TMI Tax Updates - e-Newsletter
May 20, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Addition - No TDS - Sec 40(a)(ia) would cover not only the amounts which are payable as on 31th March but also which are payable at any time during the year -HC

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Notifications

Customs

1. 11/2013 - dated 16-5-2013 - ADD

Seeks to impose anti-dumping duty on imports of Peroxosulphate, originating in or exported from People's Republic of China and Japan for a further period of 5 years pursuant to final findings of SSR

Circulars / Instructions / Orders

FEMA

1. 104 - dated 17-5-2013

FDI in India - Issue of equity shares under the FDI scheme allowed under the Government route against pre-operative/pre-incorporation expenses

DGFT

2. 14(RE 2013)/2009-2014 - dated 17-5-2013

Amendment in Para 2.43.2 (c) of Handbook of Procedure Vol.I, 2009-2014.

Highlights / Catch Notes

Income Tax

• Section 40(a)(ia) Covers Payments Due Anytime in the Year, Not Just March 31.

  Case-Laws - HC : Section 40(a) (ia) would cover not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year. - HC
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• Parliamentary Debates Not Reliable for Statute Interpretation in Income Tax Matters, Case Law Confirms.

  Case-Laws - HC : The proceedings in the Parliament, its debates and even the speeches made by the proposer of a bill are ordinarily not considered as relevant or safe tools for interpretation of a statute. - HC
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• High Court Overturns Tribunal's Decision on TDS Disallowance u/s 40(a)(ia) in Merilyn Shipping Case.

  Case-Laws - HC : Disallowance u/s 40(a)(ia) - TDS - the decision of the Tribunal in the case of M/s. Merilyn Shipping & Transports vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), does not lay down correct law - HC
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• Estimations on electricity use for tax assessments deemed unreliable; concrete evidence required for accurate tax liabilities.

  Case-Laws - AT : Addition made on estimating the consumption of electricity, production, sale and profit thereon is not sustainable. - AT
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• Section 10(37) Exemption: Agricultural land qualifies for tax exemption regardless of taxpayer's residence or other business activities.

  Case-Laws - HC : Exemption u/s 10(37) - agricultural land - Merely because the assessee was not residing close to the land or was also pursuing some other business would not by itself be sufficient to hold that the land was not used for agricultural purposes by the assessee. - HC
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• Excess Interest from EOUs Must Be Deducted for Section 10B Income Tax Deduction if Income Exceeds Expenditure.

  Case-Laws - AT : EOU - If the interest expenditure is less or the interest income is more then the difference of excess interest received by the assessee is to be reduced while calculating the deduction under Section 10B. - AT
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• Assessing Officer's Disallowance of Interest and Charges from Short-Term Capital Gains Deemed Premature.

  Case-Laws - AT : Disallowance of interest, DEMAT charges, Membership Subscription out of short term capital gain - disallowance so made by the AO is pre-mature - AT
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• Court Finds Unreasonable Valuation of Unaccounted Assets, Including Paintings and Electronics, u/s 69B.

  Case-Laws - AT : Addition u/s 69B - valuation - unaccounted 5 paintings, Branded watches & 14 items of house-hold items & Melectronic goods ie TVs, Music Systems, ACs etc - absurd assessment of value of impugned items is not appreciable - AT
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• Section 50C of Income Tax Act Targets Sellers of Land or Buildings, Not Buyers.

  Case-Laws - AT : Section 50C applies to the seller i.e. transferor of the capital asset being land or building or both - the transferee or the purchaser is outside the scope of these provisions - AT
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• Playground Costs on Leasehold Land Considered Revenue Expenditure for Tax Purposes, Not Capital Investment.

  Case-Laws - AT : Expenditure incurred on play ground - leasehold land - One day, the leased land has to go back to the MHADA. - the expenditure constitutes revenue expenditure - AT
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Corporate Law

• SEBI Ordered to Investigate Company's Misleading Ads on Buy-Back and Bonus Shares Under SEBI Act, 1992.

  Case-Laws - Board : Misleading advertisements as regards issue of buy-back as well as bonus shares - Direction to SEBI to launch an investigation into the alleged misleading and/or fraudulent advertisement by VCL no doubt is acceptable as SEBI is duly authorized by the SEBI Act, 1992 to do so - Tri
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Service Tax

• Service Tax Upheld on Imported Drawings and Designs in IPR Case Involving Plant and Machinery Imports.

  Case-Laws - AT : Import of IPR - Duty of customs or service tax - Import of imported drawings and designs along with the plant and machinery and capital goods - levy of service tax upheld - AT
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• Electroplating Process Deemed Manufacturing; Appellant Exempt from Service Tax Payment u/s 65(19.

  Case-Laws - AT : Process of electroplating - process undertaken by the appellant amounts to manufacture and therefore they are not liable to pay service tax - AT
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• High Court Invalidates April 28, 2008, Instruction on Works Contract Service Tax; Reverts to Pre-March 1, 2008 Rate.

  Case-Laws - HC : Appropriate rate of tax - Works Contract Service - 4% or 2% - the applicable rate of tax would be the rate which was prevalent prior to 01.03.2008 - instruction dated 28.04.2008 is invalid - HC
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Central Excise

• Appellant's Suo-Moto Credit Set Aside: Mistaken Payment Not Classified as Duty Under Review.

  Case-Laws - AT : Demand of duty – Suo-moto credit taken by appellant - the amount paid by mistake cannot be termed as duty in the case on hand - demand set aside. - AT
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Case Laws:

• Income Tax

• 2013 (5) TMI 457
  Disallowance u/s 40(a)(ia) - as per AO assessee had admittedly not deducted TDS though payments were made to transporters which exceeded to Rs. 20,000/- in a single trip and aggregated above Rs. 50,000/- in the year - assessee had obtained Form No.15-I from such contractors but were not furnished along with necessary particulars in Form-15J to the CIT before due date - ITAT allowed the appeal of assessee putting reliance on decision in case of Merliyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) - Whether decision of ITAT in the case of Merilyn Shipping & Transports lays down the correct law in respect of interpretation of section 40(a)(ia)? - whether disallowance confined only to those cases where the amount remains payable till the end of the previous year or would include all amounts which became payable during the entire previous year? - Whether the principle of conscious omission can be applied in case there is a doubt regarding the draft presented in Parliament and the final legislation passed. Held that:- No hesitation in accepting the contention that the provision must be construed strictly. The terms “payable” and “paid” are not synonymous. Word “paid” has been defined in Section 43(2) of the Act to mean actually paid or incurred according to the method of accounting, upon the basis of which profits and gains are computed under the head “Profits and Gains of Business or Profession”. In contrast, term “payable” has not been defined. The word “payable” has been described in Webster’s Third New International Unabridged Dictionary as requiring to be paid: capable of being paid: specifying payment to a particular payee at a specified time or occasion or any specified manner. In the context of section 40(a)(ia), the word “payable” would not include “paid”. In the context of requirements of Section 40(a)(ia) no warrant in the said decision of the Supreme Court in Ashokbhai Chimanbhai case [1964 (10) TMI 11 - SUPREME Court] to apply the test of payability only as on 31st March of the year under consideration. Merely because, accounts are closed on that date and the computation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be ascertained on the strength of the position emerging on 31st March. The position prevailing prior to the amendment introduced in Section 40(a) would certainly be a relevant factor. However, the proceedings in the Parliament, its debates and even the speeches made by the proposer of a bill are ordinarily not considered as relevant or safe tools for interpretation of a statute. The Tribunal committed an error in applying the principle of conscious omission in the present case as already observed having a serious doubt whether such principle can be applied by comparing the draft presented in Parliament and ultimate legislation which may be passed. Secondly, the statutory provision is amply clear. The principle of deliberate or conscious omission is applied mainly when an existing provision is amended and a change is brought about. While interpreting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, has been when the language of the legislature is compared with some other analogous statute or other provisions of the same statute or with expression which could apparently or obviously been used if the legislature had different intention in mind, while framing the provision. In the result Section 40(a) (ia) would cover not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirements of the said provision exist. In that context, in our opinion the decision of the Tribunal in the case of M/s. Merilyn Shipping & Transports vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), does not lay down correct law - in favour of the Revenue.

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• 2013 (5) TMI 456
  Addition on the basis of electricity consumption - held that:- addition made in assessment on estimating the consumption of electricity, production, sale and profit thereon is not sustainable. - As both, assessment and the Appellate order, are based on the findings in the case of the sister concern M/s. Boon Industries [2010 (7) TMI 833 - ITAT MUMBAI] and as the Tribunal has decided the issue in the case of M/s. Boon Industries in favour of the assessee, appeal filed by revenue dismissed - decided in favor of assessee.

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• 2013 (5) TMI 449
  Exemption u/s 10(37) - whether said section require that the assessee should himself carry out the agricultural activities on the land? - assessee contended that in view of provisions of section 10(37) r.w.s. 45(5), no capital gain tax was payable as also allowed by ITAT - Held that:- Only ground on which the CIT (Appeals) held against the assessee was that he was staying away from the agricultural land and that he was otherwise engaged in a business. But neither of these two facts, either in isolation or cumulatively, would be sufficient to hold that such land was not being used for agricultural purposes by the assessee. The concept of personal cultivation as accepted in agricultural land tenancy laws also recognizes, as can be seen from the statutory provisions contained in the Bombay Tenancy and Agricultural Lands Act, 1948, cultivation of a land through hired labourer or through member of one’s family. Merely because the assessee was not residing close to the land or was also pursuing some other business would not by itself be sufficient to hold that the land was not used for agricultural purposes by the assessee. The Tribunal recorded that in the earlier years, the assessee had declared agricultural income, which was also accepted by the Revenue. Under the circumstances, the Tribunal correctly ruled in favour of the assessee. No question of law arises. The tax appeal is dismissed.

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• 2013 (5) TMI 448
  Re opening of assessment - assessee contested as the reasons for reopening the assessment have not been provided at any time during the assessment proceedings and the same are brought to the knowledge only on receipt of the impugned order of assessment - Held that:- There was no timely service of notice, dated 7.3.2013 about the hearing dated 14.3.2013 and due to over-sight, it was stated to have been despatched only on 16.3.2013 by the respondent, i.e. after the date of hearing, and therefore, there was denial of opportunity of hearing to the petitioner before passing the impugned order, resulting in violation of principles of natural justice. It requires under law that the assessee should be heard in the matter before concluding the proceedings and therefore, the authority is bound to afford an opportunity of hearing to the assessee in accordance with law, before proceeding to pass an order. Hence, the impugned order passed by the respondent cannot be sustained and the same is liable to be set aside and the matter should be remanded back to the respondent for fresh consideration.

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• 2013 (5) TMI 447
  Disallowance of interest at the rate of 18% - Held that:- It is seen that a sum of Rs.41 lakhs was advanced during the year under consideration out of export proceeds received by the assessee. It means that the assessee has advanced the amount to its sister concern out of the profit of the year. Therefore, on this amount, disallowance of interest was not justified. However, a sum of Rs.29 lakhs was advanced on 28-3-2008 out of packing credit limits obtained by the assessee, therefore, on this amount, the disallowance has to be made. Partly in favour of assessee. Coputaion of profit derived from export of EOU for the purpose of computing deduction u/s 10B - Exclusion of interest received on margin money - Held that:- Applying the case of ACG Associated Capsules P. Ltd [2012 (2) TMI 101 - SUPREME COURT OF INDIA] to this case AO directed that interest income has to be set off against interest expenditure. If the interest expenditure is less or the interest income is more then the difference of excess interest received by the assessee is to be reduced while calculating the deduction under Section 10B. Sale of bardana and waste material generated during course of production of industrial undertaking has a direct and immediate nexus with industrial undertaking and, therefore, deduction under Section 80IB on the amount of sale of bardana and waste material generated during course of production is allowable. sEE Nirma Industries Ltd. Vs. ACIT, [2005 (4) TMI 242 - ITAT AHMEDABAD] & Wippro Limited Vs. DCIT, reported in [2005 (6) TMI 210 - ITAT BANGALORE-B). Therefore, the action of the AO in treating the sale of bardana as income from other sources, as CIT(A), is not justified. In favour of assessee. Allowance of deduction under Section 10B by the AO at 90% of the profit derived from export of EOU - Held that:- Assessee deserves to succeed on this issue also. It is seen that the 90% deduction was restricted only for one year i.e. for assessment year 2003-04, otherwise deduction under Section 10B is allowable at 100%. In earlier year also, the deduction was allowed 100%. Therefore,direct the AO to allow 100% deduction against 90% directed by the CIT.

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• 2013 (5) TMI 446
  Disallowance of transaction charges - addition u/s 40(a)(ia) - CIT(A) deleted the addition - Held that:- As decided in Kotak Securities Ltd. case [2011 (10) TMI 24 - Bombay High Court] Payment regarding transactions charges are in the nature of the payment for technical services and liable to TDS however held that the assessee had bonafide reason to believe that tax was not deductible at source from the payment of transaction charges under section 194J. Prior to this decision this Tribunal has been taking the view that the payments of transaction charges are not subjected to TDS u/s 194J. Even the revenue was also proceedings with a view that no TDS is deductible in respect of payment of transaction charges prior to the assessment year 2006-07. Further, when the issue has been decided in favour of the assessee by the Tribunal for the AY 2006-07, then no doubt about the bonafide of the claim of the assessee under belief that no tax at source was required to be deducted u/s 194J. Further, it is to be noted that the assessee filed its return of income for the year under consideration on 24.10.2007 and even till the said date, no disallowance was made by the revenue u/s 40(a)(ia) in respect of transaction charges paid because the assessment order for the AY 2006-07 was passed on 22.12.2008. Thus as that first time the AO has disallowed the transaction charges by invoking the provisions of sec. 40(a)(ia) while passing the assessment order for Assessment Year 2006-07 on 22.12.2008. Therefore, no reason to interfere with the impugned order of the CIT(A) on this issue for the year under consideration. The claim of bonafide is accepted only for the year under consideration and shall have no bearing on future years - Against revenue.

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• 2013 (5) TMI 445
  Gain on shares and mutual funds - short term capital gains v.s business income - assessability of income - assessee is a private limited company in business of consultancy relating to tours and travels and allied service - Held that:- On a perusal of the transaction, it is seen that the assessee has shown gain on sale of equity shares at Rs. 91,32,471, and gain on sale of mutual fund of Rs. 92,23,053. For short term capital gains, the number of scrip entered into are 74, however, in most of the cases, the average holding period is far more than 100 days. The over all average of period of holding is around 184 days. Insofar as the allegation of the Revenue is concerned that the number of transactions have been undertaken in the sale of 74 scrips, the same cannot be taken as primary parameter to hold that it should be treated as business activity because it is a known phenomenon in Stock Exchange that a single transaction is split into many smaller transactions while trading in the Stock Exchange through computers. As the assessee has, all throughout, been showing purchase of shares as investment in the books of account and the same has been classified in the balance sheet under the head "Investment" & has been treated to be capital gain in the assessment years 2004-05 and 2005-06 by the AO under scrutiny proceedings wherein the order has been passed u/s 143(3). In the assessment year 2008-09, the Commissioner (Appeals) has accepted the gain from transactions of shares to be assessable under the head "Short term Capital Gain". Thus, if the same facts are permeating through all the assessment years, it cannot be held that on similar nature of transactions, the income from shares has to be assessed as "Income From Business" as also all the transactions undertaken are delivery based and the assessee has not undertaken any speculative or derivative trading of shares showing that intention was never to indulge in trading of shares and as no interest bearing borrowed funds or loans have been diverted for purchase of shares rather they have been purchased from the surplus funds available with the assessee & most of the gain has come from sale of mutual funds, which cannot be traded in Stock Exchange. This also goes to prove that the assessee is mainly an investor & the assessee's intention was to purchase the shares for holding it as investment. In view of above gain arising from sale of shares is assessable under the head "Short Term Capital Gain" and not under the head "Income From Business" - In favour of assessee.

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• 2013 (5) TMI 444
  Penalty u/s. 271(1)(c) - addition made in respect of service charges - assessee is member of Bombay Stock Exchange mainly engaged in business of share broking - Held that:- Disallowance was made by treating the said payment as capital expenditure. There is no charge of furnishing of inaccurate particulars or for concealment of particulars of income. Thus, on these facts, it cannot be held that the assessee is guilty of furnishing inaccurate particulars or has concealed particulars of income. The nature of payment has also not been disputed. The only dispute relates to whether can be allowed as recalled expenditure or capital expenditure. Thus under these circumstances we do not feel that penalty under Section 271(1)(c) can be levied. Penalty u/s. 271(1)(c) - addition made in respect of speculation loss - Held that:- Tribunal has held that in value of shares in the closing stock can be allowed as loss. However, it was subsequently only that the Hon'ble jurisdictional High Court has settled this issue while holding it to be speculative loss. Thus, at the time of filing of return there was a possible view in favour of the assessee and therefore, it would not be held that assessee had either furnished any inaccurate particulars of income or has concealed the particulars of income. Thus, it cannot be a case of penalty under Section 271(1)(c) can be levied or confirmed. Penalty u/s. 271(1)(c) - disallowance of interest payment holding that when interest payment were not for business purposes, assessee furnished inaccurate particulars by claiming it to be business expenditure - Held that:- Once the assessee has submitted that it had surplus funds from where it had advanced the money to the sister's concerns, there cannot be any presumption that the same has been made out of borrowed funds only. At least in the penalty proceedings, with any adverse material on record to dispute the assessee's explanation, penalty for concealment cannot be levied or imposed. Thus, on this score also no penalty is warranted - the appeal filed by the department stands dismissed.

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• 2013 (5) TMI 443
  Disallowance of interest, DEMAT charges, Membership Subscription out of short term capital gain - Held that:- AO & CIT(A)'s conclusions were derived in the context of the assessee's failure to submit the details establishing the nexus of the interest expenditure qua the capital used for purchase of the shares. Thus, it is evident that the Revenue Authorities have given their finding without going into the merit of the issue and the connection of the impugned expenditure qua the capital gains claimed by the assessee. It is, thus the disallowance so made by the AO is pre-mature, which requires one more round of examination of the facts by the AO. Considering the request of the assessee's Counsel to remand the issue to the files of the AO for fresh adjudication - grounds raised by the assessee are partly allowed for statistical purposes.

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• 2013 (5) TMI 442
  Addition u/s 69B - search action u/s 132 - unaccounted 5 paintings, Branded watches & 14 items of house-hold items & Melectronic goods ie TVs, Music Systems, ACs etc. - Held that:- AO has not borrowed any experts opinion on the extent of additions made. He has not even bothered to refer the matter to the DVO for obtaining the value of the paintings, branded watches and branded electronic goods but simply picked up figure from the air without any basis. He should have employed his ITI at least to gather the market value from any branded shops before resorting to adhocism. Thus this kind of absurd assessment of value of impugned items is not appreciable and therefore, this kind of valuation is absolutely uncalled for and unwarranted in this kind of cases. Regarding the other issue of availability of explainable sources perusuing the cash withdrawals of self and other family members for the year are in the range of Rs. 35.13 lacs. The expenses / investment in question does not only belong to the self but also to the entire family members of the assessee, whose withdrawals for the past ten years were of Rs. 68.08 lacs, which is an undisputed fact. It is also not the case of the AO that the assessee has unaccounted sources of income. Thus the onus is on the Revenue to prove that the assessee has unaccounted sources of income and the withdrawals of Rs. 68.08 lacs were not spent for the impugned movable assets, valued at Rs. 18.75 lacs - grounds raised by the Revenue are dismissed.

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• 2013 (5) TMI 441
  Deduction u/s 80IB(4)- whether an allowable expenditure added under Section 40(a)(ia) - reopening of assessment - Held that:- The AO has observed in his order that as per items in the report of auditor in form 3CD under Section 44AB, the business income is computed which has been claimed as deduction under Section 80IB and accordingly, the deduction was allowed. From this observation of the AO, who passed assessment originally, it is clear that the assessee claimed deduction u/s 80IB as per profit and loss account and disallowed by the assessee himself in terms of Section 40(a)(ia) the required. In this way, the total business income was computed at Rs.40,84,160/- and deduction on that amount was claimed, which the AO has allowed after satisfying that on business income deduction u/s 80IB is allowable in full. Thus this is a clear cut case of change of opinion as one AO has allowed deduction by considering the fact that disallowance of expenditure under Section 40(a)(ia) has been made by assessee himself and, therefore, business income was increased and on business income, the deduction is allowable. Therefore, the reopening of the assessment was bad in law. See M/s 1Up Clothing Co (2013 (5) TMI 88 - GUJARAT HIGH COURT) wherein held that deduction on the amount of expenditure disallowed in terms of Section 40(a)(ia) is allowable as the disallowance on expenditure is part of business activity and, therefore, the business profit increased and on increased business profit deduction is allowable. In favour of assessee.

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• 2013 (5) TMI 440
  Levy of penalty u/s 271(1)(c) - CIT(A) deleted the levy - deletion of addition of advance from customers by CIT(A) - Held that:- There is no dispute on the fact that the said advances are subsequently repaid. From the order of the CIT (A), we have noticed that, during the proceedings before the first appellate authority, CIT (A) has rightly deleted the addition made by AO after carefully perusing and considering the submissions made by the assessee. Therefore no infirmity from the order of the CIT (A) and the same does not call for any interference. Accordingly, the ground raised by the Revenue is dismissed.

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• 2013 (5) TMI 439
  Addition u/s 69 - difference between the value of the property purchased as per the Stamp Duty Authorities and the sale consideration - AO made difference of Rs. 19.68 lacs as unaccounted consideration and invoked the provisions of section 50C - Held that:- The provisions used the expressions 'transfer by an assessee' which imply unambiguously that the section 50C applies to the seller i.e. transferor of the capital asset being land or building or both. Therefore, the transferee or the purchaser is outside the scope of these provisions. Thus, the AO erroneously invoked these provisions mistakenly to this assessee, who is undisputedly a transferee. Thus considering the settled nature of the issue the provisions of section 50C are no application to the assessee-purchaser of the property. The assessee is entitled to relief on this count itself. Accordingly, the issue raised by the assessee is allowed. 6. In the result, the appeal filed by the assessee is allowed.

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• 2013 (5) TMI 438
  Disallowance u/s 14A r.w.r.8D - assessee contested that income in question is not an exempt income as the same is not covered by the provisions of section 10(38) Held that:- no reason to reject the claim of the assessee for the limited purpose of examining the issue if the dividend income in question does not constitute exempt income for forming part of the total income. In case, the dividend income is not completely examined, it is obvious that the provisions of section 14A do not come into picture. Therefore, the AO is directed to examine the issue afresh and re-adjudicate the same after considering the relevant provisions as well as existing laws if any in force. Disallowance of expenditure incurred on play ground - Held that:- The expenditure incurred on the play ground for (a) Removal of bushes, trees, trees, stumps, roots and their disposal, (b)Filling and leveling of ground (c) Repairing of gutters and broken boundary walls etc , merely brings or adds advantage to the school. The advantages merely facilitate asessee's business operation or enabling it to efficiently or more profitably run its business. One day, the leased land has to go back to the MHADA. Hence, the impugned expenditure constitutes revenue expenditure - appeal of the assessee allowed pro-tanto.

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• Customs

• 2013 (5) TMI 437
  Confiscation – wireless equipment – licence - Whether the wireless equipment purchased under an invoice by the appellant from M/s. A.T. Manufacturing Company is liable to confiscation? – Held that - The appellants have installed the wireless equipment in their foreign going vessel for which no licence under Indian Telegraph Act, 1885 is required. However, these Rules are not applicable for the situation when a wireless equipment was purchased by the appellant in the territorial India, which is not permissible, as per Ministry of Communication letter dated 27.7.1995. The wireless equipment purchased by the appellant is therefore, liable to confiscation. Whether option can be given to the appellant to redeem the same on payment of redemption fine? - Held that - the wireless equipment purchased by the appellant under a valid invoice was installed on their foreign going vessel, which is permissible as per Rule 3 of Indian Wireless Telegraph (Foreign Ships) Rules, 1973. Destruction of wireless equipment will be required as per letter dated 27.7.1995 only in a situation where such wireless equipment is required to be retained within the jurisdiction of Indian Territory after purchase from the ship breaking activity. Thus, the wireless equipment purchased by the appellant and installed in their foreign going vessel was not required to be absolutely confiscated and ordered for destruction. Therefore, set-aside and case is remanded back to Commissioner.

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• 2013 (5) TMI 436
  Refund claims – rejected by original authority reason as the same is not filed before the jurisdictional AC/DC of Customs in the Air Cargo Complex - lower appellate authority has set aside the impugned Order-in-Original – Held that - However, the order of the lower appellate authority transferring the refund claim to the dealing Assistant/Deputy Commissioner in the Air Cargo Complex cannot be said to be not legal and proper, even though he has passed the said order for other reasons. Accordingly, we uphold the impugned order and dismiss the appeal filed by the department. The stay application filed by the department also stands disposed of.

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• Corporate Laws

• 2013 (5) TMI 435
  Misleading advertisements as regards issue of buy-back as well as bonus shares - Appellants contested that both the schemes of buy-back and bonus shares did not materialize at all & in the process they suffered huge losses - prayer for direction to SEBI for grant of compensation for the loss suffered by them in the course of the transaction in respect of 1,71,773 shares in question @ Rs.30 per share at least - Held that:- There is no directive or mandate in any of the 15 or 16 measures empowering SEBI to undertake the task of considering and granting compensation to an investor for the alleged losses he might have suffered due to certain misleading or fraudulent advertisements by a company. Thus the prayer of the Appellants seeking a direction to the SEBI to grant them compensation to the tune of Rs.51,53,190/- for the alleged loss suffered on account of the purchase/sale of 1,71,773 shares of VCL is totally misconceived and is hereby rejected. Appellants' prayer for compensating him for the alleged loss is in the nature of a claim for damages on account of such alleged fraudulent and misleading representations by the VCL through various advertisements needs to be looked into by a civil court of competent jurisdiction in a trial and not by SEBI under the SEBI Act, 1992 for the simple reason that SEBI has neither the expertise nor infrastructure for this purpose. There is no mandate in law requiring SEBI to do so in case any investor suffers loss on account of trading in shares etc. Direction to SEBI to launch an investigation into the alleged misleading and/or fraudulent advertisement by VCL no doubt is acceptable as SEBI is duly authorized by the SEBI Act, 1992 to do so in any given and fit case in this connection. SEBI itself has stated in its affidavit in reply dated 6th March, 2013 filed by Ms. Doel Saha, Assistant Legal Advisor that SEBI has already taken action against VCL and its directors under Section 11B and by an order dated 20th February, 2008, VCL was barred from accessing the securities market and from buying, selling or dealing in securities for a period of two years - Thus SEBI directed to look into the part of the complaint of the Appellants which relates to the alleged misleading and fraudulent advertisements issued by VCL, along with the investigation, understandably, being carried on in respect of VCL or separately, as it may be advised and considered fit and proper in the circumstances of this case as per law.

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• 2013 (5) TMI 434
  Voluntary liquidation - Held that:- From the statement of accounts it appears that there has been no transaction in the accounts of the Company, except for withdrawal of an amount of Rs.610/- from the Bank. An amount of Rs.638/- was credited in the account of the Bank leaving balance of Rs.28.15p only. Prima facie, it appears that the amount of Rs.638/- in the Bank account of the Company was credited on account of accumulation of interest since commencement of winding up proceeding. There is no asset of the Company, which may be proceeded with for disbursement to its creditors, if any, in liquidation proceeding. This Court also finds that after taking charge, the then Official Liquidator made attempts to convene meeting of the Company with its Creditors and Contributors repeatedly but with no success. Therefore, the then Official Liquidator could not proceed in the matter further to comply the provisions of sections 497, 508 and 509 of the Companies Act. This Court also finds that till now, no creditor of the Company has come forward before this Court to lay any claim against the Company. In the circumstances, this Court finds that there is no option left in this liquidation proceeding than to close the same and direct for dissolution of the Company in exercise of powers under section 481 of the Companies Act, 1956 read with Rule 9 of the Company (Courts) Rules, 1959. Report of the Official Liquidator is accepted and the requirement of compliance with provisions of Sections 497, 508 and 509 of the Companies Act, 1956 as well as requirement of audit of final account annexed as Annexure-C with the said report are dispensed with. The Company stands dissolved in accordance with law with effect from the date of this order. Let the Official Liquidator take follow-up steps as per the law.

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• Service Tax

• 2013 (5) TMI 453
  Import of IPR - Duty of customs or service tax - Import of imported drawings and designs along with the plant and machinery and capital goods. - held that:- It is not in dispute that the appellant has paid the entire amount of service tax liability and interest thereof under the Head Intellectual Property Right Services. It is also not in dispute that the said service tax liability has arisen only on the ground of receipt of Drawing and Designs from upcountry seller of the Plants and Machinery to the appellant for installation/ fabrication and erection the said machinery for manufacturing the finished goods by the appellant. - levy of service tax upheld. Regarding penalty - held that:- there cannot be any malafide intention attributable to the actions of the appellant in not discharging the service tax liability under the category of Intellectual Property Right Services. Be that as it may, we find that the entire amount of service tax liability stands deposited along with interest before the issuance of show cause notice. We also note that the appellant was eligible to avail Cenvat credit on the such service tax paid, as it was in relation to the Plant and Machinery, which is used for manufacturing of finished goods. - levy of penalty deleted - decided in favor of assessee.

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• 2013 (5) TMI 452
  Recruitment and supply of personnel - valuation u/s 67 - inclusion of reimbursement of salary and other contributions - held that:- There is no dispute that the amount received from the clients i.e. M/s. Hutch and M/s. Zenta was reimbursable amount as the show cause notice itself admits. It is settled law that the principle of taxation is to tax only on the consideration received and retained. In the instant case various expenses incurred during the course of business activity were paid to the persons concerned. For example there cannot be second opinion that amount paid TNEB cannot be included in the taxable value for demanding Service tax. Likewise other amounts received also were paid to the concerned persons and were not retained by the appellant and hence the demand of Rs. 60,418/- is not sustainable. Consequently no interest and penalty are also demandable.

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• 2013 (5) TMI 451
  Benefit of Notification No.8/2005 denied - as per department appellant should have discharged service tax on the electroplating cost including the cost of electroplating materials used by the appellant - whether electroplating of electrical contacts by the appellant amounts to manufacture or not? - service tax demand confirmed - Held that:- As decided in Modison Metal Refiners vs. Commissioner [1996 (9) TMI 289 - CEGAT, NEW DELHI] the process undertaken by the appellant amounts to manufacture and therefore they are not liable to pay service tax in view of the specific exclusion in the definition of business auxiliary service which provides that if the process amounts to manufacture, no service tax would be liable to be paid. In this case, the 100% EOU viz., M/s. Tyco Electronics to whom the appellants have supplied the goods on job work basis is eligible for exemption Notification No.24/2003-CE dated 31.3.2003. Stand of the department that this notification exempts 100% EOU from payment of duty and therefore the appellant is not eligible for the benefit of Notification No.8/2005-ST is not acceptable as this is not an unconditional exemption notification. Exemption is available only if the goods are not brought to any other place in India. Since exemption under Notification No.24/2003 is not an unconditional exemption, the appellant has a case for eligibility for exemption under Notification No.8/2005 also even if it is assumed that the process does not amount to manufacture. In favour of assessee.

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• 2013 (5) TMI 450
  Appropriate rate of tax - Works Contract Service - whether the applicable rate of service tax would be rate in force at the time of realisation of the consideration or would it be the rate of tax which was in force at the time of the rendition of the taxable service - 4% v/s 2% - assessee submitted that Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 had not been examined by this court in the case of Vistar Construction (2013 (2) TMI 52 - DELHI HIGH COURT) therefore the decision was distinguishable - Held that:- The rendition of the service had been completed prior to 01.03.2008 and, therefore, the taxable event had occurred prior to 01.03.2008. Consequently, the applicable rate of tax would be the rate which was prevalent prior to 01.03.2008. Since the entire foundation of the argument of the revenue is based on the instruction dated 28.04.2008 which has been found to be invalid by virtue of decision in the case of Vistar Construction (supra), the present appeal is also liable to be dismissed Unable to agree with the appellant inasmuch as the instruction dated 28.04.2008 had been dealt with in detail in Vistar Construction case (supra) and the paragraph 2 thereof, specifically refers to the said Composition Rules of 2007. Secondly, and more importantly, the show cause notice does not contain any such allegation with regard to the respondent having made an option under the said Rule 3. Since, there is no foundational basis for making the submission and no such submission was made before the appellate authority, the appellant cannot be permitted to take up this plea before this court for the first time. Thus following the decision in the case of Vistar Construction (supra,) the present appeal does not raise any substantial questions of law and is therefore dismissed.

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• Central Excise

• 2013 (5) TMI 433
  Waiver of predeposits/penalties - Held that:- As the penalties also stands set aside by the Commissioner (Appeals) earlier order dated 20th December 2007, the subsequent order of Commissioner (Appeals) against the same impugned order in original, upholding the penalties imposed on the present applicants is not legal. Accordingly, after dispensing with the condition of pre-deposit appeal is allowed. Stay petition as also appeals get disposed on in above manner.

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• 2013 (5) TMI 432
  Classification dispute - Demand of duty – Extended period of Limitation - manufacture of forgings and forged articles of iron and steel. - Held that: - Following the decision of Hon’ble Supreme Court decision in the case of CCE, Baroda vs. Cotspun Limited [1999 (9) TMI 87 - SUPREME COURT OF INDIA] wherein, when the classification list approved by the revenue, the Hon’ble Court held that the demand cannot be raised even within the limitation period as provided u/s 11A. However, the said declaration law was neutralized by retrospective legislation amending the provision of Section 11A and laying down that even in the case of approval of classification or price list, the demand can still be raised within the limitation period. In the present case demand is within the limitation period and appellant is not challenging the classification confirmed, thus, no infirmity in the impugned order. Appellant submits that the interest confirmed against the appellant is @ 20% whereas the correct rate was 15% in terms of Notification No. 41/2000 while upholding the confirmation of demand, therefore direction is given to lower authority to quantify the interest at the correct rate applicable during the relevant period.

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• 2013 (5) TMI 431
  Notification No. 23/2003 - Denial of benefit - 100% EOU cleared their final product in DTA by availing the benefit of Notification No. 23/2003 - As per revenue the respondent were required to satisfy the condition No. 3 of the notification which prescribes requisite permission from DTA in respect of goods specified in paragraph 6.8 (a), (b), (d) and (h)- Held that:- In the present case revenue has taken altogether a new ground which was neither the subject matter of SCN nor of the order-in-original or the order of Commissioner (Appeals). Thus, appeal cannot be entertain on the above ground raised. Utilization of Cenvat credit – Held that:- In terms of Rule 17, clearances by 100% EOU in DTA have to be a payment of appropriate duty by debiting the account current required to be maintained for this purpose. As the appellants paying duty through account current, the duty already paid from the Cenvat credit would be credited to their said account. Confiscation – Original adjudicating authority had confiscated the excess found raw material and finished good with an option to redeem the goods on payment of redemption fine. Commissioner (Appeals) set aside the confiscation on the ground that the weighment and stock verification was not proper inasmuch as the same was on eye estimation basis - Held that:- Revenue has not shown any documentary evidence to reflect upon the fact that the physical stock taking was made by actual weighment of the goods and by making inventories. Therefore, Commissioner (Appeals) decision is upheld.

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• 2013 (5) TMI 430
  Demand of duty – Suo-moto credit taken by appellant - The facts are that the amount which has been paid in the cenvat credit and PLA is over and above the amounts which were debited by appellant for the consignments which were exported by availing the benefit under Rule 19 of Central Excise Rules, 2002. - Appellant submitted that the credit which was availed by the appellant was reversed in respect of the inputs which were used for the manufacturing of exported goods cleared under Bond. It is his submission that since the exports were done under LUT/Bond, the wrong debits made by the appellant in the Cenvat Credit Register, was required to be re-credited in the respective Cenvat Register and this was not a wrong duty as has been held by the lower authorities. Held that:- the amount paid by mistake cannot be termed as duty in the case on hand - Following the decision of Motorola India Pvt. [2006 (7) TMI 223 - HIGH COURT OF KARNATAKA] decided in favor of assessee - demand set aside.

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• 2013 (5) TMI 429
  Condonation of delay of 13 months and 25 days in filing the appeal - Held that:- The only contention of the applicant that the concerned clerk kept the impugned order in the file and did not bring before the Management for further action. Negligence of the employee cannot be considered as sufficient cause for not filing the appeal within the normal period of limitation. The applicant had not brought on record any evidence showing that the applicant had taken any action against the employee. No merit in the application for condonation of delay and is dismissed.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 455
  Revision application - order of the Tribunal – Issue in C.S.T. assessment whether additions made on account of discrepancies in the values in 'F' Forms and delivery notes and whether such additions were right in law and on facts. Issue in the K.G.S.T. assessment is with respect to classification of a disinfectant product, by name "Domex". – Held that - Matter remanded back to the Appellate Tribunal to decide the issue of classification together, but the issue of "F" Forms by separate order within a period of three months thereafter.

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• 2013 (5) TMI 454
  The four different establishments including a proprietorship concern, controlled by the common persons are having separate registrations under the KGST Act and are engaged in similar nature of business dealing with rice, wheat, dal etc., sharing the same roof. While so, there was a search in the premises of the petitioners, by the authorities of Sales Tax Department, when some incriminating materials were traced out. Pursuant to which, notices were given to produce the 'books of accounts' and despite the several adjournments and various communications in between, the opportunity given was not properly utilized by the petitioners, leading to separate orders of assessment and penalty under Section 45A; which forms the subject matter of challenge in the concerned writ petitions. The first two writ petitions (W.P.(C).No12352/2005 and W.P.(C). No.10403/2012) have been filed by the very same Company, while the 3rd one (W.P.(C).No.10938/2012) is by a different Company consisting of the same person as the Managing Director and his wife being the other Director. The last writ petition (W.P. (C).No.12299/2012) is filed by the petitioner in respect of proprietorship concern, who happens to be the Managing Director of the two Companies as mentioned above, while the sole remaining Director is his wife who is also having a proprietorship concern by name 'South Asian Trade Links'. Held that - From the above, it is seen that, but for the vague averment and lame excuse, no effective steps were taken by the petitioner Company to have responded to the notice issued for finalization of proceedings, which was pending for quite long. As mentioned already, the petitioner is not a 'layman' or an individual, but a Company incorporated under the relevant provisions of the Indian Companies Act, 1956, who could have ensured proper representation before the concerned authority through the Company Secretary, the Chartered Accountant, Lawyer if any, or such other authorised representative. Hence interference is not called for in this writ petition. In the result, Writ Petitions 12352/2005, 10403/2012 and 10938/2012, filed by the concerned Companies are found as devoid of any merit and they are dismissed accordingly. This however shall be without prejudice to the rights and liberties of the said petitioners to avail the statutory remedy in accordance with law. In W.P(C).No.12299/2012 filed by the petitioner/individual assessee in respect of the proprietorship concern related to that Ext.P5 statement of objections as well as the request therein seeking for 30 days' time to produce the books of accounts, has not been properly considered while proceeding with haste and finalizing the assessment. The first respondent is directed to pass fresh orders after giving an opportunity to produce the books of accounts and for hearing, in accordance with law, as expeditiously as possible, at any rate within 'three months' from the date of receipt of a copy of this judgment.The petitioner is directed to appear before the first respondent with all the books of accounts and such other records or such other day to which the case is adjourned by the first respondent. It is open for the petitioner to appear either himself or through the duly authorized representative and no adjournment needs to be granted under any circumstances, but for compelling reasons to the satisfaction of the first respondent, however ensuring that the time schedule as mentioned hereinbefore is not varied.

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