TMI Tax Updates - e-Newsletter
April 4, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. Cost Accounting Record Rules 2011 to Service Industry

   By: ajay singh

2. Unjust and unreasonable amendment vide notification dated 30.03.2012 withdrawing higher rate of depreciation for certain renewable energy machines to be installed on or after 01.04.2012. A request for reconsideration.

   By: DEVKUMAR KOTHARI

News

1. Amendment in the provisions for filing of return of income.

2. Joint Press Statement by the Chancellor of the Exchequer of UK and the Finance Minister of India After the Fifth Round of UK-India Economic and Financial Dialogue.

3. Calendar for Auction of Government of India Treasury Bills for the quarter ending June 2012 issued .

4. Change in Tariff Value of Gold, Silver, Brass Scrap (All Grades) and Poppy Seeds Notified .

5. Government of India (GOI), Asian Development Bank (ADB) and States of Tamil Nadu and Uttarakhand sign a $ 43.84 Million Loan Agreement for the Second Tranche of Infrastructure Development Investment Program to boost Tourism in two States.

6. India’s Foreign Trade: February, 2012.

Notifications

Central Excise

1. 22/2012 - dated 30-3-2012 - CE

Amend notification no. 18/2012-Central Excise - Prescribes peak rate of excise duty as 12% in most of the products and 6%, 14% adn 15% in certain cases .

2. 21 /2012 - dated 30-3-2012 - CE

Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96.

3. 22/2012 - dated 30-3-2012 - CE (NT)

Central Excise ( Third Amendment) Rules 2002.

Companies Law

4. S.O. 268(E) - dated 13-2-2012 - Co. Law

Indian Government Accounting Standard 3 on Loans and Advances made by Governments.

Customs

5. 17/2012 - dated 30-3-2012 - ADD

Anti-dumping duty on import of bias tyres, tubes and flaps falling under tariff items 4011 20 90, 4013 10 20 and 4012 90 49 of the First Schedule to the Customs Tariff Act, 1975, originating in, or exported from, China PR and Thailand.

6. 30/2012 - dated 30-3-2012 - Cus (NT)

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

7. 29/2012 - dated 30-3-2012 - Cus (NT)

Amends notification no. 101/2004-Customs (N.T.) - Thailand — Interim Rules of origin for preferential tariff concessions for trade between India and Thailand.

DGFT

8. 110 (RE-2010)/2009-2014 - dated 2-4-2012 - FTP

Validity of extension for export of 6,50,000 tons of wheat products upto 31.03.2013.

Circulars / Instructions / Orders

FEMA

1. 101 - dated 2-4-2012

Overseas Direct Investments – Liberalisation / Rationalisation.

2. 102 - dated 2-4-2012

Use of International Debit Cards/Store Value Cards/Charge Cards/Smart Cards by Resident Indians while on a visit outside India.

Central Excise

3. 964/07/2012-CX - dated 2-4-2012

Clarification regarding classification of structural components of Boiler and admissibility of CENVAT credit on these structural components – reg.

Highlights / Catch Notes

Customs

• Notification No. 30/2012-Customs (N.T.) amends tariff values for palm oil, palmolein, crude soybean oil, and brass scrap.

  Notifications : Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values. - Ntf. No. 30/2012 - Customs (N. T.) Dated: March 30, 2012
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• India-Thailand Trade Boost: New Interim Rules for Preferential Tariff Concessions Under Notification No. 29/2012-Customs (N.T.

  Notifications : Amends notification no. 101/2004-Customs (N.T.) - Thailand - Interim Rules of origin for preferential tariff concessions for trade between India and Thailand. - Ntf. No. 29/2012 – Customs (N. T.) Dated: March 30, 2012
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• Anti-dumping duties imposed on bias tyres, tubes, and flaps from China and Thailand under Customs Tariff Act, 1975.

  Notifications : Anti-dumping duty on import of bias tyres, tubes and flaps falling under tariff items 4011 20 90, 4013 10 20 and 4012 90 49 of the First Schedule to the Customs Tariff Act, 1975, originating in, or exported from, China PR and Thailand. - Ntf. No. 17/2012-Customs (AD) Dated: March 30, 2012
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DGFT

• DGFT extends export validity for 650,000 tons of wheat products until March 31, 2013, per Notification No. 110.

  Notifications : Validity of extension for export of 6,50,000 tons of wheat products upto 31.03.2013. - Ntf. No. 110 (RE-2010)/2009-2014 Dated: April 2, 2012
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FEMA

• Resident Indians Can Use International Debit and Smart Cards Abroad Under FEMA Guidelines, April 2, 2012.

  Circulars : Use of International Debit Cards/Store Value Cards/Charge Cards/Smart Cards by Resident Indians while on a visit outside India. - Cir. No. 102 Dated: April 2, 2012
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• FEMA Circular No. 101: Streamlining Overseas Direct Investments for Easier Global Economic Engagement and Compliance.

  Circulars : Overseas Direct Investments – Liberalisation / Rationalisation. - Cir. No. 101 Dated: April 2, 2012
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Corporate Law

• Indian Government Accounting Standard 3: Framework for Transparent Reporting of Government Loans and Advances for Better Accountability.

  Notifications : Indian Government Accounting Standard 3 on Loans and Advances made by Governments. - Ntf. No. S.O. 268(E) Dated: February 13, 2012
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Indian Laws

• India Updates Tax Return Filing Rules: Key Changes to Deadlines and Documentation for Streamlined Compliance. Review Now to Avoid Penalties.

  News : Amendment in the provisions for filing of return of income.
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Central Excise

• Clarification on CENVAT Credit Eligibility for Structural Components of Boilers Under Central Excise Regulations.

  Circulars : Clarification regarding classification of structural components of Boiler and admissibility of CENVAT credit on these structural components – reg. - Cir. No. 964/07/2012-CX Dated: April 2, 2012
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• Excise Duty Amendment: New Peak Rate Set at 12% with Variations at 6%, 14%, and 15% for Specific Cases.

  Notifications : Amend notification no. 18/2012-Central Excise - Prescribes peak rate of excise duty as 12% in most of the products and 6%, 14% adn 15% in certain cases . - Ntf. No. 22/2012-Central Excise Dated: March 30, 2012
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• Central Excise Rules 2002 Amended: Streamlining Tax Procedures and Enhancing Compliance with 2012 Updates.

  Notifications : Central Excise ( Third Amendment) Rules 2002. - Ntf. No. 22 /2012--Central Excise (N.T.) Dated: March 30, 2012
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• Central Excise Duty Rates Updated for Goods in Chapters 1-96 per Notification No. 21/2012, Effective March 30, 2012.

  Notifications : Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96. - Ntf. No. 21 /2012-Central Excise Dated: March 30, 2012
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Case Laws:

• Income Tax

• 2012 (4) TMI 479
  Addition - principal agent relationship - addition on the ground of surplus in RGCTP account on sale of development rights to M/s Parsvnath Developers Ltd., made by the AO - The assessee-Board and the Chandigarh Administration are not natural persons but juristic entities and hence there cannot be any oral agreement between them to create agency. The admitted position is that there is no written contract between them to create agency. After taking into account all the materials brought on record including the legal position, we confirm the finding of the AO/CIT(A) that the assessee-Board was not an agent of the Chandigarh Administration in so far as the said project is concerned. All the pleas taken by the assessee in this behalf are therefore rejected. . Regarding diversion of income - if the income, before it reaches the assessee, is diverted away by superior title so that the assessee, when he receives the income, has to pass it on to a third party, the portion passed on, or is liable to be passed on, is not the income of the assessee but of the person to whom it is passed on or is liable to be passed on - Held that: there is no diversion of income arising from the commercial exploitation of land owned by the assessee by an overriding title in favour of the Chandigarh Administration - it is held that the impugned sums accruing to the assessee in pursuance of the Development Agreement did not stand diverted at source by any over-riding title, which is antecedent in point of time, in favour of the Chandigarh Administration - The application or destination of the income has nothing to do with its accrual or taxability. . Whether the AO is right in holding that the impugned amount has accrued to the assessee in the year under appeal and taxing the same as such in the year under appeal - The case of the AO is that the assessee follows mercantile system of accounting and hence the entire bid price amounting to Rs. 821.21 crores being consideration for granting the leasehold and development rights to the Developer has accrued to the assessee in the year under appeal and therefore is chargeable to tax in the year under appeal - assessee has followed accrual system of accounting, the AO has rightly taxed the impugned sum in the year of accrual, i.e., the year under appeal, and not on the basis of receipt or in the years of actual receipt - Appeal is dismissed

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• 2012 (4) TMI 478
  Block assessment - Search and seizure - Undisclosed income - Assessing Officer issued a notice under Section 158 BC of the Act on 11.03.1997 directing the assessee to furnish return of income in Form -2B for the block period 1987-88 to 1997-98 - In addition to the above sum of Rs.75 lakhs, the assessee also paid another sum of Rs.25 lakhs to AIADMK on 13.07.1995 as is evidenced by the statement of his Bank Account - it is an undisputed fact that the assessee would have generated more than Rs.7,73,250/- for the 10 assessment years during the period 1987-88 to 1997-98. Hence the assessee would not have earned any amount from undisclosed source - Held that: it is clear that the Tribunal had given a finding that the assessee had established the source of fund from where it was collected and the collected money was given to the AIADMK head quarters for Building Fund - Decided in favor of the assessee

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• 2012 (4) TMI 476
  Rejection of Audit report u/s 142(2A) by the AO - Undervaluation of closing stock - it is submitted that there was a change in method of valuation of closing stock. In this connection, she has drawn our attention to the table noted by the Assessing Officer, who has held that the closing stock was bifurcated into three categories; finished goods, semi finished goods and goods under process - assessee has, before us, filed a chart giving year-wise details of the closing stock from the assessment year 1997-98 to 2005-06 in respect of finished goods, semi finished goods, goods under process and raw material. The said chart indicates that the closing stock was exported or was sold in different time spans in each year - Assessing Officer did not interfere/reject the valuation of the closing stock made by the assessee @ 90%, 74% and 60% of the sale value for finished, semi finished and goods under process - Considering the volume of business and numerous items involved, the assessee has been valuing the finished goods, semi finished goods and goods in progress on the basis of sale price of these items sold in the subsequent year after deducing a particular margin, which has been uniformly followed by the assessee in the earlier and the subsequent years - for assessment year 2003-04, an assessment order was passed on 31st March, 2006 and in the said assessment order no addition whatsoever was made to the closing stock but the method adopted by the assessee for the said assessment year was same - Decided in favor of the assessee Regarding addition of Rs.25,80,879/- made by the AO on account of travelling expenses - Assessing Officer had disallowed the entire expenditure of Rs. 25,80,879/- The tribunal while partly deleting the disallowance held that the expenses were incurred for purpose of business under Section 37 - Held that: tribunal has estimated and disallowed 20% of the foreign travel expenditure on the ground that it may not have been incurred wholly and exclusively for the purpose of business - Decided in favor of the assessee Regarding addition u/s 40A(2)(b) of the Act on the ground that excessive/unreasonable expenditure was incurred on getting garments fabricated from associate concerns, namely, R.A. Exports and Sensational Exports - Held that: the disallowance had been made mainly on the basis of some technical defaults noted by the A.O. The assessee has satisfactorily explained the absence of GRN or challans, which were not required as the work was being done at the factory premises of the assessee - Assessing Officer did not conduct any investigation or verification into the reasonableness of the said expense with reference to payment made to third parties or fair market charges payable for similar nature of work - Decided in favor of the assessee Regarding rejection of book of accounts - High Court has clearly observed that absence of stock register, in a given situation, may not per se lead to an inference that the accounts were incomplete or false but this issue has to be examined keeping view the other factors, which include fall in gross profit rate - Held that: the contention of the Revenue that stock register was not maintained and the relevant column of the auditor s report record indicate absence of the stock register, justify rejection of the books of accounts, cannot be accepted - Decided in favor of the assessee

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• 2012 (4) TMI 475
  Search and seizure - Block assessment - Undisclosed income - Provisional attachment to protect revenue in certain cases - it is stated that the block assessment proceedings were to be completed by 25th August, 2007 but in view of the stay granted by the Supreme Court, the proceedings were still pending - The third proviso was inserted in 2009 by Finance (No. 2) Act of 2009 with retrospective effect from 1st April, 1988 is as under:- “Provided also that the period during which the proceedings for assessment or reassessment are stayed by an order or injunction of any court shall be excluded from the period specified in the first proviso - The contention relating to communication of the order also need not be decided as there is no order extending the provisional attachment under Section 281B on or after 24th January, 2008 - It is not the contention of the Revenue and it was not urged and in our opinion rightly that the third proviso incorporates a deeming provision, which has the effect of continuation or extension of the last order under Section 281B dated 19th July, 2007 which was upto and valid till 24th January, 2008 - It does not stipulate that the provisional attachment order issued, shall be deemed to be effective and continue beyond the stipulated period mentioned in the order, when there is an injunction or an order by a Court staying the assessment/reassessment proceedings The contention of the petitioner is that there is no connection between the block assessment proceedings and the refunds which are due to the petitioner - The “connection” mentioned in the said order has reference to the reasons stated in the order of provisional attachment and whether the said reasons have any nexus or connection with the assessment/reassessment proceedings, which have been stayed by the Supreme Court Whether the Revenue can pass a fresh order under Section 281B in view of the third proviso to the said Section introduced/inserted by Finance (No. 2) Act of 2009 with retrospective effect from 1st April, 1988 - The petitioner in fact had filed an application CM No. 2845/2010 challenging the retrospective amendment, which was dismissed as withdrawn vide order dated 26th May, 2010.

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• 2012 (4) TMI 474
  Exercise of jurisdiction by the Assessing Officer under Section 147/148 - deduction under Section 33AC and deduction under Section 80IA of the Act - The tribunal has held that the aforesaid reasons to believe do not justify reopening and satisfy the requirements under Section 147/148 of the Act. - Held that :- Re-assessment proceedings were initiated by the Revenue, inter alia, stating that income had escaped assessment in respect of so many items. Additions were made on account of as many as six heads - The order passed by the tribunal is cryptic and does not deal with the contentions and the issues raised with reference to the reopening under Section 147 of the Act - the tribunal has not examined and dealt with the said aspect as mandated and required - accept the appeal by the Revenue and pass an order of remand directing the tribunal to decide the issue afresh

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• 2012 (4) TMI 473
  Deemed dividend - Assessing Officer held that Rs. 2,13,84,360/- received by the partnership firm from Bharti Enterprises Pvt. Ltd. should be treated as deemed dividend. It may be noted that the two partners hold more than 10% shares in Bharti Enterprises Pvt. Ltd - learned counsel for the respondent-assessee submits that the payment of Rs.2,13,84,360/- was not out of accumulated profits but this contention was not examined by the CIT (A) and Income Tax Appellate Tribunal as the respondent had succeeded on the other ground mentioned above - Decided in favor of the assessee by way of remand to Tribunal. Regarding capital loss - It was simultaneously claimed that a note was enclosed with the return stating that long term capital gains on the sale of the property was exempt under Section 54, consequent upon her purchase of a residential house in Vasant Vihar for more than Rs.13 crores. The Assessing Officer expressed reservation/doubt about the exemption claim by Deepika Mittal under Section 54 after stating that only Rs.50 lacs was paid to her and balance amount was payable on registration of the sale deed. - held that:- The Revenue should have examined and verified the records before raising the said contention in this appeal.

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• 2012 (4) TMI 101
  Allow ability of discount charges in respect of debentures issued by the assessee while computing income from house property - the outstanding loans which were utilized for the construction of property were converted into deep discount debentures in assessment year 2001-02 - AO observed that it was a colourable device. - AO further observed that no interest liability had accrued to the assessee as the liability on account of interest would arise only on maturity of deep discount debentures. He therefore held that the claim of deduction under section 24(b) was not allowable and accordingly he disallowed the claim in both the years which was disputed by the assessee. - CBDT in Circular No.28[F 8/8/69-IT(A-I)] dated 20.8.1969 a copy of which has been placed by the assessee at page 46 of the paper book that fresh loan raised to repay the original loan used for construction of house property will be eligible for deduction under section 24(vi) which corresponds with present section 24(b) - Held that: the claim has already been allowed by the Tribunal in the initial year i.e., assessment year 2001-02 and appeal filed by the department has been dismissed by the Hon'ble High Court - the principle of re-judicata is not applicable in case of income tax proceedings, the rule of consistency has to be followed when there is no change in legal and factual position. In view of the judgment of Hon'ble Supreme Court in the case of Madras Industrial Finance Corpn. Ltd. (1997 -TMI - 5591 - SUPREME Court), the difference between the issue price and maturity value has to be spread over the debenture holding period and only proportionate amount can be allowed as deduction in a particular year. Tax liability in the hands of director - held that:- it is for the department to ensure that the director pays tax on interest income from year to year as it has power to enforce compliance and assessee can not be penalized for the failure of the department to take action in case of the director.

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• 2012 (4) TMI 100
  Interest u/s. 234A, 234B, & 234C - assessee is a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act 1992 - The levy of interest under the provisions of Sections 234A, 234B and 234C is mandatory in nature - The submission which has been urged on behalf of the Respondent, however, is that the provisions of the Special Court Act, would override those of the Income Tax Act, 1961 and that consequently the provisions of Sections 234A, 234B and 234C would not be attracted - the remedy of a notified person who is assessed to penalty or interest after the notified period would be to move the appropriate authority under the taxing statute in that connection - it has been directed that no reduction or waiver of interest shall be ordered unless the assessee files a return of income for the relevant Assessment Year and pays the entire income tax due on the income as assessed - Held that: the assessee in the present case, is not without remedy since it is open to the assessee to take recourse to the remedy available under the direction dated 26 June 2006. We accordingly answer the questions of law as framed in the negative - it would be open to the notified person to seek a waiver or reduction by making an application to the Chief Commissioner of Income Tax in terms of the order dated 26 June 2006 of the Central Board of Direct Taxes. - The appeal is accordingly disposed of

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• 2012 (4) TMI 99
  Exemption u/s 10A(2) - Depreciation - Deduction u/s 80HHE - Capital or revenue expenditure - Assessing Officer held that the undertaking was carrying on the same business before Assessment Year 1995-96; it was formed by splitting up or reconstruction of a business already in existence since the same business was being carried on by the software division of IOCL before the assessee came into existence and all the assets and liabilities including plant and machinery previously used were transferred to the Section 10A undertaking - In relation to a software technology park, the condition required that the undertaking must begin to manufacture or produce articles or things during the previous year relevant to the Assessment Year commencing on or after 1 April 1994 - the test in law is as to whether the undertaking is formed by splitting up or reconstruction of a business already in existence - Tribunal in the present case has come to the conclusion that where a running business is transferred lock, stock and barrel by one assessee to another assessee the principle of reconstruction, splitting up and transfer of plant and machinery cannot be applied - Reconstruction is of a business already in existence and there must be a continuation of the activities and business of the same industrial undertaking - In the present case, the entire business of the software undertaking was transferred to the Assessee - Decided in favor of the assessee

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• 2012 (4) TMI 80
  Indo-Japan Treaty – Japanese Banking company having branch offices in India – loan advanced by HO to PE on which interest has been provided by the PE - deductibility of interest payable to the H.O. and other Overseas Branches in the hands of branch offices in India - taxability of interest payable by PE in the hands of Head Office in India – deduction of tax at source from interest payments – Held that:- Although interest paid to the H.O. of the assessee bank by its Indian branch which constitutes its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the PE which is taxable in India as per the provisions of article 7(2) & 7(3) of the Indo-Japanese treaty read with paragraph 8 of the protocol which are more beneficial to the assessee. The said interest, however, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law or relevant tax treaty. Accordingly, no liability for deduction of tax at source. Same is held for interest payments made to overseas branches – Decided in favor of assessee.

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• 2012 (4) TMI 79
  Depreciation on intangible assets being “business and commercial rights” - assessee, vide slump sale agreement, acquired power transmission and distribution business as a going concern for a total sale consideration of Rs. 44.7 crores out of which Rs. 16.58 crores were paid for acquisition of “business and commercial rights” being business claims; business information; business records; contracts; skilled employees; know-how described as “goodwill” –dis-allowance of depreciation on the amount described as goodwill by Revenue – Held that:- Addition of the words “business or commercial rights of similar nature” after the specified intangible assets clearly demonstrates intention of Legislature to provide depreciation to other categories of intangible assets which are not exhaustively enumerated. It is observed that in case of the assessee, intangible assets being Business claims; business information; business records; contracts; skilled employees; knowhow were invaluable and resulted in carrying on the transmission and distribution business by the assessee, without any interruption. Therefore, specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in Section 32(1)(ii) and were accordingly eligible for depreciation. It is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation u/s 32(1)(ii) – Decided in favor of assessee.

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• 2012 (4) TMI 78
  Charitable Institution - Trust registered u/s 12A engaged in conducting coaching classes for open university/distance education – dis-allowance of exemption u/s 11 by A.O. - CIT(A) set aside dis-allowance on the ground that the assessee is entitled for exemption u/s 10(23C)(iiiad) – Held that:- Mere conducting of classes for open university/distance education cannot be construed as charitable activity within the meaning of section 2(15) of the Act. See Sole Trustee, Loka Shikshana Trust vs CIT (1975 - TMI - 6453 - Supreme Court), Bihar Institute of Mining And Mine Surveying v. CIT (1993 - TMI - 20160 - Patna High Court) Furthermore, when no approval was granted u/s 10(23C), CIT was not justified in holding that assessee is a charitable institution and eligible for exemption u/s 10(23C)(iiiad) – Order of CIT(A) is set aside. Also, cancellation/rejection of registration u/s 12A and completion of assessment under 'AOP' by the A.O. is without jurisdiction. Hence, it is open to the Commissioner to consider the case of the assessee and pass necessary order u/s 12AA(3). - Decided in favor of Revenue.

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• 2012 (4) TMI 77
  ITAT deleted the addition of Rs. 1.50 crore made by AO invoking the provisons of Section 40(a)(ia) read with section 194C - During the course of assessement proceedings in the case of the assessee, it was noticed by the Assessing Officer that the assessee had claimed that it had carried out work worth Rs. 4.92 crores for PGF Ltd. but the TDS certificate issued by PGF Ltd. was only in respect of Rs. 4.55 crores - In the present case payments has not been made by the respondent assessee to M/s. Rishikesh Properties Pvt. Ltd. for carrying out any work for it as sub contractor, secondly it is claimed as an expenditure under the head “profits and gain of business and profession” - Tribunal while deleting the addition made under Section 40(a)(ia) of the Act has made out altogether a new case and accepted the stand of the assessee that they had not paid Rs. 1.50 crores and the said work was not sub-contracted by them to Rishikesh Properties Pvt. Ltd - Held that: the order of the Tribunal is perverse and this Court should interfere with the said order - Decided against the assessee

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• 2012 (4) TMI 76
  DTAA between India and UAE - there is no dispute that tax has been assessed upon the assessee as agent of a shipping Company situated at UAE - Circular No. 333 dated February 2, 1982 issued by the Board which states that the provisions made in DTAA would prevail over the general provisions of the Act - Held that: the owner of the ship being admittedly a resident of UAE, there was no scope of taxing the income of the ship in any of the ports in India. - once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above. - Appeal is dismissed

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• 2012 (4) TMI 75
  Writ petition - learned counsel appearing on behalf of the petitioner had submitted that it would suffice, if this Court is pleased to permit the petitioner to make a representation to the second respondent - the petitioner is permitted to make a representation to the second respondent, with regard to the return of the sale deed, dated 22.1.1973, registered on 13.2.1996, along with the other relevant documents, within a period of two weeks from today and on receipt of such representation - Petition is disposed of

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• 2012 (4) TMI 74
  DTAA - No PEs - Fees for technical services - Whether, on the facts and circumstances of the case, the payments received/receivable in connection with following costs incurred/proposed to be incurred for and on behalf of X India, are chargeable to tax in India - the payment received/receivable by the applicants in connection with the IVTC services are in the nature of technical services and taxable as FTS under section 9(1)(vii) of the Income-tax Act and that the exception provided in section 9(1)(vii)(b) is not available to the applicants - applicants have opted for and are entitled to avail the beneficial provision of the DTAA entered into by India with the respective countries of their residences - Technical services rendered by the affiliates do not “make available” technical knowledge, experience, skill, know-how or process while preparing these reports for their clients, X India / Indian customers - Held that: The payments received / receivable by the applicants in connection with IVTC Services are chargeable to tax as FTS under section 9(1)(vii) of the Act, but not under the provisions of Article on “Royalties and fees for technical services” under the respective DTAAs or when the said Article is read with the MFN clause, which has to be taken as part of the Convention In the absence of a provision on FTS, the amount received by the applicants would be taxable as business income under Article 7 of the DTAA. As the applicants do not have a PE in India, the amount received would not be taxable as business income - FTS shall be governed by Article 22 of the Tax Treaty and not as per Article 7 of the Tax Treaty that deals with taxation of business profits - Rulings are given

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• 2012 (4) TMI 73
  Deduction u/s 80-IC - Rule 8 of the ITAT's Rules - the assessee has pleaded two more issues in ground Nos. 7 & 8, wherein it has challenged the selection of its case for scrutiny assessment and non-service of notice under sec. 143(2) of the Income-tax Act, 1961within the statutory time period - Whether manufacturing of fragrances, fragrant compound, attar and other floral waters at its undertaking at Bhimtal amounts to manufacture within the meaning of definition of expression "manufacture" provided in section 2(29)(BA) of the Income-tax Act, 1961 - In order to avail deduction under section 80IC, an assessee has to fulfill the conditions contemplated in the section - The assessee has not manufactured any article or thing, which provided in thirteenth schedule. It is situated in Industrial Estate, thus it falls in section 80IC(2)(ii) of the Act - it is concluded that as far as geographical location of the assessee is concerned, it falls within the industrial estate specified for the purpose of admissibility of deduction under sec. 80-IC of the Act Regarding manufacture - The stand of the revenue authorities is that at the most activity carried out by the assessee is of blending one. It has just mixed the floral distillate from Kannouj and no new or distinct product has emerged out - learned counsel for the assessee has placed in the written submissions a flow chart exhibiting the activities carried out by the assessee before producing altogether distinct saleable commodity which has its own identification in the commercial world - he moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted - assessee contended that its undertaking is registered with Excise Department, however, excise duty is exempt by virtue of notification Nos. 49 and 50 of 2003 - Decided in favor of the assessee by way of direction to allow the deduction

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• 2012 (4) TMI 72
  Recovery of arrears of tax and interest - learned counsel had further submitted that the petitioner would pay a sum of Rs.3 lakhs, which is about 1/3 of the amount said to be payable by the petitioner, as arrears of tax and interest - The attachment of the bank account of the petitioner, made by the second respondent, if any, in respect of the above mentioned dues, shall be raised, on the petitioner paying the amount of Rs.3 lakhs

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• 2012 (4) TMI 71
  Interest under Section 220(2) - Application u/s 220(2A) - learned standing counsel appearing for the respondents submit that from the pleadings itself it is obvious that this is a case where the grounds mentioned in section 220(A) were not cumulatively made out and that in spite of it partial waiver has been granted - the order does not contain any reason why the first respondent has limited the waiver only to 1/3rd of the interest levied - Held that: the interest should be limited 1/3rd of what is levied on the petitioner - petition is disposed of

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• Customs

• 2012 (4) TMI 93
  Application for restoration of the appeal - Learned Counsel for the respondent confirms that the electronic copy of the order placed by Revenue is correct. In view of material facts recorded in para 2 to 9 of order of Hon ble High Court there is no appeal existing in the record of the Tribunal calling for disposal and the matters have come to an end - Learned Counsel for the respondent confirms that the electronic copy of the order placed by Revenue is correct - Held that: the order passed today shall be subject to the decision of the Hon ble High Court of Delhi on the restoration application of the appellants , if any, as has been averred by the learned Counsel for them - Miscellaneous Applications praying for adducing additional evidence are misconceived and fail

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• 2012 (4) TMI 70
  Re-export of consignment – goods imported did not match and tally with the description of the goods mentioned in the bill of entry/invoices - petitioner paid the custom duty on default goods -fault and negligence of the consolidator - petitioner's consignment had been sent to Taiwan and the consignment that was meant for Element Fix Ltd., Taiwan had been sent to India instead – permission asked to re-export the consignment - granted permission after 22 months levying a penalty of Rs.10,000/ - petitioner claimed refund or drawback being 98% of the customs duty paid by them – AO rejected the refund claim goods were not entered for re-export within two years from the date of payment of customs duty – Held that :- the custom authorities took their own time to grant permission to re-export - permission for re-export was granted on 1st May, 2007, though the request was made on 30th June, 2005 - the lapses and default have been on the part of the Respondents - present case would be covered under Section 154 of the Act as it is a case of errors arising out of incidental slip or omission - The petitioner has been made to go through several proceedings, furnish NOC, etc - penalty imposed is quashed allowing a refund along with interest @ 10% per annum w.e.f. 1st January, 2008 till payment is made - respondents will pay costs of the present proceedings which are assessed at Rs.10,000/- within 2 months of order.

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• 2012 (4) TMI 69
  Demand - Redemption file - Penalty - When the value declared and taken for determination of duty by the department is found to be not acceptable in these cases, we have to give a finding as to what value should be adopted for quantifying the duty amount - The two importers are 100% EOU viz. M/s. ETK Softech (P) Ltd. Ranipet and M/s. ORJ Electronic Oxides Ltd. Pudukottai, both licensed under Section 58 of the Customs Act, 1962 to operate as private warehouses for goods imported by them - Investigation by DRI also revealed that similar capital goods imported from Singapore by M/s. ORJ through Tuticorin Port and cleared under Bill of Entry No. 346 dated 27.5.97 were the same goods which M/s. ETKIF had manufactured and exported under Shipping Bill No. 1516 dated 9.4.1997 through Chennai Port - This is a case where admittedly the goods of Indian origin exported earlier have been re-imported. - if proper goods of the declared value were actually imported and the same was either mis-used or diverted for home consumption, and not used in an EOU unit, there would have been evasion of customs duty on that score - Held that: the export value is available in respect of both the consignments in terms of FOB value in both the cases the value is indicated as USD 1,71,300 Whether any amount would have to be added to the value towards insurance and freight charges as the import value is required to be computed on CIF basis - Held that: addition of actual freight and insurance charges or the addition of usual 20% when such amounts are not available may not be necessary as the FOB value in India can be taken as it is as the CIF value in India in respect of these cases for the purpose of determining customs value and customs - it is clear that the fraudulent transactions involved in these cases were not so much intended to defraud the customs department or cause customs duty evasion as was for obtaining inadmissible benefits violating provisions of other enactments such as the Income Tax Act and the Foreign Exchange Management Act etc In the eyes of the customs law, being owners, they were importers and under the income tax law being owners, they alone were eligible for claiming depreciation in respect of the impugned imported machinery - It makes no difference to the legal position that in respect of one Bill of Entry, the financing institution had signed the Bill of Entry and in the other case, the bank had not signed it, since in both the cases, the Bills of Entry were filed in the joint name, the ownership was retained with SFL/Bank, the purchase order was placed by SFL/bank, the Bill of Lading was in the name of SFL/Bank and the commercial invoice was also in the name of SFL/bank Regarding penalty - Held that: the order passed in this case confirming the penalty in an export fraud case, has been passed in the larger interest of arresting fraudulent acts, in a Writ Petition and does not interpret the statutory provisions of Section 114 or under any of the sub-sections thereof to conclude that value under Section 14 has to be taken as the mis-declared value - the penalty imposed was very low even compared to the actual value of the goods. It was held by the Tribunal that the penalty imposed by the adjudicating Commissioner was very low considering the declared value of the goods, gravity of offence and the extent of mis-declaration - Appeals are partly allowed by way of remand to Adjudicating Commissioner

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• 2012 (4) TMI 68
  writ Petition- Petitioners had imported second hand Digital Multifunction Print and Copying Machines - the customs authorities may be directed to release the retained goods on payment of the applicable customs duties on the declared value of the goods on their furnishing the necessary provisional duty bonds, pending final assessment in order to safe guard the interest of the Revenue - The petitioners stated that they had imported the second hand goods from their overseas suppliers who had also filed the Bills of Entry, with the assessment group concerned, at the Chennai Custom House, declaring the value of the imported goods and sought the clearance of the goods, under `Free Importability', as second hand capital goods, in terms of Foreign Trade Policy - the Customs authorities had not taken up the goods for assessing their value, for the payment of the customs causing a delay - petitioners are incurring heavy financial losses due to the payment of detention and demurrage charges – Held that: - the authorized chartered engineers had not inspected the goods in question, the customs authorities concerned shall direct the inspection of such goods before they are released. Such goods may be directed to be released, on payment of the appropriate customs duty and on the fulfillment of the conditions prescribed by law - writ petitions of assessee allowed.

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• 2012 (4) TMI 67
  Classification of goods being natural sea water used for curbing deficiency of mineral in the body – Commissioner(Appeals) classified it under heading 2501 – Revenue contending heading 2106 covering food preparations – Held that:- Once we are satisfied that the goods have not undergone any preparation and nothing contradictory evidence is brought by revenue to discard the observation of first appellate authority. Classification under heading 2501 is upheld – Decided against the Revenue.

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• Corporate Laws

• 2012 (4) TMI 92
  Petition under Article 226 of the Constitution of India, a writ of Mandamus - direct the respondent/Registrar of Companies to register a company without insistence on the petitioners providing a local address - the petitioners are residents of Moscow - They complied with all the requirements of an applicant/ applicants seeking incorporation of a Company - Despite all formalities compiled with , the petitioners were told to make enquiries delaying the process of incorporation and registration of their Private Limited Company – reasons for delay communicated that the foreign subscribers have not stated their local address – one Company of these very subscribers has been registered as a Private Limited Company in the State of Maharashtra - an affidavit was filed by Registrar while signing MOA and AOA in respect of existing Company, the foreign subscribers showed their presence in India - period of stay is more than 3 months hence requirement of furnishing local address - Held that:- the petition succeeds. The Respondent is directed to register and incorporate the private limited Company in the State of Goa provided the petitioners comply with all other rules and regulations and requirements thereof save and except furnishing of the local address.

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• 2012 (4) TMI 66
  Dissolution of the Company (in liquidation) under Section 481 of the Act - application moved by the Official Liquidator ) for dispensing with the requirement of filing the accounts and audit of the Company (in liquidation), since it has no funds to its credit - that the Official Liquidator is not in a position to proceed further with the winding up of the Company for want of funds, assets and reasons stated in the application and for discharging the Official Liquidator from proceeding further - promoters of the Company (in liquidation) filed for winding up of the said Company on the ground that though the Company was incorporated in the year 1992, no shares was subscribed and no statutory meeting of the Company has held - Held that:- when the affairs of the Company had been completely wound up or the Court finds that the Official Liquidator cannot proceed with the winding up of the company for want of funds or for any other reasons, the Court can make an order dissolving the Company from the date of that order [Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti [2007] 78 SCL 482 ] - Consequently the Company (in liquidation) shall stand dissolved and the Official Liquidator attached to this Court is discharged - make necessary arrangement for payment of fee to the counsel for the Official Liquidator from the Common Pool Fund

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• Service Tax

• 2012 (4) TMI 472
  Failure to examine the material which gives rise to the demand making the adjudication unsustainable - both the authorities proceeded under presumptions and suppositions without applying their mind to examine the evidence which has determined liability - Held that :- it is desirable in the interest of justice to send the matter back to the adjudicating authority to examine the very source document which creates liability and incidence tax shall be determined - All legal pleadings are open to the appellant to argue before the adjudication authority in its defence leading permissible evidence

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• 2012 (4) TMI 471
  Penalty imposed u/s 76, 77 & 78 of Finance Act 1994 - Cable operator – period 1.9.03 to 31.3.06 – services taxable w.e.f. 16.08.2002 – assessee pleaded illiteracy, bona fide belief of non-taxability of said service and financial hardship – Held that:- Service tax together with interest is confirmed as not contested by the applicant. Tribunal in the case of Krishna Satellite Cable Network v. CCE [2008 - TMI - 31294 - CESTAT NEW DELHI] has held that there could be bona fide reasons on the part of the assessee, who was cable operator and was receiving signals from multiple system operator, as regards the fact of services not being taxable. In view of aforesaid, penalties are set aside – Decided in favor of assessee.

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• 2012 (4) TMI 107
  Availment of services of commission agent abroad – 'Business Auxillary service' - period involved 13.07.2004 to 31.03.2005 – assessee contending non-taxability of said services before 18.04.2006 - Held that:- Liability under Finance Act 1994 for availing service of foreign agents arise after 18.04.2006 following Apex Court decision in case of Indian National Shipowners Association v. Union of India (2010 - TMI - 78723 - Supreme Court of India) - Decided in favor of assessee.

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• 2012 (4) TMI 106
  Refund - Cenvat credit unutilised - Mandate of Rule 5 of Cenvat Credit Rules, 2004, grants refund of unutilised Cenvat credit - Decided in favor of the assessee

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• 2012 (4) TMI 105
  Waiver of pre-deposit - Classification - The issue involved in this case is regarding discharge of Service Tax liability on the appellant as a society which imparts training for the candidates and collects the fees from them as charges and not discharging the Service Tax liability - Held that: the issue involved in this case is to be considered from the factual matrix as to whether there was any suppression of facts on the part of the assessee - the issue involved in this case is to be considered from the factual matrix as to whether there was any suppression of facts on the part of the assessee - Decided in favor of the assessee by way of direction to deposit Rs.50 ,000 within a period of 4 weeks from today and report compliance on 14.02.2012

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• 2012 (4) TMI 104
  Demand - Claim for exemption under Notification 12/2003-ST which was not claimed in adjudication proceedings - Revenue was of the view that the permission granted as per the agreement to TAFE to use the Trade Mark for tractors is Intellectual Property Right Services as defined in section 66(55a) and 66(55b) of Finance Act ,1994 and hence the appellants should have paid service tax on the consideration receive - The Counsel submits that as per this definition in the Constitution transfer of right to use, whether or not for a specified period, constitutes sale. In their case the transfer is in perpetuity and there cannot be a doubt that it constituted sale - The appellants continues to be owner of the trademark "EICHER" and they have only permitted TMTL to use the Trademark in relation to tractors and is squarely covered by the definition of "intellectual property service" - When the contract is read as a whole it is indeed a contract for transfer of the right to use the Trademark for limited purposes but on a permanent basis - the impugned contract, in its pith and substance is not a "transfer of right to use" and is more in the nature of permission to use the trademark which continues to be the property of the licensor - The Appeal is thus allowed partially by setting aside the penalty imposed. However the demand for tax and interest are confirmed.

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• 2012 (4) TMI 83
  Whether Cenvat Credit on service tax availed in respect of GTA services, received by assessee, can be used for payment of service tax on the GTA services for outward transportation of the goods – Held that:- The issue is no more res integra. Assessee was within his rights to utilise Cenvat Credit for payment of service tax on the GTA service so received by him. See Nahar Industrial Enterprises Ltd. v. UOI (2010 - TMI - 207889 - Punjab And Haryana High Court), CCE vs Auro Spinning Mills (2011 - TMI - 211441 - Himachal Pradesh High Court) – Decided in favor of assessee.

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• 2012 (4) TMI 82
  Demand - Classification - Business Auxiliary Service or storage and warehousing - During the pendency of the application for centralized registration, the anti-evasion wing at Bangalore initiated investigation against the branch office of the appellant at Bangalore for evasion of service tax - another show-cause dated 16.04.2007 was issued demanding service tax amounting to Rs. 3,14,81,709/- for the period from 01.10.2005 to 30.09.2006 as the same formed as in the previous notice and the case was assigned to Commissioner of Central Excise, Thane I for adjudication - Ld. Advocate for the appellant submits that the provisions relating to storage and warehousing under section 65(102) and 65(105)(zza) of the Finance Act, 1994 applies only in respect of good as defined in the Sale of Goods Act, 1930 Whether the records such as discharged cheques, vouchers, deeds, agreements, books of accounts of banks and corporate houses would come under the category of ‘goods' as per the provisions of section 2(7) of the Sale of Goods Act, 1930 or not - it is clear that to constitute goods, saleability is an essential criteria. If "saleability" was not a relevant criterion, there was no necessity to refer to the definition of goods, under the Sale of Goods Act, 1930. Sale of Goods Act governs sale and purchase of goods - the various old records such as discharged cheques, vouchers, books of accounts in respect of which the service was rendered by the appellant to his clients such as banks and corporate houses for management of the records, cannot be considered as storage and warehousing of "goods" as defined in the Finance Act, 1994 read with section 2(7) of the Sale of Goods Act, 1930 - Decided in favor of the assessee

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• 2012 (4) TMI 81
  'Maintenance and repair services' – tyre retreading – non payment of service tax – demand imposed on non-production of documents by appellant – appellant partly paid demand on the presumption that 30% of the total services is liable to tax – Held that:- Since Invoice produced during proceedings covers almost 35% of the amount of service provided. Therefore, on further pre-deposit of Rs.1,00,000/- apart from amount already deposited, matter would be remanded back to adjudicating authority.

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• 2012 (4) TMI 62
  Stay petition - Cenvat credit - During the course of audit of the records of the assessee, it was noticed that the appellants had taken Cenvat credit of Rs.1,45,245/-against debit notes issued by Shri Ganpat Pal Onkarlal Agarwal & Co. for clearing and forwarding charges as also loading and unloading charges at Railway Station - The Counsel for the Appellant submits that though the document is titled as "Debit Note" the said document contains all relevant details as specified in Rule 9(2) of the Cenvat Credit Rules, 2004 and therefore there is no reason to deny the credit - Appeal is allowed

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• Central Excise

• 2012 (4) TMI 65
  Exemption under Notification No.8/97-CE, dated 1.3.1997 - finished goods manufactured by the 100% EOU out of the raw material supplied by another 100% EOU, and subsequently, cleared in the Domestic Tariff Area (DTA) in accordance with the EXIM Policy 1997-2002 – Revenue contended availiability of alternative benefit of Notification No.2/95-CE, dated 4.1.1995 – Held that:- The notification requires to be interpreted in the light of the words employed by it and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural meaning, when the wordings are simple, clear and unambiguous. Therefore, Tribunal has rightly allowed the benefit of exemption under Notification no. 8/97-CE – Decided against the Revenue.

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• 2012 (4) TMI 64
  Writ petition - alternative remedy to file an appeal - demand of duty of excise on an amount written off representing advances towards dies and tools - held that:- the petitioner company ought to have availed the appellate remedy, by filing an appeal before the Commissioner (Appeals), Chennai. However, the petitioner has chosen to prefer the present writ petition before this Court, under Article 226 of the Constitution of India, without showing proper cause or reason to do so. - it would be open to the petitioner company to file an appeal before the Commissioner (Appeals) Chennai, by raising all the grounds available to it, as per law, within a period of thirty days from the date of receipt of a copy of this order.

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• 2012 (4) TMI 63
  Tribunal had remanded the matter to the lower authority - the respondent aggrieved by order went before the Hon'ble High Court that passed order on 28.2.2005 without considering that Revenue's appeal was time-barred - review was done before 31.12.02 and unsigned review order was communicated on 17.3.2003 - upon receipt of such order, appeal was filed before Tribunal on 31.3.2003 - respondent challenged the date of review by Board, Revenue was directed to place review record for perusal of the Bench but failed to produce its record and establish that review was done actually on or before 31.12.2002. Revenue explains its stand relying on an unsworn affidavit received from Board – Held that: - Right to appeal is a statutory right which is exercised in accordance with law and within the time prescribed by it to put an end to the litigation - Time of 1 (one) year was prescribed to review order - merely explaining the practice followed by Board in decision making, Revenue is not absolved of its obligation to adhere to the limitation prescribed by law - entire contention of Revenue based on Board's unsworn affidavit averring non-availability of review record does not grant immunity from bar of limitation - in absence of any cogent evidence establishing date of review was on 31.12.02 Revenue's appeal is dismissed.

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• 2012 (4) TMI 61
  Demand - on the ground that invoices did not contain necessary details as required under Rule 11 of Central Excise Rules, 2002 - . Learned consultant on behalf of the appellants submitted that appellant's grievance is that Cenvat credit has been denied without considering the provisions of Rule 9(2) of Cenvat Credit Rules, which provides that Cenvat credit can be allowed even when certain details which are required to be contained in invoices are not available - The fact that Rule 9(2) is an exception to the provisions of Rule 11 of Central Excise Rules, has not been taken note of by both the lower authorities - it is necessary to go through the records maintained by the assessee and the documents in detail and thereafter come to a conclusion - Decided in favor of the assessee by way of remand to original adjudicating authority

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