TMI Tax Updates - e-Newsletter
April 19, 2012

Case Laws in this Newsletter:

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

News

1. Allowing ECB for Capital Expenditure on the Maintenance and Operations of Toll Systems for Roads and Highways

2. Liberalization in External Commercial Borrowings (ECB) Policy Relating to Refinancing of Rupee Debt for Power Sector

3. FDI policy - ‘Circular 1 of 2012’

4. HAL Pays RS.699.50 Crore interim Dividend

5. Proposed Disclosure Framework for the Annual Business Responsibility Report Presented to DR. M. Veerappa Moily

6. Order Against Explosive Manufacturers/Suppliers Imposing a Penalty of About Rs.58.83 Crore

7. Order against Medical Equipment Suppliers imposing a penalty of about Rs.3.01 crore.

8. Interests of Investers Needs Protection-Dr. M.Veerappa Moily.

9. Growth Outlook Should Now Improve; Monetary Policy Announcement Should help in investment Revival and Contribute to Strengthening of Business Sentiments: FM.

10. Union Finance Minister, Shri Pranab Mukherjee’s Speech at Annual General Meeting and National Conference of CII.

11. Monetary Policy Statement for 2012-13 Press Statement by Dr. D. Subbarao Governor, RBI.

12. 2nd India-Azerbaijan Inter- Governmental Commission Reviews Bilateral Economic Relations Jyotiraditya Scindia leads Indian Delegation to Baku.

13. India and UK agree to push Trade and Investment.

14. Changes in Tarif Value of Gold, Silver, Brass Scrap (All Grades) and Poppy Seeds Notified.

Notifications

Customs

1. F.No. 437/13/2012-Cus. IV - dated 17-4-2012 - Cus (NT)

Appointment of Common Adjudicating Authority of M/s M.K. Retail Pvt. Ltd. and M/s M.C. Retail Pvt. Ltd.

2. F.No. 437/09/2012-Cus. IV - dated 17-4-2012 - Cus (NT)

Appointment of Common Adjudicating Authority of Shri Rajesh Kumar Gupta, Proprietor of M/s J.P. Enterprises, J.P. House, Nehru Road, Siliguri.

3. F.No. 437/08/2012-Cus. IV - dated 17-4-2012 - Cus (NT)

Appointment of Common Adjudicating Authority of M/s Chimes Aviation Pvt. Ltd. & Others by the Additional Director General, Directorate of Revenue Intelligence, New Delhi.

4. 33/2012 - dated 16-4-2012 - Cus (NT)

Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.

FEMA

5. GSR 292(E), - dated 12-4-2012 - FCRA

Amendment in Foreign Contribution (Regulation) Amendment Rules, 2011 -Rule 15, insertion of rule 6A and substitution of rule 24

Circulars / Instructions / Orders

Service Tax

1. DRAFT - F No 201/05/2011-CX.6 - dated 13-4-2012

Revised format for Excise and Service Tax Return- regarding

FEMA

2. 109 - dated 18-4-2012

Authorised Dealer Category II – Permission for additional activity and opening of Nostro account

3. 107 - dated 17-4-2012

Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Money changing activities.

4. 108 - dated 17-4-2012

Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme.

Customs

5. 11/2012 - dated 12-4-2012

Disposal of confiscated goods – clarification on existing instructions – regarding.

Central Excise

6. 965/08/2012-CX - dated 17-4-2012

Clarification regarding admissibility of Industrial Growth Centres/Industrial Infrastructure/EP Indl. Parks, etc. Units - Exemption from Excise Duty

Highlights / Catch Notes

Income Tax

• Interest Deduction for House Property: Normal and Penal Rates Allowed, But No Deduction for Interest on Interest.

  Case-Laws - AT : Interest claim for deduction u/s. 24(b) in the computation of income from house property - Interest at normal rate allowed - Interest at panel rate allowed - Interest on Interest is not allowed. - AT
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• High Court Reviews Eligibility of Standing Charges for Deduction u/s 80 IC of Income Tax Act.

  Case-Laws - HC : Whether the standing charges payable under the agreement dated 23rd June, 2004 qualify and are eligible for deduction under Section 80 IC - HC
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• Tribunal Finds Assessing Officer's Use of Section 154 for Higher Truck Depreciation Rate Unjustified.

  Case-Laws - HC : Higher rate of depreciation on trucks – the Tribunal was, thus, not justified in holding that the assessing officer had erroneously exercised jurisdiction under Section 154 - HC
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• Industrial Park Registration Sought Under 2002 Scheme for Tax Benefits via Section 80IA of Income Tax Act.

  Case-Laws - HC : An application filed with the Ministry of Commerce and Industries for registration of the industrial park under the Industrial Park Scheme, 2002 to avail of benefits/exemption under Section 80IA - HC
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• Single TDS Certificate for Two Years Raises Double Taxation Concerns; Emphasizes Need for Clarity in Tax Documentation.

  Case-Laws - AT : Double taxation of income - Single TDS certificate for two years - AT
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• Tax Authorities Must Prove Fair Market Value Exceeds Declared Value for Unexplained Investments u/s 69.

  Case-Laws - HC : Unexplained investment u/s 69 - the burden is on the Department to show that the fair market value of the assets as on the date of purchase was more than the value declared by the assessee - HC
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• Supreme Court Expands Definition of "Transfer" Under Income Tax Act, Impacting Slump Sales and Related Transactions.

  Case-Laws - HC : Slump Sale - SC gave definition of “transfer” in Section 2(47) of the Act is inclusive, and therefore, extends to events and transactions which may not otherwise be “transfer” according to its ordinary, popular and natural sense. - HC
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• Notice Issued u/s 153C After Search and Seizure; Assessment Moves to Inspecting Assistant Commissioner for Review.

  Case-Laws - AT : Search and seizure action at the business and residential premises - Notice u/s.153C - the quasi-judicial function of the Income-tax Officer as an assessing authority comes to an end the moment the assessee files objections to the draft order and the power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections - AT
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• Appellate Tribunal Member's Attempt to Frame New Questions Deemed Invalid u/s 255(4) of Income Tax Act.

  Case-Laws - AT : Procedure of Appellate Tribunal – the Accountant Member who is in the minority and had become functus officio wherein he has expressed his inability to give effect to the opinion of the majority and proceeded to frame three new questions to be referred to the President, ITAT again for resolving the controversy cannot be said to be a valid or lawful order passed in accordance with the provisions of section 255(4) - AT
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• Educational Institution Denied Tax Exemption u/s 10(23C)(iiiad) Due to Inactivity During Construction Phase.

  Case-Laws - AT : Educational Institution – exemption denied u/s 10(23C)(iiiad) on ground that institution is not active in field of education - from construction period it is to be stated that educational institution is existing - AT
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• Charitable Trust Loses Tax Exemption as 78% Funds Spent on Religious 'Bhagwat Katha'; Approval Withdrawn u/s 80G(5.

  Case-Laws - AT : 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.....- AT
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• Section 92CA(3) Adjustment: Catering Services to Airlines Treated as Single Transaction for Tax Purposes.

  Case-Laws - AT : Adjustment u/s 92CA(3) - providing catering services to different airlines - 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 - AT
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• Court Rules Against Assessee: 'Infrastructure Fund' Setup Not a Diversion by Overriding Title, Affects Tax Obligations.

  Case-Laws - AT : Diversion by overriding title - maintaining an "infrastructure fund" to which a fixed portion of its receipts is credited and out of which infrastructure related expenses are incurred - Decided against the assessee - AT
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Customs

• Customs Circular 11/2012 Clarifies Efficient, Transparent Disposal Procedures for Confiscated Goods to Prevent Discrepancies.

  Circulars : Disposal of confiscated goods – clarification on existing instructions – regarding. - Cir. No. 11/2012 -Customs Dated: April 12, 2012
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• Common Adjudicating Authority Appointed for M.K. Retail and M.C. Retail Under Notification F.No. 437/13/2012-Cus for Customs Matters.

  Notifications : Appointment of Common Adjudicating Authority of M/s M.K. Retail Pvt. Ltd. and M/s M.C. Retail Pvt. Ltd. - Ntf. No. F.No. 437/13/2012-Cus. IV Dated: April 17, 2012
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• Common Adjudicating Authority Appointed for Customs Cases Involving Siliguri-Based Business Entity, Notification Dated April 17, 2012.

  Notifications : Appointment of Common Adjudicating Authority of Shri Rajesh Kumar Gupta, Proprietor of M/s J.P. Enterprises, J.P. House, Nehru Road, Siliguri. - Ntf. No. F.No. 437/09/2012-Cus. IV Dated: April 17, 2012
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• Common Adjudicating Authority Appointed for Chimes Aviation and Others to Streamline Customs Adjudication Process, per Notification No. F.No. 437/08/2012-Cus. IV.

  Notifications : Appointment of Common Adjudicating Authority of M/s Chimes Aviation Pvt. Ltd. & Others by the Additional Director General, Directorate of Revenue Intelligence, New Delhi. - Ntf. No. F.No. 437/08/2012-Cus. IV Dated: April 17, 2012
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• High Court Orders Department to Pay Rs. 93,622 in Warehousing Fees for Regrind Polycarbonate Imports.

  Case-Laws - HC : Import of regrind polycarbonate - payment of demurrage charges- The Department shall be liable to bear the warehousing charges amounting to Rs. 93,622/- which has been paid by the petitioners - HC
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• Advance Ruling Applications on Import Activities Deemed Non-Maintainable; "Activity" Term Not to Be Narrowly Interpreted.

  Case-Laws - AAR : Maintainability of the applications for Advance Ruling - activity of import has taken place but term activity should not be interpreted in a narrow sense, applicant is not eligible to seek a ruling on its proposed business activity. - AAR
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• Tariff Values Amended for Palm Oil, Palmolein, Crude Soybean Oil, and Brass Scrap Under Notification 33/2012-CUSTOMS.

  Notifications : Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values. - Ntf. No. 33/2012-CUSTOMS (N. T.) Dated: April 16, 2012
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FEMA

• New Circular Sets AML & CFT Standards for Money-Changing Activities Under FEMA to Combat Illicit Financial Activities.

  Circulars : Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Money changing activities. - Cir. No. 107 Dated: April 17, 2012
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• New Guidelines to Strengthen AML/CFT Standards for Cross-Border Inward Remittances under Money Transfer Service Scheme.

  Circulars : Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme. - Cir. No. 108 Dated: April 17, 2012
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Service Tax

• New Format for Excise and Service Tax Returns: Key Updates in Circular No. DRAFT - F No 201/05/2011-CX.6.

  Circulars : Revised format for Excise and Service Tax Return- regarding - Cir. No. DRAFT - F No 201/05/2011-CX.6 Dated: April 13, 2012
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• Court Affirms Appeal Dismissal for Non-Compliance with Service Tax Pre-Deposit Order; Compliance is Crucial for Appeals.

  Case-Laws - HC : Non-compliance of pre-deposit order - dismissing the appeal for non compliance of the predeposit order cannot be faulted - HC
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• Cenvat credit approved for service tax on input services for staff colony, plantation, and godown (Oct 2005 - Jan 2007).

  Case-Laws - HC : Cenvat credit - Input services - service tax credit on the input services pertaining to maintenance of its staff colony, plantation and godown for the period October, 2005 to January, 2007. - Credit allowed - HC
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• CENVAT Credit Rules: Rule 7 allows credit claims on invoices predating registration. No prohibition specified.

  Case-Laws - AT : Cenvat Credit - Under the rule 7 of CENVAT credit rules there is no bar denying the credit in respect of the invoices of the period prior to date of the registration - AT
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• Department's Objection to Pre-Increase Service Tax Payment Deemed Unjustified After Accepting Advance Without Issue.

  Case-Laws - AT : Determination of rate of service tax - The department did not take any objection to such payment in advance. So at a later date when the rate went up, there is no reason for the department to turn around and say that the Appellant should not have paid tax in advance - AT
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• Paying Service Tax Before Show-Cause Notice Doesn't Stop Penalty Notice Issuance Under Tax Regulations.

  Case-Laws - AT : Payment of service tax before issuance of SCN - There is no bar to issuance of a show-cause notice for imposing a penalty. - AT
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Central Excise

• Excise Duty Exemption Clarified for Industrial Growth Centres and Parks under Central Excise Framework.

  Circulars : Clarification regarding admissibility of Industrial Growth Centres/Industrial Infrastructure/EP Indl. Parks, etc. Units - Exemption from Excise Duty - Cir. No. 965/08/2012-CX Dated: April 17, 2012
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• Court Finds Insufficient Evidence to Prove Seized Shoes Were Meant for Sale Without MRP Printing.

  Case-Laws - AT : Non printing of MRP on footwear - footwears were still in factory and from the statement of excise clerk that there are some technical difficulties in printing the MRP it cannot be concluded that the shoes under seizure were going to be cleared without printing the MRP - AT
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• Cenvat Credit Allowed for Excess Captive Electricity: Sale Permitted per Feb 20, 2003 Notification.

  Case-Laws - HC : Modvat / Cenvat Credit - though the generation of electricity is for captive use, if the electricity manufacture is found to be excess, the same is permitted to sell under the notification dated 20-2-2003 - Credit allowed - HC
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• Ferrous waste from worn-out capital goods in manufacturing is dutiable under Central Excise regulations.

  Case-Laws - AT : Dutiability to ferrous waste - Even the part of the capital goods which periodically wear out on account of manufacturing process then such wearing out will be in relation to the manufacturing process. - AT
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• Understanding By-Products vs. Waste: When Valuable Materials Become Disposables.

  Case-Laws - AT : A distinction has to be made between the term ‘by-product’ and the term ‘waste.’ - The by-product would be waste only if it is of no value or negligible value something which the manufacture would want to get rid of - AT
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• Refund Granted for Overpaid Excise Duty Due to Price Deduction Benefit Passed to Customers or Dealers.

  Case-Laws - HC : Refund of excess excise duty paid - depending on the performance of customers/dealers he has passed on the benefit of deduction in the price of the goods. - refund allowed - HC
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VAT

• Court to Decide if Dealer's Delivery Order is a Document of Title Under Central Sales Tax Act, 1956, Section 5(1.

  Case-Laws - HC : Local sale or central sale - Whether delivery order issued by the dealer is not a document of title and therefore, the case of the appellant does not fall under the second limb of section 5(1) of the Central Sales Tax Act, 1956 - HC
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Case Laws:

• Income Tax

• 2012 (4) TMI 338
  Penalty u/s 271 - Whether the appellate authorities were right in holding that the imposition, of penalty by the assessing authority in exercise of power under Sec. 271 (1)(c) of the IT Act 1961 is after satisfying himself that the non-disclosure of income warrants imposition of penalty - held that:- the assessee had filed a return and had disclosed the income. However, later the assessee did file another return in response to the notice issued under Section 148 of the Act and in this return what had not been shown as income earlier but claimed as a cash credit was offered as income. The assessment was concluded on such premises. -In a situation where the assessee admits that a return which had been filed earlier did not disclose a true or full income, which is the case in the present situation, does not warrant proof or burden on the revenue to prove things, as it is well settled legal principle that any proof and manner of proof are all not required when there is an admission. Proof is required where it becomes a contentions issue and person asserting is required to make good his version. But in a situation where it is not contested, but admitted, production of proof is not necessary nor warranted in law. - both the appellate commissioner and the tribunal erred In setting aside the order of the assessing officer levying penalty - Decided against the assessee.

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• 2012 (4) TMI 337
  Order of settlement commission - interest u/s 245D(4) and 245D(6) - held that:- As is evident from the aforesaid procedure laid down u/s 245D of the Act, once the application is admitted, the assessee is required to pay the additional demand on the basis of income disclosed in the application within 35 days of the order of the Commission u/s 245D(1) and in case the demand is not paid within the time allowed interest at prescribed rate is chargeable under 245D(2C). There is no material before us nor there is anything to suggest that in the order of the Settlement Commission that the assessee did not comply with aforesaid order u/s 245D(1) of the Act. Similarly, when the Settlement Commission passes final order under section 245D(4) of the Act, the tax payable in pursuance of such an order is required to be paid by the assessee within 35 days of the receipt of copy of the order and for failure to do so, the assessee is liable to pay interest at the prescribed rate under section 245D(6A). Thus the interest payable under sections 245D(2C) and 245D(6) are in different contexts and are levied independently. Thus, the determination of income by the Settlement Commission is necessarily with reference to the income disclosed in the application filed under the said section in the prescribed form. Moreover, in terms of provisions of sec.245I of the Act, every order of settlement passed under sub-section (4) of section 245D is conclusive as to the matters stated therein and no matter covered by such order, save as otherwise provided in the Chapter XIXA, can be reopened in any proceeding under this Act or under any other law for the time being in force. - Decided in favor of assessee.

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• 2012 (4) TMI 336
  Interest claim for deduction u/s. 24(b) in the computation of income from house property - Normal interest versus penal interest versus interest on interest - allowed at nil by the Revenue as the interest on unpaid capitalized interest is not envisaged for allowance u/s 24(b) – Held that:- the term 'interest' is defined comprehensively u/s. 2(28A) to include on any debt and, more importantly, the same is in respect of 'capital borrowed'. - The word 'capital' is wider in scope than the term 'money', and under appropriate circumstances, as the present one, include part of the debt that the seller, a financial institution, has agreed to extend, on charge of interest, to the assessee– purchaser. The interest deductible is the actual interest payable by the assessee in respect of the capital borrowed, and not one which would have been payable under a different fact setting than the actual one. - the claim must be genuine and not a result of an artifice, arising as a device to inflate the interest expense with tax or other motivation. There is no scope for bifurcating the interest into normal and penal components, as done by the Revenue. The agreement is clear. The capital is to be repaid as per a time schedule. If not paid thereat, additional interest would become chargeable for the period of default, i.e., till the payment of the installment. This would not be interest on interest, but a higher rate of interest on the capital borrowed and, thus, allowable u/s. 24(b) of the Act. Interest at normal rate allowed - Interest at panel rate allowed - Interest on Interest is not allowed.

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• 2012 (4) TMI 335
  Block assessment - Search and seizure - The main contention of the petitioner is that the Assessing Officer has illegally assumed jurisdiction under Section 153C read with Section 153A of the Act, that there was no undisclosed income to be assessed in the petitioner’s hands and therefore a writ of certiorari should issue to quash the proceedings as null and void. - held that:- Once Section 153A is found to be applicable, there will be only one assessment in respect of each of the six assessment years immediately preceding the assessment year - It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person - Even if they tend to act unreasonably or under misplaced enthusiasm, there are adequate safeguards which can be availed of by those persons - Writ petition dismissed

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• 2012 (4) TMI 334
  Whether the standing charges payable under the agreement dated 23rd June, 2004 qualify and are eligible for deduction under Section 80 IC of the Income Tax Act, 1961 - The expression “derived from” in taxation laws means something which has direct or immediate nexus with the specified activity, which in the present case means manufacture or production of article or thing - In the present case, in view of words “derived from”, we have to look at the immediate source which has generated or resulted in the said receipt/income - The final conversion charge shall be re-determined based on discussions related to financing cost of equipment, power costs, actual capital cost based on speed of the machine, import duties, etc - The Fixed Charges are the same as defined in Standing Charges in Clause 12 above but the Return of Equity will be considered as 100% instead of 50% - In the present case, the standing charges were payable because Hindustan Lever Limited did not place purchase orders for the normative production possible - The standing charges obviously do not form part of the supply made and are not treated as sale consideration or the price of the goods on which excise duty or the sales tax etc. would be or is payable - Decided against the assessee

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• 2012 (4) TMI 333
  Writ petition - The petitioner had entered into an agreement of purchase of the property dated 19th November, 1995 - The Appropriate Authority came to the conclusion that the land rate had to be computed on the basis of the FAR and adjustment of +35.71% was made on account of the said additional FAR - In the present case, after the order of acquisition dated 29th February, 1996 was passed, the Central Government paid an amount of Rs.42 lacs to the petitioner on 17th March, 1996 and Rs.2.37 crores to the respondent Nos. 3 and 4 on 22nd March, 1996 - It is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a writ court will indeed bear in mind the conduct of the party who is invoking such jurisdiction - The present writ petition was filed by the purchaser in end of May, 1996, more than two months after the cheques were received and encashed - The agreement to sell records that the conversion charges will be paid by the vendee, i.e., the petitioner. The petitioner had not incurred any such expenses after the agreement to sell dated 19th November, 1995. Form No. 37-I was filed on very next day, i.e., 20th November, 199 - Petition is dismissed

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• 2012 (4) TMI 332
  Higher rate of depreciation on trucks – rectification of error - AO noticed in the return filed that the rate of depreciation claimed by the assessee on trucks at 40% was wrongly allowed as the assessee was not plying trucks owned by it on hire but was utilizing the trucks for its own purposes and hence rate of depreciation applicable was 25% - the Tribunal decided in favor of assessee - Held that:- the assessee was unable to demonstrate with reference to any material that the respondent-assessee was using the vehicles in a business of transportation of goods and the trucks owned by the assessee were being used for public carrier - the Tribunal was, thus, not justified in holding that the assessing officer had erroneously exercised jurisdiction under Section 154 of the Act substantial questions of law claimed above are, therefore, answered in favour of the revenue and against the assessee.

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• 2012 (4) TMI 331
  An application filed with the Ministry of Commerce and Industries for registration of the industrial park under the Industrial Park Scheme, 2002 to avail of benefits/exemption under Section 80IA - petitioner was informed that the date of commencement of park was after 31st March, 2006, their application was not covered under the 2002, Scheme - the 2002 Scheme ended on 31st March, 2006 and the 2008, Scheme was notified on 8th January, 2008 and parks set up on or after 1st April, 2006 but not later than 31st March, 2009 were covered by the said scheme - the petitioner did not fulfil the requirements of 2008, Scheme on the minimum requirement of constructed area required and required minimum number of units - Held that:- when an application was filed on 23rd September, 2006, there was no scheme in place/operation, which had been framed and notified by the Central Government -The 2002, Scheme had lapsed as it was effective, notified and applicable upto 31st March, 2006 - with effect from 1st April, 2006 there was no scheme which had been framed and was gazetted. Therefore, no undertaking could take advantage or benefit of Section 80 IA(4)(iii) of the Act

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• 2012 (4) TMI 330
  Appellate Authorities held that the MODVAT credit should not be added to the income as well as the value of the closing stock for the current assessment year as held by the Assessing Officer – CIT(A) assessing officer should not have rejected the method of accounting employed by the assessee, as it was a standard method of accounting and even as approved by the institute of Chartered Accountants in India and therefore this amount was directed to be deleted – Held that:- follow the view taken by the Income-tax Appellate Tribunal, Mumbai in the case of S.H. Kelkar & Co. Ltd. v. Dy. CIT (1992 - TMI - 58028 - ITAT BOMBAY-A ) and also in the case of Berger Paints India Ltd. v. Dy. CIT (1992 - TMI - 60611 - ITAT CALCUTTA-E ) the assessing officer was not justified in adding the amount on account of MODVAT etc., and therefore upheld the view of the appellate Commissioner and dismissed the appeal of the revenue - deem it proper to remand this matter to the assessing officer on this question, so that the assessee can make good its claim in terms of actual payment etc. disallowance on the ground of obsolescence - the Appellate Authorities held that custom duty paid on goods claimed as irrecoverable and therefore the entire amount of Rs. 9,84,349/- should be allowed as an expenditure despite the assessee not establishing that this amount had become obsolete – Held that:- the understanding and the manner of working out of the extent of obsolescence by the appellate Commissioner was fully justified, having regard to the nature of the business the assessee carried on and the kind of product with which it is dealing with etc – against revenue. Whether the Appellate Authorities were correct in holding that custom duty paid on software and expenses incurred on MRB items should be allowed in full and not at 50% as held by the Assessing Officer and since computer software would become obsolete despite the assessee not producing any proof to claim such obsolescence - Held that:- having regard to the fact that the products got obsolete fairly fast in comparison to the other products in other industry and more so even in the computer industry a software having comparatively lessor shelf life we do not propose to disturb the view taken by the appellate authorities - in favour of the assessee.

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• 2012 (4) TMI 329
  Addition to the regular income as performance incentive received from employer claiming tax deducted at source - reason for the demand is non availability for TDS credit claim - same performance incentive was admitted both in the assessment year 2007-08 and 2008-09, whereas TDS credit is available only for the assessment year 2008-09 – appeal on ground that amount of performance incentive has been taxed twice by the Income Tax Department – assessee submitted that he had aggregated with salary amount, performance incentive of Rs. 4,28,750/- which was given by the said company to him in financial year 2007-08 relevant to the assessment year 2008-09, by mistake as shown in Form 16 issued by the said company – Held that:- If the Income-tax Act authorizes a designated authority to collect tax for State, the same Act always permits the said authority to rectify any proceedings, which has resulted in double taxation - the assessment of Rs. 4,28,750/- to income-tax for the assessment year 2007-08 is against law - direction to the assessing authority to delete the said amount from the assessment relating to the - the appeal of the assessee is to be allowed

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• 2012 (4) TMI 324
  Validity of the order passed u/s 153A r.w.s 143(2) - Search and seizure - held that:- the warrant is issued in the name of the assessee and the address of the premises searched is also the official address of the assessee viz. E-127, Industrial Area, Bhiwadi. The panchnama is prepared for the search operation conducted at this premises and the name of the assessee very much appears in the panchnama. In view of these facts, it is clear that a valid search and seizure operation has been conducted u/s 132 and the order u/s 153A passed by the A.O is as per law. - it is not disputed by the assessee company that search warrant was not issued against the assessee company. A single search warrant can be issued in the name of number of concerns. Once search warrant has been issued then the AO is required to pass the assessment order u/s 153A read with Section 143(3) of the Act. Tax evasion - Fluctuation of share price - Indo-Mauritius DTAA - held that:- The shareholders having the shares as on 17-07-2006 have offered the gain arising from sale of shares by treating the sale consideration at Rs. 318/- per share. Hence, it is not the case that there is a tax evasion. The entities which purchased the shares before 17-07-2006 and has offered the profit. It is not the case of the revenue that such entities have given back profit to the persons from whom such shares were purchased before 17-07-2006. Hence, it is not the case of tax evasion.

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• 2012 (4) TMI 323
  Penalty u/s.271 (1)(c) - assessee, Gujarat State Road Transport Corporation engaged in the business of Mass Transport facilities and allied services - CIT (A) deleted the penalty in respect of loss of Rs. 33,55,15,227/- on the ground of bonafideness of the assessee, however, the CIT (A) confirmed the penalty u/s. 271(1)(c) of Rs. 2 crore as the assessee disclosed this amount of loss only in response to notice u/s. 148 and the assessee has failed to discharge the onus cast upon it within the meaning of Explanation-1 to section 271(1) (c) - In the assessment proceedings the AO while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished - The deemed concealment is provided in explanations often a question arose whether in cases where additions or disallowances made by the AO the penal provisions of section 271(1)(c) would attract - The essence of part B of the explanation is that the person must provide an explanation which is bona fide and he should substantiate that explanation by some evidence with him - Held that: when the assessee is able to offer reasonable explanation based on some evidence, the AO cannot invoke Part B of the explanation unless he has given finding based on some contradictory evidence to disapprove that explanation offered by the assessee - There is no finding of the AO based on some contradictory evidence to disapprove that explanation offered by the assessee was false or the assessee was not able to substantiate the explanation furnished or fails to prove that such explanation is not bona fide and that all the facts relating to the same and material to the computation of his total income has not been disclosed by him - Decided in favor of the assessee

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• 2012 (4) TMI 322
  Deduction claim under section 80 IB - penalty order was issued under section 271(1)(c) - claim allowed by Tribunal - department appeal - Held that:- The Apex Court in the case of CIT vs. Reliance Petroleum Products (P) Ltd (2010 (3) TMI 80 - SUPREME COURT) has laid down that a mere making of a claim which is not sustainable in law, but itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee - there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false - no question of inviting the penalty under section 271(1)(c) of the Act - no error in the order of the Tribunal dismissing the appeal of the Department.

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• 2012 (4) TMI 321
  Addition made in the income as an unexplained investment - AO noticing the valuation report from DVO made an addition – Held that:- the seller of the property was not called by the AO nor there was any material to come to a conclusion that the amount which has been added in the income was actually paid by the assessee - DVO's reported value as 17 lacs does not leads to the conclusion that unexplained consideration of Rs. 5 lacs was actually paid by the assessee -the burden is on the Department to show that the fair market value of the assets as on the date of purchase was more than the value declared by the assessee and that the amount paid has been understated and the assessee has actually paid more than what has been declared – in favour of assessee.

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• 2012 (4) TMI 319
  Slump Sale - The contention of the petitioner is that the ‘transfer’ under the Scheme of Arrangement is not a sale under Section 50B of the Act. The Scheme of Arrangement was sanctioned by the High Court of Calcutta under Section 391 to 394 of the Companies Act, 1956 and is statutory in nature and character. It is pleaded that Section 50B of the Act has no applicability as the ‘transaction’ was under the Scheme of Arrangement and the same is not a ‘slump sale’ as contemplated under Section 2(42C) of the Act. - Held that:– The term ‘transfer’ is used in Section 2(42C) is with reference to the transaction in the nature of ‘slump sale’. Thus any type of “transfer” which is in nature of slump sale i.e. when lump sum consideration is paid without values being assigned to individual assets and liabilities are covered by the definition clause 2(42C) and then by Section 50B of the Act - decision of the Supreme Court in Vania Silk Mills (P) Ltd. Vs. CIT (1991 (8) TMI 2 - SUPREME Court) gave definition of “transfer” in Section 2(47) of the Act is inclusive, and therefore, extends to events and transactions which may not otherwise be “transfer” according to its ordinary, popular and natural sense. The Act i.e. Income Tax Act, 1961 was enacted to tax the income or gains made by an assessee. The Companies Act, 1956, on the other hand serves, and is intended to serve a different purpose and, therefore, when a scheme under Sections 391-394 of the Companies Act, 1956 is sanctioned by the Court, it is treated as a binding statutory scheme because the scheme has to be implemented and enforced. This cannot, or is not, a ground to escape tax on ‘transfer’ of a capital asset under and as per provisions of the Act.

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• 2012 (4) TMI 318
  Search and seizure action at the business and residential premises - Notice u/s.153C and assessment u/s. 153C r.w.s. 144 framed for all the 4 A.Ys - assessee challenged the validity of assessment order in absence of approval of the Joint Commissioner of Income Tax as provided u/s.153D of the Act and the validity of addition of the amount made by A.O. u/s. 69C - revenue submitted that Sec 153 D talks of only approval of the Joint Commissioner of Income Tax for assessment order passed u/s. 153A of the Act - Held that:- that requirement u/s. 153 D for obtaining approval of JCIT is not procedural only but a mandatory requirement - conjoint reading of Sec. 153 A, Sec. 153 B and Sec. 153 D makes it clear that the approval as prescribed u/s. 153 D is also required to be obtained in cases where notice u/s. 153 C had been served -reliance on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Mrs. Ratnabai N.K. Dubhash (1997 - TMI - 17266 - BOMBAY High Court)mentioning cases falling under section 144B of the Act, the quasi-judicial function of the Income-tax Officer as an assessing authority comes to an end the moment the assessee files objections to the draft order and the power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections – in favour of assessee.

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• 2012 (4) TMI 317
  Tax deducted at source - Grossing up of TDS - AO disallowed the assessee’s claim of TDS without actually deducting the same from the payments and added it back – held that:- From the literal reading of the above provision, it is clear that the provision for grossing up of the tax can be made only if the same forms part of the income concerned, where there is an agreement or arrangement to pay the income-tax by the prayer itself. In the case before us, the assessee has not stated anywhere that the labour charges to be paid are agreed to be paid tax free or that the assessee has to bear the taxes. Deposit of TDS before due date of filing of return - Held that:- Assessee has made the provision for such payment of tax at the end of the year, it is to be presumed that there is an arrangement for paying tax free income to the labourers – tax deducted at source at the end of the year can be deposited before the due date of filing of the return of income as decided in co-ordinate Bench of the Tribunal at Mumbai in the case of Bapu Saheb Nanasaheb Dhumal v. ACIT (2010 - TMI - 204337 - ITAT MUMBAI ) given a finding that Sec.40(a)(ia) cannot be invoked if the assessee remitted the TDS within the due date of filing of the return prescribed u/s 139(1) of the IT Act - appeal of the revenue dismissed.

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• 2012 (4) TMI 316
  Procedure of Appellate Tribunal – whether order proposed by AM while giving effect to the opinion of the majority consequent to the opinion expressed by the Third Member, can be said to be a valid or lawful order passed in accordance with the provisions of Section 255 – difference of opinion in respect of additions made u/s 68 and allowability of expenses - Held that:- Third Member was called upon to answer two questions on which there was difference of opinion among the two members who framed the questions and the Third Member in a well considered order, answered the reference by giving sound and valid reasons agreeing with the views of the Judicial Member. Thus, the majority view was in favour of the assessee. We further hold that the proposed order dated 18.2.2010 of the Accountant Member who is in the minority and had become functus officio wherein he has expressed his inability to give effect to the opinion of the majority and proceeded to frame three new questions to be referred to the President, ITAT again for resolving the controversy cannot be said to be a valid or lawful order passed in accordance with the provisions of section 255(4) and, hence, the said order proposed by the AM is not sustainable in law.

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• 2012 (4) TMI 315
  Unexplained cash credit - assessee filled appeal stating that the Tribunal without setting-aside the positive findings of the CIT(Appeals) has chosen to deal with the issue - Held that:- It will be difficult to uphold the contention of the appellant that Tribunal has decided this issue disregarding the orders of the lower authorities. In our opinion not only the Tribunal, has taken note of decisions of both, the Assessing Officer and that of CIT(Appeals), it also categorically made mention of the observations of CIT(Appeals) of absence of any positive material made available by the Revenue to disprove the claim of the assessee which was prima facie proved by furnishing the necessary confirmation. From the overall facts and circumstances, Tribunal noted that there was no sufficient material adduced by the appellant-assessee towards the proof of all the deposits and the depositors. There was absence of PAN numbers in certain cases and addresses of many depositors were lacking. This nowhere indicates that there was any prejudicial approach on the part of Tribunal nor did it conclude either in favour or against the appellant or Revenue. - Decided against the assessee.

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• 2012 (4) TMI 314
  Scope of deduction under Section 10B(4) - the sale proceeds received in convertible foreign exchange i.e. export turnover, the AO reduced there from the canvassing commission paid by the assessee to foreign agents and took only the net export turnover realized for the computation of export profit for deduction - Revenue stated since the assessee has DTA sales, the eligible export profit for deduction has to be worked out in terms of Section 10B(4) of the Act, which provides for working out proportionate profit on export turnover from the total profit - Held that:- There is nothing to indicate in the records or in any of the orders including the assessment order that the agent, who rendered service and to whom payment is made by the assessee, has rendered any technical or professional service answering the definition of "technical service" - no deduction is called for in terms of Explanation 2(iii) of sub Section (9A) of Section 10B for the purpose of computation of deduction under sub Section (4) of Section 10B

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• Customs

• 2012 (4) TMI 328
  Overvaluation of the exported goods - Penalty - Regarding determination of present marketable value - CBEC Circular No.69/97-Cus. dated 08.12.97 - Para 3.b specifically talks about PMV and is up to 150% of AR 4 value no market enquiry requires to be caused but if it is more than 150% of AR 4 price, then market enquiry has to be caused. - held that:- The factual aspect of the purchase of CD ROMs from M/s. Padmini Polymers Ltd, at a price cannot be discarded by the Revenue simply for the reason that the said M/s. Padmini Polymers Ltd. had no domestic sale and even if there is any domestic sale, it was to the tune of just merely 0.5% of the total sales affected by them. It is undisputed that even the 0.5% of domestic sales which were affected by M/s. Padmini Polymers Ltd. were of the value which were the purchase price of M/s. Colourtex. If that be so, the quantum of local sale clearances cannot be determinative factor as to whether the purchase price of M/s. Colourtex of the CD ROMs is incorrect or otherwise.

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• 2012 (4) TMI 313
  Import of two consignments of non-alloy steel slabs - The petitioner sought for clearance of the goods, availing the benefits of the Customs Notification No.21/2002, Sl.No.190B – one consignment was detained and samples were drawn - the petitioner sought for drawal of fresh samples for the purpose of re-test, by a reputed International Agency as per the notification dated 21.5.1955 - test report was in favour - communication by Assistant Commissioner of Customs, the second to carry out a further test, in respect of the 25% of the cargo detained by the authorities of the Customs Department – Held that:- the second respondent does not have the authority or power to order re-testing of the cargo detained by the authorities of the Customs Department, based on the reason that the report of the earlier test done, in respect of the said goods, is in favour of the petitioner - not be open to order re-testing after a lapse of a number of years – in favour of assessee.

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• Corporate Laws

• 2012 (4) TMI 312
  Transmission of shares and to rectify the register of members - The petitioner is kept completely in the dark as to the status of the company, position of fixed assets, present valuation of the assets etc. Section 109A of the Companies Act is clear as to transmission of shares to the legal heirs in case of members who have appointed a nominee - it is settled law that the board of directors of the company even should not make any roving enquiry - When the petitioner does not have locus standi, there is no valid petition in the eyes of law. By continuing with the petition without any locus standi, the petitioner has abused the process of law - respondent No. 1 is not empowered to decide this issue of succession under the law and is bound to rely upon the succession certificate issued by a competent authority designated for this purpose From the perusal of documents filed by the petitioner along with the petition it is seen that he addressed letters dated February 15, 2010, February 17, 2010 and July 12, 2010 to the company requesting transmission of shares on the ground that he is the only legal heir of deceased shareholder - The said fact has been concealed by the petitioner and tried to obtain the orders from this Bench keeping in the dark, and this Bench presumes that the said act is with a mala fide intention and with ulterior motive, and this Bench can dismiss the petition even on that ground. However, the matter is decided on merits - . The stand of the respondent is absolutely correct and this Bench cannot interfere in absence of required documents as per the law or articles of the company - Petition is dismissed

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• Service Tax

• 2012 (4) TMI 327
  Non-compliance of pre-deposit order - SCN was issued – assessee contented that the amounts received were for procuring orders on behalf of their principals which did not constitute taxable service - appeal before the CESTAT – direction to the assessee to make pre-deposit of Rs. 30,00,000/- for entertaining the appeal - Held that:- contracts entered into by the assessee with various parties do not appear to be simply placing orders and earning commission - the credit notes clearly disclose that the Assessee has directly dealt with the goods in lifting providing of the vehicles and delivery of the goods - the decision of the Tribunal in directing the assessee to make predeposit of Rs. 30,00,000/- out of the demand of Rs. 91,07,006/- and dismissing the appeal for non compliance of the predeposit order cannot be faulted – against assessee.

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• 2012 (4) TMI 326
  Co-operative Society rendering rent-a-cab service under the contract agreement - SCN was issued for the period from 1/4/2000 to 30/9/2004 for demand service tax with further penalty under section 75(A), 76, 77 and 78 – Held that:- the levy of service tax was w.e.f. 1/4/2000 on rent a cab service hence assessee may be unaware with regard to this new levy of tax - there was a confusion over applicability of this levy as appellant a cooperative society rendering under the Contract for many years - there were divergent views of different benches of Tribunal, which added appellant’s confusion - if the appellant had persuaded their right of reimbursement of payment of service tax with the ONGC by way of conciliation and arbitration that fact can not negate them the defense of bona fide belief of applicability of service tax - the appellants were unable to pay the amount on the ground of dispute with the ONGC though they were aware of the levy of service tax in absence of any fraud, misrepresentation, collusion or willful mis-statement or suppression, there is no justification in levying the penalty – in favour of assessee.

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• 2012 (4) TMI 311
  Department alleged that assessee being not registered as "Input Service Distributor" are not entitled to CENVAT credit in respect of invoices pertaining to period prior to their obtaining registration – Held that:- Under the rule 7 of CENVAT credit rules there is no bar denying the credit in respect of the invoices of the period prior to date of the registration – decided in favour of assessee as requirement of pre-deposit for hearing of the appeal is waived and recovery of the dues is stayed till disposal of the appeal.

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• Central Excise

• 2012 (4) TMI 310
  Assessee under compulsion began paying central excise duty on the Cable Jointing Kits though there is no manufacture of any excisable goods - assessee challenged the exibility and also claimed MODVAT credit on the inputs - Held that:- the assessee is not a manufacturer of goods as held by this Court that the assessee was only assembling Cable Jointing Kits - availment of MODVAT credit at the relevant time was justified since it was compelled to pay central excise duty on Cable Jointing Kits - the assessee did not act in an illegal manner and for this reason the action taken under the show cause notice issued to the assessee was not justified.

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• 2012 (4) TMI 309
  Voluntary payment of duty u/s 11A(2B) - Time limitation - Interest as per the provisions of Explanation 2 to Section 11A(2B) - Rule 25 of the Central Excise Rules - learned counsel for the Department and having perused the documents on record, as already noted, the finding of the Commissioner that there was no suppression or mis-declaration on the part of the respondent has achieved finality - It can be seen that under sub-Section (1) period of limitation for issuing notice for recovery of duty not paid, short paid or erroneously refunded is one year unless, of course, such non-payment, short payment, or erroneous refund of duty arises by the reason of fraud, collusion or wilful misstatement or suppression of facts or contraventions of the provisions of the Act or the Rules with intent to evade payment of duty - In the present case, when the period of limitation had already expired and when the extended period beyond one year was not available to the department as held by the Commissioner himself in his order in original, to our mind the respondent was not liable to pay even the basic duty - If by efflux of time and in absence of availability of extended period of limitation, such show cause notice itself had become time barred, any payment made voluntarily by the manufacturer cannot be viewed as one made under sub-Section (2B) of Section 11A - Appeal is dismissed

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• CST, VAT & Sales Tax

• 2012 (4) TMI 325
  Appellant in relation to respondent No.2 firm, brother of the appellant, moved application under the provisions of Right to Information Act, 2005 related to the returns filed with the Sales Tax Commissioner - CPIO and CIC refused to divulge the aforesaid information – Held that :- Section 8(1)(d) levies no obligation to give any citizen information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information - present appeal is nothing but misuse of the process of law and hereby dismiss with costs of Rs. 50,000/- and cost of Rs. 25,000/-imposed by the learned Single Judge.

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