TMI Tax Updates - e-Newsletter
May 23, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Income u/s 2(24) - exercising of voting rights in a particular fashion - to exercise voting rights is not the business - not recurring - not taxable - Tri

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Articles

1. Applicability of provision of Section 40 (a) (ia) – Calcutta High Court in Crescent Export Syndicate

   By: DEVKUMAR KOTHARI

2. PANCHNAMA

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. P. Chidambaram’s Speech at ICSI Seminar on Indian Financial Code

2. Change in Tariff Value of Gold Notified

Notifications

Customs

1. 30/2013 - dated 21-5-2013 - Cus

Amends Notification No. 12/2012-Customs, dated the 17th March, 2012

2. 55/2013 - dated 21-5-2013 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Highlights / Catch Notes

Income Tax

• Court Approves Deduction of Genuine Commission Payments to Relatives for Sales Promotion Under Tax Laws.

  Case-Laws - HC : Payment of commission to relatives for the services rendered by them for promoting sales. - genuineness of commission established - deduction allowed - HC
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• Court Condones Appeal Delay for Individual Assessee, Acknowledging Lack of Company-Level Advisory Support.

  Case-Laws - AT : Condonation of delay in filing the appeal - assessee is not a company placed with experts advising - Assessee is only an individual which must be appreciated - Delay condoned - AT
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• Tax Deduction Allowed for TDS on Non-Reimbursable Taxes Paid to MasterCard and Visa Under Operating Expenses.

  Case-Laws - AT : Grossing up of the expenditure with TDS amount for claiming deduction - Non reimbursable tax paid to Master Cards/Visa Cards included under the head “Operating Expenses“ - Claim allowed - AT
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• Revenue Must Consistently Apply Judgments Across Taxpayer Cases Without Unjust Challenges.

  Case-Laws - AT : It is not open to the Revenue to accept a judgement in the case of an assessee and challenge its correctness in the case of any other assessee without just cause. - AT
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• Exercising Voting Rights Not Business Activity; Non-Recurring Receipt u/s 2(24) Not Taxable.

  Case-Laws - AT : Income u/s 2(24) - exercising of voting rights in a particular fashion - to exercise voting rights is not the business of the assessee. - The receipt was not of recurring in nature - not taxable - AT
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• Accounting Error Corrected: Mistake Not Considered Income, No Tax Liability Imposed on Assessee for Advance or Deposit.

  Case-Laws - AT : Wrong accounting entry - inadvertent mistake, merely an accounting entry which is subsequently corrected and explained cannot fasten the assessee with tax liability by assuming it to be an income whereas in realty the amount was by way of advance/ deposit. - AT
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Service Tax

• Service Tax Penalty on Rent Income u/s 78 Overturned by Court Decision.

  Case-Laws - AT : Penalty u/s 78 - Changeability of service tax on rent income classifiable under the category of Renting of Immovable Property. - penalty imposed set aside. - AT
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• Waiver of Pre-Deposit Requirement Granted for Assessee in Construction Case Involving Multiple Buildings with 12 Flats Each.

  Case-Laws - AT : Construction of complex - several quarters - different buildings in the same compound. - None of the buildings had more than 12 flats in each building - Prima facie case in favor of assessee - pre deposit waived. - AT
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• Court Reviews Tax Benefits for Tyre Retreading Under Notification No. 12/2003-S.T.; Partial Stay Granted Despite Unfavorable Ruling.

  Case-Laws - AT : Retreading of old tyres - Maintenance and Repair service - benefit of Notification No. 12/2003-S.T., dated 20-6-2003 - prima facie case is against the assessee - stay granted partly. - AT
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Central Excise

• Cigarette Manufacture Registration Rejection Overturned; No License Needed Under IRDA Act for Excise Registration Certificate.

  Case-Laws - AT : Rejection of the application for registration – Manufacture of cigarettes - No condition regarding issue of licence under IRDA Act by Ministry of Commerce and Industry, before the issue of Central excise registration certificate - refusal of registration is incorrect - AT
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VAT

• Court Upholds Sales Tax on Transfer of Right to Use Cinematographic Equipment Due to Lack of Documentation by Assessee.

  Case-Laws - HC : Transfer of right to use the goods - Exigible to sales tax -assessee(s) have not produced any document/agreement to show that the assessee(s) retained possession and control over the Cinematographic equipments leased out. - Levy of tax upheld - HC
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• Court Rules Passive Infrastructure Transactions Not Interstate Sales Under CST Act, Clarifying 'C Forms' Use for Providers.

  Case-Laws - HC : Interstate sale or not - CST - passive infrastructure provider - The fact that the goods purchased by the petitioners were neither sold nor used in the manufacture of goods for re-sale does not constitute violation of the C forms. - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 541
  Payment of commission to relatives for the services rendered by them for promoting sales. - genuineness of commission - held that:- the parties had sent confirmation of having received the commissions directly to the Assessing Officer, complete details of month-wise commissions were filed whenever TDS provisions were applicable, tax was deducted - Commissioner (Appeals) and the Tribunal concurrently on the basis of the appreciation of evidence on record held that the payment of commission was genuine and proper. The necessary evidence and justification for such commission payment was on record. - deduction of commission allowed - decided in favor of assessee.

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• 2013 (5) TMI 533
  Condonation of delay in filing the appeal - CIT(A) dismissed the same as barred by limitation - Held that:- On appreciating the facts it is noticed that the assessee actually filed an application u/s 154 in the month of May, 2009 and the issues are common which remain un-adjudicated by the AO or the CIT (A) as on date. Considering the fact that the assessee moved an application for rectification, it cannot be inferred that the assessee is not vigilant about his rights. Therefore, dismissing the allegation of the CIT (A) in this regard it is noticed that AO has not so far adjudicated the said rectification and it is also noticed that the assessee is left with pending issues despite they are raised before the AO / CIT (A) through different proceedings. It is also a fact that the assessee is not a company placed with experts advising in matters of litigations. Assessee is only an individual which must be appreciated in matters of this kind. Thus assessee cannot be considered as non- vigilant person in the matter of exercising his rights. Therefore, it is a fit case for condonation of delay - direct the CIT (A) to admit the appeal. In favour of assessee.

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• 2013 (5) TMI 532
  Grossing up of the expenditure with TDS amount for claiming deduction - Non reimbursable tax paid to Master Cards/Visa Cards included under the head "Operating Expenses" - Assessee claimed that as per the agreement with Visa/Master Cards, the company is required to make payment without deduction of tax - Held that:- As decided in CIT Vs Standard Polygraph Machines Pvt. Ltd (1998 (11) TMI 49 - MADRAS High Court) on identical facts allowed the claim holding that amount paid was only to the discharge of the liability which liability the assessee had taken to pay as part of the agreement entered into. The amount so paid as tax has been held to be the amount payable between the collaborator and the assessee. The Tribunal decided that the amount so paid by the assessee was only in discharge of a liability which it had undertaken in terms of the agreement. Also see S.Takenaka Vs CIT (1998 (9) TMI 55 - KARNATAKA High Court). Respectfully following the orders of the co-ordinate bench decide the grounds raised against the Revenue.

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• 2013 (5) TMI 531
  Assessment of fixed deposits in the name of the assessee - CIT(A) deleted the addition - Held that:- CIT(A) has given a clear finding that the society has accounted for these deposits in its books of account the explanation of the assessee, from the very beginning, was that these deposits belong to the society and the said explanation stands vindicated by the assessing officer by assessing these deposits in the hands of the society. Under these set of facts, CIT(A) was justified in deleting the assessment of these deposits in the hands of the assessee. Assessment of bank deposit - whether the deposit belongs to the assessee or to the society - Held that:- This issue requires fresh examination at the end of the assessing officer, as the facts relating to the ownership of the deposit have not been properly brought out. Accordingly, we set aside the order of Learned. CIT(A) on this issue and restore this matter to the file of the assessing officer with a direction to examine it afresh and take appropriate decision in accordance with the law. Gift receipt - Held that:- The claim of the assessee that he has received the gift amountfrom his father in law, and the said fact has also been confirmed by his brother in law. The source for giving the said gift was explained to be the sale proceeds of a property & as has already submitted a copy of conveyance deed to the assessing officer during the course of assessment proceedings CIT(A) was justified in accepting the claim of receipt of gift. Assessment of investments found in the name of Sri Karunanidhi - Held that:- CIT(A) has given a finding that the investments in the name of Sri Karunanidhi have been made from 1995 onwards and further Sri Karunanidhi would have had income to make these investments. Since the present assessment is a block assessment and further since no other material was brought on record to show that the assessee herein has actually provided money to make investments in the name of Shri Karunanidhi, therefore no infirmity in the decision taken by CIT(A) on this issue. Assessment of cash seized during the course of search - Held that:- As submitted by D.R., CIT (A) has rendered his decision by following the decision of his predecessor & did carry out any verification on this issue. The submissions put forth by both the counsel would show that the claim of the assessee requires verification at the end of the assessing officer, thus restore the matter to the file of AO to reexamine the issue afresh.

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• 2013 (5) TMI 530
  Income from joint venture - income from other sources v/s Business income - disallowance of expenses - Held that:- There is no mention in the orders of the authorities below that assessee was also engaged in the petrol pump business. Assessee is submitting that petrol pump license was terminated by the BPCL on 16.5.2000, but was eventually restored upon Hon'ble Apex Court decision in this regard. Thus commencement of the petrol pump business occurred much after the orders of CIT (A) in this regard. Hence, the additional documents in the shape of letter of BPCL dated 20.11.2012 and order of the Hon'ble Apex Court dated 16.12.2011 were not before CIT (A) or AO, thus this needs to be considered in arriving at the conclusion whether the assessee was carrying any business. Some of the expenses have been allowed by the CIT (A) in assessment year 2007-08 which have not been allowed for the assessment year 2006-07. The additional ground raised that AO failed to record a finding determining the amount of business losses to be carried forward to the subsequent years available for adjustment in future, as per provisions of law. This was not raised before the CIT (A) Thus as assessee has submitted certain additional documents which were not before the authorities below as well as raised certain grounds which were also not before the authorities below matter is remitted to the file of the AO to consider the issues afresh - both the appeals filed by the Assessee stand allowed for statistical purposes.

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• 2013 (5) TMI 529
  Disallowance of commission payment in respect of export - Held that:- On examining the export invoices, it turns out that there is a clear mention of such commission on the very face of the export invoices that the commission on export to these two persons was deposited in their respective NRE accounts at the rates agreed in conformity with the Memorandum of understanding, substantiates the factum of the assessee having actually paid commission to these two parties at Rs. 35.37 lakh. Therefore, order for granting deduction to this extent. In favour of assessee. Commission on domestic purchases - Held that:- It is a fundamental proposition that the onus of proving the rendering of services is on the assessee for a genuine claim of deduction on account of commission. As the assessee has failed to lead any evidence in respect of services provided by these persons no deduction can be allowed for a sum of Rs. 18.73 lakh as Commission on domestic purchases - Against assessee. Disallowance of Clearing and forwarding expenses u/s 40(a)(ia) - Held that:- As assessee fairly admitted that no tax was deducted at source in respect of payments at Sr.nos.8 and 9 the disallowance u/s 40(a)(ia) was rightly made. As regards item at Sr.nos. 4 and 5, assessee pointed towards certain material showing that these parties obtained certificates from the Department for no deduction of tax at source as additional evidence & as regards item in Sr.no.10, the real character of this payment was of purchase and not payment of Clearing and forwarding charges relied on certain documents to indicate that this payment was towards some purchases was also filed through additional evidence - therefore remit the case for fresh decision - Partly in favour of assessee for statistical purposes. Disallowance of traveling expenses - Held that:- As during the course of assessment proceedings assessee placed on record copies of invoices of M/s Perfect Tours and Travels showing payment of Rs. 2.70 lakh as an additional evidence, thus it would be in the interest of justice if restore the issue back to the file of A.O. for examining the deductibility or otherwise of Rs. 2.70 lakh in the light of the fresh evidence filed by the assessee - in favour of assessee for statistical purposes.

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• 2013 (5) TMI 528
  Disallowance of deduction of discount as claimed twice - CIT(A) deleted the addition - Held that:- CIT(A) after verifying the sales promotion ledger account of the assessee observed that the sales promotion expenses of Rs. 26,673/- debited in the profit and loss account are expenses other than the expenses of Rs. 9,55,685/- claimed as deduction from the commission income. Therefore there was no double claim of these expenses as observed by the AO. DR could not bring any material on record to show that this finding of the CIT(A) was not correct or to show that the deduction claimed in the profit and loss account under the head sales promotion expenses was not the expenses other than the expenditure as claimed as deduction from commission income by the assessee - appeal of the revenue is dismissed.

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• 2013 (5) TMI 527
  Profit on sale of flats - assessee is a builder into constructing two buildings at Bhayander - whether the A.O. was justified in taxing 15% of payments in respect of 5 flats for which the possession was given by the assessee in the previous year relevant to the assessment year under consideration - assessee submitted that following percentage completion method which stands accepted by the Revenue - Held that:- The amount of work in progress in respect of these five flats at the rate of 31.65% was included in the overall 31.65% of WIP, which the assessee offered for taxation, after deduction of expenses. With the making of separate addition by the AO at the rate of 15% profit on 100% of the amount in respect of these flats, some part of these amounts got doubly included, once, when the assessee voluntarily offered at 31.65% of the total WIP and secondly when the AO brought to tax the profit on 100% in respect of receipts from these flat owners. Since the proceedings for all the years up to A.Y. 2004-2005 have been concluded and in the years following the previous year relevant to the assessment year under consideration, the assessee has followed the same method of accounting by also considering same percentage in respect of these five flats in each of the years, no final reduction can now be done to reduce the income for the subsequent years. It would be just and fair if the percentage of profit from 15% as applied by the A.O. and confirmed in the first appeal is reduced to 10% to set off the effect of double inclusion of the amount in respect of these five flats in this year and subsequent years - appeal of assessee partly allowed.

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• 2013 (5) TMI 526
  Gain on sale of assessee's share of land - assessee received a gift of 40% undivided share in land from his father vide gift deed - whether CIT(A) erred in directing the AO to treat the sale proceeds as the Long Term Capital Gain and to allow the claim for deduction u/s 54 as claimed by the assessee - Held that:- It is an undisputed fact that the assessee received a gift of 40% undivided share in land from his father vide gift deed duly executed before the Registrar on 20.11.2007 & the said land was sold to five person on 12.12.2007 by way of a sale deed which was executed by the assessee, his father and his brother the co-owners of the said undivided land. CIT(A) will allowing the claim of assessee has relied on the order in the case of his brother who was also one of the signatory of the sale deed executed on 12.12.2007 where AO had accepted the gift of undivided share in the land of 40% to him vide gift deed dated 20.11.2007 as genuine and has held the sale proceeds to be a capital receipt form the sale of the said land and also allowed the claim for deduction u/s 54. DR could not bring any material on record to show that whether any remedial action was taken by the Department in the case of assessee's brother or not. Thus as decided in UOI vs Kamodini Dalal and Another (2000 (12) TMI 101 - SUPREME Court) that it is not open to the Revenue to accept a judgement in the case of an assessee and challenge its correctness in the case of any other assessee without just cause. In favour of assessee.

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• 2013 (5) TMI 525
  Income u/s 2(24) - Amount received by the shareholders - Whether Rs.60,59,303/- received by the assessee under the agreement from M/s.Tyco Electronics Middle East FZE, Dubai was exempted income from Income Tax? - whether the amount received by the assessee in consideration of exercising its voting right in the meeting of RPG Raychem Ltd. was a wind fall receipt in the hands of the assessee? - Held that:- Consideration was received by the assessee in lieu of its exercising of voting rights in a particular fashion. It is not in dispute that to exercise voting rights is not the business of the assessee. It is also not in dispute that similar receipt has never been received by the assessee either in the earlier years or in the subsequent years. The receipt was not of recurring in nature. The DR could not point out any distinguishable facts in the instant case from the facts which were in the case of CIT vs David Lopes Menezes (2010 (10) TMI 11 - BOMBAY HIGH COURT (GOA)) wherein held that the burden of proving that a receipt is of revenue character initially rests on the revenue which have not discharged. Also the receipt was a casual receipt in the nature of windfall arising out of one time event of affirmative voting on a resolution. It was not of repetitive character and was not likely to happen again, thus Hon'ble Bombay High Court being a superior court decision of the same should be respectfully followed & in the absence of any other contrary decision being cited by the Revenue the receipt of Rs.60,59,303/- was not in the nature of income in the hands of the assessee company - appeal of the assessee is allowed.

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• 2013 (5) TMI 524
  Re opening of assessments - proceedings initiated after the expiry of four years from the end of the assessment year - disallowance of deduction u/s 80IB - CIT(A) quashed reopening - Held that:- Deduction u/s 80IB was allowed to the assessee in assessment made u/s 143(3) on 21.03.2006 after scrutiny of the claim of the assessee. The reopening thereafter was made on the very same set of facts. Therefore the decision of the Khaitan B. Mehta vs ACIT (2012 (10) TMI 742 - Gujarat High Court) wherein held that reassessment after four years to disallow deduction on the ground that interest was not paid for earning dividend but for acquiring controlling interest in company cannot be said that there was failure on the part of the assessee to disclose material facts. In favour of assessee. Deduction u/s 10A - CIT(A) allowed the claim - Held that:- As from the assessment orders that deduction u/s 10A has been allowed to the assessee by the AO in the A.Yr. 2004-05 and 2006-07 in an assessment made u/s 143(3), DR could not point out whether the department has taken any remedial measures for allowing deduction u/s 10A to the assessee in these years. In the above facts and circumstances of the case order of the CIT(A) is supported by the order of the Tribunal in the case of ITO vs Ektara Exports Pvt. Ltd. (2005 (7) TMI 607 - ITAT KOLKATA) and that the AO himself has allowed deduction u/s 10A to the assessee in therefore find no infirmity to interfere with the order of the CIT(A) which is confirmed and the ground of appeal is dismissed. In favour of assessee.

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• 2013 (5) TMI 523
  Unsecured loan - Search and seizure u/s. 132 - notices u/s. 153A - unaccounted share application money - Held that:- As far as addition on account of share application money is concerned,AO submitted that the assessee company filed a confirmation from the investor by name Mr. Pavan Kumar Nallamala stating that he had given a demand draft for Rs. 50 lakhs bearing No. 125623 dated 21-1-2008 drawn on Citibank, Hyderabad towards share application money for allotment of 5 lakhs equity shares @ face value of Rs. 10/- each in M/s. Lahari Impex Pvt. Ltd. In the remand proceedings the AO but the same could not be materialized on the ground that the alleged investor/creditor is an NRI, hence not produced before the AO. No compliance from the assessee to the above query raised in the appeal proceedings. As held in earlier A.Y. 2007-08, remit the issue to the file of the AO with a direction to the assessee to furnish necessary details to discharge the burden cast upon it u/s. 68 as any credit appearing in the books of account, the assessee is required to explain the identity of the parties, genuineness of the transaction and capacity of the creditors as held by jurisdictional High Court in the case of R.B. Mittal (2000 (8) TMI 54 - ANDHRA PRADESH High Court). Accordingly, the issue is remitted back to the file of the Assessing Officer for fresh consideration - assessee appeals are partly allowed for statistical purposes.

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• 2013 (5) TMI 522
  Difference in cash deposit in bank account and cash sales - CIT(A) deleted the addition - Held that:- Addition was made by AO observing that the assessee's sale proceeds in cash from software are less than the cash deposits in bank for which the assessee has given satisfactory explanation about there being other receipts which are duly incorporated in the account books. In view of these facts no infirmity in the order of CIT(A) on this issue. Against revenue. Unexplained share application money - CIT(A) deleted the addition - Held that:- When the department itself, on earlier occasion, has accepted the identity and existence of the party, primary onus to prove creditworthiness to purchase shares of Rs. 4,09,000 is discharged no justification in assuming that ITSL was not a genuine party and does not have capacity. Assessee has duly demonstrated that an amount of Rs. 4 lacs was credited to share application money account and Rs. 5 lacs were credited to ITSL other running account. The allotment of shares has been duly intimated by the assessee to ROC. Thus relying on Oasis Hospitality case (2011 (1) TMI 194 - DELHI HIGH COURT ) the assessee has discharged its onus approving the share application money u/s 68. For remaining two minor share applications in respect of Davendra Kumar and Mool Chand, assessee has filed their confirmatory letters along with PAN numbers. This is further supported by the returns of past several years and statement of affairs - Against revenue. Addition on account of credits from M/s Integra Telecommunication & Software Ltd. (ITSL) - CIT(A) deleted the addition - Held that:- As already held that the identity and creditworthiness of this party is established, transactions are through bank a/c. The assessee has received an amount of Rs. 5 lacs by a/c payee cheque no. 128813 dated 12-10-2004 and Rs. 1 lac by a/c payee cheque no. 128812 on 12-10-2004. the debit of these amounts is reflected in ITSL a/c and credited in the assessee's bank account. Copy of reciprocal accounts are also on the record. Thus no infirmity in the order of CIT(A) in deleting the addition. Against revenue Interest accrued but not declared as income - CIT(A) deleted the addition - Held that:- There is no enabling provision by which notional income can be added in the hands of the assessee. It is undisputed that assessee neither charged interest from this party nor showed it on accrual basis in the books of a/c. The assessee has not paid any interest on borrowed capital, therefore, there is no interest expenditure also. Thus, it is not a case of diversion of interest bearing funds as the advance to GISL is out of the interest free funds available at the disposal of the assessee. Against revenue. Sale of non-existing fixed assets - CIT(A) deleted the addition - Held that:- Since the assessee has demonstrated it to be an inadvertent mistake, merely an accounting entry which is subsequently corrected and explained cannot fasten the assessee with tax liability by assuming it to be an income whereas in realty the amount was by way of advance/ deposit. A mistaken entry cannot convert a receipt on account of deposit loan or advance as income of the assessee. Reliance placed on Kedarnath Jute Mills (1971 (8) TMI 10 - SUPREME Court), by assessee, is well placed. Against revenue. Unexplained cash credits received from M/s Global Info System Ltd. - CIT(A) deleted the addition - Held that:- AO made the addition only relying on the mistaken certificate issued by Axis bank ignoring the proper explanation of the assessee that confusion was created by assessee depositing two cheques by one paying slip into Axis Bank by which the cheque of Rs. 4,07,000/- received from GISL and cheque of Rs. 3,99,000/- received from TSR Financial services were deposited in Axis Bank which issued a transaction slip mistakenly writing it to be from Global Infosis which was corroborated by the banks revised certificate. Against revenue.

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• Customs

• 2013 (5) TMI 521
  Imposition of penalty on custom officer - ante-dating – shipping bill was received from M/s Amber Exports, export of hand tool under claim of DEPB. The Inspector of Customs examined the goods and placed the examination report before the respondent on 31.3.2000 for countersignature, the same was signed by the respondent on 31.3.2000. Revenue contended examination report was signed by the respondent with mala fide. Held that – Following the case of D.R. Ahuja vs. CC, Amritsar [2009 (5) TMI 462] inasmuch as there is no proof of the extraneous consideration for their action and for the imposition of penalty, the penalty imposed upon the said officer was set aside. By following the said decision of the Tribunal in the same respondent case, we find no reason to interfere in the impugned order of Commissioner (Appeals). Revenue’s appeal is accordingly rejected.

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• 2013 (5) TMI 520
  Waiver of pre deposits – Benefit of Notification No.21/2002-Cus is denied - Duty demanded - Aggrieved by the order appellant preferred an appeal to the Commissioner (Appeals) and same directed them to pre-deposit the amount, which they did not deposit. Accordingly the appeal is dismissed for non-compliance with Section 129E - As per appellant pre deposit will cause financial hardship. Held that:- Appellant has endeavored to set up financial hardships as a ground for substantial reduction of the amount for pre-deposit. In this connection, he has referred to profit and loss account as on 31.3.2011, balance sheet as on 31.3.2011, etc. we find a marked improvement of the financial position of the company. This apart, the income tax records indicating the latest financial status of the company at least as on 31.3.2012 are not forthcoming. The above records cannot be considered to reflect the latest financial position of the company. If the aforesaid trend of improvement of financial status from 2010 to 2011 has continued for 2012 and 2013, their financial position as on today will be much much better. In the above view of the matter, we would expect the appellant to pre-deposit the amount to enable the Commissioner (Appeals) to dispose of their appeal on merits. Thus, appeal stands allowed by way of remand.

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• Corporate Laws

• 2013 (5) TMI 518
  Mismanagement of the affairs of company - allegations of conducting affairs of the company in a manner prejudicial to public interest, causing oppression to the members of the company - legality of the existing financial transactions of the company, which the petitioners contend is impermissible having regard to the object clause contained in the memorandum of the company - plea against CLB to conduct the investigation - Held that:- Mere investment of the funds of the company in financial products in this case would not constitute violation of the object clause of the memorandum. The CLB, however, has not come to any finding in that regard, but on the other hand, directed appointment of the said audit firm to ascertain profits made by HVL in relation to dealings through Lodha Capital Market Ltd., and PLC Securities Ltd. As regards the allegation that HVL is an interested party, it was submitted on his behalf that this point was not taken in the pleadings and the provisions of Section 299 of the Act is not applicable in the instant case. Case of the appellant as well as HVL is that the said section applies in the event there is an arrangement or agreement between two companies but so far as investment in mutual fund is concerned, the agreement or contract is between the appellant and the mutual fund and subclause (6) of Section 299 of the Act also does not apply as HVL does not hold two per cent or more of the share capital of both the companies. So far as this issue is concerned, again the matter has to be remanded to the CLB for further consideration as CLB does not appear to have had examined applicability of the aforesaid provision in detail. So far as the transactions themselves are concerned, mere involvement of the company in CBLO or MIBOR linked debentures or investment in mutual funds through the two finance companies per se would not warrant an order or investigation. It does not appear again that the CLB had examined that issue in detail but investigator was appointed on being satisfied that the company was conducting business through entities connected with one of the Directors. It would be within the inherent jurisdiction of the CLB to take assistance of specialized agencies where having regard to nature of information required, it may lack specific expertise or infrastructural support. But such investigation is to be directed only after a case is made out of prima facie mismanagement and oppression in connection with a company in relation to the subject on which investigation is being directed, and only after such case is established, again prima facie by the petitioners, who seek investigation about large scale misapplication or unauthorized application of company’s funds. As in the instant case no sufficient materials were available before the CLB for directing investigation. As petitioners sought to demonstrate referring to the annual reports of the company for different years, the manner of employment of funds. But while exercising this court jurisdiction under Section 10F of the Act over a judgment of the CLB in an interlocutory proceeding, I do not think I ought to embark upon such a factual enquiry. For the reasons indicated above, stay granted permanently that part of the order of the CLB by which investigation is directed by the audit firm. Till the matter is reexamined by the CLB, or any further direction is passed by the CLB in the light of observations made in this judgment, status quo ought to be maintained so far the proposed Special Resolution for amending the object clause in the memorandum of the company is concerned. Liberty to the petitioners to apply before the CLB for particulars pertaining to borrowing and application of funds of the company over which there is allegation of misuse. If such application is made, the same shall be dealt with by the CLB in accordance with law.

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• Service Tax

• 2013 (5) TMI 538
  Penalty u/s 78 - Changeability of service tax on rent income classifiable under the category of Renting of Immovable Property. Held that:- Appellant has discharged the service tax liability and interest which has been appropriated in the order. The matter in this case is related to the service tax liability on the renting of immovable property services. when this taxable service brought under statute, there was dispute and the matter has not yet reached finality as the appeal is pending before the Hon’ble Apex Court in the case of Home Sales Retail India Ltd also that the first appellate authority has recorded in impugned order as an issue involving question of interpretation of the provision of the law, as contended by the appellant that it is a question of interpretation for setting aside penalties u/s 76 & 77, the same reasoning would be applicable for penalties u/s 78. Accordingly, the imposition of service tax on renting of immovable properties, by invoking the provisions of Section 80 of the Finance Act, 1994, penalty imposed is set aside.

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• 2013 (5) TMI 537
  Refund claim - GTA services – Rejection of refund claim as appellant has not produced the documentary evidences in respect of taxable services being provided to SEZ and consumed partially or wholly outside the SEZ. Held that:- Perusing of invoices raised by BSNL and other various telephone service providers and also the bills of transport companies it indicate the consignors or beneficiary of the services as the appellant in a particular clause which is in SEZ. It is also seen from the records that the said transport company is for transportation of the goods into the SEZ unit and also taking up the goods from the SEZ unit. Appellant has produced enough evidence before the lower authorities to justify his refund claim. Thus, impugned order is set aside and appeal is allowed.

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• 2013 (5) TMI 536
  Refund of service tax - export of goods - notification No.41/2007-ST dated 6.10.07 - The appellants have submitted that there was gross violation of principles of natural justice in this case and therefore they are required to be given another opportunity. They have relied upon several decisions in support of the submission. - held that:- the appellants took more than six months to reply to the letter written by the Assistant Commissioner rejecting the claim. In the letter several omissions in the refund claim were pointed out and therefore it is clear that the refund claim was not complete when it was filed and to make good the omissions, appellants took their own sweet time. Not only the refund claim was filed beyond 60 days as prescribed under the Notification but remedial steps were also not taken by the appellants. The Assistant Commissioner’s letter informing the appellants of the requirements not fulfilled is a very detailed letter and therefore it can be treated as an appealable order. Under these circumstances, the rejection of the refund claim by the Assistant Commissioner and subsequent decision of the Commissioner (Appeals) upholding the rejection are to be sustained. - decided against the assessee.

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• 2013 (5) TMI 535
  Construction of complex - several quarters for Kendriya Vidyalaya - These residential quarters were distributed in different buildings in the same compound. None of the buildings had more than 12 flats in each building. - held that:- The definition u/s 65(91a) is applicable for taxable entry 65(105)(zzzh) the entry relevant for deciding this appeal as also 65(105)(zzzza) covering works contract which was the entry in the case of Macro Marvel Projects [2008 (9) TMI 80 - CESTAT, CHENNAI] The explanation pointed out by the AR has nothing to do with the dispute in hand because that explanation defines ‘residential unit’ and the definition in dispute is that of ‘residential complex’. The explanation can mean only that the building should have 12 residential units. So the explanation is not for interpreting the meaning of ‘residential complex’. - Prima facie case in favor of assessee - pre deposit waived.

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• 2013 (5) TMI 534
  Retreading of old tyres - Maintenance and Repair service - benefit of Notification No. 12/2003-S.T., dated 20-6-2003 - held that:- This issue is covered in favour of Revenue in [2012 (6) TMI 719 - CESTAT], whereby the Tribunal denied the benefit of the Notification No. 12/2003-S.T. in respect of retreading. Further, we find that the Larger Bench of the Tribunal in the case of Agarwal Colour Advance Photo System cited [2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)], has decided against the assessee by denying the contention regarding exclusion of value of material in that case. - prima facie case is against the assessee - stay granted partly.

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• Central Excise

• 2013 (5) TMI 517
  Conditions for registration u/s 6 of the Act - Manufacture of cigarettes - Rejection of the application for registration – Held that:- The requirement for obtaining Central Excise registration in Section 6 of the Central Excise Act, according to which any person who is engage in production or manufacture of any specified goods included in the 1st and 2nd schedule to the Central Excise Tariff Act, shall get himself registered with the proper officer in the manner prescribed. Sub-rule (3) of Rule 9 provides that registration under sub-rule (1) shall be subject to such conditions, safeguards and procedures as may be specified by the Notification by the board. The board has issued Notification No. 35/2001-CE (NT) and also Notification No. 36/2001-CE (NT) under Rule 9 (3). None of these notifications prescribe any condition regarding issue of licence under IRDA Act by Ministry of Commerce and Industry, before the issue of Central excise registration certificate. In view of this, the order passed by the Assistant Commissioner refusing the registration is not correct.

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• 2013 (5) TMI 516
  Non compliance of pre deposits - 100% EOU, had not fulfilled the export obligation in entirety - Held that:- From the judgement that the Hon’ble High Court reduced the predeposit amount to a sum of Rs.40 lakhs. It is also directed by the High Court that if such deposit is made within a period of eight weeks from the date of receipt of a copy of its order, the benefit granted by the Tribunal in the stay order shall continue to operate pending disposal of the appeal. On a query from the Bench, learned advocate submits that they have not deposited Rs.40 lakhs till date.Thus, for non-compliance of the order of Hon’ble High Court, the appeal is dismissed.

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• 2013 (5) TMI 515
  Waiver of pre-deposit – classification and valuation - manufacture of trailers which were purchased mainly by transport companies - duty paid chassis - benefit of Notification No.5/2006-CE dated 1.3.2006 - duty-paid in terms of heading 8706 - as per revenue as trailers were specifically classified under heading 8716 - Held that:- Having found two serious infirmities in the adjudication of the cases, the impugned orders is set aside and direct de novo adjudication of the disputes. Accordingly, we set aside the impugned orders and allow these appeals by way of remand with a request to the Commissioner to pass speaking orders on all the relevant issues in accordance with law after giving the appellants reasonable opportunities of being personally heard. The assessees shall have to pre-deposit Rs.10,00,000/- each within eight weeks and report compliance to the Commissioner whereupon the latter will take up the case for de novo adjudication as above.

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• 2013 (5) TMI 514
  Demand of differential duty – differential quantity of sulphuric acid - difference in the particulars shown in the balance sheet and excise records – Held that:- There is a difference of quantity of 2844.445 MTs between the figures of Central Excise records and balance sheet. We also note that in the opening balance of 1998-99, the opening stock of Sulphuric Acid is 3685.115 MTs. As explained by the appellant, this consists of 2844.445 MTs of the differential quantity for the year 1997-98 plus a balance of 840.710 MTs as shown in the RG.I account. Therefore, the closing balance in the 1997-98 and the opening balance in 1998-99 tallies. We agree with this submission of the appellant and take a view that the shortage of a quantity of 2844.445 MTs for the financial year 1997-98 has been taken into account in balance sheet in the subsequent year 1998-99. Thus, the impugned order is set aside and appeal is allowed.

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• 2013 (5) TMI 513
  Valuation - Demand of differential duty – Penalty - Held that:- though the duty was paid by the appellant at Rs.1064/- per meter but they did not receive the above consideration from the Electricity Board on account of subsequent dispute about the prices. The Board further reduced the price to Rs.600/- per electricity meter. On the above prices, the appellant had actually filed refund claim with the Revenue, which was rejected on the ground that as contracted price was Rs.1064/- per meter, subsequent reduction of prices will not have the effect on the payment of duty. - As the earlier matter decided by the Tribunal in [2005 (2) TMI 549 - CESTAT, NEW DELHI] it stands rejected by the Tribunal that original assessment and payment of duty took place at the contracted price and as such, there was no justification for subsequent reduction in price. - As such, it is seen that price of Rs.1064/- was upheld by the Tribunal in the earlier case and while rejecting the refund claim of the applicant further reduced the price. - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 540
  Transfer of right to use the goods - Exigible to sales tax - Whether hiring of cinematographic equipments would amount to "transfer of right to use the goods" for cash, exigible to sales tax under Section 3-A of the Tamil Nadu General Sales Tax Act, (in short, TNGST Act")? – Held that - Whether a transaction is a transfer of right to use goods or a service is essentially a question of fact, which has to be determined in each case, having regard to the terms of the contract. As pointed out earlier, in the present case, the assessee(s) have not produced any document/agreement to show that the assessee(s) retained possession and control over the Cinematographic equipments leased out. In the absence of any material evidence, we find no sufficient reasons to upset the concurrent findings recorded by the authorities and the Tribunal and questions of law are answered accordingly. Whether the Tribunal is justified in upholding the penalty, when the question of liability to tax itself is a debatable issue? – Held that - Assessment order was made based upon the registers seized from the premises of the assessee(s), which were inspected. Even though the Department contends that the assessee(s) have not maintained proper accounts, the assessment was made based on various registers. In Appollo Saline Pharmaceuticals (P) Ltd. Vs. Commercial Tax Officer (FAC) and others, [2001 (10) TMI 1100 - MADRAS HIGH COURT], this Court held where the assessment was based on return and accounts, penalty is not leviable. Applying the ratio of the said decision, in the present case, even though the assessee(s) have not maintained the accounts, the assessment was made based on the registers seized from the premises of the assessee(s) and therefore the penalty cannot be levied. The penalty levied on the assessee(s) are not sustainable and set aside.

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• 2013 (5) TMI 539
  Interstate sale or not - CST - passive infrastructure provider - whether goods purchased by the petitioners/dealers (for the purposes of building, operating and maintaining passive telecom infrastructure and where on the towers erected and maintained but nonetheless continued to be owned by the petitioner—the passive infrastructure provider ; goods which are indisputably integrally associated with the building and maintenance of the cell towers), are goods falling within the ambit of section 8(1) read with the provisions of section 8(3)(b) of the CST Act, and thus eligible only at the concessional rate of tax provided in section 8(1). Held that - In the facts and circumstances of this lis, in view of the rationales deducible from the judgments of the Supreme Court in Rajasthan Electricity Board [1996 (8) TMI 455 - (SC)] and in J. K. Cotton Spinning and Weaving Mills Co. Ltd. [1964] 10 TMI 2 - (SC)], we are of the considered view that the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates) of registration under the CST Act granted to them against issue of C forms and where the goods have been employed in erection and maintenance of cell phone towers which are integral to telecommunication network, fall within the ambit of section 8(1) read with section 8(3)(b) of the CST Act and are entitled to be taxed accordingly. The fact that the goods purchased by the petitioners were neither sold nor used in the manufacture of goods for re-sale does not constitute violation of the C forms. Consequently, levy of penalty, on the factual parameters apparent on the record of these cases, is unsustainable. - Penalty waived - Decided in favor of assessee.

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• Indian Laws

• 2013 (5) TMI 519
  Salary claim of an employee - release of grant in aid - aided v/s non aided institution - Held that:- Appellant-Institution contention that Institution is an aided-Institution but aid has not been released to them after the year 1990 because of non-compliance of certain provisions of Scheme of Rules 1993 and lapses on the part of the appellant-Institution in not complying with the provisions for the purpose of release of Grant-in-Aid, would not affect the category of the appellant-Institution as not being an aided-Institution and in case the aid of the Institution was not released in time, as submitted by the appellant, or withheld by the sanctioning authority in not complying with the provisions of law or procedure provided under the Scheme of Rules 1993 has not been followed, the remedy to an Institution is available of filing appeal against the order of the sanctioning authority u/R.19 of the Scheme of Rules 1993 and such decision of the State Government is final but the appellant has failed to avail the remedy as contemplated under the law and for that purpose the appellant-Institution cannot be forbidden and state that the appellant-institution is not an aided-Institution and as such is not under the obligation to pay such pay and allowances, as contemplated u/S.29 of the Act, as provided for the staff belonging to the similar category in the Government Institutions and this what the learned Single Judge observed in the order impugned dt.24th August, 2005. The submission of counsel for appellant that appellant-Institution is not receiving aid from the State Government may be for reasons whatsoever for the period in question they are not entitled to comply with u/S.29 of the Act is wholly without substance for the reason that once the Institution is categorized as an Aided-Institution, such aided-Institutions are under obligation to make payment of such pay & allowances to the employees of the Institutions which shall not be less than those prescribed for the staff belonging to such categories in the Government Institutions, as provided u/S.29 of the Act. As regards submissions made for issuance of mandamus against State Government for release of Grant-in-Aid to meet out its legal obligation, suffice it to say that the writ petition came to be filed by the appellant in the nature of certiorari jurisdiction u/Art.226 of Constitution assailing the order of Tribunal and if at all their Grant-in-Aid was withheld by the sanctioning authority/State Government in violation of the Scheme of Rules 1993, of which reference has been made above, it is always open for the appellant to avail the remedy which the law permits and this what the learned Single Judge also observed while dealing with the contentions advanced. Appeal dismissed.

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