TMI Tax Updates - e-Newsletter
May 18, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Wealth tax

Articles

1. Constitutional provisions relating to taxation-How important to understand tax laws

   By: AMIT BAJAJ ADVOCATE

2. AWARE AND BEWARE

   By: Jayaprakash Gopinathan

3. “EMPLOYEE” UNDER EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Import of Steel

2. Rise in Prices of Steel

3. Vanishing Companies

4. Increasing Industrial Package for Industries in Assam Operational From 1st April.

5. India’s Ranking on UNIDO Competitiveness Industrial Performance Index Improves.

6. Steps to Improve Salt Industry.

7. India’s Ranking on UNIDO Competitiveness Industrial Performance Index Improves.

8. Increasing Industrial Package for Industries in Assam Operational from 1st April.

9. Indian Embassy takes up Default in Payment by Iranian Buyers for Export of Rice.

10. Export to Iran Despite US and Eurozone sanctions.

11. No Proposal to Ban Iron Ore Exports.

12. Details of Import of Agricultural Products .

13. SEZs Approved and Notified in North East.

14. Representations Received Declaring Tea as National Drink.

15. Dedicated SEZs for Gems And Jewellery Industry.

16. Change in Tariff Value of Brass Scrap, Poppy Seeds, Gold and Silver Notified .

17. CCI’S Advocacy Initiatives in Delhi Schools.

Notifications

Central Excise

1. Corrigendum - dated 7-5-2012 - CE

Corrigendum of Notification No. 07/2012-Central Excise (N.T.).

2. Corrigendum - dated 30-3-2012 - CE

Third Corrigendum of Notification No. 12/2012-Central Excise.

3. Corrigendum - dated 23-3-2012 - CE

Second Corrigendum of Notification No. 12/2012-Central Excise.

4. Corrigendum - dated 22-3-2012 - CE

First Corrigendum of Notification No. 12/2012-Central Excise.

5. Corrigendum - dated 20-3-2012 - CE

Corrigendum of Notification No. No. 9/2012-CE.

6. Corrigendum - dated 20-3-2012 - CE

Corrigendum of Notification No. 10/2012-CE.

7. Corrigendum - dated 20-3-2012 - CE

Corrigendum of Notification No. 11/2012-CE.

8. Corrigendum - dated 19-3-2012 - CE

Corrigendum of Notification No. 16/2012-CE.

9. Corrigendum - dated 19-3-2012 - CE

Corrigendum of Notification No. 18/2012-CE.

Customs

10. F.No. 437/17/2012-Cus. IV - dated 16-5-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

11. 43/2012 - dated 16-5-2012 - Cus (NT)

Amends the Handling of Cargo in Customs Areas Regulations, 2009

Income Tax

12. 32/2012 - dated 7-5-2012 - IT

U/s. 35AC, read with Explanation (b) thereto of the IT Act, 1961 - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes

Circulars / Instructions / Orders

VAT - Delhi

1. 03 OF 2012-13 - dated 11-5-2012

Offline block for filing of DVAT/CST returns and Annexure 2A & 2B .

Income Tax

2. NO. F-46-AD(AT)2012, - dated 11-5-2012

Transfer of specified members of ITAT from one Benches to another Benches

FEMA

3. 128 - dated 16-5-2012

Exchange Earner’s Foreign Currency (EEFC) Account

DGFT

4. 63 (RE-2010)/2009-14 - dated 16-5-2012

Amendment in the conditions and modalities for registration of contracts with DGFT for export of sugar.

5. 64 (RE-2010) /2009-14 - dated 16-5-2012

File applications for 58 SEZ ports codes - reg.

6. 112 (RE2010)/2009-2014 - dated 15-5-2012

Areca nut (i.e. Betel nut) under SIONs (including Leather SIONs), disallowing import thereof.

Highlights / Catch Notes

Income Tax

• Income Tax Act Section 35AC: Tax Deductions for Contributions to Notified Socially Beneficial Projects and Schemes Explained.

  Notifications : U/s. 35AC, read with Explanation (b) thereto of the IT Act, 1961 - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes - Notification
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• Selecting Comparable Transactions in Transfer Pricing: Ensure Close Match to Assessee's Business Model for Accuracy.

  Case-Laws - AT : IT - TP - Selection of comparable transactions - the selection of comparables and selection of similar transactions is not easy to find out and a difficult task to pick up exactly identical business model. Only an endeavour should be made so that the comparables should match with the assessee as close/near as possible.
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• Clarification of Section 11(1)(a) on Trust Income: Tax Payments Under Voluntary Disclosure of Income Scheme, 1997 Examined.

  Case-Laws - HC : Trust - Interpretation of Section 11(1)(a) - Application of income - treatment of payment of taxes under the Voluntary Disclosure of Income Scheme, 1997
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• Super Stockist Tax Implications: Principal-to-Principal vs. Principal-to-Agent Relationship and TDS Applicability Explained.

  Case-Laws - AT : TDS on the activity of super stockist of Chemists & Druggists - Principal to Principal relationship or Principal to agent relationship
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• Interest Deduction Allowed u/s 36(1)(iii) Even If Capitalized in Accounts.

  Case-Laws - AT : Interest Expenditure u/s 36(1)(iii) - even if the assessee has capitalized its interest expenditure in the books of account, the same is eligible for claim of deduction u/s 36(1)(iii).
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• Block Assessment Invalidated Due to Failure to Serve Notice u/s 143(2) Despite Section 292BB Provisions.

  Case-Laws - HC : Block assessment - Participation in assessment proceedings - Notice u/s 143(2) was not serviced - assessment not valid even under section 292BB.
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• Debate on Section 80IB: Should Balcony Space Be Included in Built-Up Area for Tax Deduction?

  Case-Laws - HC : Deduction u/s 80IB - inclusion / exclusion of balcony - built up area - admittedly if the balcony area is excluded
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• Transfer Pricing Adjustments for Software and IT Services: Key Factors in Arm's Length Price u/s 92CA.

  Case-Laws - AT : Transfer Pricing adjustments - Arms length price (ALP) - u/s 92CA - software development and IT enabled services - selection of comparable - Size matters in business
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Customs

• Amendments to Handling of Cargo in Customs Areas Regulations 2009: Streamlining Procedures for Efficient Customs Management.

  Notifications : Amends the Handling of Cargo in Customs Areas Regulations, 2009 - Notification
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• New Common Adjudicating Authority Appointed to Streamline Customs Cases for Consistent and Efficient Processing.

  Notifications : Appointment of Common Adjudicating Authority - Notification
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• Petition Challenges Customs Reward Calculation: Seeks 20% on Full Duty Including Penalties and Fines, Citing Prior Practices.

  Case-Laws - HC : Writ petition - to pay the reward @ 20% on the entire duty including penalty and fine as earlier sanctioned
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DGFT

• DGFT Issues Public Notice: Areca Nut Imports Prohibited Under Standard Input Output Norms, Including Leather Industry Regulations.

  Circulars : Areca nut (i.e. Betel nut) under SIONs (including Leather SIONs), disallowing import thereof. - Public Notice
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Central Excise

• Cenvat Credit on Additional Excise Duty for Textiles Not Part of Input Costs Due to Unused AED Credit.

  Case-Laws - AT : Cenvat credit - AED (T&TA) and AED (T&TA) - just because during the period of dispute, they were not in position to utilize the AED Credit, the AED (T&TA) cannot be included in the cost of inputs.
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VAT

• Offline Filing for DVAT/CST Returns: New Procedures for Annexures 2A and 2B Submission to Boost Compliance and Efficiency.

  Circulars : Offline block for filing of DVAT/CST returns and Annexure 2A & 2B . - Circular
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Case Laws:

• Income Tax

• 2012 (5) TMI 217
  Avoidance of Dividend Distribution tax - commission paid to director - allegation of avoidance of DDT - Disallowance u/s 36(1)(ii) - whether commission is paid in lieu of dividend - held that:- The AO’s conclusion that the corpus for paying the dividend had reduced does not reflect the correct legal position with reference to section 36(1)(ii). Whenever any commission is paid to an employee it is bound to reduce the corpus available for distribution as dividend. But that ipso-facto cannot be the basis for holding that commission is in lieu of dividend. All the facts and circumstances of the case have to be taken into consideration for arriving at right conclusion. It cannot be disputed that the company as well as Ms. Renu Munjal were bracketed in the highest income tax slab and the only effect was on account of saving dividend distribution tax to the company which was very minimum keeping in view the overall profits of the company. This cannot be held to be device for reducing the overall tax effect in the case of company. It is not disputed that had the commission not being paid to Mrs. Renu Munjal, she would not have received dividend to the extent of Rs. 39 lacs because her holding was only .1%. The dividend would have been much less than the commission actually paid to Mrs. Renu Munjal. Thus, sum of Rs. 39 lacs, in any case, would not have been paid to Mrs. Renu Munjal as profits or dividend if it had not been paid as commission. Following the decision in the case of Loyal Motor Service Company Limited vs. CIT, decided in favor of assessee.

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• 2012 (5) TMI 216
  Disallowance on account of proportionate interest on advances – Held that:- The assessee utilized land belonging to company as a security against loan raised from the bank proved by a copy of certificate issued by the State Bank of India certifying that the property owned by party was pledged with the bank as security against loan provided to the assessee – since the company had provided its land as security to the bank against loan taken by the assessee and in lieu of that the assessee deposited a sum of Rs.50 lakhs with the said company so it cannot be said that the said amount was an interest free advance or loan – assessee had also given advances against purchases to other mentioned company - against revenue. Additions under the head bad and doubtful debts, balances written off and additions u/s 41 – Held that:- As per amendment of section 36(1)(vii) with effect from April 1, 1989 to obtain a deduction in to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable it is enough if the bad debit is written off as irrecoverable in the accounts of the assessee -As bad debts had been written off as irrecoverable in the accounts of the assessee, therefore, the Assessing Officer was not justified in making the addition – against revenue. Addition out of disallowance of foreign exchange fluctuation – Held that:- The assessee entered into forward exchange contract through State Bank of India for purchase of 7,30,000 USD after 11 months at a fixed price to cover up the risk of upward fluctuation of the USD rate and paid fixed premium over the support rate – the proportionate amount for the period falling in the assessment year was charged by the assessee in the profit and loss account - since the amount of premium paid was fixed and there was no element of speculation in the transaction, the amount so paid set to rest the possible fluctuation liability of the assessee company at the time of repayment of loan - on verification of the calculations furnished by the assessee it can be concluded that no element of speculation in the transaction exists - the transaction in question was a business transaction – against revenue.

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• 2012 (5) TMI 215
  Mercantile method of accounting - Revenue recognition in construction service - AS-7 issued by ICAI and sectin 145 - (i) accrual of income in the case of retention money but TDS deducted including the retention money, year of accrual is the issue and (ii) same way work-in-progress and bills receivable is the other issue. - Decided in favor of assessee by majority decision. The question is whether the Tribunal has power to decide the issues in respect of assessment year which are not before it? In this regard, it is well-settled proposition that the Tribunal has no jurisdiction to give any finding for the earlier or subsequent year while dealing with the particular assessment year. Under the Income-tax Act, each assessment year is a separate unit and the decision of the AO given in a particular year cannot operate as res judicata in the matter of assessment of subsequent years. Similarly the jurisdiction of the Tribunal in the hierarchy created by the same Act is no higher than that of the AO and hence it also should confine to the year of assessment. It is clear that the Tribunal has no power to decide the issue in respect of assessment years which are not before it.

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• 2012 (5) TMI 214
  Deduction u/s 10A - FD interest - held that:- The Hon’ble jurisdictional High Court in the case of Green Agro has considered an identical issue. The judgement of the Hon’ble High Court has not been brought to the notice of the Income Tax authorities. Moreover, there has been no proper examination of the issue as to whether the bank interest to the extent of Rs.5,76,799/- is earned on deposits kept as margin money. - matter remanded back. Clubbing of turnover - deduction u/s 10A - held that:- the assessee before the Income Tax authorities had given only a general description about the computation of deduction under section 10A of the Act, probably for the reason that the assessee was under the impression that the Assessing Officer also recognized that the assessee is operating three different/distinct units. The assessee ought to have focused on the evidence to show that it is having three separate units. The evidence that the assessee is operating three separate units are already on record, however, these evidences were neither highlighted before the CIT(A) nor proper examination has been done by the authorities below. Therefore, the matter is restored to the Assessing Officer, who shall examine whether the assessee is having three separate units or one single/integrated unit.

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• 2012 (5) TMI 213
  Deduction u/s 80IA - notified Industrial Park Scheme, 2002 - business of Hotel, builders and real estate developers - Assessee submitted that there is no reason why the income from the development of industrial park declared by the Assessee in AY 04-05 and 05-06 should not be exempted u/s.80-IA(4)(iii) of the Act as by now the Assessee has satisfied the conditions requisite for grant of the said exemption. - CBDT in Instruction No.4/2009 dt. 30.6.2009 - held that:- From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) of the Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. There is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the Assessee for grant of deduction u/s.80-IA(4)(iii) of the Act in respect of profits declared in AY 04-05 and 05-06 and allowing the same as admittedly the conditions for grant of such deduction were satisfied though at a later point of time - Decided in favor of assessee.

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• 2012 (5) TMI 212
  Simultaneous deduction u/s 80HHC and 80IB - on the ground that 100% deduction had not been claimed on the profits when such allowance is not permissible under both the provisions in accordance with section 80-IA(9) of the Act read with section 80-IB(13). - held that:- the contention of the revenue that the profits and gains permitted to be deducted under Section 80-IA should be deducted out of the profits of the business and thereafter the profits and gains from export business is to be calculated, as otherwise it would amount to double benefit, is contrary to the scheme of the aforesaid statutory provisions as well as Clause (baa) to Explanation (ii) to Section 80-HHC. When once it is held that Sections under the heading " 'C' - deductions in respect of certain incomes" are independent of each other and the assessee is entitled to claim deduction under more than one Section, the deduction has to be necessarily in the profits and gains arrived at after making the claims in terms of the oforesaid Section. However, the overall claim under both Sections has to be restricted to the total profits and gains of such eligible business from gross total income. - Decided in favor of assessee.

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• 2012 (5) TMI 211
  Entitlement to deductions u/s 80HHA and u/s 80-I – Held that:- Only total value of the plant and machinery of industrial undertaking, which manufactures or produces article should alone be considered – considering the break up details of the each plant and machinery and excluding certain items such as air-conditioners for office, 63 numbers of ceiling fans, value of electrical installations in branches of the company the aggregate value of the plant and machinery relating to industrial undertaking comes less than Rs. 35,00,000 thus liable to claim deduction - in favour of assessee. Withdrawing the deductions u/s 154 by AO – Held that:- Assessing Officer was wrong in rectifying the assessment order under Section 154 in respect of the relief granted earlier under Section 80HHA and 80-I on the reason assigned that the second unit was also functioning in the same - it is not necessary that the new industrial undertaking should be set up in a new premises - no justification for withdrawing the relief granted earlier - there is no patent or glaring mistake on the face of the record regarding the original assessment that warrants rectification under Section 154 – against revenue.

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• 2012 (5) TMI 208
  Transfer pricing - arm's length price (ALP) - transactions with Associated Enterprises (AEs) - selection of comparable - held that:- The Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. had given specific direction to be followed by the Transfer Pricing Officer. - Matter remanded back for denovo consideration. Admission of additional evidence - held that:- the additional evidence would be relevant to consider and decide the case already made out by the Revenue and it is, therefore not a case of tendering of fresh evidence by the department to support a new point or to make out a new case. According to us, the additional evidence filed by the revenue is quite relevant for the purpose of deciding the issue before us and the same, therefore, can be admitted as per rule 29 of Appellate Tribunal Rules, 1963. Capital or revenue expenditure - held that:- The Special Bench in the case of Amway India Enterprises (2008 -TMI - 64346 - ITAT DELHI-C) had laid down various tests to determine whether the expenditure incurred for purchase of computer software is capital or revenue.

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• 2012 (5) TMI 207
  Income from surrender of possessory rights of premises - tenancy (sub tenancy) right - held that:- the assessee is in continuous possession of the property, was continuously conducting the business from the premises, in fact had right to construct buildings therein for the purpose of business subject to permission from the tenants and the authorities and further he had undertaken to pay increased tax, if any, on the said premises. All these factors including the fact that the assessee undertook not to sublet the premises to others do indicate that the assessee is keeping the premises only as a sub-tenant with tenancy rights. - the question of allowing to let out the premises can arise only by a tenant. The landlord/vendor has only received a consideration of Rs. 75 lakhs for sale of the trust property, whereas the assessee for surrendering his possessory title/ other rights has obtained Rs. 1.75 crores - The fact is that the amount received by the assessee was more than the amount received by the vendors per se. This also indicates that there is a right in the said property to the assessee and not mere a license holder as contended. - the assessee is having property as a sub tenant and his tenancy rights were surrendered to the buyer. Therefore, provisions of section 55(2) are applicable. - Decided against the assessee.

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• 2012 (5) TMI 206
  Transfer pricing - Arm's Length price (ALP) - associated enterprises - Software Development Activity - selling agent (or markteing office) versus distributor - held that:- there was no direct evidence in the hands of the TPO to say that the assessee was simply a selling agent and that it appears that the TPO had proceeded on a presumption that the MUK has acted as a selling agent for the year under consideration. - His presumption is primarily based upon one fact that there was a fixed percentage of award given by MIL to MUK; which in his opinion is prevalent in selling agent's case. - considering the FAR analysis, risk factor and the business model as well as the terms and conditions of the Master Agreement incorporated in the light of the changed circumstances of UK, the AE, i.e. MUK has functioned as a distributor in UK. - it was not appropriate to characterize MUK as a 'marketing services provider' instead of a 'distributor'. Selection of comparable transactions - held that:- the selection of comparables and selection of similar transactions is not easy to find out and a difficult task to pick up exactly identical business model. Only an endeavour should be made so that the comparables should match with the assessee as close/near as possible. Applicability of cases decided u/s 40A(2)(a) - held that:- though presently not the subject matter of dispute, that the case laws which are already in public domain in respect of deciding the disallowances made u/s. 40A(2)(a) of the Act can be helpful. We have expressed this opinion because in a difficult Transfer Pricing case, primarily because of the complexity of the facts, even the best intentioned tax-payer can make an honest mistake and like-wise the best intentioned tax-examiner, may genuinely draw wrong conclusion. OECD TP guidelines thus suggest, first, tax examiners are to be flexible because precision may be unrealistic and, second, commercial judgment or business expediency or trade realities do play a vital role in the application of arm's length principle. Human Resource Management ('HRM') s Services / Secondment services between AEs- for enabling the AEs to provide 'onsite' service, the assessee has seconded its employees to those AEs. - held that:- The assessee has made out a case that by such an arrangement of sending the employees to AEs, in return assessee has also been benefited. Employees, after returning, are with upgraded skills, better experience, update knowledge and with a better delivery skills. This is one part of the advantage and the other part of the advantage happened to be procurement of "offshore" business in high volume. - The comparability analysis as carried out by the TPO do not match with the facts of the case. - The assessee was not functioning as an external recruitment agency. Interest on account of excess credit period to AE's - held that:- Once it is an admitted fact that the MIL is a debt free company and that there was no interest burden on the assessee, then it cannot be justifiable to presume that the borrowed funds have been utilized to pass on that facility to AEs. - There is no rationale to inflict upon the assessee, merely on presumption, that he ought to have charged the interest from it's AEs. Non deduction of Tax (TDS) - fees for technical services (FTS) - section 9(1)(vii)(b) - held that:- Explanation has been inserted by Finance Act, 2007 and later on substituted by Finance Act, 2010. Due to this reason, at the relevant point of time, i.e. during the relevant Financial Year, it was not possible on the part of the assessee to comply with the said Statute. We therefore hold since the services in question were neither "availed" nor "rendered" and even not "utilized" in India, therefore no tax was required to be deducted at source. Rest of the issues about the nature of the FTS and whether it was made available to the assessee are alternate plea of the assessee and need not to be addressed because on the preliminary question of "chargeability", the issue stands decided in favour of the assessee. Disallowance of 20% of recruitment and training expenses - held that:- where the requisite detail in respect of training of employees and the genuineness of the expenditure was very much before the AO and in respect of these two reasons, no disallowance was suggested, then it was unjustifiable on the part of the AO to say that a 20% recruitment and training expenses would be disallowed on mere presumption that it was not wholly beneficial to the assessee. Setting off losses of other units while computing deduction under section 10A of the Act from the profits of eligible units - held that:- AO erred in not appreciating the fact that each eligible undertaking is an independent and distinctive business that required deduction to be computed specific to eligible undertaking instead of considering net profits of the assessee. Ld. AO ought to have granted deduction u/s 10A of the Act without setting off losses of eligible and non - eligible undertakings against profits of eligible undertaking while computing deduction u/s 10A of the Act.

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• 2012 (5) TMI 204
  Interpretation of Section 11(1)(a) - Application of income - treatment of payment of taxes under the Voluntary Disclosure of Income Scheme, 1997 – revenue contested taxes paid are not to be treated as application of income of the trust - Held that:- In the case of a business undertaking held under trust, its 'income' will be the income as shown in the accounts of the undertaking - the expenditure incurred by a charitable trust by way of payment of tax out of the current year's income has to be considered as application for charitable purposes because such payment has to be made to preserve the corpus, the existence of which is absolutely necessary for the trust - The issue whether the word "income" used in Section 11(1)(a) of the Act must be assigned the same meaning as the words "total income" as defined in Section 2(45) of the Act cannot be accepted as confirmed by circular No. 5 dated 19.06.1968 - the payment of taxes under the VDIS is to be deducted before arriving at the commercial income of the assessee-trust that is available for application to charitable purposes – in favour of assessee. Expenditure incurred outside India on events/activities held in connection with the exhibition – Held that:- The provision as it existed after the amendment made in Section 11(1)(a) w.e.f. 1.4.1952 makes a reference to application or accumulation for application of the income of the trust "to such religious or charitable purposes as relate to anything done within the taxable territories" - even if relocate the words "in India" in the manner in which assessee suggests in the definition , it would make no difference to the -meaning to be ascribed to the group of words - the amount spent by the assessee-trust cannot be considered as application of the income of the trust in India - against assessee. Non Applicability of Section 28(iii) on trust - non-refundable admission fee from its members as well as annual subscription charges – Held that:- The annual subscription fees is a "recurring receipt, receivable by the assessee-trust by mere efflux of time irrespective of whether any services are rendered or not to the members - what is contemplated in Section 28(iii) is the receipt of fees from particular members to whom specific services have been rendered by the trust - in the absence of any evidence to show that the assessee receives fees from the members for specific services rendered to them the Tribunal was correct in holding that the annual subscription fees was not assessable under the section - in favour of the assessee. Corpus donation received by the assessee – Held that:- The finding of fact recorded by the Tribunal that the members who paid the one-time admission fee were aware that it can be spent by the assessee only for the purposes of acquiring a capital asset and, therefore, the amount must be held to be a corpus donation, not taxable as income - in favour of assessee.

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• 2012 (5) TMI 203
  TDS on the activity of super stockist of Chemists & Druggists - Principal to Principal relationship or Principal to agent relationship - held that:- the assessee company has not paid even a single penny to its super stockiest. - Rather, it is just the opposite. - The super stockist is paying to the assessee company for the produce of Drugs. In turn, it is selling those goods at the rate of 80% of MRP and is earning income of 10% of MRP which is stipulated in the Memo of Understanding dated 12-05-2009. - Therefore, the relationship between the assessee company and its super stockiest is on a Principal to Principal basis. The A.O. as well as the CIT(A) totally misinterpreted the agreement, misread the facts and have come to wrong conclusions. - Decided in favor of assessee.

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• 2012 (5) TMI 202
  Reassessment - Notice u/s 148 - Addition on account difference in revenue booked in P & L A/c and TDS Certificates - held that:- not only the return of income stood assessed but also the proceedings u/s.154 have been concluded after the assessee has submitted its reply. After all these stages reopening u/s.147 has been initiated by an issuance of notice u/s.148 dated 25.03.2009. On this background, the validity of the proceedings u/s.147 has been challenged before us in the additional grounds. - The case is covered directly by the ratio and law laid down by the Hon'ble Calcutta High Court in the case of Berger Paints India Ltd. (2009 -TMI - 76496 - CALCUTTA HIGH COURT) - assessment proceedings u/s 147 quashed.

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• 2012 (5) TMI 201
  Challenge to notice u/s 143(2) on CA of the assessee - held that:- the CA representing the assessee received the notice and thereafter the assessee ratified the notice by filing various submissions. Thus, these estoppels from challenging such service of notice as held in the case of Y. Rajendra, Dy. CIT v. Khoday Eshwarsa & Sons (2004 -TMI - 10101 - KARNATAKA High Court). Interest Expenditure u/s 36(1)(iii) - held that:- even if the assessee has capitalized its interest expenditure in the books of account, the same is eligible for claim of deduction u/s 36(1)(iii) of the Income-tax Act, 1961. Since this is a purely legal claim and entire facts are available on record, the CIT(A) was not justified in not admitting the purely legal ground raised before him for the first time. - matter restored before CIT(A). Netting off of Interest - Interest received and Interest Paid - held that:- view of the decisions in ACG Associate Capsules (P.) Ltd. (2012 -TMI - 210468 - SUPREME COURT OF INDIA) and Shriram Honda Power Equip (2007 -TMI - 2891 - HIGH COURT, DELHI) the Hon'ble High Court held that where the assessee is paying interest expenditure and also in receipt of interest income, net interest income is to be arrived at after excluding the interest expenditure incurred for earning such interest income. - matter remanded back to CIT(A).

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• 2012 (5) TMI 200
  Profit from sale of DEPB - Deduction u/s 80HHC - held that:- the matter is no longer res integra as the same has been finally settled by Hon'ble the Supreme Court in a recent judgment rendered in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA).

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• 2012 (5) TMI 199
  Stay - Admission of appeal before ITAT where no payment was made u/s 249(4) - held that:- in view of the case of Pawan Kumar Laddha (2010 -TMI - 75438 - SUPREME COURT) the appeals of the assessee are maintainable because the provisions of section 249(4)(a) in Chapter XX-A relating to the filing of appeal before the CIT(A) cannot be read into section 253(1)(b) in Chapter XX-B of the I T Act which relates to filing of an appeal before the ITAT. - stay granted.

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• 2012 (5) TMI 198
  Block assessment - Participation in assessment proceedings - validity of assessment in view of section 292BB - Notice u/s 143(2) was not serviced - held that:- We find that a categorical finding has been recorded by the CIT (A) and the Tribunal that no notice under Section 143 (2) of the Act had been served upon the assessee and the block assessment has been made. They participated in the said proceedings. Matter is squarely covered by the law laid down by Hon'ble Supreme Court in the case of Hotel Blue Moon (2010 -TMI - 35251 - SUPREME COURT OF INDIA). - Decided in favor of assessee.

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• 2012 (5) TMI 197
  Deduction u/s 80HHC - exclusion of unrealized export receipts - definitions of 'export turnover' and 'total turnover' provided in explanation (b) and (ba) to 80 HHC of the Income Tax Act 1961 - held that:- Tribunal did not commit any error in directing the AO to exclude unrealized export receipts as they could have affected the calculation of total turnover in applying the formula. - Decided in favor of assessee.

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• 2012 (5) TMI 196
  Deduction u/s 80IB - inclusion / exclusion of balcony - built up area - held that:- admittedly if the balcony area is excluded, none of the residential units is more than 1,500 sq. ft. Therefore, the assessee is entitled to 100% benefit of Section 80IB(10), The Tribunal was not justified in giving only the proportionate benefit. - the assessee is entitled to the benefit of Section 80IB(10) in respect of the 152 flats. - Decided in favor of assessee. Dis allowance on account of payment in cash - Rule 6DD read with section 40A(3) - The assessee contends when he has not put forth any claim of expenditure, Section 40A (3) is not attracted and 20% disallowance was not permissible. - held that:- matter remanded back.

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• 2012 (5) TMI 195
  Default under section 194C on account of payment under labour charges – the assessee contention that he has not engaged any labour contractor and all the payments made towards labourers who are employed by the assessee directly and it is accounted for the said payments in its cash book - Held that:- The AO is required to examine the assessee’s cash book and find out whether the assessee has directly paid the amounts to the individual labourers or the same was paid through the mastri - If the assessee paid the said payments to the individual labour, then the assessee is not liable to deduct TDS under section 194C of the Act, otherwise the assessee is liable to deduct TDS - set aside the entire issue to the file of the AO to decide the same afresh – in favour of assessee.

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• Customs

• 2012 (5) TMI 194
  Cost paid for grant of further opportunity to accused - appellant contested that no provision in the Cr.P.C under which this cost can be imposed by Court and be given to the accused persons and when accused have been substantially responsible for the delay and by directing the payment of costs to them, it will be putting premium on their conduct - Held that:- Since Petitioner has stated that he has no objection to the deposit of cost with the Delhi High Court Legal Services Committee and a statement has been made by the learned counsel for the accused persons also confirming such payment - Let the cost be deposited with the Delhi High Court Legal Services Committee by the petitioner. Evidence of the petitioner ought not to have been closed - Held that:- Even after framing of the charges against the respondents, sufficient number of opportunities had been given by the Court and even one final opportunity was given to the petitioner - If the petitioner did not complete its evidence, despite the final opportunity having been given, it cannot be said that the evidence of the petitioner had been erroneously closed - two decades having gone by, it cannot be said that the right, which is guaranteed under Article 21 of the Constitution of India to the respondents, is being observed in letter and spirit.

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• 2012 (5) TMI 193
  Writ petition - to pay the reward @ 20% on the entire duty including penalty and fine as earlier sanctioned – Held that:- The Reward Committee in the last two minutes of meeting held has opined that the information given by the petitioner was of generic nature and according to the role played, the petitioner is entitled to reward @ 8.33% on Rs.60 lacs and 8.28% on Rs.160 lacs - there is a contradiction between the findings recorded in the minutes of the Reward Committee one in which it was decided that the petitioner would be paid reward @ 15% on all future realization of the penalty amount - merit in the contention of the petitioner that there is element of arbitrariness, inconsistency and disagreement in the three minutes - the difference in monetary terms in view of the quantum is substantial - an order of remit to the Reward Committee to consider afresh the rewards awarded vide minutes dated 26th March, 2009 and 10th March, 2010.

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• Corporate Laws

• 2012 (5) TMI 192
  Liquidation of a company - Claim under Section 536(2)- transfer of flat after the order of winding up – Held that:- Transaction undertaken by company in liquidation can be validated under Section 536(2) as compulsion of circumstances, in order to save or protect the company, provided evidence is produced about such compulsion and it was further held that the assets of the company (in liquidation) cannot be disposed of at the mere pleasure of the company - The Agreement for Sale executed by Smt. Anita Jain in favour of the appellant bears the date of payment of stamp duty of 14.02.2002 whereas the said Agreement is however purported to be ante dated on 13.12.2001 when the Agreement to Sell executed by the company in liquidation in favour of Smt. Anita Jain bears the date of payment of stamp duty of 13.02.2002 - This alone shows collusion and an attempt to show the Agreement to be of a date different than it is borne out to be of - it cannot be said that transfer of subject flat, after the order of winding up and in violation of the order restraining such transfer was under compulsion or for the benefit of the company in liquidation - claim under Section 536(2) rejected.

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• Service Tax

• 2012 (5) TMI 220
  CENVAT Credit availed on input services - appellants submitted that the original documents could not be produced since the factory had been attached by GIDC and therefore the impugned order has been passed holding that the appellant could not produce the original documents, on the basis of which credit has been taken. - matter remanded for verification.

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• 2012 (5) TMI 219
  The appellant is engaged in providing Advertising services to their customers and availed CENVAT Credit of Service Tax paid on Hotel services, Catering service, Decorator service and Pathological laboratory service. Proceedings were initiated on the ground that such credit is not admissible - held that:- except for the Service Tax paid on both Pathological Laboratory Service and Catering Service, CENVAT Credit taken in respect of other services is held as admissible.

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• 2012 (5) TMI 218
  Penalty u/s 76 and 78 - - Commercial & Industrial Construction service - late payment of service tax - penalty u/s 76 and 78 - held that:- penalties under Section 76 and 78 of Finance Act, 1994 are mutually exclusive even earlier to the amendment of Section 78, which permits for non-imposition of penalty and penalties are imposed under Section 78.

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• Central Excise

• 2012 (5) TMI 210
  Constitutional validity - Restriction on Cenvat / Modvat Credit on inputs when imported - petroleum products - restriction imposed retrospectively - but the same restriction was deleted prospectively - Constitutional validity of Section 87 of the Finance Act, 1997 and Section 11a of the Central Excise Act - Notification No.14/97-Central Excise (NT) - held that:- It is a settled legal proposition that if initial action is not in consonance with law, subsequent proceedings would not sanctify the same. In such a fact situation, the legal maxim sublato fundamento cadit opus is applicable, meaning thereby, in case of foundation is removed, the superstructure falls. Similar principle of law, in our opinion, can be extended in the present case too. Though the restriction operated for about 16 months, the action of not allowing the Modvat credit of the actual amount paid as additional duty to the petitioner-Company is in violation of Article 14 of the Constitution of India because such a restriction was unreasonable and arbitrary even during the intervening period i.e. during the period of operation. The petition is accordingly allowed. It is hereby declared that the Notification No.14/1997 dated May 3, 1997 restricting admissibility of Modvat credit for all the petroleum products to the extent of 10% irrespective of the fact that whether the inputs were manufactured in India or the inputs were imported into India, being violative of Article 14 of the Constitution of India, is hereby quashed and set-aside.

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• 2012 (5) TMI 209
  Inclusion of extra amount in the name of Majuri (labour charges) and the Octroi from their customers in the value under central excise - held that:- matter remanded back for verification and fresh decision.

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• Wealth tax

• 2012 (5) TMI 205
  Addition to the net wealth on account of Urban Land - agriculture land under wealth tax act 1957 - held that:- There is no dispute about the fact that the impugned lands were within the Municipal limits of Shamli. U/s 2(ea) of the Act, Urban land is liable to wealth tax. - from 1.4.1993, any urban land whether it is agriculture land or otherwise is liable to wealth tax if it falls under the definition of urban land. - The construction of building is "not permissible under any law" does not mean that agricultural land will falls under such category. - Decided against the assessee.

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