TMI Tax Updates - e-Newsletter
May 2, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws

Articles

1. Amendments in Deemed Export Policy under Foreign Trade Policy – What is the intention of Ministry of Commerce and Industry.

   By: Surender Gupta

2. SERVICE TAX TERMINOLOGY – PART IV

   By: Dr. Sanjiv Agarwal

3. SERVICE TAX TERMINOLOGY – PART-III

   By: Dr. Sanjiv Agarwal

News

1. Banks must pay Rs100 a day penalty for delay in reimbursement for failed ATM transactions.

2. India’s Foreign Trade: March, 2012.

3. Change in Tariff Value of Brass Scrap, Gold and Silver Notified.

4. Joint Press Statement Enhancing Cooperation between the Ministry of Commerce and Industry of India and the Ministry of Economy, Trade and Industry of Japan in the Area of Creative Industries.

5. Joint Press Release by H.E. Anand Sharma, Minister of Commerce, Industry and Textiles, India and H.E. Yukio Edano Minister of Economy, Trade and Industry, Japan at the 2nd India-Japan Ministerial Business-Government Policy Dialogue.

6. Index of Eight Core Industries (Base: 2004-05=100) March 2012 .

7. De-Registration of not-for-Profit Companies.

8. Registration of New Companies.

9. Compliance of Reporting Norms by Companies.

10. Export of Sugar.

11. Reforms in SEZ Policy.

12. Trade between India and France.

13. Incentives for Exporters.

14. FTA with JAPAN.

15. Cotton Export Policy.

16. Setting up of Trade Centres.

17. WTO Modalities on Agriculture and Subsidies.

18. Trade Deficit with China.

19. Export of Agricultural Products.

20. Benefits of SEZs.

21. Mutual Agreement Between India and Swiss Confederation Signed for Liberal Interpretation of Identity Requirements for Providing Information Under DTAA.

22. Finance Minister calls for need to empower people with skills and capabilities for continuous and inclusive growth; Releases Logo for 46th Annual Meeting of Board of Governors of ADB; India to host the next ADB Annual Meeting in Delhi in May, 2013

23. Government Denies Allegations

Notifications

Customs

1. 29/2012 - dated 30-4-2012 - Cus

Amends Notification No.21/2012-Customs - substitution of date in the proviso - from “1st day of May, 2012” to “1st day of June, 2012”

2. 28/2012 - dated 27-4-2012 - Cus

Seeks to amend Notification 69/2011 – Customs, dated 29-07-2011 thereby exempting specific goods when imported into India from Japan.

3. F.No. 437/14/2012-Cus. IV - dated 30-4-2012 - Cus (NT)

Appointment of Common Adjudicating Authority of Ajit Bapu Satam and others.

4. F.No. 437/10/2012-Cus. IV - dated 30-4-2012 - Cus (NT)

Appointment of Common Adjudicating Authority of M/s Agarwal Traders, Kolkata.

5. 39/2012 - dated 30-4-2012 - Cus (NT)

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

Circulars / Instructions / Orders

VAT - Delhi

1. F.12/Operation Cell/2006/869-889 - dated 19-4-2012

ARRANGEMENTS FOR RECEIPT AND MOVEMENT OF QUARTERLY RETURNS FOR QUARTER ENDING 31.03.2012.

DGFT

2. 60 (RE-2010)/2009-14 - dated 30-4-2012

Online transmission of DES (Advance Authorization), DFIA and EPCG at ICD CONCOR , Tondiarpet, Chennai, Tamilnadu ( IN TVT 6 ) w.e.f. 08.05.2012 - regarding.

Highlights / Catch Notes

Income Tax

• Dispute Over Tax Deduction: Are 72 Doctors for 100 Students Justifiable Salary Expenses for Educational Institutions?

  Case-Laws - AT : The disallowance of expenditure on salary - strength of 72 doctors against 100 students - AT
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• Court Rules Engineer Hiring Costs as Revenue Expenditure, Not Capital, Given Director's Expertise in Business Setup.

  Case-Laws - AT : Capital or revenue expenditure - Commencement of business - There was no necessity to employ Engineers because the Director was competent to render advisory services for setting up the business. - AT
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• India-Germany DTAA Article 8: Permanent Establishment in International Shipping, Feeder Services, and Slot Arrangements Explained.

  Case-Laws - AT : Article 8 of DTAA between India and Germany - Reference to DRP - Pooling/slot arrangements - Permanent Establishment (PE) - Feeder services - operation of ships in international traffic - AT
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• High Court Examines Inclusion of Returnable Plant and Machinery in Section 10A Tax Exemption Eligibility Calculation.

  Case-Laws - HC : Exemption u/s 10A - Percentage of new plant and machinery and old machinery - inclusion of plant and machinery received on returnable basis for determination of percentage - HC
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• Depreciation on Tippers, Vibrators, and Compactors Limited to 15% Rate u/s 32 of Income Tax Act.

  Case-Laws - HC : Depreciation @ 40% or 15 % on Tippers, Vibrator and Vibrator Soil Compactor - AO allowed depreciation at the rate of 15% only - Section 32 - HC
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• Assessee Granted Immunity u/s 271AAA Despite Not Paying Full Tax Before Filing Return.

  Case-Laws - AT : Penalty u/s 271AAA - Search and seizure - Undisclosed income - assessee could not be denied the immunity under section 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return - AT
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• Unrecorded amounts in profit and loss can't determine book profits u/s 115JB of the Income Tax Act.

  Case-Laws - AT : MAT - Book profit -- the amount which was never routed through the profit & loss account and never debited to the profit & loss account could not be considered for the purpose of determination of book profits under clause (b) of Explanation 1 to sec.115JB - AT
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• High Court Upholds Addition u/s 68 of Income Tax Act; Assessee Fails to Prove Claims in VDIS Case.

  Case-Laws - HC : Addition u/s 68. - VDIS scheme - Retraction of statement - Assessee failed to discharge the onus - HC
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• Examining the Impact of Section 32 on Short-Term Capital Gains Calculation and Interpretation of Section 50 in Tax Liabilities.

  Case-Laws - HC : Whether effect of section 32 should be examined while computing short term capital gains and interpreting Section 50 - HC
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• Authority to Transfer Tax Case from Vapi to Surat u/s 127; Natural Justice and Recorded Reasons Debated.

  Case-Laws - HC : Power to transfer case from Vapi to Surat u/s 127 - Principles of natural justice - requirement of recording reasons - matter referred to LB - HC
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• Consideration of Lower Tax Rate for Long-Term Capital Gains on Bonus Shares u/s 115E.

  Case-Laws - AT : Whether lower rate of tax u/s 115E will be applicable to long term capital gains on sale of bonus shares where such bonus shares resulted out of original investments of shares made out of convertible foreign exchange - AT
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Customs

• India Amends Notification 21/2012: Exempts Certain Imports from Additional Duty u/s 3(5) Until June 1, 2012.

  Notifications : Exemption from additional duty u/s 3(5) when imported into India – Notification no. 21/2012 amended to allow exemption in respect of certain goods without conditions upto 1st June 2012
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• Port Trust can't claim demurrages or port charges beyond 75 days from landing date.

  Case-Laws - HC : Port Trust authorities were not justified in claiming demurrages and/or port charges for any period beyond 75 days from the date of landing. - HC
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• Appellant's Exemption Request from RSP-Based Assessment on CVD Not a Misdeclaration by Importer.

  Case-Laws - AT : Merely because the appellant had sought an exemption from RSP based assessment in respect of CVD, it does not amount to any misdeclaration on the part of the importer. - AT
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• India-Japan Trade Boost: Amended Customs Notification Lowers Duty on Specific Imports for Economic Cooperation.

  Notifications : Concessional rate of duty on specific goods when imported into India from Japan. - Notification no. 69/2011-Customs as amended vide Ntf. No. 28 / 2012 - Customs Dated: April 27, 2012
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• Dispute Over Customs Drawback Rate for Girls' Trousers: 8.80% vs. 1% of FOB Value.

  Case-Laws - CGOVT : Girls Trousers or Legging - claimed drawback rate - Rate of DBK @ 8.80% of FOB or 1% of FOB value - CGOVT
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DGFT

• Electronic Submission for DES, DFIA, EPCG at ICD CONCOR Chennai Starts May 8, 2012, per Circular No. 60 (RE-2010.

  Circulars : Online transmission of DES (Advance Authorization), DFIA and EPCG at ICD CONCOR , Tondiarpet, Chennai, Tamilnadu ( IN TVT 6 ) w.e.f. 08.05.2012 - regarding. - Cir. No. 60 (RE-2010)/2009-14 Dated: April 30, 2012
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Corporate Law

• High Court to Evaluate Alleged Misfeasance by Former Directors in Company Liquidation Case Under Company Law.

  Case-Laws - HC : Application of official liquidator alleging misfeasance on the part, of the erstwhile Directors of the Company-in-liquidation - HC
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Indian Laws

• Amendments to Deemed Export Policy Enhance Efficiency, Simplify Compliance, and Boost Competitiveness in Global Markets.

  Articles : Amendments in Deemed Export Policy under Foreign Trade Policy – What is the intention of Ministry of Commerce and Industry. - Article
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• Understanding Recent Changes in Indian Service Tax: Key Terms and Important Aspects Explained with Annotations

  Articles : SERVICE TAX TERMINOLOGY – PART IV - Article
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Service Tax

• Services charges for liaising with Customs for duty drawback are taxable under Customs House Agent services.

  Case-Laws - AT : Customs House Agent' Services - services charges were received by the assessee for liaisoning with the Customs department for collection of duty draw back - held as taxable - AT
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• Court to Decide if Visiting Network Services Qualify as Exempt, Limiting Cenvat Credit to 35.

  Case-Laws - AT : Whether the service provided by the appellant as a visiting network service provider shall be treated as exempt service and Cenvat credit shall be limited to 35% - AT
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Central Excise

• Joint Brand Owners Eligible for Individual SSI Exemption Under Central Excise Rules.

  Case-Laws - AT : SSI exemption - Joint ownership of brand name - each owner is eligible for SSI exemption. - AT
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• Court Examines Time Limits on Interest Claims in Central Excise Cases with Price Variation Clauses.

  Case-Laws - AT : Price variation clause - applicability of period of limitation on demand of Interest under central excise - AT
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Case Laws:

• Income Tax

• 2012 (5) TMI 11
  The disallowance of expenditure on salary was on the premises that the assessee had employed staff in excess of the norms of the Dental Council - assessee has explained that some doctors had left and in their place other doctors were employed, so that the norms could not be strictly complied with, and which rather by itself shows the exigency of the situation - Held that:- assessee has not been able to lead satisfactory evidence with regard to its claim for expenditure, having been called upon to file the full names and addresses as well as proof of filing the return of income by the relevant doctors - strength of 72 doctors against 100 students, as is stated to obtain for the current year, is disproportionately high, and the AO in stating so is only drawing support from the guidelines of the Dental Council of India in this regard, and not basing his disallowance thereon, as projected by the ld. AR before us - Decided against the assessee by way of remand to AO. Advertisement and hotel expense - assessee explained that the heavy expenditure in the month of March, 2005 was for purchase of heavy quantity of sweetmeats, namkin, dry fruits, cents, etc., which it had to in view of the inspection of the college on March 10 & 11, 2005 for starting of the classes of the Third Year - Held that: the incurring of the said expenditure for the object/s of the trust is not explained, much less proved. Where is the question of commercial expediency while incurring expenditure in extending common courtesy to the officials on an official visit, and in computing the income of a charitable trust, as the assessee, which itself pleads for the non-application for the provisions of Chapter IV-D of the Act in the computation of its income, an argument with which we have expressed our agreement. The said disallowance is thus upheld. Regarding cash donation - Held that:- a clear contradiction in the findings by the assessing authority and the first appellate authority. - The AO states that the identity has not been established - ld. CIT(A) admitted the assessee's plea - where the identity is not disclosed, the presumption would be that the same flows from the beneficiary of the assessee's activity, i.e., the students, or their parents or close relatives. The same could not be termed as a voluntary contribution subject to sec. 11(1)(d), and neither would the ingredients of sec. 68 be satisfied in such a case. Whether given under a general direction to form a part of the corpus, or as toward, say, a building fund, the furnishing and proving the identity of the donor is the first pre-requisite, which remains unsatisfied in the instant case. If, on the other hand, the identity is confirmed, and the donor confirms the same to be toward a particular fund or corpus, in our view, the onus to prove that it is not 'voluntary', and given, or made to be given, for and toward a consideration, so that it is income would only be on the Revenue. Also, where given for a `building fund', and utilized for that purpose, the same would only amount to an application of funds for the objects of the trust, where the building is owned by the trust and used, or to be used, for its purposes. In view of the foregoing, we remand the matter back to the file of the AO to allow an opportunity to the assessee to present its case - Appeal is partly allowed

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• 2012 (5) TMI 10
  Capital or revenue expenditure - Repairs and maintenance - Enduring nature - substantial repair had undertaken for rig - AO was of the view that expenditure has been incurred before commencement of business - Held that: it could not be said that the business was not set up. There was no necessity to employ Engineers because the Director was competent to render advisory services for setting up the business. Meeting and discussions, was therefore an indication of setting up of business. Following the said view and considering the entirety of the evidences placed on record, as also the totality of the circumstances, it appears that no capital asset had come into existence through which the assessee has obtained enduring benefit. - Decided in favor of assessee. Regarding head Office expenditure - Held that:- the contracting States have kept in mind the provisions of the tax laws of the contracting States and to avoid any conflict in the provisions of the tax laws vis-à-vis the provisions of Treaty, as also to streamline the applicable provisions of law, it was decided to incorporate that, for the purposes of determining the profits of a permanent establishment, there shall be allowed deduction of expenses incurred for the purposes of the business of the permanent establishment including general administrative expenses but in accordance with the provisions and also subject to the limitations of the tax laws of that State. Therefore by this amendment in the Article the applicability of provisions of section 44C has been enforced, nevertheless with effect from 1st day of April-2008. Regarding previous year income - AO has noticed that as per Schedule XIV - notes to the accounts, the said claim was confirmed by Cairn India Pvt. Ltd. On the other hand, as per the assessee, the claim was still under dispute and the claim was not recognized by the said party - Held that: It is worth to note that the final payment was received from the said party in the F.Y. 2006-07 as per the TDS certificate given by the assessee and that fact has also been noted by the AO - once the admitted factual position is that the payment in question has actually been received in the F.Y. 2006-07, i.e. A.Y. 2007-08 and that fact has been noted by the AO himself, inter alia, further reaffirmed by ld. AR that in the next Financial Year it was duly recognized in the books of accounts - Appeal is partly allowed

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• 2012 (5) TMI 9
  Article 8 of DTAA between India and Germany - Reference to DRP - Pooling/slot arrangements - Permanent Establishment (PE) - the entire ship was chartered by the assessee and the same was operated by the assessee and other carriers operated its feeder service. - held that:- the DRP has already granted relief to the assessee to the extent of the profit earned from transportation of cargo by feeder vessels and the assessee is able to establish the link between the feeder vessels with mother vessels voyage wise. Feeder services - operation of ships in international traffic - held that:- The assessee has not disputed the fact that freight receipts taxed u/s 44B is towards transportation of the cargo by feeder vessels under slot/pooling arrangements and the mother vessels was not owned, leased or chartered by the assessee. Hence, when there is no link between the transportation of cargo by the feeder vessels and transportation by mother vessels owned or chartered by the assessee, then the said activity cannot be termed as operation of ships in international traffic and subsequently the benefit of Article 8 of Indo German DTAA would not be available on such profit. - the benefit of Article 8 would be available only on the profit from the operation of ships in international traffic would not necessarily be available to the profits computed u/s 44B. What is a participation in a pool - held that:- it is clear that slot sharing is not the same as participation in a pool or a joint business or an international operating agents. Hence the nature of arrangement does not fall in Article 8(4) of DTAA. - Section 115V-(2)(ii)(A) Explanation (a), explains pooling arrangement. This does not include slot charter, etc. Section 115VB definition cannot be applied to DTAA as the definition is for the purpose of that chapter only and even then the requirement is that the slot has to be chartered. Application of article 7 of DTAA - held that:- There is no dispute that the assessee carrying out the business of operation of ships in India through its Agent M/s Hapag-Lloyd India Pvt Ltd. The agent in India concluding the contract of cargo transportation by issuing bill of lading which are legally binding on the assessee; therefore, the assessee is carrying out the business of operation of ships in India and thus is having a PE in India as per article 5 of DTAA. This is not a case of availing service of agent in support of the business but the assessee is carrying out business through the agent in India. Therefore, the source of income to the extent of booking of cargo by the agent in India and physically transported the cargo from port in India to the mother vessels is in India and constitute a PE in India. The assessee has earned income through such business in India and thus certainly said to have a source of income in India Apart from having a PE, when the assessee is carrying out the business in India and earned income from such source in India, then, the contention of the assessee is not acceptable that the income is not assessable to tax in India. As it is clear from the facts in the case in hand that the assessee has carried out the business in India and the agent was concluding the contract which is legally binding on the assessee; therefore, remuneration paid to the agent is not relevant factor for taxing the profits and gain at source from India.

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• 2012 (5) TMI 8
  Exemption u/s 10A - Percentage of new plant and machinery and old machinery - inclusion of plant and machinery received on returnable basis for determination of percentage - held that:- Neither in section 10A(2) nor in section 80-I, there is any requirement in law that the assessee should own the machinery before claiming the said exemption. The requirement of law is that the assessee should use the machinery or plant in the business. - In the instant case, it is not in dispute that the total value of the plant and machinery which was owned by the assessee is Rs. 44,93,797/-. - the plant and machinery which is used and transferred to the new undertaking is only Rs. 13,15,083/-, which is less than 20% of the total value of the machinery used in the business. - Decided in favor of the assessee

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• 2012 (5) TMI 7
  Depreciation @ 40% or 15 % on Tippers, Vibrator and Vibrator Soil Compactor - AO allowed depreciation at the rate of 15% only - Section 32 - held that:- According to explanation, the commercial vehicle is to include heavy goods vehicle, heavy passenger motor vehicle, light motor vehicle, medium goods vehicle but is not to include maxi-cab, motor-cab, tractor and road-roller - The reasoning adopted by the Tribunal would not suffer from any legal infirmity because the Tippers are registered under the Motor Vehicles Act, 1988 (for brevity 'the 1988 Act') as road transport vehicle as would be vibrator and vibrator soil compactor In the case of Karnataka High Court in the case of CIT v. Mahalinga Setty & Co. [1991 (3) TMI 36 - KARNATAKA High Court - Income Tax] has opined against the revenue by giving the benefit of investment allowance to the assessee. If that be so then Vibrator and the Vibrator Soil Compactor would follow the suit because the reasoning adopted is that the vehicles are registered under the 1998 Act and it is essential machinery to carry on the construction work - Decided in favor of the assessee

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• 2012 (5) TMI 6
  Penalty u/s 271AAA - Search and seizure - Undisclosed income - AO also initiated the penalty proceedings u/s 271 AAA and observed that "Since the assessee has not paid the full taxes and interest on disclosure made u/s 132(4), penalty proceedings u/s 271AAA of the Act are initiated - Held that: Once a time limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one - on the facts of the present case wherein entire tax and interest has been duly adjusted out of seized cash or otherwise paid in deference to notices of demand, well before the penalty proceedings were concluded, the assessee could not be denied the immunity under section 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - Appeal is dismissed

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• 2012 (5) TMI 5
  TDS u/s 194C - Disallowance of payments of stevedoring expenses to Calcutta Dock Labour Board - The contention of the assessee, however, is that the provisions of Section 194 C are not applicable on the facts of this case, and, therefore, disallowance under section 40(a)(ia) cannot be made, and it is this contention which has been accepted by the CIT(A), on the ground that "the Dock Labour Board is operating as an agent of stevedores, who are actual employers" and that "there is no contractual relationship between the appellant and Calcutta Dock labour Board" - Held that: there is no dispute that the assessee has paid the amounts for "supply of labour" for carrying out work - CDLB is an agent of the stevedores like the assessee in the sense that the labour is recruited by the assessee through CDLB, but then this fact does not affect the nature of payment by the assessee to the CDLB which is admittedly in the nature of payment for supply of labour - There is no cause and effect relationship between workers assigned by the CDLB having employer workman relationship with the assessee, and the payments being made by the assessee to CDLB being not in the nature of 'payment for supply of labour' - Appeal is allowed by way of remand to CIT(A)

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• 2012 (5) TMI 4
  MAT - Book profit - Adjustment of reserves created on revaluation of the assets of the amalgamated Company - held that:- Supreme Court clearly observed in the case of National Hydroelectric Power Corpn. Ltd. (2010 -TMI - 77137 - SUPREME COURT) that for making an addition under clause (b) of Explanation 1 to sec.115JB two conditions must be satisfied jointly. (1)(a) There must be a debit of the amount to the profit & loss account, (clause (b) of Explanation 1 to sec.115JB) the amount so debited must be carried to the reserve. - Further, the reserve contemplated by clause (b) of Explanation 1 to sec.115JB is required to be carried through the profit & loss account. - The Hon'ble court also observed that there can be two types of reserves, namely, those that are routed through the profit & loss account and those which are not routed through the profit & loss account, e.g. capital reserve such as share premium account. It is clear that assessee has debited a sum of Rs. 47,39,19,646/- which is the present market value of the work-in-progress which has been taken over and, therefore, it cannot be said that it consists of some portion of reserve also. Creation of general reserve out of revaluation reserve cannot be said to be out of appropration of profits - the amount which was never routed through the profit & loss account and never debited to the profit & loss account could not be considered for the purpose of determination of book profits under clause (b) of Explanation 1 to sec.115JB - Decided in favor of the assessee

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• 2012 (5) TMI 3
  Deduction u/s 10A - Transfer pricing adjustment - It is relating to the reduction of export turnover by communication expenses i.e internet charges attributable to the delivery of computer software outside India and not reducing the same from total turnover also for the purpose of computing deduction u/s 10A of the Act - learned counsel for the assessee submitted that this issue is now covered by the decision in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] - wherein it has been held that if certain expenditure is reduced from the export turnover, the same has to be reduced from the total turnover also - Decided in favor of the assessee Regarding Transfer Pricing adjustments - DRP decided the ALP to be @ 119.45% of the operating cost and reduced the same by the price shown in the international transaction and arrived at the short fall of Rs. 3,55,93,801 - TPO did not accept the analysis conducted by the assessee and he conducted a fresh economic analysis and failed to appreciate that such data was not available in the public domain to the assessee at the time of complying with the mandatory TP documentation by the prescribed due date - the basic objection of the assessee is that the TPO has rejected the filters adopted by the assessee and has adopted untenable filters for arriving at the comparables and in his detailed submission before the TPO as well as the Tribunal, the assessee has brought out the various factors that would justify the adoption of comparables by the assessee - The information acquired by the TPO u/s 133(6) was no doubt provided to the assessee. However, the assessee was not allowed to rebut the said information by way of any evidences - In the case of Genesis Integrating System India Pvt. Ltd., Bangalore and this Tribunal vide orders dated 5.8.2011 had answered the various issues raised by the assessee therein and has also issued guidelines for adoption of comparables and has also directed the TPO to allow the assessee to cross examine the comparables whose replies were sought to be used against the assessee if the assessee so desires - Decided in favor of the assessee by way of remand to AO

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• 2012 (5) TMI 2
  Addition u/s 68. Appellant submitted that the persons who had made statements had declared the jewellery under the VDIS scheme and the said statements were later on retracted in as much as it was stated by all of them that the earlier statements were recorded under coercion and duress. Held that: the benefit of VDIS scheme where various persons had declared the jewellery thereunder was not available which could have been taken by the appellant. There was huge cash deposit of Rs. 16.28 crores in a period of 1 month and 7 days from 13.2.1998 to 20.3.1998 in the bank account of the assessee for which heavy onus lay upon it to satisfactorily tender explanation along with supportive material to substantiate its plea which the assessee had failed to do. Even with regard to the retraction of statement, it may be noticed that the earlier statements of these persons were recorded in the year 2000 whereas they had sought to resile therefrom in the year 2003. Appeal is dismissed

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• 2012 (4) TMI 470
  Confirmation of the penalty u/s. 271(1)(c) by CIT (A) as on the date of filing of return no judicial pronouncement was available in his favour of assessee – assessee contested that appellant had disclosed all the details with respect to claim u/s. 10B in the computation of income and notes thereon and the said claim was as per Form 56G issued by the Chartered accountant – Held that:- Availability/non-availability of a particular pronouncement on a particular date cannot be the basis for imposing penalty u/s. 271(1)(c) - deduction has to be allowed in respect of three eligible units and loss of the fourth 10A unit has to be set off against the normal business income - Provision of s. 271(1)(c) are valid when there exists concealment of the particulars of the income of the assessee or the assessee have furnished inaccurate particulars of his income - no information given in the return was found to be incorrect or inaccurate – in favour of assessee.

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• 2012 (4) TMI 469
  Treating the sale proceeds of depreciable assets as short term capital gains – ITAT held the Order to be contrary to Section 50 - Held that:- Given the fact that block of assets is identified by the percentage of depreciation granted, on going through the various heads under the Schedule, we find that the depreciation percentage fixed is more of machinery specific rather than industry specific. Thus, on going through the various clauses in the Schedule, we find, if the asset transferred and the asset purchased fall for consideration under the self-same percentage of depreciation, then the asset qualified for being termed as falling under a block of assets. Thus, if the assets transferred from the 100 per cent export- oriented unit and the assets purchased come for the same percentage of depreciation as prescribed in the table, the assessee would be justified in seeking adjustment in the matter of working out the capital gains. Whether effect of section 32 should be examined while computing short term capital gains and interpreting Section 50 - held that:- ection 32 forms part of Chapter IV-D and relates to computation of income from profession and business. It is not the case of the Revenue that the gain on transfer of the block of assets is taxable as business income. The two sections operate in their own filed and there is no conflict. In these circumstances, we do not think we should refer and rely upon Section 32 and accordingly compute and decide whether short term capital gains is payable under Chapter IV-E - in favour of the assessee

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• 2012 (4) TMI 468
  ITAT deleted addition of Rs.5,60,750/-, Rs.4,50,600/- and Rs.8,12,350/- made by the Assessing Officer on the basis of the valuation report – Held that:- AO cannot make addition solely on the basis of the report of the DVO - no incriminating material was found during the course of search and the transactions were duly reflected in the returns filed by the assessee in the normal course – against revenue. ITAT deleted addition made by the Assessing Officer on account of undisclosed investment – Held that:- Income in question had to be taxed in the hands of Association of Persons and the mere fact that the said income was taxed in the hands of individual members of Association does not bar the Income Tax Officer from taxing the Association of Persons - Order passed by the tribunal is perverse and an order of remit is passed to the tribunal to re-examine the question of taxability on account of the undisclosed investment in the purchase of property No.1028, Sector 15-II, Gurgaon in the hands of the respondent-assessee –in favour or revenue. Undisclosed income in the block assessment proceedings has to be taxed at a flat rate - no matter whether the income has been assessed under the head “income from business”, “income from other sources” or “income from property”.

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• 2012 (4) TMI 467
  Income from a market complex for commercial purpose - Income from house property or business income – Held that:- The Assessing Officer has rather misdirected himself to hold the case laws cited by him leaning in favour of the Department - that the bank took cognizance of the commercial viability of this project to grant loan which partners pooled their resources to repay the loan and let out the property to the commercial organizations for earning income against which incidental expenses incurred for carrying out such activities - as it is rendered its income, residual to receipts from the lessees on account of electricity, water charges etc., which are the business activities from the assessee to charge for their portion and incur the remaining for itself along with the maintenance and providing security was in the nature of carrying out commercial activities and not for the purpose of letting it out as house property- the impugned orders of the authorities below are set aside with a direction to the Assessing Officer to accept the return of the assessee holding the same as income from business and not income from house property – in favour of assessee.

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• 2012 (4) TMI 466
  Disallowance u/s.40(a)(ia) - reopening of the assessment – CIT(A) charging interest u/s.234B and initiating penalty proceedings u/s. 271(1)(c) – Held that:- Decided in Kanubhai Ramjibhai Makwana Versus ITO (2010 - TMI - 202951 - ITAT, AHMEDABAD) that provisions of section 40(a)(ia) as amended by Finance Act, 2010 w.e.f. 1.4.2010 are to be treated as having retrospective application with effect from 1st April, 2005 - Assessing Officer is directed to delete the disallowance of Rs. 3,69,568/- as made u/s. 40(a)(ia) of the Act – in favour of assessee.

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• 2012 (4) TMI 465
  Deduction u/s 80 HHC on export incentives received by the assessee as a supporting manufacturer in the same manner as in the case of direct exporter, treating the supporting manufacturer at par with the direct exporter – revenue appeal - Held that:- Court being the jurisdictional Court has already decided the issue raised in Special Leave Petition against the revenue and the instant appeal will follow the suit – in favour of assessee. Addition of Rs. 8,38,77,635/- made by the AO on account of difference in the value of stock as per stock statement submitted to the Bank and that as per the books of account – Held that:- The mere fact that value furnished to the bank is without any detail or verification by the bank may not constitute the basis to make additions - there are categorical finding that the assessee- respondent had maintained broad details of the stock, its consumption, production and closing balance and the accounts have been maintained on day to day basis which have been accepted by the Excise and VAT authorities – in favour of assessee. Depreciation - depreciation @ 50% on the purchase of machinery under TUF Scheme as against depreciation @ 25% allowed by the A.O.- Held that:- The machinery has been purchased as per TUF Scheme, making the assessee- respondent eligible for deduction at higher rate - the nature of stock purchasing is a finding of fact and revenue- could not advance any argument warranting admission of the appeal – in favour of assessee.

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• 2012 (4) TMI 464
  Reopening - Deduction u/s 80IA - assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution - contractor or supplier of irrigation products versus developer of any new infrastructural facility. - held that:- It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Assessing Officer earlier did not arrive at such conclusion and thus, the amended Explanation subsequently added cannot be of any help to him in arriving at the second opinion based on the alleged new law. In the absence of existence of "any tangible material" to come to the conclusion that there was escapement of income from assessment, the Assessing Officer exceeded his authority to reopen the assessment merely on the basis of a "change of opinion" and accordingly, it is a fit case of quashing the notice. - Decided in favor of the assessee

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• 2012 (4) TMI 463
  Power to transfer case from Vapi to Surat - Principles of natural justice - Petitioners filed objections and for effective and coordinated investigation in the search cases of the same group, the order impugned in the applications was passed - held that:- the requirement of recording reasons under section 127(1) is a mandatory direction under the law and noncommunication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee as held by the Supreme Court in Ajantha Industries vs. Central Board of Direct Taxes (1975 (12) TMI 1 - SUPREME Court). Division Bench of this court in the case of Arti Ship Breaking vs. Director of Income Tax (Investigation) and others (2000 (3) TMI 38 - GUJARAT High Court) considered the similar question as to whether non-discloser of reason in the order of transfer vitiates the order and in spite of referring the above decision of the Supreme Court decided to ignore such vital defect. Since we propose to hold that the law laid down in the case of Ajantha Industries (supra), is still the law of the land and has not been overruled by any competent bench of the Supreme Court whereas a co-ordinate Division Bench has taken a contrary view, judicial decorum demands that we should refer the matter to a larger bench for deciding the question - matter referred to LB.

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• 2012 (4) TMI 462
  Deduction u/s 80-IB (10) - the sanction plan was issued on 4.4.2005 making it clear it comes into effect from 4 4.2005 and will be in force till 3.4.2007. Assessee contended as the approval was granted on 28.3.2005. he is entitled to the benefit under Section 80-IB(10) of the Act from the assessment year 2005-06 onwards - Held that: it was communicated to the assessee on 4.4.2005 and in law he should have 2 years time to complete the construction, the said communication and the sanctioned letter made it clear the time for completing the construction starts from 4,4,2005 and it ends on 3.4.2007 - As per the judgment of the Bombay High Court, once approval is granted it dates back to the date of application. Even that exercise is not to be done in this case, as the date of approval is 28.3.2005 the assessee is entitled lo the benefit for the assessment year 2005-06 - Decided in favor of the assessee

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• 2012 (4) TMI 461
  Whether lower rate of tax u/s 115E will be applicable to long term capital gains on sale of bonus shares where such bonus shares resulted out of original investments of shares made out of convertible foreign exchange - Held that: A conjoint reading of Section 115E and 115F clearly show that long term capital gains mentioned in clause (b) of Section 115E and investment made out of sale consideration received on transfer of foreign exchange asset mentioned in Section 115F, both relate to income arising out of transfer of foreign exchange asset - In the case of Sanjay Gala v. ITO [2011 - TMI - 205129 - ITAT, MUMBAI - Income Tax] - it is clear that foreign exchange asset for the purpose of section 115F is the one which assessee has acquired in convertible foreign exchange. In the present case, the assessee subscribed to shares in convertible foreign exchange and acquired the foreign exchange asset - assessees cannot be deprived of the concessional rate available under Section 115E of the Act just because the sale of shares were bonus shares - Appeals are allowed

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• Customs

• 2012 (4) TMI 460
  Writ petition - Assessee had asked the Commissioner of Customs at ICD, Tughlakabad, New Delhi to permit and allow import into India of the Data Graphic Display Tubes, which have been imported from Malaysia. It was claimed that these goods could be imported under the open general license - custom authority is delaying the release of the said consignment by taking the plea that the goods imported were old and used and therefore, they are “Electronic Waste” - The contention of the petitioner is that the consignment are lying since December, 2011 and the delay is causing immense hardship and financial loss to the petitioners on account of demurrage and detention charges - Held that: it is directed that the respondent authority will pass an order-in-original determining whether the goods in question can be imported to India and the duty etc. payable thereon within a period of three weeks i.e. by 21st March, 2012 - petition is disposed of

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• Corporate Laws

• 2012 (5) TMI 1
  Company in liquidation - maturity of fixed deposits - interest on such FD - held that:- what is to be noticed is that the said deposit receipts are not issued in the name of the company-in-liquidation, but in the name of the second respondent. However there is no dispute with regard to the fact that the money for the purpose of deposit has been kept with the third respondent-bank by the company-in-liquidation. The deposit receipts were lodged with the second respondent as a compliance of the requirement for the purpose of issue of Money Lenders licence. In that circumstance, for the company-in-liquidation to carry on its business of money lending, licence should have been in force till the date of winding up. If that be the position, the company-in-liquidation was required to have the money lending licence in force till 13.03.2002, unless the company-in-liquidation had made any positive efforts to see that the company does not require the money lending licence as the activities had come to a standstill. Therefore, first or the second respondent cannot be held liable for negligence as on the date of maturity, more particularly in a circumstance when the second respondent has acted immediately on receiving the communication from the Official Liquidator pursuant to the statement of affairs which had been filed by the Directors and when the second respondent had addressed a letter dated 27.07.2009 seeking for return of the certificates. Considering that the deposits had matured much prior to the date of winding up, it is the persons who were in charge of the company as on that day who need to explain if there was any lapse in that regard and the respondents cannot be held liable. Hence, the first prayer already having satisfied by the return of the documents, the second prayer cannot be granted for the reasons stated above. - Application of official liquidator dismissed.

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• 2012 (4) TMI 459
  Application of official liquidator alleging misfeasance on the part, of the erstwhile Directors of the Company-in-liquidation - held that:- KSFC has sold the plant and machinery and the issue is pending, the first respondent who was the Director in any event cannot be held liable for the said auction and the question as to whether the KSFC could have sold the machinery and as to whether it could have been sold for a better value and as to whether the valuation had been appropriately made by the KSFC are issues which would have to be inter se decided between the Official Liquidator and the KSFC - the very same value of the plant and machinery which had been seized by the KSFC and sold cannot be considered as an amount which was due to be realized from the Directors for the misfeasance of not accounting for the said amount, when the facts are clear in the instant case. - Application is dismissed

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