Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 21, 2012
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Articles
News
Notifications
Highlights / Catch Notes
Customs
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Seeks to amend Notification 09/2012 – Customs - Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy. - Ntf. No. 27 /2012-Customs Dated: April 18, 2012
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Seeks to amend Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Ntf. No. 26/2012 - Customs Dated: April 18, 2012
DGFT
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Indian Trade Classification(Harmonised System) of Export and Import Items, 2012 [ITC(HS),2012]. - Ntf. No. 111(RE-2010) / 2009-14 Dated: April 18, 2012
Central Excise
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Regarding CENVAT credit taken or utilized on the process cutting, slitting or printing of aluminium foils. - Ntf. No. 24/2012 - Central Excise (N. T.) Dated: April 19, 2012
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Central Excise (Fourth Amendment) Rules, 2012. - Ntf. No. 23/2012 - Central Excise (N.T.) Dated: April 18, 2012
Case Laws:
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Income Tax
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2012 (4) TMI 361
Addition u/s 69 - Assessing Officer noticed that as per Annexure-B of audit report fresh loan of Rs. 58,42,320/- has been shown which included loan from Sona Traders Rs. 18,24,950 - the bank account and other details were not furnished, the Assessing Officer made addition of Rs. 18,24,950/-as unexplained cash credit under section 68 of the Act - The admitted facts of the issue is that there was opening balance in the account of Sona Traders for a credit balance as evident from the copies of account reproduced by the Assessing Officer in his order - Held that: there is no contrary material or facts available on record nor the Ld. Departmental Representative pointed out any such contrary material to the finding of the CIT(A), in the light of the facts, order of the CIT(A) is confirmed - Appeal is dismissed Regarding addition of Rs. 15,40,000/- made under section 68 - Assessing Officer was of the view that under the circumstances the amount of Rs. 15,40,000/- could not be treated as explained credit entry - In the case under consideration the issue is in respect of gift of Rs. 15,40,000/- from younger sister of the assessee - It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount - Held that: The assessee has also failed to furnish the complete circle of all these transactions that wherefrom original money came to the account of Smt. Anjali Consul which was invested in units as well as in banks in the form of fixed deposits and others - Decided against the assessee
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2012 (4) TMI 360
Additions made by the AO u/s 10A and 80HHE - Penalty of ₹ 10,00,000/- in the AY 2003-04 & ₹ 1,05,00,000/- in the AY 2004-05 levied by the AO u/s 271(1)(c) - During the course of assessment proceedings, the Assessing Officer noticed that the assessee, inter alia, did not receive or bring in convertible foreign exchange into India within the stipulated time on account of exports made by it to the extent of ₹ 13,16,087/- in Leela Unit & ₹ 25,08,077/- in GNR unit - the assessee claimed deduction on the basis of report dated 27.11.2003 of the CA in form no. 56 F & 10CCAF - assessee, in the instant case, merely made a bona fide claim for the deduction in terms of the said certificate while pointing out that the aforesaid amounts towards exports were not realized within the stipulated period. Not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed - The assessee, in the instant case, merely made a bona fide claim for the deduction in terms of the said certificate while pointing out that the aforesaid amounts towards exports were not realized within the stipulated period A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee - Held that: the disallowance of claim for deductions u/s 10A & 80HHE in relation to unrealised exports or disallowance of an estimated amount, having recourse to provisions of sec.14A the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO - Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate - Appeals are dismissed
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2012 (4) TMI 359
Grievance of the assessee relates to the adjustment of ₹ 1,76,56,164 to the ALP of the international transactions between the assessee and its Associated Enterprises (AEs). The TPO passed an order u/s. 92CA of the Act on 28.10.2009 proposing adjustments of ₹ 2,29,86,949 - The ld. counsel for the assessee submitted that the assessee purchased raw material for ₹ 21.09 crores and adopted TNMM method - It was submitted that as per proviso to section 92C(2) of the Act, an option was available to the assessee for adjustment of +/- 5% variation for the purposes of computing ALP - In the present case, the assessee has not disputed the adjustments u/s. 92CA of the Act, but challenging the working of ALP without giving benefit of the option available under the erstwhile proviso to section 92C(2) of the Act, so it becomes relevant to discuss the provisions contained in the erstwhile proviso to section 92C(2) of the Act, which was inserted by Finance Act, 2002 w.e.f. 1-4-2002 - It is clear that the option is available to the assessee for adjustment of +/- 5% variation for the purposes of computing ALP. - In the present case, it appears that the benefit of +/- 5% adjustment has not been given to the assessee for the reason (as mentioned by the TPO) that sales made by the assessee to third parties were higher in comparison to the rates of sale by AEs to the assessee - Held that: the benefit of +/- 5% intended by the erstwhile proviso to section 92C(2) of the Act was not available to the assessee. Regarding the applicability of the amended provisions in proviso to section 92C(2) - the withdrawal of the interpretation placed in circular No 5 /2010 (supra) on the applicability of the amended proviso is sought to be done away by the Corrigendum dated 30.9.2010 and, therefore, such withdrawal shall be effective only after 30.9.2010, even if such Corrigendum is accepted as valid - Held that: the circulars which are in force during the relevant period are to be applied and the subsequent circulars either withdrawing or modifying the earlier circulars have no application. Held that: no justification in the action of the lower authorities in disentitling the assessee from its claim for the benefit of +/-5% to compute ALP in terms of the erstwhile proviso to section 92C(2) of the Act – Appeal is partly allowed
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2012 (4) TMI 358
Appeal against Order of Tribunal - addition in respect of the gift received as unexplained cash credits as well as non-genuine - AO required details of the donor and creditworthiness of power of attorney holder of donor to give confirmation with regard to such gift - opinion that details of business activities of Donor prior to 1999 was not provided – submitted by the assessee money had been transferred through banking channel and it has also come from the NRE account of the donor- Held that:- relationship of the Donor with the present appellant had not been established, so much so that for love and affection or for being an acquaintance also, not an iota of evidence was furnished - It doubted the very source of the gift and since the onus is on the appellant to prove the genuineness of the gift – the issue merits no acceptance. Dis- allowance of set off of short-term capital loss on cancellation of the agreement to sell (banakhat) – Held that:- no capital loss would be allowed if it is more than the cost of an asset - there could be transfer of the asset by the assessee and in the entire transaction of forfeiture of advances, no assets are owned by the assessee and nothing is transferred - there was no question of invoking any of the provisions of the Income-tax Act to allow capital loss - a colourable device was designed so as to get set off against the capital gains earned by the assessee on sale of jewellery declared under the VDIS - tax appeals dismissed.
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2012 (4) TMI 357
Reopening - Deduction u/d 80HHC - assessee, an individual, is in the business of cashew exports as well as running a hotel - whether the processing charges has to be excluded in arriving at the figure of 'total turnover' while computing the export profit u/s. 80HHC(3) - In fact, not only is the said case of a cashew exporter, i.e. as the assessee, as it would appear, the same is only in the assessee's own case (for A.Y. 1993-94) in-as-much as the apex court thereby decided the Revenue's appeal against the decision by the Hon'ble Kerala High Court in the case of CIT v. K. Rajendranathan Nair [2007 -TMI - 2378 - Supreme Court of India] - The apex court per the same has abundantly clarified that the 'processing charges' is an 'independent income' like brokerage, commission, rent, charges, etc. forming part of the gross total income (GTI), being business profit, though having no nexus with the export and, accordingly, is to be deducted at 90% thereof The assessee has, however, raised an alternative plea, claiming that even if so, it is only the income from the processing charges, and not the gross receipt by way of processing charges, that has to be excluded under Explanation (baa) - once 'processing charges' has been held to be an 'independent income', i.e., as rent, commission, brokerage, etc., like treatment in its respect would follow - Held that: The onus, however, to establish the said profit included in the GTI would only be on the assessee, so that in its absence, the statutory prescription in its respect would follow. The matter is accordingly restored back to the file of the AO - Appeal is partly allowed
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2012 (4) TMI 356
Arm's length price - Reference to TPO - TPO passed the order on 16.10.2008, in which upward revision of Rs. 2,95,42,104/- was suggested for bringing the value of the transactions in line with the ALP - AO adopted CUP method, which has been accepted by the assessee - it is mentioned that the assessee did not file form no. 3CEB either with the return of income or in the course of the determination of the ALP - ld. CIT(A) made adjustment of 7.40% on account of increase in the rate of copper in the months of January, February and March, 2005 - The contracts with unrelated parties were fixed-price contracts. The AO adopted ALP on the basis of rate charged from unrelated parties - It appears from the conduct of the parties that the contracts were valid till the end of the last quarter of financial year 2004-05, as sales to them at the fixed rate have been made in January and February, 2005 - the facts show that the fixed price-contracts with unrelated parties took into account the probable increase in prices in copper during the period in which they were entitled to buy the goods - it is held that the assessee is not entitled to get any deductions on account of increase in price quoted at LME Regarding deduction of expenditure incurred in opening the LC, granted by the ld. CIT(A) at 0.35% - e ALP shall be taken to be the arithmetical mean prices, or, at the option of the assessee, a price which may vary from arithmetical mean by an amount not exceeding 5% of such arithmetical mean - where there is only one price say in case of gold, copper, zinc etc., there is no possibility of different prices once purity is same - Decided in favor of the assessee
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2012 (4) TMI 355
Additional Evidence - Rule 46A - right of the assessee - held that:- The assessee has explained that because the Assessing Officer has not specifically called for the evidence, therefore the assessee did not file the same before the Assessing Officer. - It is pertinent to note that the Assessing Officer has raised a specific query whereby the assessee was asked to explain such valuation and subsequent loss. - The assessee filed its reply vide letter dated 7.10.2009. Therefore, the assessee was given sufficient opportunities to explain and substantiate its claim of revaluation of closing stock. - As regard sub rule (4) of Rule 46A that is a discretionary power of the CIT(A) to direct the production of any document, or the examination of any witness for proper adjudication of the case. - the assessee cannot claim any right under sub rule (4) of Rule 46A for producing of any document which otherwise cannot be produced under sub Rule (1) of Rule 46A. Valuation of Closing Stock - deduction in respect of cost of production of feature film as per Rule 9A - held that:- once the expenditure on the production of the film is allowable as deduction as per the provisions of Rule 9A, then no deduction is permissible de-hors the provisions of Rule 9A. Allowance of cost of the feature film as business loss - abandoned project - held that:- the assessee's case is not for the claim of abandoned project or covered under Rule 9(4). Therefore, the case relied upon by the assessee are not applicable in the facts of the present case. Further, the alternative plea of the assessee is pertaining to the issue of allowing the business loss in the assessment year other than the year under consideration, which cannot be adjudicated in the proceedings of this year. Business loss as per Rule 9A(4) - held that:- The deduction shall be allowed in accordance with the provisions of sub rule (2) to sub rule (4) of Rule 9A of I T Rules 1962. Therefore, sub rule (2) to (4) expresses various circumstances and procedures to allow the deduction. Whereas sub rule (5) of Rule 9A stipulates the conditions which are required to be fulfilled for such deduction is allowed. - when the assessee has neither himself exhibits feature film on commercial basis nor sold the rights of exhibits of the feature film nor transfer the rights of exhibits of feature film, then the claim of deduction is hit by sub rule (5) of Rule 9A of the I T Rules and cannot be allowed. Valuation of opening stock of the next year - held that:- in view of the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Mahalaxmi Glass (2009 -TMI - 35481 - BOMBAY HIGH COURT), opening stock of the next year should be valid at the figure which has been taken by the Assessing Officer for the closing stock of this year.
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2012 (4) TMI 354
Treating the Appellant's wholly owned subsidiary in UAE as its proprietary concern and treating income earned by the said wholly owned subsidiary as that earned by the Appellant – A.O stated since the assessee is the only shareholder and holding 100% shares of Vega UAE, it is not a valid company as two shareholders are required - Held that:- Article (1) of the said Memorandum of Incorporation states that this entity is established with corporate entity and independent and separate financial liability from those of its owner and the only situation where the owner will be treated as personally responsible is regarding omission of some specified information that the entity FZE - this is a situation where it specifies that corporate veil may be lifted therefore, because of this restriction alone, it cannot be said that Vega UAE is not a separate legal entity - as per these provisions of Section 2(17) UAE is definitely not an Indian company - As per this Amiri Decree No. (2) of 1996 promulgated by His Highness the Ruler of Emirates of Ajman, Free Zone Establishment can be established with limited liability and shall have the body corporate capacity and it shall belong either to one natural person or one judicial person - in favour of assesee. TP adjustment made by the A.O in respect of sales made to Vega UAE and commission payment considering the controlled transactions of the assessee as comparable for benchmarking the international transaction – Held that:- Vega UAE is carrying both the inventory risk as well as credit risk and therefore is not a marketing service provider but a distributor of the assessee company - ALP has to be determined on the basis of profit on sale of goods by the assessee company as compared to the comparable companies - If the operating cost is higher in Vega US, it cannot be said that the profit margin of other Vega Entities should be at par with the profit margin of Vega US and hence, TP adjustment proposed by TPO and confirmed by DRP on the basis of operating cost/operating profit of Vega US is not sustainable – in favour of assessee. Disallowance u/s 14A of the Income tax Act, 1961 - Held that:- the assessee working regarding interest expenditure and indirect expenditure accepted without any mistake - confirm the disallowance u/s 14A to the extent ₹ 11,48,609/- and delete the balance disallowance made by the A.O - appeal assessee is partly allowed. Disallowance u/s 40a(ia) for non deduction of tax on commission paid on non residents for the services rendered outside India - Held that:- nothing has been brought on record by the revenue to show that the foreign agent to whom commission was paid, had any operation carried out in India as per the provisions of Section 9(1)(i) of Income tax Act,1961- the provisions of Section 40a(ia) are not applicable – in favour of assessee.
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2012 (4) TMI 353
Unsigned assessment order u/s 143(3) - valid or not - revenue contested that since the tax has been determined and demand notice issued and served if the assessment order remained to be unsigned it is merely a procedural irregularity curable under the provisions of section 292B, it is the service of demand notice which is crucial and such failure would invalidate proceedings - Held that:- Provisions of Sec.143(3) of the Act contemplates that the AO shall pass an order of assessment in writing. The requirement of signature of the AO is therefore a legal requirement. The omission to sign the order of assessment cannot be explained by relying on the provisions of Sec.292B of the Act – in favour of assessee.
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2012 (4) TMI 352
Deletion of penalty by CIT(A) imposed u/s 271(1)(c) by the AO ignoring that the assessee has not discharged its onus of proving that there was no intention of concealment on its part and the mistake was bonafide - A.O. noticed that the assessee claimed deduction for expenses on account of fines and penalties - assessee debited an amount of Rs. 1,90,338/- under the head bad debts written off - Held that :- the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified - the explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return - Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision fair and appropriate to vacate the findings of the ld. CIT(A) and restore the matter to his file with the directions to readjudicate the levy of penalty - against assessee.
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2012 (4) TMI 351
Payments made for managerial services in terms of paragraph 4 of Article 13 of the DTAC between India and France - Applicant is a 100% subsidiary of a French company – service agreement on an automatic renewal of its terms for one year at a stretch – assessee contested that managerial services were not included in the concept of “included services” under the India–US Convention and the payments could be understood only as the business income of the French company and the payments to it could not be taxed in India in the absence of that company having a permanent establishment in this country – Held that:- managerial services, within the meaning of paragraph 13 of India- France DTAC, are provided by the French Company to the applicant for a consideration equivalent to the cost incurred by the French Company plus 5% thereof as mark up - services rendered on marketing, on strategy and the training provided to optimize sales techniques all would come within the purview of consultancy services – The services are enduring and they help in promoting the business of the applicant, knowledge and know-how are made available to the applicant. Hence the services agreement are held to be consultancy services are made available to the applicant - in terms of paragraph 2 of Article 13, the tax charged is not to exceed 10% of the gross amount of the fees and the deduction under section 195(1) of the I.T. Act has to be on that basis - contention of assessee on existence of a permanent establishment does not arise in view of the finding that the payments are liable to be taxed as fees for technical services - applicant is required to deduct tax at source under section 195(1) of the Income Tax Act - against assessee.
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2012 (4) TMI 349
Disallowance u/s.40 (a)(ia) on payments made to subcontractors – Held that:- Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. - If tax was deductible and was so deducted during the first eleven months of the previous year, that is, up to February, 2005, the disallowance was to be made if the assessee failed to pay it before 31st March, 2005 - provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005 - assessee had deposited the tax deducted at source on or before the due date for filing return of income u/s.139(1) of the Act and therefore the impugned disallowance deserves to be deleted - in favour of assesee.
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2012 (4) TMI 348
Waiver/ Refund of interest u/s 234A and 234B - Advance Tax - revenue denied the waiver - power u/s 119 - held that:- The first respondent has arrived at a conclusion that the assessee could have fairly and accurately anticipated the income pertaining to financial year 2007-08. The Commissioner has arrived at a conclusion that the majority of expenditure, as mentioned in the tabular chart below paragraph 5, is definite and ascertainable. The said expenditure has actually been incurred within the same year. The assessee maintains computerized books of accounts and they could have made provisions for anticipated expenditure in accordance with the accepted accounting principles. In these circumstances, and when the ultimate conclusion in paragraphs 7 and 8 of the impugned order cannot be said to be either irrational or arbitrary or vitiated to such an extent that no reasonable person would arrive at the same in the given facts and circumstances, that we are unable to interfere with the impugned order in writ jurisdiction. - Decided against the assessee.
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2012 (4) TMI 347
Claim of exemption under Section 54EC - ITAT hold that AO was not justified in invoking Section 50(2) - assessee computed LTCG on the sale of land and having invested the gains in REC Bonds claimed gains as exempt under Section 54 EC of the Act – Held that:- A combined reading of Section 2(11), Section 32(1) and Section 50(2) of the Act shows no depreciation is allowable in respect of land as it is not specifically mentioned as an asset eligible for depreciation - if land is not a depreciable asset and cannot form part of the block of assets in the absence of a rate of depreciation the provisions of Section 50 of the Act cannot be invoked –land as an asset was held for a period of more than 36 months the surplus of the sale price over the indexed cost of acquisition was rightly shown as LTCG AND investment in REC Bonds the entire long term capital gains are exempt under Section 54EC of the Act - against revenue. Cost attributed to the building when it was purchased was only Rs. 68, 00,000/- divided in two properties and the assessee had incurred expenditure on additions to the building up to 31.03.2003 and reckoned from this date the assessee did not hold the property for more than 3 years and, therefore, the sale of land cannot be considered as a sale of a long term capital asset – Held that:- incurred substantial expenditure on additions to the building could well have been because of the compulsions of its business and not because it considered the land to be of considerably low worth compared to the worth of the building. We are unable to appreciate or accept the line of argument adopted by the Assessing Officer – against revenue.
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2012 (4) TMI 346
Arms length price – Reference to TPO - Tribunal deleted the disallowance of the brand fee/ royalty payment while determining the ALP. - Tribunal hold that the royalty/ brand fee payment was justified and held that the TPO was totally wrong in disallowing the same on the footing that the assessee suffered continuous losses. Held that:- There is no reason why the OECD guidelines should not be taken as a valid input in the present case in judging the action of the TPO. - it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred “wholly and exclusively” for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines. Even on merits the disallowance of the entire brand fee/ royalty payment was not warranted. The assessee has furnished copious material and valid reasons as to why it was suffering losses continuously and these have been referred to by us earlier. Full justification supported by facts and figures have been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses. - Decided against the revenue.
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2012 (4) TMI 345
Exemption/deduction u/s 10B - extended period of ten years - meaning and scope of the term undertaking - assessee initially established spinning unit in A.Y. 1992-93 and one more spinning unit was added in each of two years namely A.Y. 1996-97 & A.Y. 1999-2000 - held that:- The expression "undertaking" has not been defined u/s 10B of the Act. The said expression has been explained by the Courts in the context of similar other provisions of IT Act viz. section 15C of 1922 Act, section 80J, 80HH, 80I, 80IA and 80IB of 1961 Act. - an undertaking means a unit/business which has a separate and independent existence distinct from the other units/business; having independent infr-structure, separate plant and machinery being set up with substantial capital investment and having an identifiable output and the profits attributable thereto can be determined. The undertaking existing prior to 1.4.1999 claiming exemption u/s 10B of the Act would be entitled to exemption for the extended period of ten years and deduction under the said sections would be admissible in respect of unit no. 3 and unit no. 4 as well for ten years from the year of start of production in these new units since these units were separate and independent production units. - Decided in favor of assessee. Deduction u/s 10B(4) on export incentives - held that:- Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. - the undertaking is eligible for deduction on export incentive received by it in terms of provisions of Section 10B(1) read with Section 10B(4) of the Act - Decided in favor of assessee.
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2012 (4) TMI 344
Whether on the facts and circumstances of the case, depreciation has to be allowed to the assessee while working out deduction under Section 80 HHC and also while working out income under the head Business” even if not claimed “ by the assessee in the return of income - assessee, while computing the total income, did not claim depreciation in respect of the assets used for the purpose of the assessee’s business. The depreciation was also not claimed while claiming deduction under Section 80 HHC of the Act. Further the assessee had while computing profits under Section 80 HHC (3)(c) from export of goods, which included both, own processed ore and trading goods, added losses incurred in export of trading goods to the profit of the business to arrive at adjusted profit of the business - The assessing officer by his order dtd. 17th March 1997 disallowed the depreciation in computing the gross total income of the assessee, but allowed the depreciation while computing deduction under Section 80HHC – Held that: depreciation has to be allowed to the assessee while working out deductions under Section 80HHC and also while working out income under the head business” even “ if not claimed by the assessee in the return of the income Where the profits of trading goods determined under Section 80HHC(3)(c)(ii) after deducting direct and indirect cost of trading goods from the export turnover of trading goods is a loss, then, whether such loss has to be ignored while computing deduction under Section 80HHC(1) of the Act - In the present case, the export turnover of trading goods is Rs.41,50,59,635/and direct/indirect costs are Rs. 35,81,34,588/and Rs.11,14,89,257/respectively. If the export turnover of trading goods amounting to Rs.41,50,59,635/is reduced by the direct and indirect costs amounting to Rs. 46,96,23,845/( Rs.35,81,34,588/+ Rs. 11,14,89,257/), the result would be loss of Rs. 5,45,64,210/. As per Section 80HHC(3)(c)(ii), the amount so determined i.e. Rs. 5,45,64,210/is liable to be treated as profits derived from export of trading goods - Held that: in calculating the profits under Section 80HHC(3)(c)(i), one has to necessarily reduce the profits determined under Section 80HHC(3)(c)(ii) and if there is loss, then, those losses in export of trading goods have to be adjusted cannot be faulted - The same analogy would apply where the assessee has issued a certificate to a supporting manufacturer – Decided in favor of the assessee
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2012 (4) TMI 343
Deduction u/s 10A - SEZ unit - outsourced job work activities - held that:- It is immaterial that whether the work was done by the assessee inside or the outside the SEZ, once the assessee located in SEZ, the assssee is eligible for deduction u/s 10A irrespective of the fact that the work was done inside or outside the SEZ – Decided in favor of the assessee by way of remand to AO. Regarding interest income charged under the head 'income from other sources' - deduction u/s 10A - held that:- Since the issue under consideration is identical to the case of the assessee in AY 2002-03, respectfully following that decision, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee. However, we direct the AO if assessee incurred any expenses to earn the income, the same may be verified and allowed in view of the section 57(iii) of the Act. Regarding inter-unit transfer - AO noticed that the assessee had not considered inter-unit transfer as a part of total turnover – Held that: the AO has not brought any material on record to show that whether the assessee filed appeal before the Tribunal or not in AY 2002-03. Decided in favor of the assessee by way of remand to AO Regarding deduction u/s 14A of the Act - AO noticed that the assessee had total funds available including loan funds were Rs. 55.59 crores as on 31/03/2003, which included loan funds of Rs. 24.34 crores - Held that: similar issue arose before the Tribunal in assessee's case for AY 2002-03 – Decided in favor of the assessee by way of remand to AO
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2012 (4) TMI 342
Jurisdiction of AO u/s 147 - Deductions u/s 80-1A - held that:- The assessee’s own case was comparable as an indicator/factor which should have been taken into consideration and not that of any other assessee for a different period which could not be the foundation or the reason to reopen assessment. - when this high rate of profit is accepted in subsequent assessment years, mere high profit without anything more could not be the ground for reopening assessment. Regarding reopening of assessment on the ground of excess payment of wages - held that:- where the Assessing Officer holds that expenditure on wages of Rs.2,58,040/- was not sufficient to defray the wages of ten or more workers, the observation of the Assessing Officer was wrong. - we cannot accept that the Assessing Officer was right in reopening assessment. - Decided in favor of assessee.
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2012 (4) TMI 340
Disallowance made u/s. 40(a)(ia) – hire charges - TDS u/s 194I or 194C - held that:- before taking a decision on the applicability of TDS u/s. 194C of the Act on a contract, it is required to be examined whether the contract is a 'contract for work' or a 'contract for sale'. TDS shall be applicable only where it is a 'contract for work' as per the principles laid down in para 7(vi)(a) of Circular No. 681, dated 8-3-1994 and Circular No. 13/2006, dated 13-12-2006. - as per Circular No. 558, dated 28th March 1990, the applicability of the provisions of section 194C will have to be examined with reference to the terms and conditions of each contract. - transactions of the assessee will fall under the provisions of Sec. 194-I of the Act, which is effective from 13/7/2006. Since the assessment year involved in this appeal of the assessee is 2006-07, which is prior to the amendment made by the Taxation Laws (Amendment) Act, 2006 w.e.f. 13/7/2006. - Decided in favor of assessee. Unexplained expenditure - Addition of Rs. 33,13,143/- u/s. 69C - There is no dispute to the fact that the payments in question related to the liabilities brought forward from earlier year, i.e. payments were made against the opening balance of liabilities of the assessment year under consideration. In such circumstances, by no stretch of imagination, provisions of sec. 69C of the Act do apply to such transactions. It is also not disputed that the payments have not been entered in the P/L Account and claimed as expenditure. In that view of the matter, we find no infirmity in the order of ld. C.I.T.(A) in deleting the addition of Rs. 33,13,143/- made u/s. 69C of the Act, which is upheld Regarding estimation of gross profit - The ld. C.I.T.(A) has elaborately discussed the issue and came to a reasonable conclusion that net profit @ 3% instead of 4.5% estimated by the ld. A.O. would meet the ends of justice under the facts and circumstances of the case. After careful perusal of the said observation/finding, we are inclined to uphold the direction given by the ld. C.I.T.(A) to the ld. A.O. to compute contract profit @ 3% in place of 4.5% - Decided in favor of the assessee
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Corporate Laws
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2012 (4) TMI 341
Condoning the delay of 427 days in filing SLPs before this Court - Held that: in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack of bonafide, a liberal concession has to be adopted to advance substantial justice, we are of the view that in the facts and circumstances, the Department cannot take advantage of various earlier decisions - Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few - Appeals are liable to be dismissed on the ground of delay
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2012 (4) TMI 339
Jurisdiction of High Court - Disputes between the parties pertain to the Board meetings dated 01st December, 2004 as well as 1st March, 2005, AGM dated 30th May, 2005, allegation of - siphoning off funds of appellant-company, allotment of 4250 shares by the Ajay Paliwal faction on 3rd February, 2005, alleged transfer of 5000 shares - held that:- It is clear that Section 10F permits an appeal to the High Court from an order of the CLB only on a question of law i.e. the CLB is the final authority on facts unless such findings are perverse, based on no evidence or are otherwise arbitrary. It is settled law that this Court while exercising its appellate jurisdiction under Section 10F of the Act does not entertain, review or reopen questions of fact save on the ground of perversity. It is pertinent to mention that the Registrar of Companies had produced before this Court the original file maintained by it with regard to the appellant company. The said file contains only the Memorandum and Articles of Association of the appellant company as well as its certificate of incorporation. Consequently, this Court is of the opinion that both the parties have failed to prove the minutes of meeting dated 1st December, 2004. Accordingly, the allocation of additional shares and appointment of three additional Directors by both the appellants and respondents are set aside. The appellants, who constitute a minority shareholding cannot abuse their majority on the Board by completely excluding the respondents from the affairs of the appellant-company and further by converting the majority shareholders into minority. There is also no violation of principles of natural justice as allegation regarding siphoning off funds - except a bald denial of siphoning off funds, neither of the appellants gave any explanation in the CLB with regard to withdrawal of the said fund and/or their usage. Consequently, in the opinion of this Court, the CLB rightly concluded that the denial by the appellants of the allegation of siphoning off funds was bald, lacking in particulars and thus constituted an admission of siphoning off funds on their part. The directions given by the CLB in sub-paras (ii), (iii), (iv), (v), (vi) and (viii) of para 34 of the impugned order are upheld. Instead of directions (i) and (vii) of para 34 of the impugned order, the appellants are directed to restore only the amount of Rs. 7.50 lacs siphoned off from the company's account forthwith. Further, the shareholding of the appellant company shall revert back as it stood as on 30th September, 2004
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Service Tax
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2012 (4) TMI 362
CENVAT credit for cellular telephone service - Meaning and scope of the term capital goods - (i) antenna, (ii) tower and parts thereof and (iii) green shelter (same as PFB) - held that:- if the signal transmitting antenna is installed on a tower, the signal receiving antenna could be installed on a high-rise building or flyover, and vice versa. If the tower is held to be an accessory of the antenna erected thereon, a high-rise building or a flyover with an antenna erected thereon will also have to be considered as accessory of such antenna. To our common sense, a huge immovable structure like tower cannot be termed 'accessory' of any goods. A supplementary, subordinate, additional or extra thing which is added to make something more useful, effective, convenient etc. is understood as an accessory as per the cited dictionaries. It will be absurd to hold a gigantic immovable structure to be an 'accessory' of a small equipment placed on its top. All the three terms --- 'components', 'spares' and 'accessories' -- used in sub-clause (A)(iii) of clause (a) of Rule 2 should be understood as standing for movables only. - Not eligible as Capital goods for the purpose of cenvat credit. Alternative plea - If the towers and parts thereof are not capital goods falling under Rule 2(a)(A) of the CENVAT Credit Rules, 2004, it is argued, they are liable to be recognized as 'inputs' under Rule 2(k). - held that:- it has to be, firstly, "goods" and, secondly, "used for providing any output service". The first requirement in this case is not met by the towers which are admittedly immovable structures and ipso facto non-marketable and non-excisable. Cenvat Credit on PFBs which were used as protective shelter for transmission equipments - office chairs - held that:- They are not components or accessories of any goods specified in that sub-clause either. Thus PFBs have no place in sub-clause (iii) also. Hence CENVAT credit cannot be claimed on PFBs as capital goods. The same conclusion can also be reached in respect of office chairs which are goods of Chapter 94. Further the chairs cannot be held to have been used for providing telecom service, in the absence of evidence. CENVAT credit on printers which are office equipments - there is no direct nexus between this item and the output service provided by the appellant. The appellant has not established sufficient nexus between printers and their output service. - Credit denied. Extended period of limitation - held that:- the learned Commissioner did not consider this plea at all. Therefore, in both the cases, the limitation issue requires to be remanded to the learned Commissioner for careful consideration and speaking order.
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