TMI Tax Updates - e-Newsletter
May 14, 2012

Case Laws in this Newsletter:

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

Articles

1. Important Caution for Professional like CA/CMA (8 category) - Rate of Tax on old invoice raised upto 31st March 2012 to revised to 12% , hence issue supplementary invoices

   By: CSSwati Rawat

2. Amendments announced by Hon. Finance Minister in Finance Bill.

   By: CSSwati Rawat

News

1. Seeks to exempt excise duty on Articles of jewellery and goods falling under heading 8607

2. RBI - Detection and Reporting Mechanism of Counterfeit Notes – Monetary Policy Statement 2012-13

3. RBI - Detection and Reporting Mechanism of Counterfeit Notes – Monetary Policy Statement 2012-13

4. Monetary Policy Statement 2012-13

5. FEMA - HENCEFORTH , 50% OF THE EXCHANGE EARNER'S FOREIGN CURRENCY (EEFC) ACCOUNT IS TO BE CONVERTED INTO INDIAN RUPEES

6. Banks in Rural Areas.

7. Import of Gold .

8. Khandelwal Committee Report.

9. Agriculture Development Bank.

10. Campaign to Recover Outstanding Amount.

11. National Policy on Microfinance.

12. Connection of Banks with EPS.

13. Remittance of Funds by Migrant Population.

14. Vidyanathan Committee.

15. Rupay System.

16. BIFR Like Institution for Agriculture Sector.

17. IT Evasion of Builders.

18. ATM System.

19. Loan From Land Development Bank.

20. Interest Rate on NRIs Deposits.

21. Auction of Government Cash Surplus.

22. Repayment of 10.25% Government Stock, 2012.

23. Anand Sharma Expresses Concern Over Decline in IIP.

24. Finance Bill 2012 as Passed By Lok Sabha. [To be called the Finance Act, 2012]

25. India Germany to Collaborate in Electric Mobility India Seeks Green Technologies from the Global Leader.

Notifications

Income Tax

1. GSR 323(E) - dated 25-4-2012 - IT

POST OFFICE TIME DEPOSIT (AMENDMENT) RULES, 2012 - AMENDMENT IN RULE 7.

2. GSR 322(E) - dated 25-4-2012 - IT

POST OFFICE (MONTHLY INCOME ACCOUNT) AMENDMENT RULES, 2012 - AMENDMENT IN RULE 8 .

3. GSR 321(E) - dated 25-4-2012 - IT

SENIOR CITIZENS SAVINGS SCHEME (AMENDMENT) RULES, 2012 - AMENDMENT IN RULE 7.

4. GSR 320(E) - dated 25-4-2012 - IT

POST OFFICE RECURRING DEPOSIT (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 9, 10 11 AND 12.

5. GSR 319(E) - dated 25-4-2012 - IT

NATIONAL SAVINGS CERTIFICATES (IX ISSUE) (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 15 AND 16.

6. GSR 318(E) - dated 25-4-2012 - IT

NATIONAL SAVINGS CERTIFICATES (VIII ISSUE) (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 15 AND 16.

VAT - Delhi

7. F.7(400)/Policy/VAT/2011/47 to 60 - dated 30-4-2012 - DVAT

Maharashtra Bank authorized for e-payment.

Circulars / Instructions / Orders

VAT - Delhi

1. 02 OF 2012-13 - dated 7-5-2012

Online issue of central declaration forms.

2. 01 OF 2012-13 - dated 2-5-2012

Clarification regarding preserving of DVAT 43 by the contractors.

DGFT

3. 02/2012 - dated 10-5-2012

Additional conditions for obtaining cotton RC’s.

4. 111(RE:2011)/2009-2014 - dated 10-5-2012

SION for new product “Tubular Bags (Gauntlet)” under Textiles Product Group.

Companies Law

5. 08/2012 - dated 10-5-2012

Filing of Cost Audit Report (Form-I) and Compliance Report (Form-A) in the eXensible Business Reporting Language (XBRL) mode.

Highlights / Catch Notes

Income Tax

• Post Office Time Deposit Rules Updated: Changes to Rule 7 Impact Terms and Conditions for Financial Instruments.

  Notifications : POST OFFICE TIME DEPOSIT (AMENDMENT) RULES, 2012 - AMENDMENT IN RULE 7. - Ntf. No. GSR 323(E) Dated: April 25, 2012
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• Changes to Rule 8 in Post Office Monthly Income Accounts for Improved Management and Efficiency Announced.

  Notifications : POST OFFICE (MONTHLY INCOME ACCOUNT) AMENDMENT RULES, 2012 - AMENDMENT IN RULE 8 . - Ntf. No. GSR 322(E) Dated: April 25, 2012
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• Amendments to Rule 7 of Senior Citizens Savings Scheme: Updates on Income Tax Regulations for Better Compliance.

  Notifications : SENIOR CITIZENS SAVINGS SCHEME (AMENDMENT) RULES, 2012 - AMENDMENT IN RULE 7. - Ntf. No. GSR 321(E) Dated: April 25, 2012
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• Amendments to Post Office Recurring Deposit Rules 9-12 Align Accounts with Current Financial Regulations.

  Notifications : POST OFFICE RECURRING DEPOSIT (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 9, 10 11 AND 12. - Ntf. No. GSR 320(E) Dated: April 25, 2012
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• Amendments to National Savings Certificates Rules 15 & 16 for Better Tax Savings and Alignment with Policies.

  Notifications : NATIONAL SAVINGS CERTIFICATES (IX ISSUE) (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 15 AND 16. - Ntf. No. GSR 319(E) Dated: April 25, 2012
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• Amendments to National Savings Certificates Rules 15 & 16 Impact Income Tax Framework for Investors and Institutions.

  Notifications : NATIONAL SAVINGS CERTIFICATES (VIII ISSUE) (AMENDMENT) RULES, 2012 - AMENDMENT IN RULES 15 AND 16. - Ntf. No. GSR 318(E) Dated: April 25, 2012
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• Assessing Officer's Transfer Pricing Adjustments Unjustified Due to Lack of Rebuttal Opportunity for Assessee in ALP Case.

  Case-Laws - AT : IT - Transfer pricing - adjustments - selection of comparable - no opportunity of being heard was provided to the assessee for rebuttal, therefore the Assessing Officer was not justified in considering those comparables while working out the ALP in assessee's case
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• Supreme Court dismisses petition challenging High Court's decision on MAT penalties u/s 115JB.

  Case-Laws - SC : SC dismissed the SLP against the order of HC - The issue involved was penalty on account of adjustments to book profit by AO u/s 115JB - Minimum Alternate Tax (MAT)
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• Accounting Standard 7: Handling Customer Advances in Construction and Real Estate for Tax and Financial Statements.

  Case-Laws - AT : Method of accounting - Treatment of advance received from customers as sales - Application of AS-7 to construction contractors and to builder or real estate developers.
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• Appellant Challenges Assessing Officer's Draft Order for Lack of Jurisdiction u/s 144C(1) Due to TPO's Non-Adjustment.

  Case-Laws - AT : Transfer pricing - Application of Section 144C - eligible assessee - Appellant contended that as the TPO has not prescribed any adjustment in the Transfer Pricing order. So, the Assessing Officer had no jurisdiction to pass a draft order under sec. 144C(1), therefore, the order is without jurisdiction and liable to be annulled.
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• High Court can hear writ petitions in tax disputes, even with other appeal options available, ensuring timely justice.

  Case-Laws - HC : Power of HC to entertain writ petition where alternative appellate remedy is available
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• Dearness Allowance Deductions Valid Without Provision or Payment in Income Tax Context.

  Case-Laws - HC : Deduction of additional dearness allowance - the fact that no provision was made or no actual payment was made are inconsequential.
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• Section 23: Rental Income Deductions Limited to 30% of Annual Value and Property Acquisition Interest Only.

  Case-Laws - AT : Business Expenses or Expenditures deductible u/s 23 from rental income - only two types of deductions are possible, namely, 30% of the total annual value and amount of interest paid for acquisition of property.
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• Tax Authorities Must Allow TDS Credit Even if Income Isn't Taxable to Ensure Fair Taxation Process.

  Case-Laws - AT : TDS – Revenue can not disallow credit of TDS even if the amount is not chargeable to tax
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• Tax Department Questions Minor Partner's Capital Contribution; Attributes Funds to Minor Instead of Firm.

  Case-Laws - HC : IT - introduction of capital into the firm by the partner - if for any reason department was not satisfied with the financial capability of Minor partner the amounts could have been added to his hands and not at the hands of Firm
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Customs

• Tata Teleservices and Tata Consultancy's Group Status Under Foreign Trade Policy Analyzed for Tax Implications.

  Case-Laws - HC : Whether Tata Teleservices (Maharashtra) Ltd. and Tata Consultancy Services Ltd. are group companies under FTP.
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• Acquiring Company Not Liable for Offenses of Acquired Firm, Clarifies Legal Ruling.

  Case-Laws - AT : A company taking over another company cannot be held liable for the offence committed by the company taken over.
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DGFT

• DGFT Issues New Conditions for Cotton Registration Certificates to Streamline Export and Trade Process.

  Circulars : Additional conditions for obtaining cotton RC’s. - Cir. No. 02/2012 Dated: May 10, 2012
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• DGFT issues new SION for "Tubular Bags (Gauntlet)" under Textiles Product Group, impacting production and export regulations.

  Circulars : SION for new product “Tubular Bags (Gauntlet)” under Textiles Product Group. - Cir. No. 111(RE:2011)/2009-2014 Dated: May 10, 2012
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Corporate Law

• Companies Must File Cost Audit and Compliance Reports via XBRL Mode per Circular No. 08/2012 for Transparency.

  Circulars : Filing of Cost Audit Report (Form-I) and Compliance Report (Form-A) in the eXensible Business Reporting Language (XBRL) mode. - Cir. No. 08/2012 Dated: May 10, 2012
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Indian Laws

• RBI Launches New Protocol for Detecting and Reporting Counterfeit Notes Under 2012-13 Monetary Policy to Protect Economy.

  News : RBI - Detection and Reporting Mechanism of Counterfeit Notes – Monetary Policy Statement 2012-13
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• Tax Rate on Old Invoices Revised to 12% for Invoices Issued Before March 31, 2012; Issue Supplementary Invoices Now.

  Articles : Important Caution for Professional like CA/CMA (8 category) - Rate of Tax on old invoice raised upto 31st March 2012 to revised to 12% , hence issue supplementary invoices - Article
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• Delhi Tribunal Approves Extra Depreciation for Power Generation Assets, Boosting Tax Incentives for Sector Investments.

  Articles : Delhi Tribunal grants additional depreciation on assets purchased for power generation - Article
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• Finance Bill 2012: Key Tax Amendments for Revenue Boost, Compliance Streamlining, and Enhanced Transparency in Financial Transactions.

  News : Finance Bill 2012 as Passed By Lok Sabha as on 08-05-2012.
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Service Tax

• Appeals on CENVAT credit disputes to be processed under Central Excise for efficiency when excise duty and service tax apply.

  Case-Laws - AT : Format of appeal before CESTAT - In a case where the assessee is paying excise duty as well as service tax, for administrative convenience, the appeal relating to dispute involving CENVAT credit should be treated as appeal under Central Excise.
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• Revenue Neutrality Bars Extended Limitation for Tax Demands in Service Tax Cases: Key Principle Highlighted.

  Case-Laws - AT : ST - Revenue neutral exercise - demand can not be raising invoking extended period of limitation.
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• Backup Power Supply Charges Exempt from Service Tax Under Management, Maintenance, or Repair Services Category.

  Case-Laws - AT : Management, Maintenance or Repair Services - amounts collected under the head 'backup power supply' - No service tax.
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Central Excise

• Court Dismisses Writ Petition for Interest on Interest; Petitioner May Seek Alternative Civil Remedy.

  Case-Laws - HC : Claim of Interest on Interest for delayed refund - writ petition dismissed - however alternative civil remedy kept open.
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• Does the 20 cm minimum diameter rule in Clause 7, sub-clause (3) apply to pipes in sub-clause (2) too?

  Case-Laws - AT : Whether restriction regarding the requirement of minimum 20 cm. diameter contemplated under sub-clause (3) of Clause 7 in the table of the Notification No. 6/2006-C.E., dated 1-3-2006 as amended by the Notification Nos. 25/2006-C.E. dated 20-3-2006, applies to the pipes specified under sub-clause (2) of Clause 7 of the said table of the said notification also
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• Revenue Authorities Demand Excise Duty on Job Work Activity, Overturning Service Tax Classification by Appellant.

  Case-Laws - AT : Job work activity - appellant paid serivce tax on such activity - revenue demanded duty of excise considering the same as amounting to manufacture
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• Valuation of Physician Samples by Contract Manufacturer Set as Transaction Value or CAS 4 Value.

  Case-Laws - AT : CE - contract manufacturer jobworker - clearance of physician samples -transaction value/CAS 4 value are the correct value
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VAT

• Constitutional Review of Section 48(5) of Maharashtra VAT Act: Focus on "Actually Paid" for Tax Credit Claims.

  Case-Laws - HC : Meaning and Scope of the term 'Actually paid' - Constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act, 2002)
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• Online Process for Issuing VAT and Sales Tax Forms to Streamline Compliance and Modernize Tax Administration.

  Circulars : Online issue of central declaration forms. - Cir. No. 02 OF 2012-13 Dated: May 7, 2012
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• Contractors Must Preserve DVAT 43 Forms for Compliance, Per Circular No. 01 of 2012-13; Ensures Tax Transparency.

  Circulars : Clarification regarding preserving of DVAT 43 by the contractors. - Cir. No. 01 OF 2012-13 Dated: May 2, 2012
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• Maharashtra Bank Authorized for E-Payments in VAT and Sales Tax per Notification F.7(400)/Policy/VAT/2011/47-60.

  Notifications : Maharashtra Bank authorized for e-payment. - Ntf. No. F.7(400)/Policy/VAT/2011/47 to 60 Dated: April 30, 2012
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Case Laws:

• Income Tax

• 2012 (5) TMI 153
  Transfer pricing - adjustments - selection of comparable - opportunity of being heard - held that:- In the present case, the AO adopted M/s. Infosys Technologies Ltd., KALS Information System Ltd., Accel Transmatics Ltd. and Tata Elxsi Ltd. as comparables on the basis of data which was obtained by him in response of the notices issued u/s. 133(6) of the Act, however no opportunity of being heard was provided to the assessee for rebuttal, therefore the Assessing Officer was not justified in considering those comparables while working out the ALP in assessee's case. - Matter remanded back for grant of an opportunity of being heard. Benefit of +/- 5% range mentioned in the proviso to section 92C(2) - whether amendment is prospective or retrospective in nature - held that:- The assessee's view was that the arithmetical mean should be adjusted by 5% to arrive at ALP, whereas the departmental view was that no such adjustment is required to be made if the variation between the transfer price and the arithmetical mean is more than 5% of the arithmetical mean. With a view to resolving this controversy, the Legislature sought to amend the proviso to section 92C(2) - Proviso is not a procedural piece of legislation and therefore, unless it is so clearly intended, the newly amended proviso cannot be understood to be retrospective in nature. In fact, it is a well-settled proposition that the statutory provisions as they stand on the first day of April of the assessment year must apply to the assessment of the year and the modification of the provisions during the pendency of assessment would not generally prejudice the rights of the assessee. - the proviso inserted by the Finance (No 2) Act, 2009 would not apply to an assessment year prior to its insertion. - no justification to deny the benefit of +/-5% to the assessee in terms of the erstwhile Proviso for the purposes of computing the ALP. - Decided in favor of assessee.

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• 2012 (5) TMI 151
  Valuation of property under wealth tax - asset under WT Act - valuation as per valuation fixed by the Stamp Duty Authorities or as per Government approved valuer - Urban land but falling in the non-development - restriction on the construction - 50% for hotel and 50% for general public park - held that:- in view of the decision of the Hon'ble Supreme Court in the case of K Vasundara Devi, we allow the deduction of 40% while computing the fair market value of the land in question on account of large track of the land. The expenditure incurred by the assessee for removing of the infirmity/defects - the expenditure, which is incurred for exploiting the potential development of the land, is an allowable deduction for computation of fair market value while determining the net wealth. - Accordingly, we allow the expenditure incurred by the assessee on development of park including construction of park, construction of strom water drain, compound wall in the garden area etc. - Partly in favor of assessee.

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• 2012 (5) TMI 150
  SLP dismissed against the order of HC in the matter of COMMISSIONER OF INCOME-TAX Versus NALWA SONS INVESTMENTS LTD. [2010 (8) TMI 40 - DELHI HIGH COURT] - The issue involved was penalty on account of adjustments to book profit by AO u/s 115JB - Minimum Alternate Tax (MAT)

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• 2012 (5) TMI 148
  Method of accounting - Treatment of advance received from customers as sales - Application of AS-7 to construction contractors and to builder or real estate developers. - The findings of the Assessing Officer for including the sale proceeds of the plots/floors in respect of which assessee has received advances. However, sale deeds have not been registered in this year. Now, the case of the Assessing Officer is that merely on account of non-registration of sale deed, it cannot be construed that transaction has not been completed between the parties. The assessee cannot defer or postpone the recognition of the revenue in respect of these plots. - held that:- In the case of assessee, it is a developer and recognized the sale of the plots on execution of the conveyance deed duly registered. Taking into consideration all these aspects, we do not find any reason to change the method of accounting in this year which was accepted in the past. The A.O. has not assigned any reason for this change. - Decided in favor of assessee.

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• 2012 (5) TMI 147
  Transfer pricing - Application of Section 144C - eligible assessee - Appellant contended that as the TPO has not prescribed any adjustment in the Transfer Pricing order. So, the Assessing Officer had no jurisdiction to pass a draft order under sec. 144C(1). Therefore, the order is without jurisdiction and liable to be annulled. - held that:- it is necessary to see that the reference made to the TPO, the order passed by the TPO, the draft assessment order passed by the Assessing Officer and the directions issued by the DRP are all pre-assessment procedures of aid and guidance provided to the assessing authority by the statute. If any irregularity is committed by the Assessing Officer in following the above set of pre-assessment procedures, such irregularity does not make the assessment order illegal. At the best, it makes the order only irregular. - when the adjustments made by the Assessing Officer are deleted by the Tribunal, that irregularity is automatically cured. In such circumstances, the assessment order need not be invalidated. The assessment order does not become void ab initio. - Decided against the assessee. Regarding deduction u/s 10A - held that:- TPO has made a categorical finding that the operating profit reported by the assessee is higher than the profit worked out on the basis of ALP. - ALP is determined on the basis of the most appropriate method. Most appropriate method is chosen either on profit basis method or price basis method. In the latter case, profits are not at all considered. In that method, profit is only a derivative of prices. When profits itself not worked out, how it is justified to adopt ALP profits to determine what is "ordinary profits" for the purpose of sec. 10A(7)? - Assessing Officer has erred in reducing Rs. 4,48,50,795/- from the eligible profits of the assessee under sec. 10A. - Decided in favor of assessee. Regarding exclusion of foreign travel expenditure - held that:- if expenses are to be reduced from export turnover, they have to be reduced from the total turnover also, to maintain the parity. - Decided in favor of assessee. Disallowance made under sec. 14A - held that:- As quantification is not permissible under Rule 8D for the impugned assessment year, the disallowance has to be made on the basis of reasonableness and fairness. In the present case, the Assessing Officer has made a disallowance of Rs. 9,81,686/-. We modify the disallowance to a sum of Rs. 6 lakhs on a fair basis. This issue is decided partly in favour of the assessee.

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• 2012 (5) TMI 146
  Deduction u/s 80IB - work contractor versus developer - reassessment - notice u/s 148 - held that: - in case of GKN Driveshafts [India] Ltd. [2002 -TMI - 6100 - SUPREME Court], the Supreme Court has clearly laid down the law that the Assessing Officer is bound to disclose the reason of reassessment within reasonable time and on receipt of the reasons, the assessee is entitled to raise objection and if any such objection is filed, the same must be disposed of by a speaking order before proceeding to reassess in terms of the notice earlier given. - in spite of repeated reminders by the assessee even pointing out the above law laid down by the Supreme Court, the Assessing Officer failed to dispose of the said objections and instead of that, straightaway passed the order of reassessment. - Assessing Officer acted without jurisdiction in initiating the proceedings for reassessment in spite of non-existence of the required conditions specified under the Act and even did not care to follow the norms laid down by the Supreme Court in the above decision by not disposing of the objections before passing the order of reassessment. - Decided in favor of assessee. Since we have decided to quash the notice under Section 148 of the Act itself on the ground of non-existence of valid ground as disclosed in the reasons, we quash initiation of proceedings itself and consequently, the subsequent order of reassessment is also quashed. Power of HC to entertain writ petition where alternative appellate remedy is available - held that:- the Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India (1996 -TMI - 44411 - SUPREME COURT OF INDIA), has specifically recognized the power of this court to entertain a writ-application by pointing out that such power cannot be circumscribed by the provisions of any enactment but while exercising such power, the writ-court will certainly have due regard to the legislative intent evidenced by the provisions of the concerned statute and would exercise their jurisdiction consistent with the provisions of the Act. Thus, in a given case, if the statutory authority exercises its power even in the absence of the conditions recognized by the Statutory provisions, a writ-court can definitely interfere to avoid prolonged alternative remedy. - Decided in favor of assessee.

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• 2012 (5) TMI 145
  Deemed capital gains – AO treated the sale of plots as sale of capital assets and determined the deemed capital gain from sale as per the provisions of section 50C – assessee contented the income from the said transaction is liable to be treated as income from profits and gains of business -Tribunal treated it as stock in trade – Revenue appeal – Held that:- no grievance to the observations of the Tribunal that in the balance sheet also the land has been disclosed as stock in trade and Stock in trade has been excluded from the definition of capital asset - it is for the Revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income - the profit motive in entering a transaction is not decisive, for an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at a profit- there is nothing to show that the assessee desired to controvert the property into some other use - appeal is dismissed stating provisions of section 50C are not applicable with respect of sale of land as sale of land was not capital asset - against revenue.

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• 2012 (5) TMI 144
  Deduction of additional dearness allowance - effect of non provision in the books of accounts - held that:- The submission is that there is no provision made in the books of the assessee for the aforesaid amount. - The assessee having contested the claim of workers of Additional Dearness Allowance, the fact that no provision was made or no actual payment was made are inconsequential. - Decided in favor of assessee.

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• 2012 (5) TMI 143
  Business Expenses or Expenditures deductible u/s 23 from rental income - business of builders, contractors & investment in immoveable properties for sale, lease, etc. - In the types business carried on by the assessee, it has to hold the properties to carry on its real estate business of buying and selling. However, till any good opportunity comes, it has given the said premises on lease to earn income. - claim of expenditure incurred on such premises - held that:- annual value cannot be reduced by the amount of expenses because sec. 23(1) clearly talks of annual rent received and the expenditure can be claimed only u/s. 24. - only two types of deductions are possible, namely, 30% of the total annual value and amount of interest paid for acquisition of property. No other deduction is possible and accordingly we hold that the amount of expenditure incurred on account of brokerage, professional consultancy, maintenance, etc., relating to the property is not allowable under the head 'income from house property'. - Decided against the assessee. 'Processing charges' as 'Interest' u/s 2(28A) - definition of 'interest' - held that:- processing charges have to be construed as part of interest in view of the definition of 'interest'. - Decided in favor of assessee.

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• 2012 (5) TMI 142
  Disallowance on payment made to directors u/s 40A(2B) - assessee explained that the Directors were well qualified and technically competent and placed at a high level of management and, therefore, the remuneration was consistent and the provisions of the companies Act are not applicable to assessee’s case. He further explained that directors are individually assessed to tax and all fall within the highest income-tax rate - Held that: CIT(A) gave a categorical finding that the AO had not brought any other fact, evidence or argument while questioning the quantum of remuneration and commission paid to Directors. He further gave a finding that the provisions of section 198 have no application to the assessee, who is a private limited company and not a private company which is subsidiary of a public company - Decided in favor of the assessee Regarding disallowance u/s 40(a)(ia) - TDS u/s 194J - Held that: , the assessee deducted tax at source, therefore, the provisions of section 40(a(ia) do not apply to the case of the assessee. Therefore, we do not find any reason to interfere with the order of the CIT(A) on this count and accordingly, the same is hereby upheld dismissing the ground raised by the revenue. - Decided in favor of the assessee

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• 2012 (5) TMI 139
  Penalty imposed u/s. 271D as the assessee receiving loans in cash in contravention of the provisions of section 269SS – Held that:- CBDT Circular No.572 dated 03.08.1990 has clearly brought out the provision of section 269SS explaining that "for taking or accepting any loan or deposit in excess of Rs. 20,000" - As cash loan is not exceeding Rs. 20,000 rather it is exactly Rs. 20,000 no contravention of Sec 269SS arises – Secs 271D inserted in the IT Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, as penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft – in favour of assessee.

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• 2012 (5) TMI 138
  Disallowance of credit of TDS – no chargeable income in the hands of assessee - The franchisee pays rent to the assessee after deducting applicable TDS." The assessee explained the transaction with the help of accounting entries passed in its books of account. It was, therefore, urged that the assessee and M/s Arvind Brands Limited were only the link between Landlords of the property and the franchisee. That was stated to be the reason for which the assessee had not shown any rental income. The Assessing Officer, on going through the assessee's explanation, agreed that the assessee did not receive any rental income. He, therefore, did not make any addition on this account. However he held that the amount of TDS could not be refunded to the assessee as the assessee had not shown any income from rent. – Held that:- As per section 199 any deduction made in accordance with the foregoing provisions of Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made and credit shall be given to him for the amount so deducted for the assessment year for which such income is assessable - The Revenue will never allow credit as the amount is not chargeable to tax and it cannot retain such amount in contravention of Article 265 of the Constitution so to circumvent the situation credit for the tax deducted at source to the payee of the amount in the year for which such tax was deducted and the amount was paid after deduction of tax at source is allowed – in favour of assessee.

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• 2012 (5) TMI 137
  Deleting the addition made by the A.O. on account of excessive payment to the persons specified in section 13(3)– Revenue appeal - Held that:- If an assessee made payments for availing benefit, services or any facility from the persons mentioned in section 40A(2(b) and similar type of benefit or service can be availed from the open market at a cheaper rate then the excess amount considered by the AO is to be disallowed to the assessee out of his business expenditure - Since the income of the assessee is being not computed as a business income and computed under sec. 11, 12 and 13 - Clause "b" of section 40A(2) provides no reference to an assessee who is a society or trust and whose income is to be assessed as per sections 11, 12 and 13 - Because a similar mechanism has been provided therein section 13(1)(ii) and 13(3) of the Act it appears that the Assessing Officer has made reference to this section unnecessarily - section 13(3) is an analogous to sub-clause (b) of section 40A(2)– against revenue. Violation of sec. 13(1)(c)(ii) r.w.s.13(3) and thus lose status of a charitable institution and exemption under sec. 11 – Held that:- Restriction is applicable to those amounts which have been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of the Act and will not lead to any conclusion that assessee would loose its charity status - if a small amount is to be disallowed that would not disqualify to enjoy the status of charity- against revenue. Whether assessee has extended any undue benefit directly or indirectly to the persons referred to in sub-section (3) – Held that:- As far as the salary paid to two persons is concerned in assessment years 2005-06 and 2006-07, AO made the disallowance and the ITAT has upheld the deletion of disallowance – looking to 6th Pay Commission which resulted into a handsome enhancement by 30% to 40%. in the salary of government teaching staff the increase in the salary of Shri Joseph John allowed to him by the ITAT in 2004-05, is being looked into with this angle also then sum of Rs. 55,000 would not be on a higher side – against revenue.

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• 2012 (5) TMI 136
  Whether income realized from the sale of land is chargeable to income tax as capital gains or as income from business – Held that:- The sale of the land was not motivated by a desire to make a profit, but to protect the corpus and the resulting expenditure due to litigation – as there were no improvements on the land by way of laying out drainage, levelling or construction of roads it cannot be said that the land was for the purpose or trade - an area of about hundred acres was repurchased cannot be treated as purchase in the commercial sense since it was a repurchase of lands which were declared as surplus under the Urban Land Ceiling Act - the surplus realised on the sale of the land during the assessment years in question was in the nature of capital gains.

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• 2012 (5) TMI 135
  Amount introduced by the minor partner in the assessee firm at the time of starting of business treated as income of the firm – Held that:- Failure to take into account that the period in question was the first year of the business of the assessee firm - the partnership firm was formed on 5.7.1990 and on 7.7.1990 Minor partner deposited capital money with the Firm through bank drafts - the accounting period being financial year i.e. ending on 31st of March, 1991, the Firm could not have any income at the time of its formation - if for any reason department was not satisfied with the financial capability of Minor partner the amounts could have been added to his hands and not at the hands of Firm - no material before the Tribunal in holding that amount introduced by minor partner at the time of starting of the business, as income of the assessee Firm – against revenue. Tribunal dismissing the appeal without recording any finding on the said grounds – Held that:- Tribunal was not justified in not considering the ground nos. 2 to 6 of grounds of appeal independently and it committed illegality in dismissing the appeal without recording any finding thereon – in favour of assessee.

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• 2012 (5) TMI 134
  Disallowance of payments made to professionals on non-deduction of tax at source – Held that:- As there is no mention of any other medical consultancy receipts, i.e., apart from surgery income (being at Rs. 28.50 lacs out of total receipt of Rs. 34.74 lacs for the financial year 2005-06) the matter without any clear finding on facts cannot be concluded as there has been no examination on this vital aspect of the matter which as it transpire would be decisive - no doubt physicians/doctors have been hired but the nature of the services rendered by them are whether facilitative or on independent stand alone basis need to looked - restore the matter back to the file of the assessing authority for an examination and issue of the consequential finding/s – in favour of assessee.

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• 2012 (5) TMI 133
  Notice issued u/s 148 - unutilized CENVAT credit to be included in the value of closing stock - Held that:- The condition precedent for exercising power of reopening the assessment as provided in Section 147 and issue of notice u/s 148 is absent and the AO acted illegally in issuing notice of reassessment by forming a second opinion without having any "tangible material" to exercise jurisdiction - only the difference of opinion of the successor-in-office which has been the basis for reopening of the assessment cannot be accepted – the meaning of the expression "reason to believe" needs to be given a schematic interpretation, otherwise Section 147 giving arbitrary powers to the AO to reopen assessments on the basis of "mere change of opinion" which cannot be per se reason to reopen - in favour of assessee.

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• 2012 (5) TMI 132
  Validity of notice under Section 148 issued after filing of revised return under Section 139(5) – Held that:- The revised return was filed on 28.5.2002 and was processed under Section 143(1) on 24.3.2004 - Rs.1,00,000 as the gift amount was surrendered to be taxed and tax amount was also deposited - the revised return filed on 28.5.2002 was the only return which substituted the original return thus it was not a case of escapement of income – wrong conclusion that revised return can be filed only when there is bonafide mistake as Section 139(5) enables an assessee to file revised return on the discovery of any omission or wrong statement – initiation of reassessment taking recourse of Section 148 was not warranted - in favour of assessee.

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• 2012 (5) TMI 131
  Cancelling the penalty u/s 271-D/27/E by tribunal - contravention of provisions of section 269SS / 269T – Held that:- Tribunal rightly invoked Section 273-B as no penalty shall be imposable on the assessee for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure - from the materials brought on record it is clear that four persons were agriculturists from whom various deposits in cash were accepted amounting to Rs. 10,000/- or lesser amount and came to the conclusion that those agriculturists had no bank account and the amounts were paid in cash – in favour of assessee.

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• 2012 (5) TMI 130
  Power of Commissioner took cognizance under sec. 263 – Held that:- AO has issued a questionnaire for information in respect of installation of wind turbine plant and the assessee has given the reply producing all relevant documents indicating the installation of the wind turbine plant meant for generation of electricity - The assessment order passed subsequent to passing of 263 order by the Learned Commissioner certain facts noticed in this subsequent orders held that Assessing Officer has not applied his mind analytically in the original assessment proceedings - according to the Learned Commissioner, the replies do not contain complete details and AO has time to frame the assessment order but without conducting any proper inquiry, passed the assessment order - information supplied by the assessee on the power purchase agreement though were on the record but they were not looked into by the AO - it cannot be inferred that Assessing Officer has applied his mind and thereafter accepted the claim of the assessee for grant of depreciation - Commissioner set aside the order of the AO directing to conduct a fresh inquiry – no error in the order of Learned Commissioner – against assessee.

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• Customs

• 2012 (5) TMI 129
  Whether Tata Teleservices (Maharashtra) Ltd. and Tata Consultancy Services Ltd. cannot be considered as group companies under para 9.28 of the Foreign Trade Policy 2004-2009. – Held that:- The Policy Interpretation Committee has not assigned any reasons as to why the petitioner company and TCS cannot be considered as group companies - petitioner indirectly fulfills the first condition set out in para 9.28 of the Foreign Trade Policy as Tata Sons Ltd held 74% equity shares of TCS and 21% equity shares of the petitioner company giving the petitioner to exercise 26 per cent or more of voting rights in TCS – in favour of assessee.

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• Corporate Laws

• 2012 (5) TMI 128
  Application filed by the Official Liquidator to take cognizance of the offence committed by the respondent in not filing the statement of affairs - Held that:- A perusal of the proceedings indicates that all the respondents other than respondent No. 3 have been discharged from the proceedings on different dates - considering the fact that the 3rd respondent has sought discharge from the instant proceedings on the ground that he had resigned, the same is a legal aspect - resignation letter filled to the office of Registrar is proof that he had resigned as a director of the company-in- liquidation thus no liability.

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• Central Excise

• 2012 (5) TMI 141
  Notice to make payment of the differential Central Excise duty - Held that:- Tribunal had adjudicated the matter in its favour which order has not been set aside so far - as per Section 35K (1)the Tribunal after the decision by the High Court or the Supreme Court is required to pass order to dispose of the case in conformity with such judgment unless, such an order is passed, the earlier order passed by the Tribunal remains in existence - no such order has been passed by the Tribunal so far in terms of the judgment delivered by this Court - open to the revenue to act against the petitioner as and when the order is passed by the Tribunal in terms of section 35K (1) - in favour of assessee.

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• CST, VAT & Sales Tax

• 2012 (5) TMI 152
  Meaning and Scope of the term 'Actually paid' - Constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act, 2002) - Petitioner seeks that the words “actually paid” be read down to mean “ought to have been paid” - Claim of set off and refund - electronic filing of return - held that:- In the context in which the words “actually paid” are used in the MVAT Act, “actually paid” means what has been as a matter of fact deposited in the treasury. Hence, in the context of the provisions of Section 48(5), we cannot accept the contention of the Petitioner that “actually paid .. in the government treasury” means or should be read to mean what tax ought to have been deposited but has not actually been deposited in the treasury. To accept the submission would be to rewrite the legislative provision. Moreover, the concept of a set off presupposes that tax has been paid in respect of the goods in respect of which a set off is claimed. To allow a set off though the tax has not been paid actually would be to defeat the legitimate interests of the Revenue. The constitutionality of the provision of Section 48(5) upheld. Similarly Section 51(7) which requires an application for refund and specifies the period within which an application can be made, cannot be assailed as being invalid. Regulating the process of refunds is as much within the province of a legitimate tax enactment and the legislature is within its power in requiring a refund to be applied for within a reasonable period. The right to obtain a set off is a right conferred by statute and the legislature while recognizing an entitlement to a set off in certain circumstances is lawfully entitled to prescribe the conditions subject to which a set off can be obtained. If the legislature, as in the present case, prescribes that a set off should be granted only to the extent to which tax has been deposited in the treasury on the purchase of goods, it is within a reasonable exercise of its legislative power in so mandating. This does not offend Article 14. A plea of hardship cannot result in the invalidation of a statutory provision in a fiscal enactment which is otherwise lawful.

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• 2012 (5) TMI 140
  Whether or not multi functional printers are input or output units under Entry No.41A of the notification issued under the DVAT Act. - held that:- the issue in question first requires determination of factual aspects viz., whether or not the multi functional machine in question, is in fact, input or output unit of an automatic data processing machine. For deciding this fact - Since petitioners have alternative remedy, writ petition dismissed.

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• Wealth tax

• 2012 (5) TMI 149
  Valuation under Wealth Tax - Fair Market Value of the selfsame jewellery as on 1st April 1974 should be arrived by reverse indexation from the date of sale held in December 1991 based on the sale price and not from the Fair Market Value as on 31 st March 1989 on the basis of which the Revenue had imposed Wealth Tax upon the assessee – Held that:- Revenue having accepted the declaration of the valuation of the selfsame jewellery given by the assessee as on 31 st March, 1989 as correct valuation for the purpose of Wealth Tax Act, there is no reason why the same valuation should not be treated to be a reliable base for the purpose of computing the capital gain under the Act by the process of reverse indexation - Contention to adopt the reverse indexation from the date of actual sale simply because in that process the Revenue will be benefited cannot be accepted - for the purpose of taxation, it is settled law that when two equally efficacious and acceptable data for the purpose of valuations are available, the one which is beneficial to the assessee should be preferred. The full value of consideration received as a result of transfer of jewellery belonging to a royal family for the purpose of ascertaining the market value as on April 1, 1974 in order to deduct the same from actual sale price would be unsafe to base the actual sale price by the process of reverse indexation and thus the valuation accepted by Revenue as market value for the purpose of Wealth Tax Act is the safest base - AO directed to recalculate the capital gain by adopting reverse indexation based on valuation as on 31 st March, 1989 - in favour of assessee.

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