TMI Tax Updates - e-Newsletter
May 11, 2012

Case Laws in this Newsletter:

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

Articles

1. Delhi Tribunal grants additional depreciation on assets purchased for power generation

   By: CSSwati Rawat

2. Cost Accounting Record Rules 2011 to Media Industry

   By: ajay singh

3. LEARNING FROM REPORTED JUDGMENTS– learning from case of SREI Infra 2012 -TMI - 212606 - DELHI HIGH COURT .

   By: DEVKUMAR KOTHARI

4. Amendments to Finance Bill 2012 based on FM speech

   By: CSSwati Rawat

5. Budget 2012 - Share premium in excess of the fair market value to be treated as income

   By: CSSwati Rawat

News

1. Germany Expresses Happiness on Indian Investment Climate Anand Sharma raises issues of Cumbersome Visa Process and IPR Infringement of Indian Intellectual Property Siemens to collaborate in Skill Development in Manufacturing Meets German Economy Minister and Mayor of Berlin.

2. New Companies Act.

3. MLM Companies.

4. Autonomy to Serious Fraud Investigation Office.

5. Export Stood at US$ 24.50 Billion in April 2012: Commerce Secretary.

6. India Germany to Surpass Trade Target of EURO 20 Billion Anand Sharma Meets German Economics & Technology Minister.

7. Removal of Protectionist Trade Barriers by SAFTA Nations.

8. Limited Imports through Wagah Land Route by Pakistan.

9. Discrimination against Indian Software Companies by US.

10. Conditions on the Export of Cotton.

11. Anti Dumping Duty on Illegal Import of Silk from China.

12. Import of Pulses and Cereals.

13. Decline in Export of Tea.

14. Export of Power and Petroleum Products to Pakistan.

15. Targets and Achievements of Leather Export.

16. Proposed Changes in Norm of Doing Business in Country.

17. DMIC in Nagda-Ratlam Investment Zone.

18. Speech of Honourable Minister of Finance - SHRI PRANAB MUKHERJEE

Notifications

Central Excise

1. 26/2012 - dated 8-5-2012 - CE

Amends notification No. 15/2010-Central Excise - Exempts all items of machinery, and components, required for initial setting up of a solar power generation project or facility.

2. 25/2012 - dated 8-5-2012 - CE

Amends notification No. 10/1996-Central Excise - Exemption to goods within the factory of their production in the manufacture of specified goods.

3. 24/2012 - dated 8-5-2012 - CE

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

4. 23/2012 - dated 8-5-2012 - CE

Articles of jewellery exempted from whole of Excise Duty. - PARTS OF RAILWAY OR TRAMWAY LOCOMOTIVES OR ROLLING-STOCK Exempted subjected to conditions.

5. 25/2012 - dated 8-5-2012 - CE (NT)

Seeks to amend CENVAT credit Rules, 2004 (Fifth Amendment). - No reversal for supplies made for setting up of solar power generation projects or facilities

Customs

6. 32/2012 - dated 8-5-2012 - Cus

Amends Notification No.21/2012-Customs - Exempts import of goods from additional duty leviable u/s 3(5).

7. 31/2012 - dated 8-5-2012 - Cus

Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.

8. 30/2012 - dated 8-5-2012 - Cus

Exemption from CVD not applicable for certain goods when imported for Defence, Coast Gaurd, Deptt. of Revenue, Police Forces, HAL, specified ordnance Factories and for ATVP, IGMDP, SAMYUKTA, LCAP, SANGRAHA, DIVYA DRISHTI and DHANUSH Programmes etc.

9. 24/2012 - dated 28-3-2012 - Cus

Seeks to amend Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.

10. 37 /2012 - dated 23-4-2012 - Cus (NT)

Amendment in Baggage Rules, 1998. - Increase in limit of baggage in case of Passengers returning from countries other than Nepal, Bhutan, Myanmar or China

DGFT

11. 116 (RE – 2010)/2009-2014 - dated 8-5-2012 - FTP

Export Policy of Onions.

Income Tax

12. 16/2012 - dated 30-4-2012 - IT

Income-tax (Fifth Amendment) Rules, 2012 - Insertion of rule 2F.

VAT - Delhi

13. F.7(433)/Policy-II/VAT/2012/75 to 86 - dated 7-5-2012 - DVAT

Amendment to notification dated 23.03.2012 relating to movement of specified goods.

Circulars / Instructions / Orders

FEMA

1. 123 - dated 10-5-2012

Risk Management and Inter Bank Dealings.

2. 124 - dated 10-5-2012

Exchange Earner's Foreign Currency (EEFC) Account .

3. 125 - dated 10-5-2012

Exim Bank's Line of Credit of USD 13 million to the Government of the Republic of Mozambique .

4. 122 - dated 9-5-2012

Risk Management and Inter Bank Dealings.

DGFT

5. 01/2012 - dated 8-5-2012

Procedure for obtaining cotton RC’s.

Highlights / Catch Notes

Income Tax

• Life Membership Subscription for Magazines Considered Income Receipt Under Tax Law, Not Capital Receipt.

  Case-Laws - HC : Revenue receipt or capital receipt - there is no justification to treat the receipt of life membership subscription of the magazine differently other than the income receipt.
  Visit to Get Source

  ---

• Increase in Capital Not Taxable u/s 56 as Income from Other Sources, Rules Assessing Officer.

  Case-Laws - HC : Addition made by the AO due to increase in the capital cannot be taxed under Section 56 as income from other sources.
  Visit to Get Source

  ---

• Development Officer's Conveyance Allowance Deductible u/s 10(14) as Part of Salary for TDS Purposes.

  Case-Laws - HC : TDS u/s 192 - salary - conveyance allowance and additional conveyance allowance received by the DO of LIC was permissible deduction under Section 10(14)
  Visit to Get Source

  ---

• When Should Tax Assessment Start: From DTA Manufacturing Date or EOU Start Date?

  Case-Laws - AT : Whether the period of ten consecutive assessment years is to be reckoned from the date of commencement of the manufacturing as a DTA Unit or from the date of commencement of manufacture as a EOU Unit. - AT
  Visit to Get Source

  ---

Customs

• Corrigenda Notification Effective Date: Key Difference Between Correction and Amendment in Customs and Tax Law.

  Case-Laws - HC : Effective date of corrigenda notification - It ceases to be a correction if it is effective from the date of its issuance. It then becomes an amendment.
  Visit to Get Source

  ---

• Amendment to Baggage Rules 1998: Changes in Customs Regulations for Personal Effects and Goods Declaration by Travelers.

  Notifications : Amendment in Baggage Rules, 1998. - Ntf. No. 37 /2012-Customs (N.T.) Dated: April 23, 2012
  Visit to Get Source

  ---

• Notification No. 32/2012-Customs exempts imports from additional duty u/s 3(5), easing tax burdens on goods.

  Notifications : Amends Notification No.21/2012-Customs - Exempts import of goods from additional duty leviable u/s 3(5). - Ntf. No. 32/ 2012 - Customs Dated: May 8, 2012
  Visit to Get Source

  ---

• Effective Duty Rates on Imports Updated in Notification 31/2012-Customs, Amending 12/2012-Customs.

  Notifications : Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Ntf. No. 31/2012-Customs Dated: May 8, 2012
  Visit to Get Source

  ---

• Countervailing Duty Exemption Unavailable for Imports by Defence, Coast Guard, and Specified Organizations per Notification No. 30/2012-Customs.

  Notifications : Exemption from CVD not applicable for certain goods when imported for Defence, Coast Gaurd, Deptt. of Revenue, Police Forces, HAL, specified ordnance Factories and for ATVP, IGMDP, SAMYUKTA, LCAP, SANGRAHA, DIVYA DRISHTI and DHANUSH Programmes etc. - Ntf. No. 30/2012-Customs Dated: May 8, 2012
  Visit to Get Source

  ---

DGFT

• DGFT Releases Circular No. 01/2012 Detailing Procedure for Cotton Registration Certificates; Compliance Guidelines Included.

  Circulars : Procedure for obtaining cotton RC’s. - Cir. No. 01/2012 Dated: May 8, 2012
  Visit to Get Source

  ---

• DGFT Issues Updated Onion Export Policy in Notification No. 116 (RE - 2010)/2009-2014, Effective May 8, 2012.

  Notifications : Export Policy of Onions. - Ntf. No. 116 (RE – 2010)/2009-2014 Dated: May 8, 2012
  Visit to Get Source

  ---

FEMA

• FEMA Circular Updates Risk Management Guidelines for Interbank Transactions, Emphasizing Regulatory Compliance and Stability in Banking Sector.

  Circulars : Risk Management and Inter Bank Dealings. - Cir. No. 123 Dated: May 10, 2012
  Visit to Get Source

  ---

• New Guidelines for Managing Exchange Earner's Foreign Currency Accounts Under FEMA Regulations Announced.

  Circulars : Exchange Earner's Foreign Currency (EEFC) Account . - Cir. No. 124 Dated: May 10, 2012
  Visit to Get Source

  ---

• 2012 Circular Guides Banks on Risk Management and Inter-bank Dealings Under FEMA for Stability and Compliance.

  Circulars : Risk Management and Inter Bank Dealings. - Cir. No. 122 Dated: May 9, 2012
  Visit to Get Source

  ---

Indian Laws

• Finance Minister Discusses Tax Reforms and Fiscal Policies to Boost Indian Economy, Emphasizes Balanced Taxation and Sustainable Development.

  News : Speech of Honourable Minister of Finance - SHRI PRANAB MUKHERJEE
  Visit to Get Source

  ---

Service Tax

• Rent-a-Cab Service Tax: Control by Assessee or Driver Key, Not Rental Duration.

  Case-Laws - AT : ST - rent-a-cab service – Whether the hiring out of vehicle is for a day or a month does not mean anything, as the said vehicle is still in the possession of the appellant assessee or his driver during the entire period.
  Visit to Get Source

  ---

Central Excise

• Refund Claim Filed Before Appeal Resolution: Limitation Period Not Applicable Under Central Excise Rules.

  Case-Laws - HC : CE - refund claim was filed by the assessee even before the appeal filed by the Revenue was disposed of by the First Appellate Authority - period of limitation not applicable.
  Visit to Get Source

  ---

• Central Excise shortage doesn't prove clandestine removal; improper account maintenance confirmed, demand upheld.

  Case-Laws - AT : CE - shortage cannot be presumed to be a case of clandestine removal - however charge of improper maintenance of accounts is established - demand confirmed.
  Visit to Get Source

  ---

• Appellant Wins Cenvat Credit for Paint Used on Pipes and Machinery, Boosting Tax Relief Benefits.

  Case-Laws - AT : Cenvat credit allowed on Paint used by the appellant for painting of pipes and machinery.
  Visit to Get Source

  ---

• Fifth Amendment to CENVAT Credit Rules 2004 Updates Tax Credit Regulations for Improved Compliance and Efficiency.

  Notifications : Seeks to amend CENVAT credit Rules, 2004 (Fifth Amendment). - Ntf. No. 25/2012-Central Excise (N.T) Dated: May 8, 2012
  Visit to Get Source

  ---

• Central Excise Amendment: Notification No. 25/2012 Modifies Exemption Rules for In-Factory Goods Production.

  Notifications : Amends notification No. 10/1996-Central Excise - Exemption to goods within the factory of their production in the manufacture of specified goods. - Ntf. No. 25/2012-Central Excise Dated: May 8, 2012
  Visit to Get Source

  ---

• Excise Duty Update: Amendment to Notification No. 12/2012 Sets Effective Duty Rates for Goods in Chapters 1-96.

  Notifications : Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96. - Ntf. No. 24 /2012 –Central Excise Dated: May 8, 2012
  Visit to Get Source

  ---

• Full Excise Duty Exemption Granted for Jewelry Under Notification No. 23/2012-Central Excise to Ease Industry Tax Burden.

  Notifications : Exemption on Articles of jewellery from whole of Excise Duty. - Ntf. No. 23 /2012-Central Excise Dated: May 8, 2012
  Visit to Get Source

  ---

• Central Excise Notification Exempts Machinery for Initial Setup of Solar Power Projects from Duties.

  Notifications : Amends notification No. 15/2010-Central Excise - Exempts all items of machinery, and components, required for initial setting up of a solar power generation project or facility. - Ntf. No. 26/2012-Central Excise Dated: May 8, 2010
  Visit to Get Source

  ---

• Interest Demand for June 2007 Issued on August 5, 2009, Without Using Extended Limitation Period.

  Case-Laws - AT : Demand for interest relates to the month of June 2007, SCN was issued on 5-8-2009 without invoking extended period of limitation - AT
  Visit to Get Source

  ---

• Trade Notice No. 20/2001 on textile job work contradicts Board's Order No. 24/14/93/Cx, issued December 31, 1993.

  Case-Laws - AT : Job work in textile industry – Trade Notice No. 20/2001 dated 24.03.2001 was clearly in contravention of law and against the direction of the Board issued vide Order No. 24/14/93/Cx Dated 31.12.1993- AT
  Visit to Get Source

  ---

VAT

• Amendment to March 2012 Notification Alters VAT and Sales Tax Rules for Transporting Specified Goods.

  Notifications : Amendment to notification dated 23.03.2012 relating to movement of specified goods. - Ntf. No. F.7(433)/Policy-II/VAT/2012/75 to 86 Dated: May 7, 2012
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (5) TMI 127
  Withdrawing the additional depreciation on the ground that electricity is not an article or thing – Held that:- CIT while treating the electricity as not an article or thing has not made reference to any provisions of the Income-tax Act, 1961 and simply construed the meaning of electricity as not article or thing on the basis of his own inference – as per the definition of “goods” as given in Article 366(12) of the Constitution it means all kinds of moveable property and the term “moveable property” when considered with reference to “goods” as defined for the purpose of sales-tax cannot be taken in a narrow sense and merely because electricity energy is not tangible or cannot be moved or touched like it cannot be cease to be moveable property when it has all the attributes of such property. It is capable of abstraction, consumption and use - If there can be sale and purchase of electrical energy like any other moveable object, this Court held that there was no difficulty in holding that electric energy was intended to be covered by the definition of “goods” - electric energy has all trapping of an article or goods – in favour of assessee. Provisionally revising the sales downward on estimate basis as per the earlier norms of CERC, final order yet to be passed in succeeding year – Held that:- An error has crept in the assessment order if an verification of the record, Learned Commissioner formed an opinion that an issue available in the computation of income required verification and investigation at the end of AO before its acceptance or rejection and such inquiry was not conducted - such an error caused a prejudice to the revenue than assessment order on such issue could be set aside - on reduction of sales Learned CIT has rightly taken cognizance u/s. 263 and has rightly remitted this issue to the Assessing Officer for fresh adjudication.

  ---

• 2012 (5) TMI 125
  Full exemption of salary under DTAA u/s 90 to the assessee for the salary received from foreign company – AO contested that the claim of the salary received from Polish Company as per Article 17(2) of the Agreement between India and Poland DTAA the person is required to be Top Level Managerial position - Held that:- As per the Cooperation agreement entered into between the assessee and the Polish Company, the function of the assessee was "to support establishing and preparing organization of the company's representative office” in India at best be termed as a management function but cannot be equated with "Top Level Managerial Position" - further findings of the A.O. that the Assessee has made only two short visits to Poland – in favour of revenue. Allowing deduction u/s. 80G by CIT (A) – Held that:- Revenue has not brought any material on record which could prove that the donations made were not genuine and made in cash - whereas assessee has submits that the donations were made by cheque and also furnished the copies of the receipts of the donations - no infirmity in the order of CIT(A) allowing the benefit of deduction u/s 80G - against revenue.

  ---

• 2012 (5) TMI 124
  Payment to Overseas Commission agent - whether it is simply commission, or it is in the nature of "fees for technical services"? - liability on the assessee to deduct withholding tax – Held that:- The agreement between the assessee and the Non Resident is only for rendering services which cannot be considered as technical services - as there is no PE to the said non - resident in India, the amount does not accrue or arise in India - as there is no need for deducting the amount under section 195, there is no violation of provisions of section 195 and accordingly the same cannot be disallowed under section 40(a)(ia)- if the fee payable is on source of income outside India, the same is not taxable in India - Since there is no evidence that the non-resident has rendered any managerial services to assessee and the agreement indicates only services were provided for agency on commission basis, the findings of AO and CIT(A) are to be rejected - reliance on the CBDT circular 786 dated 7 February 2000 that where the non-resident agent operates outside the country, no part of his income arises in India and no tax is therefore deductible under section 195 - in favour of assessee.

  ---

• 2012 (5) TMI 123
  Treatment of receipt by way of subscription of magazine from life members – Tribunal held it as revenue receipt – Held that:- The assessee has failed to prove that the subscription amount which was received from the life members was in the nature of deposit and is refundable to the subscriber as and when any subscriber so desires - being no evidence that ten years subscription and annual subscription are considered as revenue receipt, there is no justification to treat the receipt of life membership subscription of the magazine differently other than the income receipt - the manner in which the sums are treated by the assessee in its accounts is neither conclusive nor a sure indication of the nature and character of the receipt – against assessee.

  ---

• 2012 (5) TMI 122
  Penalty under Section 271 (1)(c) - revised return surrendering the amount due to mistake committed by the Accountant, was a case of concealment of particular of income and to be added to its income as extra profit – Held that:- No illegality in the order of the Tribunal - concealment of income and furnishing inaccurate particulars of income was surfaced by the AO only then Rs.1,00,000/- was surrendered, after availing multiple opportunities of filing revised returns - Suffice it to say that the Tribunal has found that the concealment has been detected by the Assessing Officer and the same forced the assessee to file the revised return – against assessee.

  ---

• 2012 (5) TMI 121
  Invoking section 56(1)- Addition made by the AO on a/c of excess generation of income by assessee – Held that:- As section 44AE providing for a method of estimating income from the business of plying, hiring or leasing trucks owned by a taxpayer has been held to be applicable, the CIT(A) and the Tribunal were justified in deleting the additions made holding that it cannot be treated as income from other sources - only ground for making the addition that the assessee was not able to explain the discrepancies in the account-books cannot be ground for making addition as income from other sources - Income, if it is changeable to tax under any heads specified in Section 14, item A to E, it cannot be changed as income from other sources - thus the addition made by the AO due to increase in the capital cannot be taxed under Section 56 as income from other sources as the accretion in the capital is relatable to profit from transport business of the assessee

  ---

• 2012 (5) TMI 120
  Validity of notice u/s 148 – status of assessee as per notice - Held that:- Department issued a notice under Section 148 in the name of assessee, in response to which the statement was filed referring to earlier return filed may be treated in compliance to the above notice – the Department being well aware of the identification of the assessee issued notice u/s 148 he having participated in the proceedings, cannot be allowed to turn round and challenge the notice issued as without jurisdiction - it is not a case where notice has been issued in favour of one assessee and the assessment has been framed against another assessee – against assessee.

  ---

• 2012 (5) TMI 119
  Additions made on account of under valuation of Closing Stock by the AO after recalculating cost of production – Held that:- The assessee is following Accounting Standard and is valuing the closing stock of finished goods and stock in process at costs, there was no justification to include the amount of interest and depreciation in recalculating cost of production - the assessee should adopt any accounting practice but it should disclose the true and proper income - no finding that by not including the depreciation and interest in the closing stock the true income of the assessee is not disclosed – against revenue.

  ---

• 2012 (5) TMI 118
  Addition u/s 68 made with respect to the share capital of the assessee in the hands of the assessee company – Held that:- As decided in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd (2008 (1) TMI 575 - SUPREME COURT OF INDIA), if the assessee has furnished complete details of investors and all the investors have confirmed having invested money in the assessee company filling the income tax details and bank account statement etc. no addition on account of share capital can be made in the hands of the assessee company - Merely because creditworthiness of all the shareholders has not been established to the satisfaction of the AO or because some of the shareholders having not appeared before the AO for examination, no addition u/s 68 could be made – against revenue.

  ---

• 2012 (5) TMI 117
  Salary - TDS in respect of conveyance allowance and additional conveyance allowance - conveyance allowance and additional conveyance allowance received by the Development Officers of the Corporation was permissible deduction under Section 10(14) as they were paid to Development Officer against the expenses actually incurred on duty as per the rules and circulars of the Life Insurance Corporation - both the AO and Appellate Authority as well as the Tribunal have proceeded on the premise that the officers of the Corporation cannot suo motu allow any deduction towards conveyance allowance or additional conveyance allowance and was in the domain of the Assessing Officer, the very premise on which the authorities have proceeded is unfounded as it is the employer who makes the payment to its employee as per the rules or the procedure regulated by it - in favour of the assessee

  ---

• 2012 (5) TMI 116
  Penalty imposed u/s 271(1)(c) on claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete – Held that:- Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty - 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 - no fault has been found with the particulars submitted by the assessee in its Return – as decided in CIT vs. Reliance Petroproducts Pvt. Ltd.[2010 (3) TMI 80 - SUPREME COURT] – in favour of assessee.

  ---

• 2012 (5) TMI 111
  Contract for ‘services for supply, installation and commissioning of 36 manometer gauges’ with ONGC - Held that:- On a proper reading of the Invitation to Tender and the contract entered into it is a contract for installation of equipment which the tenderer itself is to supply - it is an indivisible contract - the object in floating the tender is in furtherance of oil extraction - all payments received by the applicant under the composite contract with ONGC is income chargeable to tax in India - The contract cannot be treated as an independent one for offshore supply of 36 manometer gauges and another one for erection of it – against assessee. Part of the payment towards price of the manometer gauges cannot be considered divorced from the payments received for the performance of entire obligations under the contract. Payment received by the applicant for installation, erection and commissioning of the manometer gauges – Held that:- The contract of services for supply, installation and commissioning of manometer gauges is chargeable to tax under section 44BB of the Act, if it is found that the contract is for providing services or facilities in connection with prospecting for, or extraction of mineral oil – the services are rendered in connection with the prospecting and / extraction of oil by ONGC, hence section 44BB of the Act is attracted - against assessee.

  ---

• 2012 (5) TMI 110
  Disallowance interest expenses holding that the assessee has not commenced its business – Held that:- As per provision of section 36(1)(iii) interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession; for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. By implication this proviso is also applicable when assets are acquired for new business – against assessee. Disallowance administrative and other expense by holding that the assessee has not commenced its business – Held that:- Merely taking land on lease, by any stretch of imagination cannot be treated as the commencement / setting up of it's hotel business – against assessee. Right to transfer or sell the plot or the building constructed thereupon (as trading commodity) – assessee contested that land has been shown as stock-in-trade - Held that:- Perusal of clause 5 of the Memorandum of Association of assessee running of hotel is one of the its main objects and not its other object - the assessee can use the hotel plot leased to it only for construction and running of hotel, with no right to transfer the same - although the assessee company has shown it as a stock in its balance sheet and profit and loss account it will not alter the legal position because the substance of a transaction is important and not its entry in the books of account or its treatment by the assessee company - against assessee. Disallowed expenditure to be allowed to be capitalized - in favour of assessee.

  ---

• 2012 (5) TMI 109
  Levy of penalty u/s 271(1)(c) – Claim of deduction u/s 10B and 80HHE – Held that:- Not a case where the assessee has not disclosed full details at the time of filing of returns or during the course of assessment proceedings - assessee claimed that export sales of Rs.549.76 lacs were not realized before the end of six months from the end of the FY 2003-04 and that company was yet to file an application for extension of time - mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty when there is nothing on record to show that the explanation offered by the assessee adverse – no levy of penalty – in favour of assessee.

  ---

• 2012 (5) TMI 108
  Write off of old unrecoverable earnest money deposits deductible u/s. 37(1) - appeal against disallowance of claim – Held that: - Assessee could not place on record any evidence showing that the amounts in question were given in earlier years on account of earnest money deposits to its business associates and the said parties refused to refund such amount to it - matter is restored to the file of AO to give one more opportunity to the assessee to lead evidence in support of its claim. Direction given to the AO to recompute the disallowance u/s. 14A – Held that:- Direction given to the AO by CIT(A) in conformity with the judgment of the Hon’ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd (2010 (8) TMI 77 - BOMBAY HIGH COURT) is correct as disallowance u/s 14A. Rule 8D is not retrospective. Rule 8D applicable from Assessment Year 2008-09 – in favour of assessee. Disallowance made by the AO u/s.14A as per Rule 8D – Held that:- Disallowance u/s.14A is called for when the AO is not satisfied with the assessee’s claim of having incurred no expenditure or some amount of expenditure in relation to exempt income - satisfaction of the AO as to the incorrect claim made by the assessee in this regard is sine qua non for invoking the applicability of Rule 8D - computing disallowance u/s.14A as per Rule 8D without rendering any opinion on the correctness or otherwise of the assessee’s claim is incorrect way - restore the matter to the file of AO to re-compute disallowance - in favour of assessee.

  ---

• 2012 (5) TMI 107
  Search under Section 132 – Tribunal decided that name of the respondent-assessee was not mentioned in the warrant – Held that:- The original warrant of authorization has been shown mentioning the name of assessee clearly readable - it appears that these names were also mentioned on the top of the second page - in the Panchnama, the name of the respondent-assessee is clearly mentioned and the documents which were seized have also been stated - the Tribunal had recorded a wrong factual finding and incorrect observation – in favour of revenue. No addition to be made in the block assessment proceedings as the AO has not relied upon any material collected/seized during the course of search – Held that :- Tribunal have not specifically referred to and dealt with the observations and findings given by the AO - Some general observations have been made by the Tribunal which do not deal with the observations and findings of the AO which are detailed, specific and to the contrary – AO has referred to several factual aspects, documents, account statements, oral statements etc. in support of the contention - Merely stating that the papers etc. do not pertain to the assessee and the contents of the document cannot be utilized do not lead to conclusion against block assessment order - remit back to Tribunal to discuss and examine the matter afresh and decide the factual matrix in detail – in favour of revenue.

  ---

• 2012 (5) TMI 106
  Deemed dividend – Section 2(22) - Held that:- Out of the payment of Rs. 11 lakhs, only Rs. 4,17,600/-was refundable advance and balance Rs. 6,82,400/- was towards salary and incentives on which tax was duly deducted at source, could not be disputed by the Department - it is not fair to treat the whole amount of Rs. 11,00,000/- as deemed dividend under section 2(22)(e) – against revenue.

  ---

• 2012 (5) TMI 105
  Whether CIT(A) was not justified in dismissing the appeal of the assessee on the ground that assessee had not shown reasonable cause for the delay in filing the appeal – Held that:- order of the Assessing Officer u/s 154 of the Act was received by the assessee on 4.4.2011 and the appeal was filed by the assessee before the ld. CIT(A) on 26.4.2011 which was within 22 days of the receipt of the impugned order. Thus, the appeal filed by the assessee was within the period of limitation. matter remanded back to his file for deciding the appeal. appeal of the assessee is allowed

  ---

• 2012 (5) TMI 104
  Whether the amount received by offering subscription based service is taxable in India – social media monitoring service - . It is a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. - The applicant is wholly controlled and managed from Singapore where the company was incorporated. It was not having a permanent establishment in India. All its directors are non-residents. - Held that:- amount received from offering the particular subscription based service is taxable in India as ‘royalty’ in terms of paragraph 2 of Article 12 of the DTAC between India and Singapore Whether tax is required to be deducted from such amount by the subscribers who are resident in India – Held that:- tax is required to be deducted in terms of section 195 of the Act from the payment made to it by the subscribers who are resident in India

  ---

• 2012 (5) TMI 103
  Unexplained credits - Section 68 - Onus to be discharged – Held that:- amount invested by the share holder company is duly appearing in its audited balance sheets of various years as Investment in unquoted equity shares and such balance sheets were also signed by the directors of the said shareholder company including Mr. Anil Kumar Gupta. - assessees have proved the share capital with overwhelming evidence and there is no adverse legally admissible evidence in possession of Revenue. - Revenue has accepted that the investment has been made by Welcome Coir Industries Limited in the assessees which is evidence from the assessment orders of Welcome Coir Industries Limited placed in the paper book. - Decided against the revenue.

  ---

• Corporate Laws

• 2012 (5) TMI 115
  Company in liquidation - The statement of affairs has not been filed by the respondents within the period of 21 days. Condonation of delay - Held that: an application under Section 454 has been pending from the year 2005, the records were perused by this Court in depth to find out as to whether any purpose would be served in retaining the main application in C.A. No. 672/2005 on file without proceeding further in the matter when the statement of affairs has been filed subsequently. The said application though not listed in the cause-list today, on the perusal of the subsequent order sheet, it is found that the same has not been disposed of. a perusal of the reasons assigned in the application supported by an affidavit seeking condonation of delay would indicate that apart from the amount which was due and payable to the creditors who had initiated the winding up petition in Co.P.No. 91/2002, the Company-in-liquidation was also due certain amounts to KSIIDC. The manner in which the statement of affairs has been filed on 30.05.2007 and the revised statement on 23.10.2007 would indicate that immediately on C.A. No. 869/2005 being disposed of, necessary steps have been taken by the respondents for filing statement of affairs. As already noticed, the deficiencies in the statement of affairs in any event would entail its consequence in accordance with law and this proceedings cannot be held on, as it would have to conclude with its consequences. Delay is condoned

  ---

• 2012 (5) TMI 102
  Rejection of arbitration application - In the consent Minutes of the Order, parties have agreed to refer disputes to arbitration - Held that:- There was an agreement between the parties that the award would have to be delivered within six months, a period which came to an end on 7 September 2010, the mandate of the Arbitrator stood terminated, that however, does not preclude the Applicant from seeking recourse to its remedies under Section 11 of the Arbitration and Conciliation Act, 1996 - it is not a case where parties have agreed to a situation where there would be an arbitration only before a named individual or that in his absence there would be no arbitration at all - upon the termination of the mandate of the Arbitrator, the jurisdiction of the Court to make a fresh appointment can be invoked - in favour of assessee.

  ---

• Service Tax

• 2012 (5) TMI 126
  Demand of duty, interest and penalty - tour operator service or rent-a-cab service – Period of limitation - held that:- the charges that has to be paid to the assessee appellant has to be based basic distance and any express travelled will upon pro-rata kilometres traversed. - the appellant is responsible for maintenance of the vehicles and he is suppose to fill the fuel and make the vehicle available along with the driver and substitute the vehicle in the case of any break down of vehicle. - the appellant herein is in possession of vehicles and is only hiring out the vehicles to ONGC for a stipulated period or as per the agreement. - Whether the hiring out of vehicle is for a day or a month does not mean anything, as the said vehicle is still in the possession of the appellant assessee or his driver during the entire period. - Tribunal in the case of Shree Sai Krishna Travels (2009 (9) TMI 515 - CESTAT, BANGALORE) was considering an identical issue and has held that in this kind of situation, the services rendered by the assessee cannot fall under the category of Rent-a-Cab services, as per the definition enshrined at Section 65 (91) of the Finance Act, 1994. - Decided in favour of the assessee. As regards the question of limitation, Held that the issue involved was really in dispute and various Benches have been holding that the activities being conducted by the appellant herein would not fall under the category of Rent-a-Cab Services and hence the bonafide impression carried by the appellant could not be faulted with.

  ---

• Central Excise

• 2012 (5) TMI 114
  Application for waiver of pre-deposit of duty - Cenvat credit on wagons as capital gain - Classification - rule 2(a) of Cenvat Credit Rules, 2004 - Held that: the wagons are classifiable under chapter 86 of the Central Excise Tariff and the same is not covered under the definition of capital goods. Further, we find that the wagons cannot be considered as components, spares and accessories of the specified goods. In view of this, we find that the applicant has not made out a case for waiver of duty no financial hardship is pleaded during the arguments - Decided against the assessee

  ---

• 2012 (5) TMI 113
  Whether the Tribunal was justified in holding that limitation was not applicable in respect of refund of deposit made by the respondents - Held that: in the present case, refund claim was filed by the assessee even before the appeal filed by the Revenue was disposed of by the First Appellate Authority. In these circumstances, the decision of the Tribunal in holding that the assessee was entitled to the refund of pre-deposit and rejecting the contention of the revenue that the claim of the assessee was time barred cannot be faulted - Decided in favor of the assessee

  ---

• 2012 (5) TMI 101
  Demand of excise duty - compounded levy / production based duty - Pan Masala Packing Machines - stay application – Held that:- tribunal after referring to the rules 2008 has taken a view that even if a machine was not working for certain period of the month, the same shall be deemed to be operating packing machine for the entire month. On that basis coming to the said conclusion the tribunal has observed that it was not a fit case of total waiver. - The consequences of sealing of non operating machines by the department itself on a notice given by the appellant have to be looked into for determining the issue. The scope and applicability of second proviso of Sub-Section 2 of Section 3-A of the Act has also to be considered by the Tribunal to which the tribunal has not adverted. - Direction to Pre-deposit reduced from 3 crores to 2 crores.

  ---

• CST, VAT & Sales Tax

• 2012 (5) TMI 112
  Proceedings under Article 226 – against the order of provisional attachment – Held that:- The material which has been revealed during the course of investigation suggests that the selling vendors are parties without any legitimate business or assets and have been set up only with a view to devise a scheme to defraud the Revenue - Nothing contained in this order would be regarded as the expression of a final or conclusive opinion by the Court on the issues which would arise during the course of assessment - if the entire basis of the claim of set off is found upon assessment to be bogus or fraudulent, the challenge to Section 48(5) cannot be entertained at the behest of the Petitioner - before the issue of constitutional validity is considered, the basic facts would need to be established in the course of assessment proceedings are required –assessee has also not submitted that he would be entitled to a set off even if the underlying transaction of sale is bogus or fraudulent - do not consider it appropriate to exercise the extraordinary writ jurisdiction under Article 226 as observations only prima facie, since the entire matter is still to be investigated following which a regular assessment would be framed – Writ dismissed.

  ---