Statement of the Commerce Ministers of India and Pakistan.

5. Union Finance Minister to Leave for four Days’ Official Visit TO USA on Wednesday, 18th April 2012 to Attend Spring Meetings of World Bank and IMF; Also to Attend G-20 Finance Ministers’ and BRICS Finance Ministers’ Meetings along with Several Bilateral Meetings on the Sidelines.

Notifications

Customs

1. Corrigendum - dated 13-4-2012 - Cus

7th Corrigendum of notification no. 12/2012 – Customs.

VAT - Delhi

2. F.3(25)/Fin.(Rev.-I)/2011-12/DSIII/288 - dated 28-3-2012 - DVAT

Delhi Value Added Tax - Amendment to Section 74 shall be effective from 31-3-2012, amendment to section 81 and section 106 shall be deemed to have come into force from 1-4-2005 and amendment to section 2, section 3, section 28 and section 29 shall come into force w.e.f. 1-4-2012

3. F.3(16)/Fin(Rev-I)/2011-12/DSIII/278 - dated 26-3-2012 - DVAT

Amendments in the Sixth Schedule of Delhi Value Added Tax Act, 2004.

4. F.7(433)/Policy-II/VAT/2012/1464 - dated 23-3-2012 - DVAT

Information to be filed on-line for movement of specified Petroleum Products, Tobacco and Gutka.

5. F.5(54)/P-II/VAT/2010-11/1315-1327 - dated 7-3-2012 - DVAT

Amendment in Sixth Schedule of Delhi VAT Act.

6. F.14(19)/LA-2011/lclaw/5 - dated 13-2-2012 - DVAT

Amendments by Delhi Value Added Tax (Amendment) Act, 2012 – Sections 2, 3, 28, 29, 74, 81 & 106 {for effective date – See notification dated 28.03.2012].

Highlights / Catch Notes

VAT

• Delhi VAT Amendments: Changes to Sections 74, 81, 106, 2, 3, 28, and 29 Announced, Effective 2005 and 2012.

  Notifications : Delhi Value Added Tax - Amendment to Section 74 shall be effective from 31-3-2012, amendment to section 81 and section 106 shall be deemed to have come into force from 1-4-2005 and amendment to section 2, section 3, section 28 and section 29 shall come into force w.e.f. 1-4-2012 - Ntf. No. F.3(25)/Fin.(Rev.-I)/2011-12/DSIII/288 Dated: March 28, 2012
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• Delhi VAT Act Sixth Schedule Amended: Updates to Tax Framework for Improved Compliance and Efficiency.

  Notifications : Amendments in the Sixth Schedule of Delhi Value Added Tax Act, 2004. - Ntf. No. F.3(16)/Fin(Rev-I)/2011-12/DSIII/278 Dated: March 26, 2012
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Case Laws:

• Income Tax

• 2012 (4) TMI 308
  Educational Institution – exemption denied u/s 10(23C)(iiiad) on ground that institution is not active in field of education, and it is in process of establishing - AY 2003-04 & 2004-05 Held that:- It is undisputed that Institution has been granted registration u/s 12A though on 29th September 2009 which infers aims and objects of the society was to run an educational institution and they are not for the purpose of profit. Apex court in case of ACIT v. Surat Art Silk Cloth Manufacturer Association(1979 - TMI - 5217 - Supreme Court - Income Tax) held that the test of pre-dominant object of the activity is to be seen whether it exists solely for education and not to earn profit. In the present case, society is in existence but actual educational activity has not taken place. Therefore in view of decisions of Calcutta High Court, Kerala High Court, wherein it has been observed that from construction period it is to be stated that educational institution is existing, we direct the A.O. to grant benefit of section 10(23C)(iiiad) – Decided in favor of assessee.

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• 2012 (4) TMI 307
  Withdrawal of exemption u/s. 80G(5) – Charitable Trust - CIT(A) withdrew approval u/s 80G(5) on finding that Trust has spend about 78% of its total receipt for organizing 'Bhagwat Katha' i.e. activities of religious nature, which is in violation of Section 80G(5B) in FY 07-08 – AY 08-08, 09-10 - Held that:- Expenditure of religious nature exceeds the qualifying limit of 5%, in AY 2008-09. The withdrawal of the approval once for all on the basis of an activity restricted to a particular year would be unjust, amount as it would to castigating a person acting bona fide, particularly considering that its objects are purely charitable in nature. The charge of un-genuineness in our view would imply that the institution is not undertaking any charitable work or engaged in impermissible activity/s in the guise of charitable objects, which would be, a very un-charitable and unwarranted view to take. Therefore, withdrawal of approval u/s. 80G would be sustainable in law only in respect of the first year, i.e., AY 2008-09, while the matter would require a review for the subsequent years. In other words, the section would continue to apply, and the approval valid, for the years for which the said limit is not exceeded – Decided partly in favor of assessee for statistical purposes.

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• 2012 (4) TMI 306
  Additions made for unaccounted donations entered in the four diaries recovered from the business premises of Shri A.K. Patil who was the Hon. Secretary of the trust - Shri Patil in one statement at the time of survey mentioned donations had been collected on the instructions of the trustees and later in statement that donations were collected in his personal capacity - Held that:- confirming addition of unaccounted donations in case of the assessee - CIT(A) has given a clear finding that the assessee could not show any co-relation between entries and the summary and therefore claim was rejected. Assessee raised ground of applicability of provisions of section 13(1)(c) - applicability of provisions of section 13(1)(c) in assessment years 2000-01 to 2003-04 on ground of unaccounted donations having been used by Hon. Secretary and trustees of the trust. The ld. AR for the assessee has argued that provisions of section 13(1)(c) were not applied by AO and therefore the same cannot be applied by CIT(A), for the first time – Held that:- settled legal position that powers of CIT(A) are co-terminus with that of the AO and he can do what the AO can do and can also consider aspects which have been omitted to be considered by the AO. Allowability of deduction/exemption under section 11 of the IT Act for assessment years 2001-02 to 2006-07 – Held that:- assessee was not registered under section 12AA for the assessment year 2000-01 and, therefore, not entitled to exemption under section 11 - As regards assessment years 2004-05 to 2006-07, the registration of the assessee under section 12AA has been restored by the Tribunal and no violations of provisions of section 13(1)(c) have been found in these years and therefore, exemption under section 11 has to be allowed to the assessee. Assessee has challenged the assessment orders passed by the AO on the ground that the same were barred by limitation – Held that:- provisions of section 142(2A) were not applicable and the AO was not entitled to avail extended period and the assessments were thus barred by limitation. The ld. AR for the assessee, however, at the time of hearing of these appeals did not press this ground. This ground is therefore, dismissed as not pressed in all the assessment years. Assessee had treated these donations as capital receipts on the ground that the same were corpus donations - CIT(A) was convinced by the explanation given by the assessee – Held that:- There is no dispute that the assessee had issued receipts in each and every case on which it was specifically mentioned and that donations were received towards corpus - Assessee also filed confirmations from all donors giving name, address, PAN, mode of payment, etc. in which it was clearly mentioned that donations were towards corpus – against revenue. Whether the voluntary contribution even if made with specific direction to form corpus of the trust could be assessed as income ? - Held that :- For assessment year 2000-01 it was not registered, the voluntary contributions with direction to form corpus have to be treated as income - In assessment years 2001-02 to 2003-04 also provisions of sections 11 and 12 were not applicable due to violation of provisions of section 13(1)(c) and voluntary contributions towards corpus have to be treated as income - in assessment year 2004-05 to 2006-07 in which the assessee was registered under section 12AA, and in which no violation of section 13(1)(c) were found, voluntary contributions have to be treated as capital receipt, not taxable. Disallowance of depreciation - assessee had filed returns of income as trust and claimed capital expenditure as full deduction in the computation of income -– Held that:- allowing full deduction in respect of capital expenditure in relation to the provisions of section 11 only meant that expenditure incurred on acquisition of capital asset to be used for charitable /religious purposes has to be treated as application of income. The depreciation has to be allowed in respect of capital assets so acquired and used for charitable activity – decided in case of CIT v. Institute of Banking Personnel Selection (2003 - TMI - 11526 - BOMBAY High Court) Disallowance of deduction claimed by the assessee on account of payment to Director of Technical Education – Held that:- The case of the assessee is that extra students had been admitted inadvertently in violation of administrative guidelines thus there was no infraction of law. The ld. DR, could not explain before us as to how there was any violation of statutory provisions in admitting students. Therefore, in our view the deduction claimed cannot be disallowed under the provisions of Explanation to section 37(1) – against revenue

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• 2012 (4) TMI 305
  Adjustment u/s 92CA(3) - providing catering services to different airlines - joint venture between IHCL at 51% stake and SATS at 49% stake – Taj Sats supplied processed food to AE's using CUP method - TPO made the adjustment to the arm's length price charged by Taj Sats to its AE after comparing the average of prices per item of meal charged to other Airlines - Held that:- the food supplied is a basket containing individual items rather than supply of the items individually. Therefore the entire transaction has to be viewed as a single transaction - A.O. was not justified in making the adjustment of Rs. 460391/-u/s 92CA(3) of the Act – in favour of assessee. Addition u/s 14A - assessee company has earned dividend income from Tata Mutual Funds claimed as exempt u/s 10(35) - A.O disallowed 10% of CFO's remuneration amounting u/s 14A of the I.T. Act relying on fact that the CFO definitely spent some time for investment decision – Held that:- since the assessee has not allocated any expenditure for earning tax free dividend income and since the disallowance made by the A.O. on adhoc basis appears to be on higher side, a reasonable disallowance of Rs. 1,50,000/-. Dis-allowance of claim of depreciation on various intangible assets grouped under the head 'Goodwill' – that the business of IHCL was acquired by the assessee as a going concern – The consideration is not paid independently for each asset or liability – Held that:- when depreciation has neither been claimed nor allowed on intangible assets in the preceding years the assessee, in our opinion, cannot be allowed to claim depreciation on intangible assets in the impugned assessment year – against assessee.

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• 2012 (4) TMI 304
  Search and seizure - Undisclosed income - assessee's claim was that the actual sale as against the later agreement was for an amount of Rs. 1,32,40,000/- and not for Rs.2 crores as is revealed from the earlier agreement - Assessing Officer has noticed that the Stamp paper used for the agreement dated 23.5.2000 and 1.6.2000 has both been purchased on 23.5.2000 from the very same vendor - It is not clear as to how the Tribunal came to the finding that the agreement dated 23.5.2000 was one which was not enforceable and we are afraid that no reasonable person could reach the conclusions arrived at by the Tribunal - Held that: The documents seized on search as also the statement recorded under section 132(4) provides ample evidence to support the actual consideration of Rs.2 crores and we answer the question of law raised by the revenue in favour of the revenue since the deletion made by the Tribunal was without adverting to the material seized and conclusion of the Tribunal with respect to the actual sale consideration is unreasonable and perverse. Regarding set off of carried forward loss from the assessment year 1999-2000 - Assessing Officer as well as the 1st appellate authority treated the same as undisclosed income for the assessment year 2000-01 - assessee failed to file a return in the assessment year 2000-01 and only after the search on 4.10.2001 and notice under Section 158BC dated 9.10.2002 filed a return of income in Form No.2B for the block period 1.4.1995 to 4.10.2001 that too on 19.2.2003 - Decided against the assessee

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• 2012 (4) TMI 300
  Penalty u/s 271B - It was noticed by the assessing authority that the assessee has failed to furnish audit report alongwith the necessary enclosures in the prescribed form within the stipulated period, as required under section 44AB - held that:- If this benevolency is going to be delivered for all the time to come, what is the sanctity of section 271B remaining in the statute book? The law enacted by the Parliament must be respected and must be followed. If the Act says that penalty is leviable in certain circumstances, penalty must be levied unless the victim shows that sufficient reasons were prevalent to justify the omission caused. Even though evidences cannot be produced in all cases, the explanations offered by an assessee must be plausible and convincing and answerable to the reasoning of a man of ordinary prudence. We are not expecting scientific reasons with mathematical precisions. We are expecting worldly but convincing reasons. - is a fit case to levy penalty under section 271B.

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• 2012 (4) TMI 299
  Petition to direct additional 4th respondent to expeditiously consider stay petition – appeal and stay petition are pending consideration - Held that:- 4th respondent is directed to consider stay petition and pass order within 8 weeks of the order. Meanwhile further proceedings for recovering the amount due under said orders will be kept in abeyance.

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• 2012 (4) TMI 298
  Remittance of matter back to original authority by Tribunal – A.O. made addition of chargeable interest indicated as hire purchase financial income – addition deleted by CIT – Held that:- Though Tribunal has not gone into the merits of the view taken by the CIT (Appeals), but at the same time no question of law arises in a matter of this nature from the remittance order of Tribunal – Appeal dismissed.

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• 2012 (4) TMI 297
  Dis-allowance u/s 36(1)(viii) - assessee claimed deduction on the ground that it had given loans and advances to various persons for construction of residential units - dis-allowance made on ground of insufficient evidences - Held that:- It is undisputed that assessee did not submit full details of the borrowers and their construction or acquisition of houses from the borrowed funds. It is not a case where large number of notices were issued and only three out of such noticees came forward suggesting that the fund was not utilized for such purpose. It was a case wherein on three random notices being issued, all the three borrowers declined to have used the funds either for construction or for purchase of the house. Tribunal rightly held that assessee was not able to discharge the onus cast upon it. No substantial question of law arises - Appeal dismissed.

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• 2012 (4) TMI 296
  Legality of proceedings initiated by Assessing Officer u/s 154 when there were no mistakes apparent from records - AO sought to revise the assessment by denying deduction u/s 80HHA & 80I on ground that assessee cannot be regarded as small scale industry - Held that: CIT(A) rightly held that after exclusion, the aggregate value of the P&M relating to industrial undertaking comes less than Rs. 35 lacs, therefore, AO has correctly allowed relief in original order. Further, it is the concurrent finding given by both CIT(A) and Tribunal that the AO was not justified in rectifying the order u/s 154 since there is no patent or glaring mistake on the face of the record regarding the original assessment that warrants rectification u/s 154. See T.S.Balaram, Income Tax Officer Vs. Volkart Brothers (1971 (8) TMI 3 - SUPREME Court)- Decided in favor of the assessee

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• Customs

• 2012 (4) TMI 303
  Recovery of short-levy of anti-dumping duty – permissibility of such recovery before introduction of Section 9A(8) into the Customs Tariff Act, 1975 on 12-5-2006 - applicability of Section 28 of the Customs Act, 1962 – invocation of extended period u/s 28A(1) - Held that:- Amendment to Section 9A(8) to the Customs Tariff Act, 1975 is retrospectively effected from 1st January, 1995 – Decided in favor of revenue. It is observed that Tribunal has not dealt with the contention of the assessee on merits and have adjusted deposit made by assessee during the investigation towards demand raised invoking extended period of limitation. Question of adjusting that amount would arise only if the demand is legally sustainable. Therefore, since plea relates to demand being time barred, we restore the matter to the file of CESTAT for de novo consideration.

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• Corporate Laws

• 2012 (4) TMI 302
  Petition filed by Director of Partnership Firm - the Company amended its MOA - the Company has only two Promoters/Directors - one Director who is also a Partner of the Firm requested the Firm to advance monetary aid in financial crises – firm advanced the sum for six years through account payee cheques – Firm issued a statutory notice of demand - The Firm produced a copy of the Balance Sheet of the Company for the year 2009-10 filed before the ROC reflecting the dues payable to the Firm - Petition filed by the Firm under the aforesaid provisions for winding up. - The Company contends that the Firm has been dissolved much earlier to the filing of the petition and it has no locus standi to maintain a petition for winding up –the company contented that it has never admitted the alleged debt and has denied the debt in its reply notice to the petitioner - Held that: - There is no explanation by the Company as to why it did not adopt the mode of serving the notice by registered post or through a lawyer - The production of the copy of the notice and the certificate of posting, after about four months of the order date would make it clear that the claim of the Company is mala fide and unbelieveable -it is to be held that the dues payable to the Firm is a crystallized form of debt and there is no impediment for this Court to pass appropriate orders for payment of this debt to the Firm - The amount of Rs. 24,75,128/- deposited in this Court be transferred to m the arbitration proceedings pending between the parties

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• Central Excise

• 2012 (4) TMI 301
  Treatment of duty paid vide TR-6 Challan by Tribunal as deposit and not the duty – period of limitation in respect of refund claim - Held that:- Tribunal has allowed claim of assessee relying on the judgment given in case of Parle International Ltd. V/s. Union of India (2000 - TMI - 45849 - High Court Of Gujarat At Ahmedabad - Central Excise). Since the same has been reversed by Apex Court in 2005, order of the CESTAT is set aside and the matter is restored to the file of the CESTAT for fresh consideration.

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